Insolvent Employers still have Auto Enrolment obligations!

Between now and 2018 1.3 million businesses with 50 employees or less will have to face up to the reality of implementing a company pension scheme that meets Auto Enrolment criteria. The Pensions Regulator (tPR) has recently published some guidance for insolvent companies surrounding Auto Enrolment, reiterating the guidance that Clumber Consultancy have been providing to insolvency practitioners.

The problem for insolvent or dissolved companies is that tPR have taken company data from HMRC’s PAYE records as at 1 April 2012. As tPR won’t be able to check with Companies House that the companies are still trading, they will be sending letters to companies which are insolvent or even dissolved. With fixed penalty notices of £400 and a further threat of daily fines of up to £10,000 per day for continued non-compliance, insolvency practitioners need to know what actions to take regarding Auto Enrolment.

How Auto Enrolment Works

The Pensions Regulator, which is enforcing Auto Enrolment, will write to each Employer 12 months before their Staging Date (company pension scheme implementation date) advising of their forthcoming Auto Enrolment duties and the consequences for non-compliance.

If tPR does not receive a Declaration of Compliance from the Employer 5 months after the Staging Date, a fixed penalty notice of £400 will be posted to the Employer along with the further threat of daily fines up to £10,000 per day for continued non-compliance.

Implications for Insolvency Practitioners

In the last Compliance and Enforcement quarterly bulletin published by tPR not only did they highlight that the number of fixed penalty notices issued had increased to 169, but there was also a full page dedicated to insolvent employers. TPR stated that “following their appointment, insolvency practitioners should get in touch with us to nominate themselves as the primary contact to ensure they receive important communications from the regulator about automatic enrolment.” This is certainly more pertinent where the company is trading, may continue to trade or be purchased and has employees to enrol. However, TPR also acknowledged insolvent employers that have ceased trading and go on to state: “It’s also important that insolvency practitioners contact us if an employer ceases to employ staff (whether because they have all been made redundant or transferred to another employer) so that we can update our records and ensure no further direct communication activity is attempted with that employer.”

When asked about fixed penalty notices and whether they can be served on insolvency practitioners tPR stated “in regard to fixed penalty notices, tPR does have the power to apply them, however we do intend on being proportionate, accountable, consistent, transparent and targeted.” We would therefore urge insolvency practitioners to be vigilant and cover auto enrolment on every corporate insolvency appointment to avoid such letters being sent out and in particular the threat of fixed penalty notices.

What Actions Should IP’s Take?

Insolvency Practitioners should contact tPR as soon as they have been appointed. We have designed two templates which you can use to do this, together with pensions check lists for insolvent companies.

Darren Toms of Clumber Consultancy recently delivered a very informative webinar about Auto Enrolment for Insolvency Practitioners belonging to the ICAEW which can be viewed here.