Andrew Firth discusses the preparation companies need to do at this point.
Research by Wealth Wizards has shown that an alarming 38 per cent of working Britons are still not clued up on auto-enrolment or realise that they are entitled to a workplace pension. The research shows that working people aged 18-24 years old are the least aware, with more than 50 per cent of people stating that they don’t know what auto-enrolment is.
Even more worrying is the lack of knowledge that still exists among employers. According to The Pensions Regulator, hundreds of thousands of the smallest companies are still lacking the awareness of what auto-enrolment entails, and don’t even know when their ‘staging date’ is.
Around 1.8 million employers are due to reach their staging date by 2018 (the vast majority of them by 2017). This is the day on which they must have a qualifying pension scheme up and running for staff. Employees must be automatically enrolled in the scheme, unless they have specifically opted out, and employers will have to make a pension contribution on their behalf.
Given that many of these employers are small businesses, they are likely to have little or no experience of running a workplace pension, and therefore it is essential to start planning well ahead of the staging date. Although it may be tempting to put off preparation for auto-enrolment, it is advised that a business begin preparing 18 months in advance, allowing enough time to ensure it is compliant with the new regulations. Failure to comply will result in a financial penalty.
What preparation has to be done prior to auto-enrolment?
An organisation’s staging date is based on how many employees it had on its PAYE scheme on April 1st 2012 and their PAYE ref numbers.
Once an organisation is clear on its staging date, it will need to start by assessing the eligibility of its workforce (which in itself can be an extremely time consuming task), and reviewing its existing pensions arrangements. It is then important that an organisation provides the relevant information to its workforce. Opting out requests and refunds may need to be actioned, and all records must be maintained accurately.
How can I help raise awareness and understanding of auto-enrolment among employees?
As you may be aware, as an employer you are legally obliged to automatically enrol your employees into a workplace pension scheme, rather than them actively choosing to join your scheme; and if they don’t want to be in, they must actively opt out. For this reason it is crucial that employees are made aware of auto-enrolment from the beginning of the process, and are given all the necessary tools to help them make informed decisions about their future.
With more small businesses approaching their staging dates, employers and employees alike must prepare themselves for auto-enrolment. Businesses should feel reassured that there is plenty of information and support available to help them through this process, both through the Federation of Small Businesses (FSB) and the Pensions Regulator. According to John Allan, FSB national chairman, most businesses which have already set up a workplace pension said they found the process fairly straightforward. The message for small businesses is clear: auto-enrolment is coming; the sooner you get to grips with what you need to do, the better off you will be.
Once auto-enrolment has taken place, employees will benefit from the provision of advice to support them with pension decisions. Online advisers (or robo-advisers) can be the answer for businesses as they offer employees access to expert financial advice (through online web apps or wizards) for a fraction of the cost of face-to-face advice. Providing employees with access to low-cost pension advice will ensure that they fully understand their entitlement and are more engaged in the process. This will guarantee that employees are clear on the benefits a pension can bring, which in turn will help to secure their futures.
Andrew Firth is chief executive of Wealth Wizards.
Further reading on auto-enrolment
