1 Sept 2014
Alice Hardie
Job Title
• In a bid to offset a potential pension crisis, the Government’s auto enrolment will see millions of British workers signed up to workplace pensions schemes. Sounds easy, but affected businesses could have their work cut out.
THOSE LUCKY ENOUGH to reach the age of 70 were paid five shillings a week when the first old age pension was introduced in 1908; however, at the time the average life expectancy in the UK was 51 – a cunning plan if you wanted to limit the numbers of those claiming it.
Today the situation is very different and we are all familiar with reports claiming few of us are saving enough to give ourselves the standard of living we expect in our later years – a problem exacerbated by the fact many people are living 20 years or more beyond retirement.
To encourage more of us to save for our old age the Government has introduced automatic enrolment. It requires all employers to provide a workplace pension scheme into which they can automatically enrol eligible employees – eligibility determined by age and salary.
Those enrolled then retain the option to opt out in the first month. Employees contribute one per cent of their salary to the scheme with their contribution matched by their employer – and, in accordance with the legislation, both employee and employer will raise their contributions over time. The Government hopes most are likely to stay enrolled and start building up a pension pot, precisely because enrolment doesn’t require employees to deal with burdensome administration
While the initiative spares employees burdensome admin, it’s not quite the same for employers so, to help companies prepare for their new responsibilities, automatic enrolment is being introduced over six years in a series of staging dates – having started with the UK’s largest companies in 2012. Veterinary group CVS’ staging date was October 2013 and, several months in, we’re pleased to report the implementation has been successful, with more than 1,600 staff enrolled, very few staff choosing to opt out and some non-eligible staff asking to join.
In August, the staging date for many medium-sized employers (150 to 249 workers) would have been reached and further staging dates for smaller businesses will arrive soon. At CVS our journey has, of course, not been without its challenges so Panel 1 provides some advice from a veterinary HR manager who’s been there, done it and lived to tell the tale.
There is a wealth of information on The Pensions Regulator website so you will find plenty of guidance in setting up the necessary processes and procedures, but the secret of success, certainly in our experience, was that we “grasped the nettle” early. We began preparations more than a year before our staging date, bringing together a project team comprising key departments from across CVS, plus our independent advisors and pension provider. We developed a detailed project plan and met monthly to review progress. Ensuring our employee data was up to date and held in a consistent format was particularly important and we tested our systems thoroughly to check our employees would be assessed and have their deductions taken accurately.
Communicating with staff was a priority, we wanted those who qualified to understand the benefits – to ensure as few as possible subsequently opted out – so we started talking to them six months in advance, while they were engaged and keen to hear more. We even ran a campaign using teabags printed with the words “relax with a cup of tea and consider your contributions” to encourage staff to think about the scheme while they were having a tea break. It proved really popular and generated a big response.
Automatic enrolment is good news for employees and gives employers the opportunity to show their commitment to their staff. The clock is ticking towards your staging date, so if you don’t yet know when it is, find out today.
Your staging date will be determined by the total number of employees in your largest PAYE scheme as of April 1, 2012 according to HM Revenue and Customs data. You can find it by consulting The Pensions Regulator website (thepensionsregulator.gov.uk). You can also use the timeline planner on the site to work out what you need to do and by when to meet your staging date.
Bring all those involved together into a team – payroll, HR, finance and IT departments. All have a part to play and it’s important they work together and actively integrate from the outset.
Find out how many of your staff qualify for automatic enrolment and, assuming you have eligible personnel, you’ll need a pension scheme. If you don’t have one, begin researching with a view to selecting one. Closer to your staging date, you’ll need to carry out a formal assessment of eligibility, so this will stand you in good stead.
Check with your payroll software provider and pension provider – they can support the necessary functionality. You should have systems in place in advance of your staging date.
You are required to write to each member of staff explaining how automatic enrolment law affects them.
You must automatically enrol eligible staff members within one month of your company’s staging date.
There is a legal requirement to submit information to the regulator about how you’ve complied with your employer duties. The Pensions Regulator will write to you to inform you of this process.
It is hoped a simplified enrolment process will encourage most employees to stay enrolled on a pension scheme and start building for the future.
IMAGE: Stephen Drescher/fentino/iStock.
