Although the concept of automatic enrolment staging dates has been around since 2012, for some smaller employers, their automatic enrolment staging date was only three years ago. As such, they will now be going through the automatic re-enrolment process. Employers should not find this difficult, because it is largely a repeat of the original process. Where the majority of the employees are already in a pension scheme, there will not be much for the employer to do.
While postponement cannot be used, the re-enrolment date can be three months either side of the three-year anniversary. However, it would be sensible to check the communications sent to members at the original staging date, to make sure the re-enrolment date is consistent.
A re-declaration of compliance is needed within five months of the three-year anniversary of the original staging date. The process is the same as that following the original staging date. The declaration needs to be completed even if no employees were originally enrolled.
An easement which you may wish to consider is that there is no need to enrol anyone who has opted out in the 12 months before the re-enrolment date nor employees who are working their notice period.
Employers should also note that legislation allows them not to enrol those with Lifetime Allowance protection. Some forms of protection are lost if contributions start up again following re-enrolment. High earners who have opted out or reduced their contribution rate because of the tapered Annual Allowance will need to pay attention, as they may need to take action. Of course, the employer would need to know that an employee has some form of protection and the onus is on the employee to tell their employer.
Remember that in most cases, the employer should not provide the opt-out form; it should come directly from the pension provider.
Of more interest is what will happen when minimum contribution rates start to increase from April 2018. Might we see a different story then, with a higher opt out rate? For many schemes, the minimum employee rate is currently 1%, which is a relatively small amount that most people would not miss from their pay. When the rate increases to 3% from April 2018, someone with an annual salary of £24,000 could see their monthly contribution increase by £30 to £40, depending on the definition of pensionable pay. While this might not be enough to make an employee opt out, particularly when they realise that the employer rate is increasing at the same time, the increase in the employee rate to 5% from April 2019 could well lead to a higher level of opt-outs.
The new Lifetime ISA might appear more attractive to some people, once it becomes more widely known. However, a pension scheme is generally still considered the best way to save for retirement and automatic enrolment tries to make sure people take advantage of that.