Pensions experts say that a review of auto-enrolment is needed following the May general election to help employers and employees meet the cost of contributions.
The call came from the Association of Consulting Actuaries (ACA) as it published a report on 4 January into pension savings, based on a survey of 414 businesses employing between one and 249 employees.
The report found that most employers implementing auto-enrolment were paying the current minimum employer contribution, or close to it.
The ACA said it was concerned with more than one million smaller employers yet to come on board, there could be significant challenges caused by the short time many businesses and workers would have between starting auto-enrolment in 2015 or 2016 and increases in contributions between in 2017 and 2018.
Until 30 September 2017, employers’ minimum contribution is one per cent of a specified band of earnings – between £5,772 and £41,865 in the 2014-15 tax year – rising to two per cent from 1 October 2017 and then to three per cent from 1 October 2018. Employees will see contributions rise from 0.8 per cent of band earnings to 2.4 per cent from October 2017 and then to four per cent from October 2018
The ACA said that the government elected in May should undertake an immediate auto-enrolment policy review to assess whether “enhancements” were necessary to help employers and employees cope with increases in contribution rates.
ACA chairman David Fairs said “In the near-term [the] government may need to be pragmatic and consider some targeted financial incentives to help deliver the desired policy outcome of wider and deeper pension coverage in smaller firms.”
Meanwhile, government research has found that employers who went through auto-enrolment in 2014 recommend starting preparation between six and nine months before their staging date, the date on which they must start auto-enrolling.
The findings came in a Department for Work & Pensions survey of 50 businesses employing between one and 499 people, published in November. The report said the time was necessary “to understand the full ramifications of automatic enrolment legislation and to prepare management databases for assessment of workers’ eligibility. In addition, it was advised that this time could be used to research available pension schemes and payroll software to facilitate pension contributions.”
Employers who are yet to be affected by auto-enrolment may be interested in Moore Thompson’s free auto-enrolment seminar on Wednesday, 11 February, which will cover issues including:
- what auto-enrolment means for your business
- the steps you can take now
- putting in place a qualifying pension scheme
- reviewing existing pension schemes and upgrading schemes
- pension scheme administration, record-keeping and reporting
- how payroll bureau services or Sage software can help.
The seminar will take place from 4.30pm at the Function Suite, South Holland Centre, Spalding. To book a place, please contact Louise Bacon at email@example.com or on 01775 711333.
For more information on our auto-enrolment services, please contact us.