‘Limited understanding’ of responsibilities will cost micro-businesses dear, as Lloyds is hit with pension discrimination tribunal
Britain’s smallest businesses could be slapped with fines of up to £22m between now and the end of next year because they are still unaware of their pensions auto-enrolment responsibilities.
Around 55,000 of the UK’s micro-businesses (21 per cent of the total) have only a “limited understanding” of their upcoming duty to provide staff with a pension, according to pension software provider Paycircle’s analysis of Pensions Regulator data.
There are 262,000 micro-businesses (employing one to four people) among the 1.8 million employers required to begin rolling out a workplace pension between now and 2018. Paycircle calculates that, without taking remedial action, companies collectively risk around £22m in fines for non-compliance.
Charles Counsell, executive director for automatic enrolment at The Pensions Regulator, said: “The law is the law. While the vast majority of employers are complying with it, some small employers are still risking fines by failing to understand how it affects them.”
Last week, the regulator published data on non-compliance for the second quarter of this year, which showed it had to use its powers 4,489 times, up from 4,161 occasions in the previous quarter.
Trent Lyons, financial analyst at Chiene + Tait Financial Planning, said: "Communication from the government probably hasn't been great, but that's no excuse for very small employers not to be on top of things. It can take three to four months to set up a proper scheme. But just as importantly, scheme providers themselves will only be able to take on so much new business the nearer the deadline looms. Those who leave it too late may find a provider is unable to work with them in time."
Meanwhile, Lloyds Bank is set to face an employment tribunal over the terms of its Guaranteed Minimum Pensions (GMP) payments, which mean around 148,000 active, deferred or retired female workers currently see their defined benefit pensions accrue at a slower rate than male colleagues in the same scheme.
Under the terms of those joining Lloyds’ final salary pension schemes before 6 April 1997, female workers' GMP starts being paid on their 60th birthday, while GMP is not paid to men until their 65th birthday. Unlike the state pension age, GMP payment ages are not being equalised.
This means between the ages of 60 and 65 a man’s pension is increased at a greater rate than a woman’s. From 65, a larger portion of a man’s pension carries on growing at the higher rate that applies to excess over GMP. Lawyers representing the Lloyds Trade Union (LTU) say this amounts to sex discrimination.
LTU general secretary Mark Brown said: “LTU is putting together a class action lawsuit to present to the employment tribunal on behalf of female members who are the victims of discrimination. We estimate the difference could be worth up to £2,000 per female member of staff. The LTU believes the difference is unacceptable and the issue needs to be resolved once and for all.”