United Kingdom

9 out of 10 want AE delay

November 2014

 

The majority of small employers who have yet to reach their auto-enrolment staging dates want the process to be delayed until the latest pension reform changes have been implemented in full.

Research by the Association of Consulting Actuaries (ACA) which surveyed nearly 500 small employers, found that nine out of ten who have not yet completed auto-enrolment, actively favoured an auto-enrolment delay.

Clare Abrahams, Head of Auto Enrolment at Aon Employee Benefits described the level of change within the pension industry as ‘immense’, which made it ‘understandable’ that employers and pension providers were struggling to keep up. However, a delay in auto-enrolment for smaller employers would be unlikely to be supported by the government due to the adverse effects it could have on workers, she said.

Abrahams also warned that minimum contribution levels for auto-enrolment are set to rise, making a strong argument against delaying auto-enrolment.

“It is widely recognised that the current contribution levels are not adequate to provide a reasonable level of savings, so a delay would not serve the purpose of the legislation, which is to encourage more people to save for their retirement, therefore ultimately lessening dependency on the state,” she said.

“Furthermore, experience has shown that many employers leave it until the last minute to prepare for auto-enrolment and it is possible that a delay will only serve to push timelines back. A delay is unlikely to raise employer awareness and instead could have the opposite effect, since any employer momentum could be quickly lost.”

According to the ACA research, six out of ten favoured the new pension reforms which include greater pension flexibility, and over half are supportive of further changes to pensions. The research also found that general awareness around staging dates and appropriate budgeting for auto-enrolment was low.

However, 62 per cent of businesses employing more than 10 staff were found to be ‘clear’ about when to enrol eligible employees.

Meanwhile, a Freedom of Information Request submitted by an auto-enrolment services organisation has revealed that 47 per cent of auto-enrolment investigations by The Pensions Regulator have resulted in breaches since January 2014.

Commenting on the latest figures, Charles Counsell, executive director of auto-enrolment at The Pensions Regulator said he would expect the number of breaches would continue to rise as the number of employers ‘subject to duties’ is also rising.

“Although the number of investigations has risen, we have been very successful in working with employers to remedy breaches where they have occurred, without needing to use our statutory powers,” he said. “We have also taken proactive steps working with high-risk employers to prevent non-compliance.”

Abrahams added: “In many cases, lack of compliance has been a result of employers not fully appreciating what is involved in becoming compliant. We are seeing a significant number of employers approaching us for support in distressed situations, either after the staging date or close to it. Thanks to our Littleblue 2go platform, we are able to help them, but it’s always better to do this earlier rather than later, since it will enable us to appropriately resource for the support we provide. We have decided to offer an early bird discount for this very reason.”

In a statement, The Pensions Regular emphasised that ‘wilful non-compliance’ is not acceptable and were prepared to use their powers to tackle the issue, including serving fixed penalty notices and escalating daily penalty notices. They also warned that they expected to see the number of times they’d need to use their powers increase as they deal with smaller employers.

 

 

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