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A new and potentially expensive area of professional negligence

View profile for Richard Kerry
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As all employers should know by now, legislation requires every employer to automatically enrol workers into a workplace pension scheme if those workers:

  • are aged between 22 and State Pension age;
  • earn more than £10,000 a year; and
  • work in the UK.

This is called ‘automatic enrolment’.

Many employers will have approached independent financial advisors (IFAs) to set up their schemes. Unfortunately, even the best professionals can sometimes negligently and/or accidentally fail to match the standard of service that their clients are entitled to expect. In those circumstances it is usually the client that loses money. If an employer pays an IFA to assist them and then suffers a financial loss because of that professional’s negligence, the employer may have a claim for compensation against that IFA.

A significant number of Fixed Penalty Notices (£400 fines) have already been issued to employers who have missed the deadline to submit their declaration of compliance. If an employer fails to declare compliance within five months of its “staging date” (the date on which the new laws apply to it for the first time), it risks being fined. The regulator can issue a range of statutory notices to employers if it is of the opinion that a breach of the employer duty provisions has occurred.

Ultimately Escalating Penalty Notices (EPNs) may be issued when there has been a failure to comply with a statutory notice. The regulator may issue escalating penalties at a prescribed daily rate, ranging between £50 and £10,000 (dependent on the number of workers the employer has), as follows:

Number of WorkersPrescribed Daily Rate
500 or more£10,000


Therefore, even if an employer only has one qualifying worker, a failure by its IFA to comply with an EPN for a week could cost it £350. If the employer has just 5 workers and its IFA fails to comply for a month it could cost the employer £15,000.

At Bell Lax we always explore ways to resolve claims out of court, if possible. However, where matters do escalate we deliver focused support, practical and legal guidance and effective representation, drawing on our specialist knowledge of professional negligence claims for the best result.