The pensions watchdog has launched more than 500 investigations into auto-enrolment compliance issues in the past six months. Naomi Rainey asks: is it up to the job?
As the pensions industry gears up for an influx of smaller employers staging in May and July, it raises questions over The Pensions Regulator's (TPR's) resources in light of the large numbers due to stage.
Hundreds of thousands of small and medium-sized enterprises (SMEs) will provide pensions for the first time, presenting TPR with a mammoth policing task.
Here are the latest facts and figures: from 1 October 2012 to 29 January 2014, the regulator launched 590 investigations into potential non-compliance with auto-enrolment (AE) duties. This compares to the 89 cases examined up to July last year. (See box belowc for a detailed breakdown of the investigations.)
However, TPR stressed that the number also includes instances where companies have proactively contacted the regulator over pre-staging concerns, and some who requested an expedited staging date.
By the end of January this year, 8,893 employers had complied with the legislation, according to TPR's auto-enrolment registration report. This led to more than 2.8m employees being successfully auto-enrolled.
TPR executive director of automatic enrolment Charles Counsell (pictured) stressed the number of investigations is comparably low in light of the numbers successfully meeting their legal duties without intervention.
"More than 8,800 employers had automatically enrolled almost three million workers by the end of January. We are focused on high-quality communications and on creating a pro-compliance culture.
"We are also working with employers to rectify anything that has gone wrong. As a result, 99.9% of employers who have completed registration with TPR have done so without the need for us to use our powers."
Counsell added he was "pleased" that only six of the cases led to the use of statutory powers. However, he added the regulator was not complacent and small employers would prove the greatest challenge.
This April, May and June, about 10,000 businesses are preparing to stage. By 2016, the number will climb as high as 80,000.
A recent National Association of Pension Funds survey found 87% of employers were concerned about a future capacity crunch.
NEST Insight research, published in January, found high levels of AE awareness, as 93% of companies with between 100 and 999 employees know their staging date. This dropped to 68% for firms employing between 50 and 99 people.
However, just 23% of employers staging between February and July this year had completed preparations as of last December. Of companies that had already staged, two-thirds found it more complex than they anticipated.
It suggests small employers may struggle to meet their duties, as company size drops dramatically in the next three months. In April, businesses with between 240 and 249 will stage; this falls to firms with 50 to 89 staff members staging in July.
Creative Auto Enrolment managing director David White said many businesses are "simply not ready to meet their responsibilities under the legislation".
Most employers staging in the coming months will have no dedicated pensions or HR resource, White added, "which sparks real concerns over how smaller firms without this resource will be able to cope with the process".
"With more than 500 pages of guidance from TPR and 33 different tasks to consider to get AE ready, it's a huge task to undertake," he said.
The industry is already preparing to help companies that are at risk of missing their AE staging. Last month, LEBC launched an update to its aeComply that targets clients that have failed to establish their scheme on time.
Legal & General has also suggested they can provide off-the-shelf schemes for firms within three months.
Despite the sharp increase in staging volumes, pension consultant Punter Southall noted the "huge budget" TPR has to tackle compliance. In the 2013-2014 tax year, TPR had a total budget of £66.6m; almost half – £29.8m – was allocated to auto-enrolment activities.
Punter Southall's head of defined contribution consulting Alan Morahan added the regulator has invested a large portion of this on staging, so it is "likely to feel it has the capacity to deal with the influx of smaller companies".
Despite this, the large number of regulatory investigations at this early stage is a reminder that the job of making pensions "the norm" is far from over.
|Auto-enrolment non-compliance takes many forms...
Three compliance notices were issued to employers failing to complete registration in line with legislation. A further compliance was issued to a company that completely failed to provide a qualifying scheme.
One firm was served with an unpaid contributions notice and there has also been one statutory inspection, carried out on 30 October last year.
Of the remaining incidents of enforcement action, 28 instructions were delivered to companies at risk of non-compliance and 101 warning letters were issued for minor alleged breaches.
The 590 investigations include those formally instigated by the watchdog and those triggered by reports from whistleblowers.
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