Auto-enrolment: fit for purpose?

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Keeping employees safe on the road to retirement

It is a fact. A large part of the working population are not saving enough for retirement, and as people are living longer, state pensions will not be able to provide for all of our needs in retirement. As part of a wider initiative the Government introduced legislation to increase private pension savings and to ultimately combat poverty in retirement.

Starting from October 2012 with the largest employers, anyone employing one or more UK ‘workers’ has, or will have to, automatically enrol all eligible workers into a qualifying workplace pension scheme that meets certain legal standards. The date from which automatic enrolment duties start is known as an employer’s ‘Staging Date’. For the first time UK employers now have a legal requirement to make contributions on behalf of all eligible workers.

The auto-enrolment initiative marked the greatest ever change to social security policy, forcing greater financial responsibility on both employees and employers. It was also perhaps the largest social experiment ever conducted, relying on the effect of inertia to ensure workers continued saving.

Automatic enrolment two years on

The impact of auto-enrolment for employers has been wide-ranging and undoubtedly complicated. Not only did the changes represent increased costs for many employers, but meeting the compliance requirements has required detailed planning and preparation, well in advance of staging, in order to mitigate the risk of considerable fines for non-compliance.

The focus of many employers over the last two years has naturally been on putting in place an auto-enrolment solution that meets the minimum requirements to ensure compliance, often at the expense of the wider benefit strategy.

For employers, simply implementing an auto-enrolment solution at all has required significant involvement from many departments and stakeholders – including not just Human Resources, Finance, and Payroll, but also external partners such as pension consultants, providers and employment lawyers. Following such an unprecedented period of pension reform and with auto-enrolment moving into ‘business as usual’; the temptation for many employers is to ‘stick with what’s in place’, even if the ongoing auto-enrolment processes require a great deal of manual work or detailed administration on a monthly basis.

Yet with auto-enrolment here to stay, and the prospect of the first phase of re-assessment and re-certification on the horizon towards the end of 2015 and beyond, now is the perfect time to give your auto-enrolment arrangements a thorough MOT to ensure you can continue to meet the strict compliance standards and ensure your solution is future-proofed for further change.

To continue reading, download the full MOT Guide to auto-enrolment by completing the form.

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