Automatic enrolment – make that New Year’s Resolution

9th January 2014

Over 2 million workers have now begun saving into a Workplace Pension Scheme as a result of automatic enrolment, according to figures released by The Pensions Regulator. This is a mere drop in the ocean when you consider by the General Election in 2015 this figure will have increased to 4.3 million workers and by 2018 to over 15 million employees.

This year alone will see a leap in the number of firms affected, with tens of thousands of medium sized employers introducing automatic enrolment. The Pensions Regulator is urging all employers to make sure they know when they must introduce the changes. Charles Counsell, executive director of automatic enrolment at The Pensions Regulator said: “If they have not done it already I would hope the first thing every employer does when they get back to work after the Christmas break is to check their staging date and prepare for automatic enrolment. The clock is ticking and if employers don’t plan ahead, they could face unnecessary challenges and costs in the New Year”.

Employers who are not working on an automatic enrolment plan at least six months prior to their staging date are risking non-compliance and this will almost certainly result in a more complex and more expensive solution. It has been reported that pension providers are approaching a capacity crunch and even refusing employers who are within a six month lead in time to their staging date. Don’t just assume the first provider you contact will be able to help you.

In addition to the above, one of the most surprising aspects is that it’s not all about the pension scheme. All employers are going to have to consider their payroll system and contracts of employment. Let’s consider payroll first. The ideal system will assess the workforce, produce relevant paperwork for each category of worker, calculate contributions, produce a file for onward transmission to the pension provider, deal with opt-outs, provide audit trails, cope with salary exchange, and do the auto enrolment all over again every three years. Have you checked what services your payroll provider is offering? And, if payroll can assist you, at what cost? And, will the service be available from your staging date?

And then there are the employment contracts. Does your standard contract even mention pensions? If not, it will need to. If it does, is pension scheme membership linked to completion of a probationary period? Does the contract specify the basis of contributions? Is age mentioned in contracts?

In summary, in addition to identifying an appropriate pension scheme, we would also recommend that employers:

• assess their workforce to identify who should be auto-enrolled
• check their payroll systems to ensure they will support auto-enrolment
• ensure that personnel records are up to date
• review existing contracts and make any required amendments

This article was last checked January 2014.
This article is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.

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