Auto-enrolment – the requirement to enrol workers automatically in a qualifying pension scheme – starts soon. In fact, for larger companies, it’s a mere ten months away: 1 October is the big day.
But it seems for many of those whose companies will be affected by one of the biggest changes in the way the UK saves for its retirement, it’s not exactly top of mind.
Designed to reinvigorate pensions saving, especially for those who are low paid, auto-enrolment rules are complex and far-reaching. They affect all employers and many of their processes. So you’d think UK companies would be a little more aware of the looming changes.
The numbers revealed by the fifth annual employers’ survey on pensions reform by JLT Benefit Solutions are pretty stark. The survey found that a mere 21% claim to understand what auto-enrolment is actually about. Furthermore, just about half that number declared that they understood what NEST (the new National Employment Savings Trust) would do for their employees.
To add to that, just under 20% of them did not know how they were going to comply with all the new rules and regulations pertaining to auto-enrolment.
Employers were certainly not happy with the way that the government and Pensions regulator were offering support or even information about the changes and their implications and implementation. A third of them thought that they could do with additional supporting information, for instance.
Duncan Howorth, chief executive of JLT, put it this way: “With less than a year to go until the reforms start to take effect, it is worrying that levels of understanding among employers are low.”
For a third of the companies surveyed, there was a definite lack of certainty about what sort of scheme they would set up. On a positive note, Howorth said while 50% of employers think auto-enrolment will be beneficial for employers, even though employer planning and understanding was still "incredibly low".
Perhaps that state of affairs has been influenced by a strong belief that, for instance, opt-out rates will be high.
It also seems that employers seem to think the reforms are actually a lot further away than they actually are.
Mr Howorth explained, “The reforms are just about upon us, and employers looking to ‘staging in’ starting in 2013 should be planning for them. Also, opt-out rates will depend on numerous factors, such as age and demographics, and employers should not read too much into headline figures.”
Other issues revealed by the survey was a ‘cause of concern’ about additional contributions, whilst the administrative resources required also troubled 2 out of 5 employers.
The recent announcement from Department of Work and Pensions has won small and medium-sized companies a little time to get their pensions house in order, but not a great deal. Micro employers with less than 50 staff will be exempt from auto-enrolment until after May 2015, with workforces of between 50 and 3000 facing a delay of several months.
For more than a few companies apparently, when it comes to auto-enrolment, it sounds like they are going to need all the time they can get.
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