Why has auto enrolment been introduced? A look at the bigger picture.

Educating your employees beyond auto enrolment

It’s important to keep in mind why the government has introduced auto enrolment pensions legislation. It is not just red tape to give employers a headache. It is the chance for you to provide your employees with a long-term pensions savings plan to ensure they are saving for their future retirement.

Helping your employees in their old age

At the heart of this legislation are people, your employees, who with a bit of help from you as their employer as well as the government, can save enough to live on comfortably in their old age.

It has been noted that the State Pension is simply not adequate for people to live on, as life expectancy grows. NOW: Pensions’ own research shows that on average people want to retire at 61 but financially don’t think they’ll be able to until they’re 64. Critically, one in seven people (14 per cent) due to retire in 2017 don’t have any private pensions savings at all. It is therefore crucial that employees are informed and educated about workplace pension schemes and the options they have for long-terms savings early on in their working lives.

Moreover, many workers such as part-time employees, carers, women and ethnic minorities who have traditionally missed out on workplace pension schemes could for the first time have one, even if they earn less than £10,000 a year and are not eligible, if they opt in.

Communication is key

It isn’t solely a moral duty to inform your employees about auto enrolment, it is a legal one too. This might seem overbearing, but there is help from providers out there in the marketplace. NOW: Pensions has a help centre that contains all the materials employers need to inform and educate their employees about auto enrolment, as well as a comprehensive FAQ page to help answer any difficult questions your employees might have.

Regular communication with your staff is important especially in the lead up to your staging date. There are certain communications that you are legally obliged to send to your employees. Within six weeks of auto enrolment beginning, you must email or send a letter to your staff. You must inform them if you have postponed auto enrolment; offer those who are not eligible the right to ask to opt in; and for those who are and have been auto enrolled, you need to explain this to them and inform them that they can opt out, but if they do, they will not benefit from your contributions and tax credits from the government.

Many employees might be first time savers and others might have more experience with pensions. Either way, it’s important that you inform them about pension fund charges and investment strategies available to them. For example, NOW: Pensions has no hidden charges and takes a long-term view when it comes to investments. It grows investments over time by making diversified investments to ensure that employees are not exposed to unnecessary risk.

Although your employees have the option to opt out of auto enrolment, it is important that you encourage them not to unless they have a bulletproof pension scheme already in place, which is regulated and accredited with the Master Trust Assurance Framework (MAF) and the Pensions Quality Mark (PQM).  Also, remember it is illegal to force or persuade them to opt out.

A good employer is one who communicates well. It’s not always easy, but it is imperative that employees are fully up to speed on auto enrolment and what it means for them. If you have done your auto enrolment homework, you would have selected the best pensions provider for your staff, then your employees will trust that you have their best interests at heart. As well as fulfilling your legal duty, you are ensuring that your people are taken care of and that will not go unnoticed by them.

 

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