It’s been a busy two months for those of you who employ between 10,000 and 29,999 staff. You will have been embroiled in auto-enrolling your employees into a company pension in what is the biggest shake-up to pensions for a century.
Auto-enrolment has a “chance of being the government policy that succeeds and is popular”, according to pensions minister Steve Webb. At a conference three weeks ago, he joked his role would be to “stir up apathy” to ensure employees did not opt out of the scheme.
For it to be successful it needs as many employees as possible to buy into the concept, or at least to be apathetic. So can we estimate the number who will opt out? The only evidence to date is from those companies who have already auto-enrolled. The first tranche of these, with 120,000 staff or more, came on board on 1 October last year and included many food industry names such as Asda.
Asda has enrolled some 60,000 employees who had not been in the pensions scheme. Pensions manager Steve Jones says its opt-out rates have been just 8%. He advises companies to consider setting up a cross-business group. “You need to bring in pensions, finance, reward, legal, payroll and IT,” he says. “You need executive sponsorship and to get your communication right. By definition, this audience is already disengaged in pensions. Ensure your marketing is consistent and engaging.”
The proof of auto-enrolment’s success will be in a year’s time when employees receive their first annual statement - and discover how little the contributions are worth. For now, though, implementation has run more smoothly than naysayers expected. And it is important it works, for it addresses a pensions time bomb will cost the UK as much as £750bn, estimates the IMF, and pre auto-enrolment, the UK had the lowest level of employees contributing to a company pension scheme since the 1950s.
A word of warning, though. There are many complexities to auto-enrolment and the number of companies coming on board over the next 12 months will rise rapidly as those with fewer employees have to comply. Payroll providers caution it will be impossible to fit everyone in. If you have not already spoken to your payroll provider, then do so now.