More than two million UK employees have started saving into a workplace pension scheme as a result of auto-enrolment, according to research by The Pensions Regulator (TPR).
Its Automatic-enrolment monthly registration report 2013, a rolling report with data starting from July 2012, found that 3,670 employers have confirmed to TPR that they have met their duties by registering during this period.
It also found that 2,205,000 eligible employees have been auto-enrolled during this period, while 6,598,000 employees were already active members of a qualifying pension scheme on their employer’s staging date.
Steve Webb (pictured), pensions minister, said: “It is great news that automatic-enrolment is beginning to make a positive difference to the retirement prospects of workers.
“The changes to workplace pensions being introduced now are set to help millions more people to achieve many happy new years in the future.
“More than 3,500 employers so far are helping us to create a fairer society by ensuring that pensions are no longer the preserve of the few.
“And the message to employers is: Make sure you’re ready for the date your workforce joins the two million already in.”
Charles Counsell, executive director of automatic-enrolment at The Pensions Regulator, added: “If they have not done it already, I would hope the first thing every employer does when they get back to work after the Christmas break is to check their staging date and prepare for automatic-enrolment.
“The clock is ticking and, if employers don’t plan ahead, they could face unnecessary challenges and costs in the New Year.
“It’s really important to arrange pension provision in plenty of time. We urge employers to have an agreement with a provider in place six months before staging. Don’t just assume the first provider you contact will be able to help you.”
Two million new savers is an encouraging milestone, with another two million or so due to be enrolled next year. But the hard work’s not over yet. Next year, tens of thousands of organisations, some of which may never have set up a pension scheme before, will reach their staging dates within just a few months.
We’re ready to welcome any employer that chooses to use the [National Employment Savings Trust] and are already working with more than 2,100 employers. But we’d encourage all employers to start planning early. Our experience is that it can take quite a few months to get ready and some employers find their existing providers can’t offer an automatic-enrolment product for all their staff. It’s worth getting ahead of the curve and finding out exactly where you stand and when you are affected.
It is extremely positive that two million people are now saving into a pension who were not before. Employers, advisers and providers need to build on this and help these workers to understand if they are saving enough, and how to make the most of their pension. Without this next vital step, the risk is we create a nation of pension zombies who fall off the savings wagon at the first bump in the road.
The regulator’s figures also show that three million workers have been left behind by auto-enrolment to date. Many of these workers cannot afford to save; however some can, particularly those who have several part-time jobs, or those part-time workers with higher earning spouses. Again, communicating the need to save and the benefit of an employer pension contribution can encourage opt ins from those who could, and should, be saving.
The number of organisations auto-enrolling is beginning to expand exponentially, and indeed the true test for auto-enrolment lies in 2014 and beyond. Employers have the difficult task of complying with the regulations, at a time when there will be unprecedented demand for the services of pension providers and advisers. Throw into the mix the fact that the government is still pondering the final rules, including a price cap, and 2014 has the potential to plunge the auto-enrolment programme into mayhem.
We are pleased that auto-enrolment has got off to such a great start and that there is strong support for saving through workplace pensions.
Large employers and pensions schemes – many of them our members – have put great effort and resources into making auto-enrolment work.
However, the real test will come when small and medium-sized employers, which have fewer resources and less pensions know-how, start enrolling staff next year. The challenge now is for the government and The Pensions Regulator to make sure these employers understand what they have to do to comply.
We’re doing all we can to support successful automatic enrolment. Our report in October provided a number of practical tips for smaller employers coming up to automatic enrolment. And we are helping employers prepare through dedicated web pages, a series of guides and PQM Ready, which helps employers find a good scheme.
Pensions auto-enrolment is the first real shake up for employee benefits in 20 years and begs the question: What other benefits should employers offer their staff?
After auto-enrolment, a pension will no longer differentiate employers. Yet the cutbacks and pay freezes of the recession mean a competitive benefits package can be essential to attract and keep staff. To stay competitive, employers should now be thinking about supporting their staff not only in retirement, but also when they are unable to work before reaching retirement age. Income Protection, for example, can fill this protection gap and provide a financial back-up plan for the one in 10 people who go on long-term sick leave during their working lives.