Automatic enrolment employer penalties spike as re-enrolment dates hit and businesses face economic pain

• The Pensions Regulator issued 17,962 ‘Unpaid Contribution Notices’ to firms from July to December 2022, up from 13,604 in the previous period (https://www.thepensionsregulator.gov.uk/en/document-library/enforcement-activity/enforcement-bulletins/compliance-and-enforcement-bulletin-july-to-december-2022)
• Compliance Notices, Fixed Penalty Notices and Escalating Penalty Notices have also all spiked substantially during this period
• Rise in regulatory sanctions primarily due to large numbers of firms being required to re-enrol staff into pensions
• However, the economic pain facing businesses is also likely a factor in non-compliance jump

Tom Selby, head of retirement policy at AJ Bell, comments:

“It is clearly concerning that the number of firms found to be failing to pay the correct pension contributions to staff spiked so significantly in the second half of 2022. It is absolutely vital workers who are entitled to workplace pension contributions receive these as expected if trust in the wider pensions system is to be protected. Other regulatory notices, including those which come with potentially substantial fines for businesses, also jumped markedly in the six months to December 2022.

“This is undoubtedly in large part due to the fact over 100% more firms were required to redeclare their compliance with auto-enrolment rules during the period. These small and micro firms are less likely to have HR departments who are able to deal with their legal obligations, and therefore potentially are more likely to fail, in many cases accidentally, to comply with the rules.

“However, it is also undoubtedly the case that rising inflation and spiking interest rates are heaping huge extra pressure on businesses, and in such an environment it is perhaps inevitable non-compliance will rise. It is critical that all firms are given sufficient information to correct any mistakes and feel a genuine threat of enforcement action, including potential fines, from the regulator if they persistently fail to meet their auto-enrolment duties.”