Pension auto-enrolment

A change in law means that all UK employers must enrol eligible workers into a workplace pension scheme. The date by which you need to do this varies depending on the size of organisation. The largest employers started auto enrolment in October 2012 and all companies will comply with the new regulation by 2017. Auto enrolment is a major project for employers, which requires close working between payroll and human resources departments to meet all obligations. We had our three largest clients (27,000 staff) go through this process in April 2013 and have led the way for regional colleagues.

There were a number of lessons learned:

1. Selecting an alternative qualifying pension scheme – There are a number of providers available, it is prudent to engage procurement colleagues at an early stage to establish the processes required for selection. Clients have selected a number of providers including the National Employment Savings Trust (NEST), The Pensions Trust and Citrus.  

2. Financial planning – Most employees who are not already in the pension scheme will be eligible to join the NHS Pension Scheme. This attracts employer pension contributions of 14% of pensionable pay. It is important that financial management are involved in projecting costs at an early stage.

3. Communicate – Employers must notify all employees of auto enrolment in writing. There are a number of key messages that must be communicated and prescribed deadlines which must be adhered too. The communication exercise should be started well in advance and numerous methods such as bulletins, payslip messages and awareness briefings can be used in addition to individual communications.

4. Workforce assessment – Our experience has found that not all employers record employees who retire and return or employees who work on a bank basis in one trust and in a substantive capacity in another. Some organisations used an employee questionnaire to gain this information.

5. Office holders and high earners – Office holders including Chairs and Non Executive Directors are exempt from the auto enrolment process. For some of the higher earners, being opted into a pension scheme can affect their lifetime allowance protection agreement and have significant financial implications. This group of staff may need to be communicated with separately.

6. Identifying resources – Last but by no means least, depending on the size of the organisation there is a huge administrative task to be undertaken. Writing to all employees, printing letters, devising communications, and analysing employee status all take considerable time. This is in addition to setting up new pension schemes and carrying out all ESR related tasks. Close working with human resources departments was paramount. The ongoing requirements for the administration of alternative schemes should also be considered.