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15 Mar 2013

FROM MINORITY SPORT TO LEGAL OBLIGATION

 Half a year ago, the introduction of new legislation brought about the biggest change to the pensions system in a generation. Iain Fox, employee benefits director of growing Bath financial services firm Fidelius, looks at what small and medium-sized businesses can learn from larger companies’ experiences of auto-enrolment.

Saving for a pension was in danger of becoming a minority sport in the UK. And that’s why the Government introduced new legislation six months ago obliging employers to enroll all eligible staff into a pension.

Big business, rather than small business, has been the guinea pig for auto-enrolment. To begin with, only firms with 120,000 employees or more were required to auto-enrol. Since then, on the first day of every month, the legislation has been rolled out to cover more and more firms. By the start of 2018 every employer in the country will be required to enroll each member of staff into a pension, unless that member of staff expressly opts out.

Now we are half a year down the track, it’s worth looking back and seeing what lessons the UK’s biggest employers, such as the big supermarkets, have learned from the new pensions regime.

A recurring theme in the feedback is that there’s no such thing as preparing for auto-enrolment too early. 2017 or 2018 might seem a long way off if you are a very small business, but to avoid HR and administrative – and not to mention financial – headaches, it pays to do your homework early. This is a message I am always keen to drive home whenever I speak to businesses, whatever their size.

The staging dates for every employer’s participation in auto-enrolment has now been confirmed (see www.thepensionsregulator.gov.uk) and it can help to work backwards from this date to ensure you have the right plan in place to meet what will be a legal obligation. Careful planning will be vital in smoothly incorporating auto-enrolment into an employee’s existing benefit package, or in ensuring that an employee is aware of the options available to them.

As with any significant administrative or HR change to a business, clear and timely communication is vital.  The experience of many of the big employers is that an auto-enrolment working party that engages the various parts of the business is crucial if the regime is to be smoothly introduced. Draft a plan that is based on a clear understanding of what is needed to meet the legislative requirements of auto-enrolment. This will allow you to implement auto-enrolment in such a way as to avoid unnecessary costs while also ensuring that its introduction doesn’t interfere with your business’s basic day-to-day goals.

There are financial implications to auto-enrolment, but there are benefits too as the advent of obligatory pension enrolment creates a chance to re-package remuneration and benefits packages. Pay reviews between now and your company’s staging date may also need to take into account the potentially increased cost of pension contributions. With these points in mind, it is vital to have a plan in place that factors in these financial implications.

From the feedback, it is clear that auto-enrolment legislation has thrown up an array of HR and data management implications too. Many companies are looking to use ‘data hubs’ or ‘middleware’ software packages that bring together payroll, HR and pensions data. These can be useful but it is crucial that employers ensure these packages can support the use of employment contracts and meet the legislative requirements. Don’t jump into anything too quickly, but carefully review what is out there and take advice if you have any doubts.

For more information on how Fidelius can help you manage pensions auto-enrolment, please call us on 0845 241 6500 or email               john.calvert-jones@fidelius.co.uk

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