Start early, understand you have a big data collection task ahead of you, know your real staging date and only deal with partners with a good reputation. These are the key lessons learnt by those who have already navigated the tortuous path to successful auto enrolment.
Auto enrolment obligations
Probably the single biggest message coming back from those larger employers who have already gone through the process is data will be a significant challenge. The payroll data your organisation already collects will probably not be sufficient to enable you to meet your auto enrolment obligations.
Auto enrolment requires employers to assess, on an ongoing basis, whether employees need to be automatically enrolled, how much should be contributed into their pensions and when communications materials specified by the regulations need to be sent. Employers are also required to maintain compliant records of employees’ eligibility for contributions.
Your existing payroll system will probably not do this. So it is likely you are going to have to source, test and implement some new payroll functionality or standalone auto enrolment assessment software. This can take several months to fully implement, and with demand set to soar as the number of employers required to enroll staff rises exponentially, the sooner you start this process, the better.
Look into possible limitations regarding automatically enrolling at your current pension provider
Many employers have also learnt to their cost that their existing pension provider is not prepared to automatically enroll parts of their workforce not already offered a pension into their scheme. For this reason, sourcing a pension provider that will welcome all of your employees is a priority.
Unlike most traditional pension providers, we at NOW: Pensions accept any and all parts of your workforce, regardless of income bracket, size or average period of employment, at our low one-price-fits-all price into our market-leading scheme.
Active member discounts
Another thing we have learned since auto enrolment started a little over a year ago is that the Government’s attitude to complex pension schemes and high charges is hardening by the day.
An Office of Fair Trading investigation into workplace pensions published in September highlighted a series of issues that the Department for Work and Pensions is now taking forward. One of the most serious of which is a charging structure known as active member discounts (AMDs), where charges for former employees are up to twice as high as those for current employees. This looks set to create a big headache for the thousands of employers who opted to partner with traditional pension companies using AMD schemes.
The pensions minister has said he wants to see these abolished, possibly by April 2014, meaning employers who have used these providers may have to change their scheme to one with a fairer charging system.
A wrong assumption about postponement
They may not have to be automatically enrolled until a month after their staging date, but employees are allowed to choose to opt-in from that date, so the scheme must be ready to receive them by then. But it is not all negative. Arguably the most important lesson from the first stage of auto enrolment is that employees like the pensions they are being automatically enrolled into. The DWP says opt-outs are currently around the 9 per cent mark, considerably lower than had been expected. Our own experience is that the figure is even lower. For those that planned early and worked with reputable partners from the outset, auto enrolment is going very well indeed.