Latest figures from the Pensions Regulator’s annual report show there remain some concerns about employers meeting their auto-enrolment duties.
However, these findings come against a more positive broader picture, which show AE has resulted in a significant increase in the number of people saving into a workplace pension.
Headline figures from the report show 87 per cent of UK employees are now enrolled into a pension, up from 55 per cent in 2012, when AE was introduced. In the private sector this figure has risen from 42 per cent in 2012 to 85 per cent in 2019.
In total there were 10 million staff automatically enrolled into workplace pensions – up from 1 million in 2013.
However, there remain concerns from some in the industry about the burden this has placed on employers. The report shows that the majority of SMEs report that they do not find it difficult to keep up with ongoing AE duties.
In total, just 7 per cent of micro sized companies, 4 per cent of small companies and 1 per cent of medium-sized companies said their organisations found it difficult to keep up with their AE reponsibilities.
In contrast, 38 per cent of micro-sized companies, 44 per cent of small companies and 52 per cent of medium-sized companies ‘strongly disagreed’ with this statement.
The report also showed that the majority of these SMEs found their ongoing duties less than they had expected. These figures are taken from a broader survey of Employer Automatic Enrolment Ongoing Duties (Winter 2019)
However beneath these headline figures, TPR’s data shows there is a lack of awareness of some key AE responsibilities. For example, 30 per cent of employers were unaware of the precise details of their re-enrolment duties.
There are also concerns that many employers anticipated AE would be hugely disruptive so the fact it has been ‘less onerous’ does not necessarily mean that it is not causing problems for some.
This survey also found that the majority of employers claim not to pay anyone outside of their organisation to assist them with completing their AE duties. This was cited by 60 per cent of micro, 56 per cent of small businesses and 67 per cent of medium-sized employers.
However this figures does not take into account that fact that from many SMEs their AE duties are performed by payroll operators.
For these employers, they can only take it on trust that payroll operators are performing these delegated duties correctly, and there is clearly risk of responsibilities falling in the cracks between employer and payroll operator, particularly given the complex nature of AE rules and guidance.
The TPR publishes 11 separate detailed guidance documents on AE (each 20-30 pages long) and nine further appendices of similar length, which could leave some smaller enterprises struggling, despite their assertions that they feel they are completing their duties correctly.
Brendan Shanks, chief executive of Husky, a business that helps firms remain compliant with AE duties says: “Of the 1000 plus employers we have onboarded, many have come to us to assist with an existing workplace pension arrangement, and of this cohort, we have seen significant errors across nearly half those firms.
“Given the complexity of the legislation, it is no wonder businesses struggle to get it right, but it’s worrying that so many employers feel everything is being done correctly.
“We have no doubt firms are getting the basics right much of the time, but the risks of getting more detailed aspects of the scheme administration wrong can be far-reaching.
“For example, we have come across many cases where the wrong tax treatment is being applied, resulting in either underpayment of tax or employees not receiving the full contributions they are due.”
He called for the TPR to do further research to confirm that employers’ assertions that they are managing ongoing AE duties are correct.
He adds: “Part of the the employer’s duties is record-keeping but in our experience, if you ask for evidence of, or copies of, the AE letters/communications to workers, it is rare an employer can produce these or as importantly, evidence them being sent.”