Three years on from auto enrolment; what has happened?
Yesterday was the three year anniversary of the introduction of the workplace pensions reform; resulting in seeing millions of employees being automatically enrolled into qualifying pension schemes.
But what does the pensions landscape look like now?
Currently, according to The Pensions Regulator (TPR), there has been 5.2 million employees enrolled into qualifying pension schemes (by March 2015, the last commentary and analysis piece from TPR).
It also seems that auto enrolment is achieving its main goal of getting more of the population saving for their retirements. According to TPR:
54% of eligible 22-29 year olds made regular contributions in 2014, more than double the amount in 2012.
In addition to this, employers are also becoming much more aware and understanding of pensions. This includes the knowledge of what they are, how they work and the importance of offering them to their employees. The following table explains the increases in awareness over different sized employers (from TPR):
As you can see from the table, awareness of the workplace pensions reform is very high across all employers and the understanding is also very high, even among the micro employers staging from June 2015 onwards.
This means that moving forward with auto enrolment to the smaller businesses of 1-4 employees, there is less likely to be a sharp increase in non-compliance notices and fines being issued by TPR.
However, since the introduction of auto enrolment in 2012, there has been 332 fixed penalty notices of £400; many of which were issued because of the late submission of the Declaration of Compliance.
In addition to this, there has also be 4 escalating penalty notices that have been issued as a result of further non-compliance following an initial warning and a penalty notice. These penalties can be to the value of between £50 and £10,000 per day; dependant on the size of the business.
There have also been numbers of people choosing to opt-out of auto enrolment for whatever reason. The Pensions Regulator estimate that around 1 in 10 people have opted out of the work place pensions. While it is also expected that this number will rise as the minimum contributions go up (currently set to increase to 8% by 2018), the hope is that more people workers will continue to pay into their workplace pension scheme.
So, what do we have to look forward to?
Now it is the third anniversary of auto enrolment, it is time for those who staged first; to go through automatic re-enrolment. Auto enrolment requires that you constantly assess your workforce each time you pay them. With auto re-enrolment, you must also assess those that have opted out and submit another Declaration of Compliance.
With many larger businesses reaching their re-enrolment window over the next few years; coupled with a large number of smaller employers reaching their first staging date: we are welcomed with the "capacity crunch".
The capacity crunch is the perceived strain on resources as a result of the increased numbers of businesses reaching their staging date and those businesses looking for help and advice at the same time for automatic re-enrolment.
This means that those businesses leaving auto enrolment to the last minute are much more likely to be non-compliant because there will be a lack of help available the closer to your staging date that you get.
The way around this? Prepare early! The Pensions Regulator advocate that you should be looking into auto enrolment preparation at least 12 months before you reach your staging date. In addition to this, they also recommend that you start looking into the payroll software and solution that you are going to use around 6 months before you stage.
This gives you the necessary amount of time needed to implement and test the new software.
The IRIS auto enrolment solution, The IRIS AE Suite™ automatically assesses your employees for auto enrolment with each payroll run. In addition to this, it also distributes payslips and P60s electronically and publishes the legally required pension communications to your employees' secure online portals.
Why not book a free demonstration for the IRIS AE Suite™? You don't have to download anything, nothing to install and it costs you absolutely nothing. You will be able to ask as many questions as you like during the 1-2-1 demonstration with one of our auto enrolment experts.
With the amount of time and money you will save by adopting the IRIS AE Suite™; can you afford not to have a demonstration?