Getting payroll systems ready for auto-enrolment is a big challenge for employers

Getting HR and payroll systems ready for compliance with auto-enrolment requirements is the biggest challenge relating to defined contribution (DC) pensions facing employers, according to research by Mercer.

The research, which analysed the DC pension offerings of more than 300 UK employers, showed that getting employees to understand pensions ranked as the second biggest challenge, followed by managing the cost of auto-enrolment and having to redesign existing pension contributions structures.

Two-thirds of the respondents are thinking of slowly introducing contributions for current non-joiners. Mercer’s survey showed that 69% of participating employers expect to enrol current non-members into existing plans and nearly two-thirds of organisations are looking to change their contribution designs to allow for the increased overall cost.

Paul Macro, UK head of DC in Mercer’s retirement business, said: “Enrolling non-members into existing scheme structures will mean considerable cost increases for most companies and is likely to result in reduced contributions for future joiners, though in some cases we might see reductions for all members. If individual savings also drop then more people will be unable to retire on the pensions they would like in the future.”

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