Old books on wooden table

Auto-enrolment-The story so far

It has almost been 3 years since employers took their first tentative steps into the world of auto enrolment (AE). 54,224 employers have so far confirmed they are AE compliant and 5,358,000 [1] eligible jobholders have been auto enrolled. On the flip side the Pensions Regulator has also issued 1,682 compliance notices in the last 12 months to encourage less engaged employers to comply.

In context, these figures could be viewed as a reasonable success. However, a further 1.75 million small, micro and new employers are still due to auto enrol by the end of 2018. In addition, some of the 54,224 employers will now need to switch their focus to issues of re-enrolment. The Regulator discusses re-enrolment of eligible jobholders who have opted out of pension saving [2] and those forced to stop pension saving because of an action of a third party (usually the employer) [3]. This blog deals with the former.

So what is re-enrolment?

Broadly, employers who have already auto enrolled need to ensure they re-enrol every three years. This process cannot be postponed. The re-enrolment process requires employers to automatically enrol eligible jobholders who have opted out of pension saving over 12 months prior to the re enrolment date.

A key difference in the re-enrolment process is that employers have some choice over the date of the assessment. Generally this will be welcomed by employers who can align their re enrolment date with their individual business processes (e.g. the start of their financial year, first day of a pay reference period or to enable them to avoid seasonal peaks of employment). However, the degree of choice over the date will be dependent upon the individual circumstances of the employer.

What’s in a re-enrolment date?

Any date chosen by employers does not need to be communicated to the Regulator until the re-declaration of compliance is given but it has to comply with relevant criteria:

  • the date needs to be within a re-enrolment window which operates three months either side of the three year anniversary of the original staging date
  • a re-declaration of compliance must be submitted within 2 months of the re-enrolment date if there are staff to re-enrol or by the day before the third anniversary of the employer’s original declaration of compliance if no workers are re-enrolled

So what issues could this give employers?

By way of an example:

  • Employer A has a staging date of 1 February 2013 and postponed this until 12 April 2013. It submitted its declaration of compliance on 15 April 2013 (within 4 months of the staging date).
  • The re-enrolment window is between 1 November 2015 and 1 May 2016.
  • Employer A could choose a re-enrolment date of 30 April 2016 to fit in with its year end.
  • A re-declaration of compliance would be required by 14 April 2016.

In the above example, although the re-enrolment date would be within the re-enrolment window, it would be after the deadline for the re-declaration of compliance and therefore mean the employer was in breach.

Additionally depending upon whether the employer’s original staging date was before or after 1 January 2015, employers would have originally had either 4 or 5 months to submit their original declaration of compliance which may further complicate matters.

…And there’s more…

Previously, the majority of DB schemes qualified automatically as AE schemes because they were contracted out. However, the abolition of contracting out in April 2016 will mean that these schemes will need to meet specific quality standards. New alternative DB scheme tests have been available since 1 April 2015 and will need to be considered by relevant employers in advance of April 2016.

Regulatory enforcement guidance

The Regulator has also deemed it an appropriate point to publish new guidance [4] to clarify how it will exercise its enforcement powers in relation to AE and re-enrolment breaches.

Broadly, the Regulator will consider a number of factors including the materiality of the breach, whether the breach had been brought to the Regulator’s attention and whether the breach was deliberate.

Next steps

With the further complexities outlined above it is not hard to see how employers may inadvertently breach the re-enrolment requirements. However, with a little advanced planning, employers should be able to avoid becoming another Regulator enforcement statistic.

This post was contributed by Suresh Bhatt. For more information, email blogs@gateleyplc.com.

[1] Declaration of compliance report July 2012-July 2015 published by the Pensions Regulator (August 2015)

[2] ‘Cyclical enrolment’ as described by the Pensions Regulator in Detailed Guidance for Employers 11

[3] ‘immediate enrolment’ as described by the Pensions Regulator in Detailed Guidance for Employers 11

[4] Compliance and Enforcement Strategy for employers subject to auto enrolment duties–July 2015

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.