How to avoid fines from The Pensions Regulator

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Employers must comply with their automatic enrolment (AE) pension duties or risk a fine. That’s according to a new warning from The Pensions Regulator (TPR).

During the cost of living crisis, nobody wants to face an unexpected penalty. So if you’re an employer, what does the warning mean for you?

How TPR compliance inspections work

TPR is the regulator of work-based pension schemes in the UK. In 2022 more than 20 large UK employers went through an in-depth compliance inspection to check they were fulfilling their AE duties.

What TPR’s compliance inspections found

TPR’s latest inspections found common errors including:

  • calculating pensions contributions incorrectly
  • errors in communications to staff
  • skipping steps in complying with ongoing pensions duties.

The firms under inspection had all successfully enrolled eligible staff into a pension and were making contributions. But administrative errors with their ongoing pensions duties were picked up by TPR. And these errors could put staff at risk of not getting the pensions they’re due.

These large employers aren’t the only ones making mistakes with their workplace pensions. In the first six months of 2022, TPR issued:

  • 20,382 compliance notices
  • 13,604 unpaid contribution notices
  • 15,302 fixed penalty notices
  • 5,918 escalating penalty notices

TPR warns mistakes can be costly

TPR’s Director of AE, Mel Charles said: “The vast majority of employers are successfully meeting their automatic enrolment duties, however administrative mistakes can put staff at risk of missing out on their pensions and employers at risk of unintended non-compliance.

“While the errors we have found are technical in nature, these types of oversights can indicate broader non-compliance issues.

“Correcting these mistakes can be costly for employers because as well as needing to make backdated payments for staff receiving incorrect contributions, they can also lead to financial penalty.”

The firms investigated, from the transport, hospitality, finance and retail sectors, have now corrected or are working to correct the errors found – including making backdated contributions.

What you can learn from TPR’s findings

Whatever size employer you are, check you’re following TPR’s tips to avoid fines and/or paying out to fix errors:

  • Use email to tell employees how auto enrolment affects them, rather than just publishing information online. Online is fine for communicating more general pensions information. Check TPR guidance about communicating to employees. If your pension scheme is with NOW: Pensions, we’ll do this for you so you don’t need to worry about it.
  • Check TPR guidance when telling employees whether their scheme uses relief at source or net pay arrangements. Again, if your pension scheme is with us, we’ll let members know we use a net pay arrangement.
  • Check you’re using correct qualifying earnings thresholds. Qualifying earnings are all an employee’s earnings between a lower and upper limit set by the government and reviewed each year.
  • Check government guidance on maternity pay  - miscalculating this can impact pensions contributions. As long as employees stay in the scheme, employers should continue to pay contributions based on their pensionable earnings before they started parental leave. An employee’s contributions will be based on their actual earnings during parental leave. For example, if an employee is getting statutory maternity or paternity pay, this is what their contributions will be based on.
  • Employers must carry out re-enrolment every three years. Use the chance to check your systems and processes are up to date and running well.

If NOW: Pensions runs your pension scheme and you have a question about your AE duties, get in touch with our client services team today.

Read TPR’s compliance and enforcement bulletin