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Auto Enrolment Penalties Explained

On this page, you can find out as little or as much as you'd like to know about the penalties your company, or a company you are advising, could face if auto enrolment duties are not properly discharged. If you have missed your staging date or think you might have, then head straight over to our What If I Miss My Staging Date article for a step by step guide to get you back on track and on your way to becoming compliant.

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Video: Auto Enrolment Penalties Explained In Under 90 Seconds

Transcript: Auto Enrolment Penalties
Explained In Under 90 Seconds

The Pensions Act 2008 set up UK Auto Enrolment and set out the penalties that can be imposed on companies by the Pensions Regulator for non compliance. The penalties can be significant; fines ranging from a flat £400, £50 a day up to £10,000 a day and even imprisonment for up to two years.

To date, the Pensions Regulator has sought to solve issues informally. But that will change as thousands of smaller, less prepared companies start to enrol.

To cope with the volume of anticipated fines, the Regulator has set up its own online penalty payment service.

The key to avoiding penalties is to:

  • Be set up correctly on time;
  • Remain compliant; and
  • To fix issues quickly (otherwise fines can build up every day that you are non compliant).

Our Knowledge Bank contains detailed explanations of penalties, and contains all the information you need to set up and run your own auto enrolment scheme.

To sign up, visit www.AutoEnrolment.co.uk now.

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1. Interactive Auto Enrolment Penalties Guide

2. Penalties - Key and FAQs

When it comes to penalties for Auto Enrolment there may be some questions that you have. We have compiled a list of FAQs below which should hopefully answer any of your queries, simply click on the section, then question relevant to you.

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  • help_outline The pension regulator:

    • Who is the Pensions Regulator?

      The Pensions Regulator is the UK regulator of work-based pension schemes. It was set up by the Pensions Act 2004. The Regulator is an executive non-departmental public body, sponsored by the Secretary of State for Work and Pensions.

      The Pensions Regulator is based in Brighton, and has around 350 staff.

      The Chief Executive of the Pensions Regulator is Lesley Titcomb (appointed 2 March 2015). Ms Titcomb was previously the Chief Operating Office of the Financial Conduct Authority.

    • Where does the Pensions Regulator's authority come from? How does the Regulator have the power to issue penalties, and fine or prosecute employers?

      Under the Pensions Act 2008, the Pensions Regulator was given a statutory objective to maximise employers' compliance under the legislation relating to automatic enrolment. The Regulator has powers to take enforcement measures such as issuing statutory notices, fines and even taking criminal prosecutions which derive from the Pensions Act 2008, the Pensions Act 2004, and earlier legislation.

      The Regulator primarily aims to stop problems from developing at an early stage.

      The Regulator states that it will

      "use our powers flexibly, reasonably and appropriately, with the aim of putting things right and keeping schemes, and employers on the right track for the long term"

      Source: The Pensions Regulator

    • Can the Regulator come and inspect my offices?

      Yes. If the Regulator is investigating you, it has various inspection powers which mean it can enter your offices to obtain information and documents. It may do this at any (reasonable) time.

  • help_outline Preventing fines and penalties:

    • How do I avoid getting a penalty?

      You may face penalties and enforcement action from the Pensions Regulator if you fail to fulfil your duties under the Pensions Acts 2004 and 2008 and regulations. To avoid being penalised you must:

      • Provide your employees with information about your duties;
      • Automatically enrol all your 'eligible workers' into a pension scheme (ie those who are above the earnings threshold and between 22 and state pension age);
      • Put all your non-eligible workers who decide to opt in, into the pension scheme;
      • Provide written confirmation to your eligible workers that they have been enrolled, and telling them how they can opt out if they want to;
      • Make sure any eligible worker who wishes to opt out from the scheme is removed, and their contributions refunded;
      • Submit a Declaration of Compliance to the Pensions Regulator, providing the required details of your scheme, such as the number of employees enrolled;
      • Automatically re-enrol eligible workers every three years, if they have not joined another pension scheme in the meantime, and renew their registration;
      • Keep records of the enrolment process (such as letters or communications you provide to employees).

      And you must not:

      • Induce your workers to opt out or cease their membership of the qualifying pension scheme.
      • Do (or fail to do) something which results in the worker ceasing to be a member of the pension scheme, while still employed by you.
      • Indicate during a recruitment process that a person's decision to opt out of automatic enrolment will affect whether you hire them or not.
    • How can Smart Pension help me avoid a penalty?

      At Smart Pension we've made fulfilling all your duties as easy as possible. You can set up your auto enrolment scheme in minutes, on any device. We do most of the leg work for you by:

      • enabling you to upload your employee data using your payroll provider, a spreadsheet or other easy formats;
      • automatically assessing your workforce and telling you who is an 'eligible worker';
      • generating letters with your logo to give to your employees to inform them about auto-enrolment, your duties and the scheme;
      • producing an employee information video for you (both English and Polish versions are available) to inform your employees about auto enrolment;
      • giving your employees the ability to manage their opt in or out status on their own;
      • automatically calculating your contributions based on your payroll;
      • many other easy-to-use and automatic features.

      Having created such an efficient and effective technology platform, in partnership with other leading British technology business, this means we can offer our service free to companies, with only a small fee paid by each employee based on the funds in their individual pension scheme. For more information on how we can help see here.

  • help_outline Types of penalty notices & fines:

    • What penalties could I face?

      The Pensions Regulator has a variety of powers to investigate, including the power to issue formal notices requesting information or warning of likely breaches, inspection powers, or to issue statutory notices where an employer has failed to meet its duties.

      The statutory notices the Regulator may issue are a Compliance Notice, Improvement Notice or an Unpaid Contributions Notice. These notices let an employer know that they are in default and that they must correct the situation and become compliant.

      The Regulator may also estimate your unpaid contributions, charge you interest on these, and recover unpaid contributions on behalf of scheme managers and trustees. If a statutory notice has been issued and not complied with, or there is sufficient evidence of a breach of the employer's obligations, the Regulator can issue a Penalty notice. The types of penalty notices include:

      • a Fixed Penalty Notice requiring payment of a fixed fine of £400;
      • an Escalating Penalty Notice imposing a penalty of £50 to £10,000 per day you are non-compliant (depending on how many workers you employ - see the rates here)
      • a Prohibited Recruitment Conduct Penalty Notice at a maximum of £5,000;
      • a Civil Penalty Notice (where contributions have not been paid). The relevant fine can be up to £5,000 per individual and £50,000 per organisation.

      If you fail to pay a penalty, the Regulator can take legal action to recover it from you. If you remain non-compliant, you could face a criminal prosecution and prison time of up to two years.

    • What is a formal notice?

      A formal notice is a letter issued by the Regulator requesting information or warning of likely breaches (but is not a Compliance Notice, Improvement Notice, Unpaid Contributions Notice, Prohibited Recruitment Conduct Notice or Penalty Notice which will inform you that the Regulator believes you have breached your duties).

      A formal notice is the earliest action the Regulator might take if it believes there might be a breach. If you have received a formal notice you should provide the information the Regulator has requested (if any) and take immediate steps to make sure you are fully compliant. Smart Pension can help you with this (see

    • What is a Compliance Notice, Improvement Notice or Unpaid Contributions Notice?

      The Regulator might issue a more formal letter to an employer, such as a Compliance Notice, Improvement Notice or an Unpaid Contributions Notice.

      If you have received one of these notices, it will be a formal letter from the Regulator telling you that it believes you are in violation of your duties under the Pensions Act. You should take steps to make yourself compliant as soon as you can.

      A Compliance Notice will tell you how the Regulator thinks you have breached your duties, give you a time frame to become compliant, and tell you what steps you must take (or refrain from taking). If the Regulator thinks the breach was caused by a third party, rather than by you, the notice will require the third party to take steps before a certain date. A Third Party Compliance Notice does not mean that you have breached your duties and is provided to you so that you are aware of the situation, and the failure of the third party.

      An Improvement Notice will come after you have received a Warning Notice. The letter will tell you how the Regulator thinks you have breached your duties, and require you to take certain action within a time frame.

      An Unpaid Contributions Notice will be issued if the Regulator thinks you have failed to pay contributions into the pension scheme. It will require you to pay the missing amount into the scheme by a certain date.

      If you have received an Unpaid Contributions Notice, the Regulator may also estimate and charge interest on unpaid contributions, and recover unpaid contributions on behalf of scheme managers and trustees. The Regulator will inform you if it is taking such steps.

    • What is a Prohibited Recruitment Conduct Notice?

      If you make any statement or ask any question during the process of recruiting a new employee, which indicates that the applicant may be given the job based on whether they will opt out of auto enrolment, this is a breach of the Pensions Act and will result in a Prohibited Recruitment Conduct Notice.

      This includes any statement made or question asked in asking for applications, requesting information, providing information or proposing terms and conditions of employment. A Prohibited Recruitment Conduct Notice will impose a fine of between £1,000 and £5,000 (depending on the number of workers employed).

      Number of employees Fixed Penalty (£)
      1-4 1,000
      5-49 1,500
      50-249 2,500
      250+ 5,000
    • What if I have received a Penalty Notice, but am still not compliant?

      If you remain non-compliant after a Penalty Notice has been issued, you could face a criminal prosecution, and a prison term of up to two years.

      If you have received a Penalty Notice you must become compliant as soon as possible (Smart Pension can assist you with this), and pay the penalty to the Pensions Regulator within the required time frame. You can do this online, through the Regulator's secure online payment service here.

    • How do I know if I've received a penalty?

      If the Regulator has issued you with a penalty, you will receive a letter informing you of the fine you must pay. This section I have received a letter from the Pensions Regulator which says I have not complied with some of my duties. What does this mean and what should I do? sets out the type of notices which might be issued by the Regulator, and what they mean. If you have received a penalty, the letter will be a Penalty Notice, and will state the fine or penalty the Regulatory has imposed, and the date by which it must be paid.

      If you do receive a notice you may be able to appeal it – please see How do I appeal an enforcement or penalty notice? If you have not yet receive any notice from the Regulator, you should make sure you are compliant by your staging date or if your staging date has already passed, as soon as possible – see What if I miss my staging date? and get your Declaration of Compliance submitted to the Regulator. The Declaration of Compliance is certain information you have to submit to the Regulator confirming you have complied with your duties, and can be submitted online at https://www.autoenrol.tpr.gov.uk

  • help_outline Consequences:

    • What if you miss your staging date?

      There are steps you will need to take if you have missed your staging date to get back on track and on your way to compliancy. See What If I Miss My Staging Date?.

    • What are the penalties for ignoring auto enrolment?

      If you ignore auto enrolment, miss your staging date, don't pay your contributions, and/or continue to ignore your duties, the Regulator will take stronger action against you – this could include fixed fines of £400, or between £5,000 and £50,000 and/or daily fines of between £50 to £10,000.

    • Can I really go to prison for failures in auto enrolment?

      Yes. If you persistently fail to comply with your auto enrolment duties as an employer, for example by failing to:

      • enrol your eligible workers;
      • automatically re-enrol those employees who have opted out every three years (unless they have joined another pension scheme); and/or
      • enrol an employee who is not an eligible worker but who has opted in to the workplace pension,

      you could receive a prison term of up to two years.

    • How long could I go to prison for?

      You could receive a prison term of up to two years as well as a fine.

    • What happens if I don't pay a fine from the Pensions Regulator?

      If you have received a Penalty Notice and you do not pay the fine, the Regulator can take legal action to recover the amount of the penalty (plus costs) from you, and could eventually take a criminal prosecution against you.

    • What level of Escalating Penalty could I receive for non-compliance?

      If you receive an Escalating Penalty, the rate will be determined by the number of employees you have. The table below shows the relevant daily rates by number of employees:

      Number Daily rate of Escalating Penalty (£)
      1-4 50
      5-49 500
      50-249 2,500
      250-499 5,000
      500 or more 10,000
    • What could happen if I have not been paying contributions into the pension scheme?

      If you have failed to make payment of contributions into the pension scheme the Regulator might issue you with an Unpaid Contributions Notice. This notice will require you to pay the missing amount into the scheme by a certain date.

      If you have received an Unpaid Contributions Notice, the Regulator may also estimate and charge interest on unpaid contributions, and recover unpaid contributions on behalf of scheme managers and trustees. The Regulator will inform you if it is taking such steps.

      Alternatively the Regulator may, in certain circumstances, issue you with a Civil Penalty. The Civil Penalty could be up to £5,000 in the case of an individual, and up to £50,000 for an entity.

    • When and why would I face a criminal prosecution and/or prison?

      If you are persistently non-compliant (for example, if you have received a penalty notice but have not paid the fine or become compliant) you could face a criminal prosecution and ultimately a prison term of up to two years.

      If you have received a Penalty Notice you should become compliant as soon as possible (Smart Pension can assist you with this), and pay the penalty to the Pensions Regulator. You can do this online, through the Regulator's secure online payment service.

  • help_outline Dealing with notices and fines:

    • I have received a letter from the Pensions Regulator which says I have not complied with some of my duties. What does this mean and what should I do?

      The Pensions Regulator may issue a number of different types of letters or notices, if it has reason to believe you have not complied with your duties. See the types of notices you might have received below.

    • I have received a penalty notice. How do I pay the fine to the Pensions Regulator?

      The Regulator has set up a secure online payment service here. You must pay the penalty before the deadline given in the notice.

      If you do not pay a penalty issued by the Regulator, the Regulator can take legal action to recover the amount of the penalty (plus costs) from you.

  • help_outline Appeals and deferring:

    • Can I delay auto enrolment if I can't afford to make the payments now?

      If your staging date has not yet passed, or was less than six weeks ago, you can postpone the automatic enrolment of your employees.

    • Can I get an extension on the deadline to pay a fine or penalty?

      Yes. If you are in financial difficulties, and payment of the penalty would cause serious financial hardship, the Regulator may agree to extend the time limit for payment. A financial hardship claim would need to be supported by documents like bank statements, certified account ledgers, and insolvency reports.

    • How do I appeal an enforcement or penalty notice?

      If you have received a statutory or penalty notice from the Pensions Regulator you may be able to appeal it. The notice you receive will set out your right to appeal, the deadline for you to appeal, and how to go about appealing. Generally, you must appeal within 28 days of the notice.

  • help_outline Managing employees:

    • Can I tell my employees not to opt-in?

      No. Telling or encouraging your employees not to opt-in is an offence, and could result in a fixed fine of £400, and/or an escalating fine of between £50 and £10,000 per day (see the rate which would apply to you here), and eventually a criminal prosecution and prison term if you continue to do it repeatedly.

    • Can I pay my employees to opt-out?

      No. Telling or encouraging your employees not to opt-in is an offence, and could result in a fixed fine of £400, and/or an escalating fine of between £50 and £10,000 per day (see the rate which would apply to you here), and eventually a criminal prosecution and prison term if you continue to do it repeatedly.

    • Can I hire a new employee because they agree to opt-out?

      No. Doing this would result in a Prohibited Recruitment Penalty Notice and a fine of between £1,000 and £5,000 (depending on your number of employees, starting at £1,000 for fewer than 4 employees, and £5,000 for 250 or more) for each instance.

    • Can I change my staff into contractors, so they don't qualify for auto enrolment?

      No. If your workers were employees, and their terms and conditions, or working practices remain those of employment, then under IR35 they will be treated as employees, and you will still be required to comply with auto enrolment and fulfil your duties.

    • My staff are all from Eastern Europe and elsewhere in the E.U. Will I get a fine if I don't enrol them?

      If your employees work in the UK, and are "eligible employees" - that is they are between the ages of 22 and the state pension age (currently 74), and earn above the earnings threshold (currently £10,000), you must enrol them. It does not matter whether they are from outside of the U.K.

  • help_outline Whistleblowing:

    • Can employees report me for breaches – i.e. whistleblowing?

      Yes. Employees can anonymously report breaches of auto enrolment duties to the Regulator. The Regulator has set up an online whistleblowing service, and many of the enforcement actions take to date by the Regulator have originated through whistleblowing.

    • Can other third parties report me for breaches – i.e. whistleblowing?

      Yes. In fact most auditors, actuaries, trustees, managers, other professionals and some other advisers will have a statutory duty to report any breaches they become aware of.

3. Official Guidance Documents

Whilst we have done our best to explain the penalties that you could face, you must not rely on us to be 100% right and should do your own research. Compliance is the responsibility of the individual company concerned.

There are excellent sources of information from the government and other sources on our Government Guidance & Other Helpful Links & Documents section of our Knowledge Bank. You may also want to visit our Frequently Asked Questions section, where you can also ask us a question.

We hope you have found this page useful. If you think any key information on penalties is missing, please let us know.

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