Pensions  

Lawyer warns employers on auto-enrolment review

Lawyer warns employers on auto-enrolment review

Auto-enrolment schemes at the UK's largest companies need to prepare for their three-year review if employers are to keep staff enrolled, pensions lawyers have warned.

Helen Baker, partner at pensions specialist Sackers LLP, said financial advisers needed to make sure their corporate clients were prepared for the three-year auto-enrolment review in 2017.

Ms Baker commented: "The largest UK employers are coming up to their three-year review, when they have to assess their auto-enrolment scheme.

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"This is a good time for employers to take stock and examine how many opt-outs they have had and whether there is anything they can do to encourage people to opt back in and remain within the workplace scheme."

"Relying on people to be inert and not opt out has worked well so far", according to Jacqui Reid, associate director at Sackers.

"However, the challenge is for employers to engage better with their members so they don't decide to opt out now", she said.

Ms Reid added: "Some employers may think their only duty is to implement an auto-enrolment scheme, but this is not the end of their responsibility. 

"They also have a duty of good faith when it comes to pension provision, and if they are going to provide a pension, they need to review the suitability of the existing scheme and communicate its benefits better to employees."

In 2014, after the UK's largest employers had fulfilled their auto-enrolment obligations, the Pensions Regulator revealed:

  • 10,817 employers completed their declaration of compliance between April 2013 and March 2014 confirming that they had complied with their duties.
  • There were 785 potential non-compliance cases referred for investigation.
  • In 78 per cent of referred cases closed in the period, no further action needed to be taken as the employer became compliant shortly after the regulator’s intervention

So far, according to latest figures from the Department for Work & Pensions, 6.7m people have auto-enrolled.

Jamie Smith-Thompson, managing director of pensions advice specialist Portafina, said: "It is likely that people who already took the opportunity to join their auto-enrolment scheme will decide to remain in it,   particularly if they have seen how quickly their pension has grown and how much of that growth has been from tax relief and employer contributions.

"When the review occurs, it’s possible that these employees will encourage their colleagues to opt-in because they’ve seen first-hand how their own contributions have immediately been boosted.

"For the employees who haven’t joined, the three-year review is a great opportunity to explain that free money is on offer, that even small contributions can really go a long way and saving early will help them to have many more options in the future."

In October, figures from the Department for Work & Pensions (DWP) last week revealed that one-fifth of all workers are still not being paid enough to be eligible for auto-enrolment.

According to its quarterly update on auto-enrolment, the DWP found 19 per cent of workers are not eligible for the government's workplace scheme because they do not earn £10,000 a year, which is the minimum wage needed for auto-enrolment.