With more than 9m new pension savers predicted by 2020, it is fair to say that the aim to get more of the working population to save for their retirement has been a success.
However, this has not always proven to be a straightforward journey, as many employers will testify.
The good news for those employers with a May 1 2017 staging date is that many of these issues can be avoided by paying heed to the experiences of their predecessors.
Review current arrangements
Employers should check that their current pension scheme satisfies the requirements to be classified as a qualifying scheme. A qualifying scheme ticks the boxes in respect of contribution levels, a default investment strategy and accessibility for all employees.
Failure to meet these requirements can usually be addressed by making some relatively simple amendments.
Employers should also ask their pension provider if they are able to expand the coverage of their current scheme to include the rest of their workforce.
However, when the only solution is to establish a new scheme, especially where old legacy schemes are in use, this will take some time.
Check your figures
Employers should give early thought to the financial implications, as a material increase to pension costs could be incurred by making contributions for a greater number of their workforce.
Additional decisions include the definition of pensionable pay and if contributions will exceed the statutory minimum rates. This is a good time to look at the bigger picture and consider how pensions fit in with an employer’s overall employee benefits strategy.
Train HR and fix payroll systems
Human resources and payroll are arguably an employer’s two most important resources when it comes to auto-enrolment.
The HR team are an employer’s conduit to their workforce. They have day-to-day contact with employees, answering questions and pointing them in the right direction when more detailed assistance is required.
It is therefore vitally important that comprehensive training is provided so they can fulfil this important role.
Auto-enrolment has certainly opened many eyes when it comes to the previously little-understood world of payroll.
It is likely that existing payroll systems will need to be upgraded or possibly replaced to accommodate requirements around employee assessment and record-keeping. In addition, thought should be given to moving from weekly to monthly payroll runs to reduce workloads.
Payroll changes most definitely do not fall into the quick fix category, so early attention to this area is a must.
Communicate ahead of time
Employers should not overlook the fact that non-scheme members will have taken an active decision, possibly with a pinch of apathy, not to join their employer’s pension scheme.
A communication out of the blue informing them they have been auto-enrolled can create tensions, which can be time-consuming to defuse and explain.
An employee communication in advance of the staging date will raise employee awareness and understanding, and provide a nice segue into the auto-enrolment process. This should mitigate any frustrations and reduce time spent by the HR team.
Avoid falling at the last hurdle
Several employers have adopted their auto-enrolment duties in good time, only to fall at the last hurdle and incur the wrath of the Pensions Regulator by forgetting to submit their declaration of compliance.
Completion of a declaration of compliance is used to tell the regulator that legal duties for auto-enrolment have been met.
It is an online form that only takes 10 minutes to complete, and you have up to five months following your staging date to complete it, so there are no excuses.
While auto-enrolment may appear daunting to some employers at outset, it need not be with early planning, a proactive attitude and good-quality professional advice.