Auto-enrolment continues to be a burden

As the first wave of re-enrolment requirements begins to loom into view later this year, pensions auto-enrolment is continuing to pose challenges for many staged employers. 

The business barometer survey published by Close Brothers Asset Management in January, for example, found that more than three-quarters (76%) of employer respondents now notice the administrative burden created by auto-enrolment, a 7% increase since September 2014.

In addition, figures published by The Pensions Regulator (TPR), also in January, highlighted that by the end of 2014 169 employers had been fined for failing to comply with their workplace pension duties.

Morten Nilsson, chief executive officer of Now:Pensions, said: “As time goes on, and the volume of organisations staging increases, it is inevitable that we’ll see more fines being issued. Many have underestimated the complexity involved and the planning required.”

But 2015 marks the year for larger employers to embark on the next stage of their ongoing duties and re-enrol those employees that opted out when the first batch of organisations first auto-enrolled employees in 2012.

These employers must first identify all affected employees. These will be employees who, as at the re-enrolment date, are classed as eligible jobholders who had previously been automatically enrolled into the employer’s scheme. They must have left the pension scheme more than 12 months before the re-enrolment date and cannot be re-enrolled if they are already members of any qualifying scheme.

Tim Middleton, technical consultant at the Pensions Management Institute, said: “It is vitally important that the employer is able to distinguish between those who are to re-enrol and those who are to be enrolled for the first time.

”This is because postponement cannot be used in the case of re-enrolment. Following on from this, it can be seen that communications material issued needs to address the different circumstances of those being re-enrolled and those being enrolled for the first time. Employers will, therefore, need to ensure that payroll software correctly identifies the two categories of employee affected.”

Karen Heath, head of strategic communication at AHC, added: “Re-enrolment provides a good opportunity to engage with employees because it will not be the first time staff have heard about pensions. Employers should embrace this opportunity to engage effectively.”

But with opt-out rates among these employers having been much lower than expected, pension and benefits professionals managers may not face as much of a re-enrolment challenge as originally predicted.

Re-enrolment may also provide an opportunity for employers to review the systems that they have system in place to manage auto-enrolment. More choice in the market may now be available after many payroll providers were not ready to handle the auto-enrolment process in the early days of 2012.

According to Close Brother’s survey, 45% of employers are now seeking to review their auto-enrolment processing system, with 32% planning a review within the next year. 

Mike Spink, defined-contribution pension consultant at actuarial firm Spence and Partners, said: “Since 2012, various technical changes have been made to payroll providers and auto-enrolment regulations.

”The early stagers may well take the opportunity in the run-up to re-enrolment to consider adopting these changes, if they have not already done so.”