AE compliance action holds steady amid calls to expand

Figures released by the regulator this week showed 6,296 compliance notices and 2,919 fixed penalty notices were issued to employers in the final quarter of 2016.

The income level below which employees are excluded from auto-enrolment is too high. This has meant a large number of employees in all sizes of firms have been excluded

Bob Scott, ACA

This is less than the respective 15,073 and 3,728 for Q3 2016, but roughly double the compliance notice figures for each of the first two quarters of the year, and more than triple the number of fixed penalty notices.

Charles Counsell, executive director of auto-enrolment for the regulator, said the fines were “increasing in line with the number of employers”.

He added that while the numbers remained steady, the behaviour of employers had become more nuanced.

“What is clear is there is a difference in the behaviour of the micro employers,” he said. “They behave much more like individuals: some people start preparing as soon as they can and others leave it to the last minute.”

While the regulator releases figures for the number of employers who have declared compliance and the different enforcement actions taken, the enforcement process itself has a staggering effect on these figures, making it difficult to calculate enforcement as a proportion of overall employers due to stage.

Counsell explained: “Employers have a staging date, [within five months] they have to declare their compliance to us. If they have failed to declare we would issue a compliance notice, which gives them a new date… if they haven’t complied at the end of that period we would issue a fixed penalty notice.”

He added that employers would be required to backdate their contributions to their staging date.

Widening the net

The Association of Consulting Actuaries this week released its own report on auto-enrolment and called for action to widen the scope of the policy and raise contributions.

The survey was conducted of 455 UK smaller companies, and found opt-outs were lower than predicted among firms with fewer than 10 workers, at between 21 per cent and 25 per cent rather than the predicted 31 per cent to 35 per cent.

However, it also found between 36 per cent and 40 per cent of employees at the smallest companies were typically ineligible for auto-enrolment. For this reason, the association is advocating a lowering of the income level at which employees are eligible for auto-enrolment.

Bob Scott, chair of the ACA, said: “Auto-enrolment has been very successful so far, opt-out rates have been lower than predicted and compliance has been very high. Our concern is as you move into very small employers, opt-outs will increase.”

In the introduction to the report, Scott said: “The income level below which employees are excluded from auto-enrolment is too high. This has meant a large number of employees in all sizes of firms have been excluded.”

He added the number of ineligible workers was “not far short” of those added by auto-enrolment.

Rachel Vahey, product technical manager at investment wrap platform Nucleus Financial, supported the call for a lowered cap, and said efforts should be made to bring the self-employed into the policy.

“We need to find a way of auto-enrolling them, as there are too many self-employed who aren’t saving for their future,” she said.

*An earlier version of this article miscalculated the number of employers who had declared compliance, this has now been corrected.