Tim Middleton: Re-enrolment gives employers opportunity for scheme review

This summer will see some employers implementing the first cyclical re-enrolment exercises

Tim Middleton

These will be the nation’s largest employers. Having been the first to implement auto-enrolment, after an interval of three years, they are now the first to apply re-enrolment. In carrying out this exercise, it will be important that they understand the way in which the process differs from the initial enrolment into a workplace scheme they went through. It will also be vital that the process is communicated effectively to employees.

Employers will need to select a re-enrolment date from a window that stretches for three months either side of the third anniversary of their initial staging date. Those workers who are to be re-enrolled must have previously been a member of the employer’s pension scheme and must meet the following criteria: they must not be an active member of another qualifying scheme; they must have left the employer’s scheme more than 12 months previously; and they must qualify as ‘eligible jobholders’ as at the re-enrolment date.

Re-enrolment differs from the original exercise in that the assessment need only identify those workers who are eligible jobholders. Additionally, there is no option for the employer to use postponement; under re-enrolment, active membership must commence immediately.

The effective communication of re-enrolment to workers will be key; they will need to fully understand why they are being brought back into a scheme that they had previously chosen to leave. It is important that they are aware of their options, including how to opt out a second time.

This is also a good time for employers to review the design of their pension scheme. Since April this year, there are now statutory duties for employers requiring them to ensure that schemes continue to represent good value for money for members. Additionally, the changes to retirement options that took effect in April mean that a scheme’s default fund must be designed in a way that anticipates the range of choices now available on retirement. Regular review is now more important than ever.

Tim Middleton is technical consultant at the Pensions Management Institute