Some 29,000 employers are due to start automatically enrolling staff into a pension in the first half of next year, mostly medium-sized firms.
2014 promises to be a year of unprecedented demand for the services of pension providers, payroll providers and advisers. One prominent insurance company has already started to turn business away. Around a third of company directors still have a low level of awareness of auto-enrolment, according to the IoD (Another) New Dawn for Pensions, Institute of Directors, May 2013. Laith Khalaf, Head of Corporate Research: “With close to 30,000 employers due to auto-enrol in the first half of 2014 there are serious questions about how the industry will cope with this influx of demand. An automatic enrolment strategy typically takes 6 months to formulate and implement. Employers with a staging date in 2014 need to act now to get ahead of the traffic.” Potential consequences of the Auto-Enrolment Crunch: Employers ‘going along’ with existing unsatisfactory pension plans because they run out of time to install a new improved scheme. Poor or no communications leading to a lack of recognition amongst staff of the payments being made on their behalf. Accidental NESTers: companies which default to NEST as they have run out of time to do anything else. There is nothing wrong with NEST but employers may have missed an opportunity to set up a more tailored solution. Employers who leave it too late may find it difficult to comply with auto-enrolment legislation before their staging date.
Laith Khalaf, Head of Corporate Research: “Auto-enrolment is going to cost many companies serious amounts of money. If they do not spend time putting a communication strategy in place they are likely to find employees don’t understand the benefit of the payments the employer is making. In other words, from the employer’s point of view that money goes straight down the drain.”
Challenges for employers to address pre-auto-enrolment include: Developing a communication strategy for employees to ensure they recognise the additional benefit provided to them; Checking their existing pension provider is willing to accept them for auto-enrolment; this may not be the case; Accounting for the additional cost of auto-enrolment in the company’s budget; Implementing a 60 day consultation period if they are offering lower contributions for auto-enrolled members; Finding out what auto-enrolment support their payroll provider can offer.
