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auto enrolment

Auto enrolment: seven million and counting  

January 24, 2017 10:57 am Published by

Auto enrolment has reached a new landmark, but the path from 2017 onwards could be challenging.

When automatic enrolment into workplace pensions started in October 2012, there were some doubts about how successful it would be. A little over four years later, few would argue that AE has not been a success, at least so far.

The latest data from The Pensions Regulator (TPR) shows that more than seven million people have now been put into a pension by their employer because of AE. More than 340,000 employers have so far complied with the AE responsibilities. The earliest were the largest employers and the stage has now been reached where AE is focussed on small and micro employers (sub-30 employees).

Auto enrolment: so far, so good?

Such is the skew towards small employer sizes in the UK that 2017 will see more than 700,000 employers embark on their AE responsibilities, double the number so far. There are already signs that compliance among smaller employers is becoming an issue. In the third quarter of 2016 TPR issued more than 15,000 compliance notices, against the 11,000 it had issued in total over the previous 15 quarters.

It was a similar story on the imposition of penalties, with the number in the most serious category − escalating penalty notices of up to £10,000 a day − three and a half times the previous 15 quarters’ total.

In 2017 the Department for Work and Pensions will be undertaking a review of the AE process, which could eventually see new measures to extend AE to the self-employed and those with multiple low-paid jobs. The review will not explicitly propose increased levels of contributions, although most pension experts think that the current ceiling of 8%, due to be reached in April 2019, is too low. At present the total contribution is just 2%, split equally between employer and employee, which may explain why few people have opted out. Next year, when employees’ contributions treble and employers’ double, could see a reaction against AE.

AE is a step on the road to adequate pension provision, but on its own will not be adequate for many people, particularly those who have only a limited time remaining in which to contribute.

If you are an employer who would like to talk about auto-enrolment , or an employee with questions about AE or pensions in general, please get in touch with the team at Hartsfield.

Employment Benefits Planning Guide

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This post was written by Melanie Dolphin

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