These businesses – with between 50 and 250 employees – had a maximum of five months to register their AE schemes after their staging date, so 1 September was a key AE milestone. In short, the Pensions Regulator now knows how many April stagers have failed to register.
The likelihood, according to informed industry players, such as Standard Life, Aviva, The People’s Pension, NEST, is that thousands of businesses have missed their deadlines.
This is hardly the response expected by the government to what is, arguably, its most radical and potentially long-lasting legislative initiative.
The prospect of mass disobedience by employers is inconceivable. AE has cross-party support and is seen as the last resort before the imposition of compulsory pension saving.
The April no-show is, almost certainly, going to be matched by the May and July tranches. A 10% failure rate would run to some 3,000 companies, representing around 250,000 employees.
These 2014 miscreants aren’t micro enterprises. They may not have dedicated in-house HR professionals, but they’ll certainly have suitably savvy financially-focused executives. If these outfits can’t or won’t get their AE act together and if the regulator fails to bring them to heel, what hope is there for the 2015/2016 entrants with less than 50 staff?
Of course, the regulator has the power to enforce compliance. So far, it’s been a case of light touch rather than big stick, but faced with thousands of cases, the regulator must surely start issuing blanket fixed penalties.
During enforcement, the regulator has a deal of discretion available to it in relation to backdating workforce assessments and paying premiums. In principle, it can require non-compliant firms to backdate their scheme operation to the original staging date, even if the firm wanted to use the three-month postponement option.
It can also require the employer to pay both employer and employee premiums for the whole of the missing period. Backdating can, therefore, carry a significant cost burden.
But it’s the administrative cost of conducting the backdated workforce assessments that may be far more expensive. Each missing pay period will have to be examined in sequence to determine who should have been auto-enrolled and to compute their premiums.
Faced with a significant number of non-compliant firms, the regulator is unlikely to allow much discretion to its inspectors, needing to be seen to be consistent and fair to all. I believe the regulator will find its hands tied and left to apply the letter of the law.
It’s not too dramatic to say that the final quarter or 2014 will decide the future of pensions savings for millions of UK workers. If the government fails to address adequately the immediate backlog, then AE is sure to fail in the long term, with the haves and have-nots in retirement saving continuing to be divided according to their employer’s commitment and resources.
And this social injustice will prompt the only alternative – compulsory saving via PAYE. Yet even this approach won’t prevent many of the most disadvantaged from falling through the cracks.
Derek Miles is the MD of Aspira
