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Recent figures from The Pensions Regulator (TPR) revealed that the number of businesses failing to meet their auto enrolment (AE) obligations increased fourfold in the 2015-2016 financial year.
And, for those failing to comply there are, as the UK Business Forums (UKBF) user Paul Norman wrote, some “fairly proper penalties lurking for people who mess this up”.
The “proper penalties” Norman references are the penalties TPR has at its disposal when an employer falls foul of pensions regulations.
At first, an employer will receive what is known as a statutory notice. These come in different forms - TPR details the full list on their website - but, in essence, they will explain what actions need to be taken to avoid the next level of penalty.
The next level is a fixed penalty notice (FPN), which comes in at £400. Further non-compliance is followed by an escalating penalty notice (EPN) which levies a daily ‘rate’ determined by your PAYE scheme (see the chart below).
Number of persons
1 - 4
5 - 49
500 or more
According to UKBF’s members, it’s a general confusion rather than wilful non-compliance that’s tripping employers up. “Too many businesses still have no idea about AE and the employer’s duties, some are missing their deadlines and incurring fines,” wrote UKBF user Consultant.
For the completely confused, professional advice is an option. Norman, who runs an ecommerce business called OrangeZone, avoided penalties by using specialist financial advisers (IFAs). “They have sorted the whole thing out for what is, to me, a reasonable fee. So, all in all, it was much less of a headache than I had imagined.”
Norman was willing to pay the fee offered by the advisers he consulted, but for some he admits it will be expensive.
But IFAs aren’t the only option; your accountant could also help if you’re struggling. UKBF member SteLacca is an accountant who has had two clients stage. “We do the assessment and pension comps,” said SteLacca.
“I get as involved as I need to. I prefer to leave the setting up of the pension scheme to the employer, though we have some very small employers due to stage in the next few months and certainly for some of them I'll have to manage the whole process for them.
“I'm comfortable with it, just not over the moon about it. Other accountants offering payroll or tax services tend to be comfortable.”
As Henry Tapper of Pension PlayPen explained on AccountingWEB, “Legally there is nothing prohibiting an accountant from giving auto enrolment advice. As long as it’s done on a business-to-business basis and the end customer is the employer and not the individual employees, it does not need to be regulated.”
But for other business owners, it seems AE isn’t yet a concern. “I've got another year until my staging date so I haven't even looked at it yet,” wrote the user BustersDogs. “Ask again in 18 months!”
Interesting read Francois
So this pension scheme is quite confusing. I've had people phone me and insist I've got to sign up, but as I understand it if you haven't a PAYE scheme because you only employ part timers below threshold then you're not obliged. Is this correct?
Interesting question phatchef, do you not even pay yourself more than 112 a week?
First is finding out your staging date (the date which you need to provide pensions to your staff).
For part timers it is a little more complicated as it would depend on how much they earn in a specific pay period.
It would be best to speak to a professional with regards to how it will apply in your case.
Any further queries, let me know.