The government’s planned system of personal accounts is set to be an administrative nightmare for employers.
Some 89% of delegates surveyed at the Employee Benefits Summit in Jerez, Spain, said that they expected this to be the case.
Employers are likely to face administrative problems in relation to the contributions they will have to make as they will be based on variable pay rather than basic pay. They will be obliged to contribute 3% of each employee’s total earnings which will include commission, bonus payments and overtime.
Employers are also expected to encounter increased administration in relation to monitoring staff who have opted out as they will have to take steps to auto enrol them again three years later.
Speaking in a panel discussion on Communicating pensions and savings benefits to employees, Marcus Brent, lead reward consultant at Aviva, said that some employers, particularly smaller ones may struggle with issues around communication. “There is not going to be any advice coming with the product, so where is communication going to come from?” he asked.
Employers will need to ensure that they clearly communicate the value of their pensions provision to staff to ensure employees are aware of the importance of saving for retirement and to reduce the number who choose to opt out once they have been auto-enrolled into a scheme. Sandy Wilson, head of reward at Bradford and Bingley, said: “There’s a great opportunity for HR to lead on that and communicate the changes. HR has a fantastic opportunity to continue to raise its profile.”
But employers are divided over whether this round of pensions reform will solve the pensions crisis. Just over half (54%) of the delegates polled said that it would, while 46% felt that this wouldn’t be the case.
Tina Odell, pensions manager at Sony, said: “It’s a good first step. It’s not going to solve the crisis, but it gets [people] thinking about it, which we can build on. Communication is going to be vital in making this happen and keeping it exciting.”
The panel also expressed concerns that some employees may still choose to opt out of schemes if they feel that they are unable to afford to meet their contribution requirements or have other financial commitments, such as substantial debts.
Wilson said: “We can encourage employees to save for the longer term, but individual affordability will come into it.”