20 May Workplace pensions and Auto-enrolment – June 2013
The purpose of this article is to highlight some of the obligations which will fall on employers in relation to setting up a pension scheme for workers and how CDC Wealth Management is able to support firms through the process. The issue of workplace pensions has been a prominent issue for a number of years now, but with clear dates now in place for employers to comply with the legislation, the need to take action is intensifying. Even the Chartered Institute of Personnel and Development (CIPD) has started to publish material urging employers to face up to the challenges ahead.
Changes to Pensions legislation mean an increased burden of responsibility for employers around providing access to a Workplace Pension Scheme. This applies to all employers, even if there is only one employee or a family owned business with only family members as employees. There are key steps that all employers must follow to ensure they have robust processes in place so as not to breach the directives laid down by The Pensions Regulator (TPR). Whilst the principle is well-intentioned, putting this into practice is likely to be a significant commitment for employers since the following issues all need to be considered:
Evaluation of pre-existing pension schemes: employers may need to devote considerable time and resources to evaluate whether existing workplace pension schemes (if any) meet the minimum ‘qualifying’ requirements for pensions automatic enrolment – especially among larger organisations or those with complex reward structures where a variety of differing schemes may operate.
Time and costs of setting up new schemes: where no workplace pension provision is currently in place, employers will need to set up new schemes – a major innovation for many smaller firms in particular. While the availability of the National Employment Savings Trust (NEST) scheme may help reduce the administrative challenge, the new requirements will inevitably add to labour costs for such employers.
Assessing individual eligibility: a significant workload may also be associated with the process of assessing individual eligibility for auto-enrolment, for example checking whether individual employees earn above the threshold at which auto-enrolment is obligatory. This is especially the case for ‘non-standard’ workers – such as individuals working on a temporary or casual basis – where assessing annual earnings levels will not invariably be straightforward
Workforce communications and financial education: a focus on increasing awareness of the need to plan for financial well-being in retirement is essential to minimising opt-outs by employees. The media deployed should be targeted according to the structure and characteristics of the workforce – for example, whether office-based or transient, levels of education and the nature of any shift patterns.
Benefits of auto-enrolment: if financial education and communications are effective, auto-enrolment may have a positive impact on employee engagement and talent management strategy – while some employers may also empathise with the Government’s overarching policy goal of ensuring all individuals have greater financial security during retirement.
With CDC’s expertise in auto-enrolment, we help businesses on the key steps required to ensure an effective auto-enrolment process is in place. A key element to this can be communication because aside from physically contributing to employees’ pension plans, it is essential to ensure workers understand these changes and how they might be affected. CDC offers a range of corporate pension advice through our specialist team, from basic consultancy to a fully bespoke offering.
For more information please contact John Sterricks at CDC Wealth Management