Auto Enrolment Two Years On: Compliance Worries
October 15th, 2014
October 1st marks two years since employers were mandated to start auto enrolling employees into company pension schemes. Yet in the last 24 months 786 firms have been investigated by The Pensions Regulator and the Government has made, or proposed, at least 10 changes to the legislation.
As the anniversary is celebrated, Creative Auto Enrolment is urging the Government to address serious issues with understanding and compliance, warning if it doesn’t act now the nation’s smaller businesses are at risk of fines, breaking the law and wasting precious business time wrestling with auto enrolment.
While overall awareness of auto enrolment is high, understanding of the preparation it entails is very low. When employers were given a list of the compulsory 33 administrative tasks that need to be completed in order to fully comply with the legislation, just 15% were confident they could tackle auto enrolment.
David White, managing director of Creative Auto Enrolment, said: “In the two years since its introduction, around 28,000 of the UK’s largest employers are estimated to have reached their Staging Dates, yet we know that many have fallen short in their auto enrolment preparations. If firms of this size did not foresee the herculean task auto enrolment compliance demands, the impact for smaller businesses is very worrying.
“Government communications are missing the mark. It is great news that so many employers are aware of auto enrolment, but that simply doesn’t cut it when it comes to actually getting the job done. We are seeing employers come through the door every week who are at serious risk of not meeting their legal requirements because they simply don’t understand how much work this entails. We are urging the Government to invest in understanding, not awareness, to make this work for all.”
More than 18 million employees around the country have now been assessed for auto enrolment, with 2.8 million new pension scheme members now benefiting from the initiative. This is up from 1.6million savers this time last year.
If each of these new savers were earning the UK’s average salary of £27,000, £1.2bn is the total cost of pension contributions in the first year of their pension, and £4.8bn once contribution rates reach their peak. These are huge sums of money on behalf of British businesses and their employees.
But it hasn’t been a smooth journey for employers, according to the last publicly available figures – 785 employers have been investigated by The Pensions Regulator.
The legislation continues to change shape, confusing advisers and employers alike. Since October 2012, there has been at least 10 changes, or proposed changes, to pensions; from the scrapping of compulsory annuities to the reduction of the lifetime and annual allowances. Earlier this year it was announced that the Department for Work and Pensions would be putting a 0.75% cap on pension charges. Legislation has also changed to reflect announcements in the Budget and the Queen’s speech. The new Budget increased the personal allowance to £10,500 a year, meaning some workers no longer meet the eligibility criteria. The Queen’s speech on the 4 June asked employers already struggling with choosing a pension scheme to consider the merits of Collective Defined Contribution schemes (CDCs).
Please click here to see the full article from Pensions World.