Auto enrolment update


Auto enrolment started in October 2012 so we are now 2 years into the process. As we move through it, medium and smaller employers are now coming up to their staging dates.

Having now seen a number of our clients through the process here are some tips for those businesses approaching auto enrolment:

• Auto enrolment was intended to improve the uptake into pension schemes and it has been a great success in meeting this aim.

• The initial estimates were that opt out rates would be 30-35%. In fact the overall opt out rate for all businesses that have auto enrolled so far is around 10%.

• That is good, but we have seen some employers rather hopefully budgeting on the basis that they would have an opt out rate of 30% or more whereas in practice 10%, even for smaller businesses, is more likely.

• The initial minimum contribution rate is 1% of qualifying earnings, but employers should be aware that this increases to 3% by 2018, so should take this into account when doing forward budgets.

• The key to making auto enrolment work is your payroll system.

• It is very important that your payroll system can perform the functions required, such as assessing the workforce into the required categories.

• Your payroll needs to be able to talk to the pension provider, so the software should be compatible. There can be a lot of data to transfer to set up employee records. The last thing you want is one of your staff manually entering 100 employees into the system.

Auto enrolment is a statutory duty. The Government is taking it very seriously and the first fines have been issued already. The Pensions Regulator has issued 169 compliance notices and 3 fixed penalty fines of £400.One large household name company has been fined considerably more.

In summary, what we have learnt so far is this:

 Know when your staging date is.

 Plan towards it well in advance.

 Budget realistically.

 Make sure your payroll system is compatible with your selected pension provider.

 Give yourself time to do a test run to make sure that everything works properly.

About Colin Rodger

Colin is an Independent Financial Adviser and is a Director of Alexander Sloan Financial Planning Ltd. (Authorised and regulated by the FCA no. 190674). Colin has over 30 years experience providing pension, investment and financial planning advice to a wide range of individuals and organisations.
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