auto-enrolment concerns
Auto-enrolment: figuring it out
According to recent figures and findings, it is so far, so good for automatic enrolment, but there are concerns
igures recently reported by The Pensions Regulator (‘the Regulator’) show that more than two million workers have begun saving into a workplace pensions scheme as a result of automatic enrolment (AE). The Automatic enrolment registration
F
report (
www.thepensionsregulator.gov. uk/docs/automatic-enrolment-monthly- registration-report.pdf), which covers the period July 2012 to December 2013, shows 5,431 employers have confirmed they have met their duties by registering. These employers have 13,308,000 workers of whom 2,557,000 were auto-enrolled, 7,017,000 were already active members of a qualifying scheme on the staging date, 396,000 are eligible jobholders subject to the defined benefit or hybrid scheme transitional arrangements, and 3,343,000 are workers not in any of these categories. The report notes that while the information is the actual data received by the Regulator, there will be employers that have reached their staging date, who have automatically enrolled their eligible jobholders and who have not yet completed registration. The figure for eligible jobholders who have been auto- enrolled is therefore likely to be higher than that shown in the report.
Commenting that more than two million people have begun saving into a workplace pension scheme, Graham Vidler, Director of communications and engagement for the National Employment Savings Trust (NEST), said: “… the hard work’s not over yet. [In 2014] tens of thousands of companies, some of which may never have set up a pension scheme before, will reach their staging dates within just a few months.
...NINE OUT OF TEN EMPLOYERS WILL EXPECT HELP TO FILL ANY GAPS...
We’re ready to welcome any employer that chooses to use NEST and are already working with over 2,100 employers. But we’d encourage all employers to start planning early. Our experience is that it can take quite a few months to get ready and some employers find their existing providers can’t offer an automatic enrolment solution for all their staff. It’s worth getting ahead of the curve and finding out exactly where you stand and when you are affected.”
Mind the gap
New findings released in January by NEST show that employers staging in 2014 have three fundamental gaps to deal with as they meet their AE challenges. Identified as the experience gap, knowledge gap and reality gap, NEST warns that, compared with their predecessors, second year employers may not be engaging enough with the detail of the reforms in order to successfully manage their duties. The report, NEST insight (www.
nestpensions.org.uk/schemeweb/ NestWeb/includes/public/news/Mind-the-
gap.html), found that first year employers successfully navigated their way through the legislation thanks to their pensions experience and knowledge and by dedicating enough time to the project. However, many reported that implementing the duties took longer than expected. The research found that twenty per cent of first year employers had taken over sixteen months to get ready, despite previously offering a pension scheme to at least some of their workers. Even with this level of preparedness and experience, 66 per cent found meeting their duties more difficult than anticipated.
Commenting on the findings, NEST chief executive Tim Jones said: “The success of AE so far … is due in large part to the efforts of first year employers. 2014 sees a new set of employers meeting their duties and they may find it more difficult than their predecessors. Our research suggests that
nine out of ten employers will expect help to fill any gaps in experience, expectations and knowledge. Our research also suggests that intermediaries are gearing up to help, but it’s vital that providers, intermediaries and employers work together to ensure the next wave of employers can meet their duties successfully.” Mike Bull, AE expert at Sage UKI says:
“The fact that two thirds of employers found implementing AE more difficult than they had expected while a fifth took over sixteen months to prepare, means all businesses need to start looking at this early … The acid test for auto enrolment will come in the next two years when mid-market and smaller firms start to stage who don’t have the same resources or expertise internally to roll-out AE. Yet Sage’s own research has revealed that the biggest concern for smaller to mid-sized business owners is the impact contributing to employee pension schemes will have on cash flow … Preparation is key and if you’ve not heard from your software provider on how they can help you get ready for AE by using their solutions to forecast its impact on cash flow then you need to be asking them some serious questions – now.”
AE earnings trigger
Commenting on the government’s announcement of raising with effect 6 April 2014 the level of the earnings trigger for auto-enrolling AE into a workplace pension to £10,000, Frances O’Grady, General secretary for the Trades Union Council, said: “Every time the government raises the … threshold another group of workers, most of whom are women, drop out of saving for their pension. With the average part-time salary just under £9,000 a year, the majority of the UK’s six million part-time workers will no longer be automatically enrolled into a workplace pension. It is time to break the link between the income tax threshold and the AE threshold unless we want to turn AE into a pensions system that predominantly benefits men.”
PP PayrollProfessional 33
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