Regulator reports sharp rise in non-compliance as AE expands

Experts previously predicted that the number of employers failing to comply with their auto-enrolment duties would rise sharply as smaller employers begin to enrol their staff from 2014 onwards.

Figures released in successive Freedom of Information requests show there were 95 instances of non-compliance in the period between January 31 and March 25 2014, almost equalling the 96 breaches in the entirety of 2013.

“The rising number of breaches comes at a time that the number of employers reaching their staging date and due to complete registration has risen significantly,” said a spokesperson for the Pensions Regulator. “Employer numbers will continue to rise over the coming months.”

Darren Philp, head of policy at mastertrust The People’s Pension, said: “The regulations are so complicated. We need to break them down [into] non-compliance and companies who are just having teething trouble. This is a complicated policy going full steam ahead; it’s inevitable you’ll see some issues.”

Issues of non-compliance may simply be the result of a rapidly increasing number of employers staging, many of whom are too late in preparing, said Philp.

He added that those who are non-compliant may not be fined immediately, suggesting the regulator’s approach centres on encouraging schemes to become compliant.

“The regulator’s approach so far has been about giving people a helping hand. From what we’ve seen it’s been more people leaving it late and not understanding,” Philp said.

Many employers face confusion over their staging date, said Ferdinand Lovett, associate at law firm Sackers. “A number of the queries we get are around staging dates, particularly for companies with a significant group structure,” he said.

Lovett said companies that were part of a group that shared payroll systems or other resources often struggled to understand their staging date, as they were sometimes judged as one company.

The number of employers not complying may end up being further compounded as a result of the recently announced charge cap.

“It’s the tip of the iceberg; I’m not surprised,” said Steve Herbert, head of benefits strategy at Jelf Employee Benefits. “Most employers will have to go back and check that they are compliant with the charge cap.” He added: “I expect that to escalate significantly this year.”

Herbert predicted that as many as one in four employers may also have to make further adjustments to their pension scheme. He cited figures from a recent survey by Jelf Employee Benefits in which around a quarter of respondents paid an annual management charge of 0.75 per cent or more.