A couple of new Auto-Enrolment (AE) news items have been flagged with me by colleagues and friends over the last week.

The first, which I think has been widely reported, was a recent decision by the Supreme Court (with the catchy name of Clyde & Co LLP and another v Bates van Winkelhof). Although this case was not about pensions, it may result in LLP members being treated as “workers” for Auto-Enrolment purposes. We are awaiting clarification from The Pensions Regulator on this, and I will update the blog once this is known.

The second item has received less air-play, yet may be very significant.

It’s been reported by Corporate Adviser Magazine that some large pension providers (including the likes of NEST and major insurers) have found that many of the employers due to undertake enrolment in April 2014 have yet to materialise as active schemes. The full article can be viewed here: http://goo.gl/456RF5

As the article acknowledges, it may well be that these employers are using their full three-month postponement window, and are therefore not yet required to undertake the actual enrolment process. This may well be true, but employers are still required to have a scheme in place for any “opt-ins” during the postponement window. If the major insurers are not yet aware of the schemes going “live”, then it seems unlikely that employers are fulfilling all of their duties adequately.

What we may be witnessing here is the first step towards a potentially massive wave of non-compliance by smaller employers. At the beginning of 2013 I guest-spoke at an event and was stunned at how brazen some of the audience were with regard to their intended non-compliance, or planned legal avoidance, of their AE duties.

Part of the problem here may be the recent history of pension legislation – and Stakeholder pensions in particular. It is a matter of fact that many employers never complied with their Stakeholder requirements at all – and were not made to pay any tangible penalty for their transgression by the regulators. So it’s possible that employers may feel that AE can also be similarly ignored.

However, there are important differences between the two regimes.

Stakeholder pensions did not require an employer pension contribution. Therefore it was unlikely that employees were materially disadvantaged by their employer not offering such a scheme. It’s also worth mentioning that an employee who wanted to join a Stakeholder scheme had to take action to do so. So for employers where no requests for pension’s membership were recorded it would be difficult to prove any tangible loss for the consumer.

AE is a very different animal, and carries with it a legal right to an employer contribution for the employee, and automatic membership managed by the employer. Quantifying a disadvantage to an employee (or indeed all employees) will be a very much easier process.

Given this, it follows that much more stringent action and regulation is likely to apply under the AE rules. The only real question may be when (not if) a harder-line on compliance will become visible to employers.

So, if you are in the “wilful non-compliance” camp, now might be a good time to revisit that decision.

Best regards

Steve