New research on employers' automatic enrolment preparations

The Pensions Regulator has today published automatic enrolment research, Employers’ awareness, understanding and activity relating to workplace pension reforms (PDF), showing improving levels of awareness and understanding among small and medium-sized employers. Awareness of the reforms remains high among large employers.

 

Carried out approximately every six months, the regulator’s tracker survey provides a snapshot of the progress that employers are making in their preparations as automatic enrolment approaches.

 

Charles Counsell, executive director for employer compliance at The Pensions Regulator, said:

 

“Our current focus is the large employers that reach their staging dates in 2012-13, and those that will advise them on preparations. For this group, adapting their current systems and processes poses the greatest challenge.

 

“A significant proportion of all employers say they will leave it as late as possible to comply, and a fifth of large employers still believe they can complete all the steps in up to three months.

 

"Employers should be under no illusions: this will take time, including assessing the suitability of their existing pensions arrangements or choosing a scheme, and adapting their payroll, HR, pensions and IT systems.

 

“We know we have a lot of work to do with small and micro employers, but the early levels of awareness are cause for cautious optimism. We are laying solid foundations and will be writing to all employers at least twice ahead of their duty dates – as well as prioritising work with the different groups of intermediaries and advisers that we know smaller enterprises will turn to for guidance and support.”

 

Indicative highlights from the research include:

 

• Two fifths (44%) of employers were aware - without prompting - of forthcoming changes in pensions law. Unprompted awareness ranged from 36% of micro employers to 91% of large employers. Awareness had increased among small employers (from 52% to 64%) and medium-sized employers (from 77% to 88%);
• When features of the reforms were read to respondents, 38% of micro, 64% of small, 87% of medium-sized, and 94% of large employers were aware that employers will have to automatically enrol workers; and 46% of micro, 67% of small, 84% of medium-sized, and 93% of large employers were aware that employers will have to contribute to their workers’ pensions;
• Among micro employers, word of mouth has increased as a source of awareness of automatic enrolment;
• 56% of employers will ask an adviser to help them choose a pension scheme for automatic enrolment;
• 64% of all employers are expecting to use an external adviser for automatic enrolment, but only 30% of these employers suggest they are willing to pay for that advice;
• 56% of employers who are prepared to pay for advice would be prepared to pay an accountant, 22% an IFA, and 11% an employer benefit consultant;
• Fewer employers think auto-enrolment is a good idea for their employees than in July’s survey (50% compared with 61%), though this was driven by an increase in neutral responses rather than employers disagreeing it was a good idea;
• Seven in ten employers (68%) have yet to discuss automatic enrolment; whilst 5% have started planning and 4% say they are fully prepared;
• A fifth of large employers (19%) believe that implementing automatic enrolment will take up to three months, while 37% believe it will take four months to a year;
• As in July’s survey, half of all employers (46%) will leave it as late as possible before thinking about how to comply;
• 36% of employers cite cost implications as the main challenge to complying with auto-enrolment; and
• More than half of employers (52%) had not heard of The Pensions Regulator before the survey, with levels of knowledge increasing according to employer size.

1. The research was carried out in September 2011 and took the form of telephone interviews with 614 employers of all sizes: micro (1-4 employees); small (5-49); medium (50-249); and large (250+). The interview findings were weighted to reflect the number of UK employers within in each of these segments.
2. These interviews were conducted prior to the announcement by the Department for Work and Pensions on Monday 28 November that the staging of small and micro employers would be put back to May 2015.
3. The research can be found on the regulator's website.
4. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund.
5. In the 2008 Pensions Act, and corresponding Northern Ireland legislation, The Pensions Regulator was given a new statutory objective to maximise compliance with employer duties (including the requirement to automatically enrol eligible employees into a qualifying pension provision and pay a minimum contribution) and with certain employment safeguards.
6. From October 2012 employers will be required to automatically enrol all their eligible jobholders into a qualifying pension scheme and make a minimum contribution of a jobholder's qualifying earnings into the scheme (this contribution will be increased in phases).
7. An eligible jobholder who reaches 22 and who has not reached pensionable age must be automatically enrolled in a qualifying scheme by the employer. Qualifying schemes are pension schemes that satisfy the quality criteria prescribed in the Pensions Act 2008. The criteria establish a minimum standard for the level of contributions made to the scheme or the level of benefit provided.

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