Louise Mulgrew
4 minutes length
Posted: 16th March 2015

Technical changes to auto enrolment regulations: What does that mean for us?

From December 2014 to January this year, the government carried out a consultation in order to find ways to simplify regulations surrounding auto enrolment. The main aims were to make the rules easier to understand and implement on the behalf of the employer.

In addition to this, with opt-out rates expected to increase as more and more companies reach their staging date, the feeling is that a more simplified process will help to keep this number as small as possible; currently standing at 12%.

The measures that were up for discussion were intended to further simplify auto enrolment and reduce the burden upon employers for implementation. The aspects included were:

  • Introduce a new measure of quality for the assessment of Defined Benefits (DB) schemes
  • Simplify and reduce the communications requirement on employers
  • Create exceptions to employer duty in certain circumstances

There was also an emphasis on trying to ensure that auto enrolment continues to be beneficial and to continually auto enrol employees that are reaping the benefits of the legislation.

So, what does this mean for us?

The answer to this question depends on who you would define as “us”.

From the perspective of the employer, the main aim of the consultation was to try and simplify existing processes for businesses and this came about from different aspects. Firstly, the qualification test for Defined Benefit schemes needed to be kept as simple as possible for it to run alongside the existing requirements. This means that actuarial work required for scheme funding processes can be relied upon for this test as well (Government Response to the consultation of draft regulations, p.8).

In addition to this, the information requirements of employers in terms of passing on information to workers about how auto enrolment legislation will affect them is reduced. It was heavily welcomed by the respondents of the consultation that the aspiration should be three communications. The document states: 

“The move to streamline both the quantity and content of the communications that employers are required to provide has been welcomed. The majority of respondents said that employees will generally still receive the information they need at the right time, although some may receive it earlier than necessary and may place an added onus on them to understand when it applies to them.” (Government Response to the consultation of draft regulations, p.14)

There was however one respondent that thought that reducing the amount of communications to employees could lead to disengagement and confusion when it came to saving money for their pension.

More information on what parts of the communications have been proposed to be removed can be found in the full consultation document.

Finally, the government have made it extremely clear that the proposed regulation changes are not there to become compulsory and should only be implemented if it is easier and more cost effective to do so. This means that companies can continue using existing processes such as payroll software but now have more freedom to choose what works best for them.

From an employee’s perspective then, this means that the amount of information and correspondence in regards to the auto enrolment legislation could be reduced. If a company was to choose to reduce the communications, the employee as a result could feel less bombarded with information and legislative communication. The content of the information will also be simplified, hopefully leading to a greater understanding by the workers.

From a payroll provider’s perspective, IRIS endeavour to always provide knowledge and information regarding legislative and regulation changes. Our clients can always be assured that if there were to be any updates, our payroll software and solutions will be updated to reflect this. In the meantime, IRIS provide courses on legislation which will always be the most up to date and is a great place for you to remain knowledgeable about any changes and how they could affect your business.

From an overall, industry perspective, what this means for us is that it appears that the government is trying to make life easier for us. The workplace pension reform was one of the biggest pensions shakeups in modern times and ultimately, it was introduced to increase quality of life for those who may not have been saving enough for their retirements.

Do you think that the government is doing enough to simplify auto enrolment and help people to understand why the legislation is in place? Are the findings from the consultation justified and will your business adopt them?

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