With fines looking set to surge for non-compliance with pensions auto-enrolment, businesses must act now if they want to avoid a hit to their finances, warns Lighthouse Group, one of Britain’s largest providers of financial advice.
A total of 166 employers were fined for failing to comply with their workplace pensions duties in the last three months of 2014, according to the latest research from The Pensions Regulator. Prior to this, since auto-enrolment started rolling out in 2012, 169 employers had been given £400 fines.
One of the pressures facing businesses is the fines that await those that don’t meet their dates, which stand at £2,500 a day for companies with 50-249 employees, £500 for five to 49 employees and £50 for one to four.
As of March, only three percent of UK businesses had reached their staging dates for the government’s pensions’ auto-enrolment scheme, so employers will need to ensure they are compliant as a matter of priority.
Roger Sanders OBE, managing director of Lighthouse Group Employee Benefits, said: “There are more than 1.3 million SMEs still to enrol, so there’s also a big queue for help for those that don’t really have a clear understanding of the requirements – or are simply too small to have the capacity to complete the process themselves.
“Owners and managers of small and medium businesses may be finding the prospect of workplace pensions’ auto-enrolment troublesome, because they are simply too busy running their firms. The Pensions Regulator will have sent out letters to every business recorded by HMRC by August, but, with such a busy schedule, these letters may have been simply forgotten or left to gather dust.
“Seeking help from advisers can be a huge benefit for these companies, as we can help streamline the process and take away the headache from decision-makers about the radical changes to workplace pensions.
“The most important thing is to find out the business’s staging date. If it is six months or less away the alarm bells should start ringing. Ideally, employers should be starting the process nine to 12 months ahead of their staging dates and deciding what they want from the scheme.”
Under the new rules, employers must enrol all eligible jobholders in a qualifying pension scheme and contribute on their behalf, and on behalf of non-eligible jobholders who opt-in to the scheme. The Pensions Regulator can impose stiff penalties on employers who do not comply and, even if a business already has a workplace pension scheme, it may have to make changes to satisfy the requirements.
Employers also need new administration and record-keeping processes to comply with their duties. Businesses may be able to use their existing pension scheme, subject to certain conditions, or one of the new workplace pensions designed specifically for auto-enrolment.
Roger comments: “Preparing early, or as soon as possible, is the key to making a business ready for auto-enrolment. Speaking to an adviser before your auto-enrolment staging date means your businesses can be fully prepared and have a tailor-made plan. It may seem complicated, but acting early and speaking to an adviser with experience is a simple step which will make the process so much easier for business leaders.
“It seems that many of the large, well-known insurance companies are reluctant to accept schemes with a small number of employees, especially if they are based on minimum contributions, possibly because they do not consider them to be profitable. Others are only taking on employers that are at least six months from their staging date, as they do not want to commit to getting schemes up and running in a rush. So it’s imperative that business leaders speak to specialists, and get to know what to expect, as soon as they can.”