A new tax year brings new pension contribution changes. In celebration of a raise in minimum auto-enrolment pension contributions, RP’s sister publication Professional Adviser put together five of the most interest facts about automatic enrolment (AE).
On Friday, minimum workplace pension contributions rose to 5% after being at 2% of qualifying earnings since the inception of the government policy in 2012.
Employers now have a duty to contribute a minimum of 2%, and employees will make up the further 3% to reach 5%.
However, if an employer chooses to contribution more, for example, 3%, the employee will only have to contribute 2% to bring them up to the threshold.
In April 2019, minimum contributions are set to rise again to a minimum of 8%.
In celebration, RP’s sister publication Professional Adviser put together five key facts about the policy that changed the face of pensions.
1. Friday’s increase makes the average earner £36,000 better off
Research carried out by Aviva found those earning the UK average annual salary of £26,572 will be £36,000 better off in retirement if they began saving when automatic enrolment began, more than doubling their pot size from £30,000 to £66,000.
2. Automatic enrolment has reached the millions
Latest figures from The Pensions Regulator (TPR) have shown that more than one million employers have enrolled staff into a workplace pension – 1,110,865, to be precise – meaning 9,431,000 employees are now paying into a pension as a result of the policy.
3. Millions of pounds have been issued in fines
Since the inception of AE, TPR has handed out nearly £13m in fixed penalty notice fines alone.
A fixed penalty notice is first fine the regulator can hand out to a firm that is failing to comply with its AE duties.
Before the fine is issued, TPR will contact the firm numerous times via letters and email before sending them a compliance notice. If they fail to respond, a £400 fine will be issued. So far, TPR has issued £12,884,400 in these smaller fines alone.
If a firm then fails to pay the £400 and comply, an escalating penalty notice can be issued and the firm can be fined anywhere between £50 and £10,000 per day, depending on its size.
4. TPR has taken 233 non-compliant firms to court
Since 2012, TPR has taken a variety of firms of all sizes across the UK to court, including Cromwell Care Home, that had to pay a fine of £52,500; Aberdeen-based cleaning service R and B Services, that had a fine of £52,500; and Air India, that had to pay £24,500.
5. Of all non-compliant employers being prosecuted, just one plead guilty
Oldham-based Stotts Tours bus company had a staging date of June 2015. Despite receiving letters and emails about their AE duties from TPR, they failed to meet their declaration of compliance. The firm eventually racked up a fine of £14,000 and, following an inspection in November 2016, TPR brought a criminal case against the firm.
Managing director Alan Stott pleaded guilty to 16 offences of wilful non-compliance of AE duties.
On 7 February this year, the judge ordered the company to pay a £27,000 fine, £7,400 and a £120 victim surcharge.
Stott was ordered to pay a £4,455 fine and a £120 victim surge, all in addition to the £14,000 in civil fines that Stott Tours already owed for failing to comply with the law on AE.