Auto enrolment for the largest businesses, employing upwards of a thousand workers, has come and gone and for the most part it has been a successful exercise. Opt out numbers at 9% have been much less than anticipated and employers have supported the government’s pension reforms wholeheartedly.
Does our industry deserve a pat on the back then? Well right now I’m thinking this would be very pre-mature. One of the biggest questions has always been how will we cope with SMEs and smaller employers. For the largest employers, most of which already have existing pension schemes in place, auto enrolment has been a pretty straight forward task. Those firms already have experience of administering schemes and most have sophisticated software and payroll systems, HR departments and employee benefit consultant services to help them do it. Clearly this will not be the case for smaller businesses.
Research by The Pensions Regulator (TPR) into the extent that employers are prepared for the workplace pensions reform found that many with staging dates between now and February next year still do not know the date they are due to begin enrolling staff. Advisor and provider support remains key so it is of real concern that some of the leading pension scheme providers are already making noises about capacity and some have already reduced their new business intake.
Six months from now all employers with 160 to 249 workers will be expected to have a qualifying pension scheme up and running with all eligible employees automatically enrolled into it. By April 2014 the first of all micro-employers (those with less than 50 employees) will have begun to receive their 12 month to staging date notification reminder from the pension regulator. If those employers want a pension solution that provides support then they need to get moving now.
At the last count there were 34 official auto enrolment Employer Duties, for example, the provision of designated communications to Eligible, Non-Eligible and Entitled employees. The best pension scheme providers will guide employers and supply this material. For the rest there is the government’s DIY version of NEST (National Employers Saving Trust).
In the early days of auto enrolment many viewed the reforms as just Stakeholder pensions all over again and we all know this was largely a damp squib. However this is most definitely not the case this time round. Firstly, the pensions crisis appears to have a far greater resonance amongst UK employees than previously thought. This is evidenced in one of the most surprising findings to come out of the regulators research by the high number of non-eligible employees opting to join their pension scheme. Remember this group of employees are of an age or salary band that are not automatically enrolled to the scheme but must be given the opportunity to opt in. Secondly, at the time of writing TPR have almost 100 non-compliance investigations in progress so it looks like they mean business this time.
There is no denying that auto enrolment starting contribution levels alone are unlikely to build an adequate pension pot for the majority. The department of work and pensions document, ‘Framework for the Analysis of Future Pensions Incomes’, revealed that even with the rise of workplace pension schemes, auto enrolment and state pensions benefit increases million of people still face an uncertain financial future. But we have at least taken a step in the right direction.