17/09/2014
By Nick Ayton, Managing Director, Friendly Pensions
The law is perfectly clear that all employers must put in place a qualifying workplace pension scheme for any eligible jobholders who earn over £10,000 per year and are aged between 22 and the state pension age. But it is also clear that despite this being mandatory, SMEs are really struggling and some are simply unable to comply even though fines are very large.
It is important that auto enrolment is successful and that employers, advisers and intermediaries take this seriously and be compliant. It is only because of an approaching election that we haven’t seen the pension regulator take more SMEs to task and hand out fines, albeit an increasing number of businesses are now under investigation.
Although it is the first time for the UK, other countries have already been through their version of auto enrolment with a high degree of success. In Australia, Superannuation was introduced in 1992 and although it took a few years for employees to get used to compulsory contribution they now have one of the best funded retirement systems in the world.
It too was overseen by a regulator with little enthusiasm to enforce the legislation, and so the government took the step of shifting the responsibility for compliance to the tax authorities and it worked. Non-compliance rates tumbled and ultimately the result of superannuation has been dramatic. Australians currently have over 1.6 trillion Australian Dollars in superannuation assets, making them an indirect shareholder society.
We suspect the same will happen here in the UK, with the role of overseeing auto enrolment passed from the Pensions Regulator to HMRC; a government department that is well known for its ability to inflict a painful bite. This would be a real game changer and a welcome move by many in the industry.
The fact is, auto-enrolment is law and our concern remains it is beyond some, and not on the radar of others and many owner directors will continue to get caught out.
