From October, the new employer responsibilities introduced by the Pensions Act 2008 and 2011 will start. From this date, employers will have to start automatically enrolling their workforce into a qualifying pension scheme. Although the staging dates for smaller companies have been put back, auto-enrolment will still happen and so employers need to understand the implications of this.
Worryingly, some two thirds of small-scale employers haven't yet considered what their responsibilities are with regard to automatic enrolment. Moreover, they haven't yet quantified the additional costs of fulfilling their responsibilities and, in terms of direct contribution costs and administrative expenses, these could be substantial. No one can underestimate the impact that these changes will have on their business, regardless of size.
Change always brings opportunities and challenges, and pensions reform is no different. The new employer responsibilities mean hard work but breaking them down into a few simple steps, can make them less daunting and more manageable. Employers need help and advice to understand what they have to do. And that's where a worthwhile adviser or helpful provider can help out.
The clock's started ticking
As soon as an employer knows their staging date, the countdown to auto enrolment starts. Time is of the essence to make sure they meet their responsibilities on time and to ensure a smoother path to auto-enrolment. Following a few simple steps will help in this process and ease them into the new pensions world rather than go crashing in.
The first thing they need to do is assess their workforce – categorising their employees. This should be at least 12 months before the staging date and should help start to give the employer an idea of the costs involved in auto enrolling (or not auto enrolling) their workforce.
Around 10 months prior to staging, it's important to review current pension arrangements – so there may be an existing scheme that could be used or adapted for automatic enrolment, or there may be a need to set up a new one. Adviser involvement is invaluable at this stage and they could well benefit from the opportunity of setting up a new scheme if required.
Design and test the process
You don't have to opt for just one solution. You could choose one solution for one set of jobholders and another for a different set of jobholders. Which solution you opt for depends on many things. Simple, quick and efficient administration will be paramount – collecting the right contributions at the right time and applying them promptly will be crucial in running a successful scheme. So designing and testing the process needs to be done upfront to make sure the chosen solution does actually work. Pension providers offer various flexible solutions to help meet this need and have extensive experience in this area.
Around seven months before staging, when testing the processes, there's a good opportunity to clean up employee data, making sure that all details are correct and up to date.
With around six months to go, it's time to develop your employee communications strategy. You cannot underestimate the importance of good employee communications for making sure that your workforce is truly engaged and that they know what their responsibilities are in the whole enrollment process.
This is something that a good provider could help you with – perhaps providing templates for letters or emails or helping with some worksite marketing – to raise awareness amongst the workforce. This, along with pre-staging communications at three months, hold the key to a successful, smooth path to auto-enrolment. People must be kept informed of what's happening and what's required of them so a robust communications plan is essential as the staging date gets closer. Change naturally unsettles people so it's important to keep your employees informed and make them feel like they're in control.
Tools to help
With so many things to remember and prepare for, it's easy to see why employers could feel daunted by the whole auto enrolment process. So, breaking down the process into manageable steps and using any available tools to help them, is just common sense.
To help employers remember key dates AEGON have developed an Iphone app which is programmed to remind them of the key tasks they need to undertake in the run up to their auto-enrolment staging date.
It works by an employer inserting their staging date or the number of employees on their PAYE and provides all future events and key legislative dates, expert opinions and blogs from AEGON and tips on what to do next.
Although the employer has a huge responsibility in rolling out the auto-enrolment process to their employees, they shouldn't feel daunted as there's a wealth of help and advice available from good advisers and pension providers.
Ross Jackson is Head of Workplace Communications, responsible for the development of AEGON's workplace communications proposition. A key part of his role is working with advisers and large employers to maximise employee engagement in retirement savings through effective and engaging communications. Ross is a subject matter expert in behavioural economics and has a particular interest in investigating how these principles can be applied in the workplace to improve engagement. He is an associate of the Chartered Institute of Marketing and has twelve years experience in marketing communications within financial services.