17 June 2020
Law at Work - June 2020 – 2 of 5 Insights
The government has introduced many measures to help businesses through these tough economic times, but an important area that has continued to apply unchanged (other than some easements around payment timings) is employers' pension obligations under auto enrolment. Here, with a defined contribution context in mind, we look at some of the key issues on that and why it is important for employers to be vigilant about complying with auto enrolment.
The Pensions Regulator has issued some useful COVID-19 guidance on dealing with auto enrolment during this period, including in relation to employees who have been furloughed under the Coronavirus Job Retention Scheme (CJRS).
It has just updated this guidance to recognise that:
In particular, it includes more detailed information about the pensions element of the CJRS available for claims ending before 1 August 2020 and also, more generally, guidance on an employer’s automatic enrolment duties for staff on furlough.
Some key practical points are:
The Pensions Regulator has various powers in relation to noncompliance with auto enrolment which include issuing compliance notices, fixed penalty and escalating penalty notices (which range from £50 a day for smaller employers to £10,000 a day for the largest). There are also possible criminal offences where there has been "wilful" default.
Quite aside from that there is the possible reputational damage of being subject to regulatory action as well as HR issues particularly if, for example, contributions are not paid correctly and/or on time.
Further, there have been recent Pensions Ombudsman1 decisions in relation to non compliance where he has explicitly said he would refer these cases to the Pensions Regulator, which would probably trigger further regulatory investigation and possible action.
For example, the case of Mr S (PO-26563) in relation to unpaid contributions where the Pensions Ombudsman made a decision against the employer for maladministration, with an additional award for the complainant for exceptional distress and inconvenience.
Though these cases seem quite extreme (in the case mentioned in the footnote the employer failed to respond to correspondence even from the Pensions Ombudsman's office on multiple occasions), this illustrates an additional member/employee driven way in which non compliance could be drawn to the attention of the Pensions Regulator. There is an agreement in place between the Pensions Ombudsman and the Pensions Regulator about sharing information but it is notable in these recent cases that the Ombudsman has been explicit in saying he will report.
The Pensions Regulator has said that it "will take a proportionate and risk-based approach towards enforcement decisions, in light of these challenging times, with the aim of supporting both employers and savers". It has also provided for some more specific easements, currently until 30 June 2020, in relation to reporting breaches and enforcement. Further, the Pensions Ombudsman office has said it will "continue to take account of the latest guidance from The Pensions Regulator to allow for possible effects that the current situation is having on stakeholders and customers". However, the fact that the Pensions Regulator has not excluded enforcement action completely means that employers must do all they can to comply fully with the requirements.
by Multiple authors