The number of fines issued to organisations for breaching auto-enrolment pension requirements increased by 144 per cent in 2018.
Figures released by the law firm EMW have revealed 25,000 organisations were fined for auto-enrolment errors in the year up to September, an increase of almost 15,000 compared to the previous year. As a result, the value of said fines increased by £12.6m to a total of £42m.
According to EMF, the sharp rise in penalties over the last year could be linked to the expansion of the auto-enrolment pension scheme. Since its introduction in July 2014 the scheme has been rolled out in several stages, until April 2017 when it eventually became mandatory for organisations with fewer than 30 employees or workers to comply. It is certainly conceivable that these smaller firms may have struggled to follow the complexities of the scheme in the 12 months that followed, given that some may lack a designated payroll department.
With this in mind, it is important that all organisations understand the need to enrol eligible employees and workers into a pension scheme. To be eligible individuals must work in the UK, be aged between 22 and the state pension age and earn more than £10,000 each tax year (or the equivalent if paid by reference to weekly or monthly pay periods).
Organisations should also take note of the changes to the minimum contribution amounts that will be introduced in April this year. Currently organisations are required to contribute a minimum of 2 per cent of employee’s gross salary into their pension pot each month, with employees expected to contribute 3 per cent themselves. However, for pay reference periods starting on or after 6 April 2019, this will increase to 3 per cent and 5 per cent respectively.
As well as failing to meet the necessary contribution requirements, organisations can face punitive action for failing to provide regular updates and data submissions to The Pensions Regulator (TPR). Whilst this requirement may seem like an added hindrance for management, failing to do so would still render an organisation non-compliant in the eyes of TPR.
In light of this, organisations are strongly encouraged to review their current practices regarding pensions and ensure they are in line with existing legislation, making use of available resources to ensure they remain complaint.