Ready for Auto-enrolment? 5 Tips to Get Ahead of the Game
Only one in three workers is contributing to a pension scheme and a further 8 million are saving absolutely nothing towards their retirement.
These recent estimates illustrate the stark reality that is forcing the Government’s hand in setting mandatory pension contributions.
But with the news that over a million people have stopped their voluntary pension contributions as a result of a squeeze on their household finances, this won’t be welcomed with open arms by your average employee.
In fact employee awareness of the new auto enrolment changes is believed to be very low, particularly amongst the younger age groups and those in non-managerial roles.
A clear communication plan is therefore essential as employees will need to understand whether or not they are eligible, how much they will be required to contribute and their ability to opt-out if they wish.
Of course this forms only part of the process and with a phasing-in period of 4 years this at least gives many employers the chance to plan ahead. The largest firms will be affected first and according to research carried out by Standard Life, 93% of larger employers still don’t have a firm plan in place to meet their auto-enrolment obligations.
The impact on cash flow is obviously a major factor given the required minimum employer contribution of 3% of qualifying earnings, but there are other key issues to consider.
- Will your current payroll system cope with the added administration, particularly auto-enrolment, and do you have enough resource to administer this?
- How much will you contribute and will this differ across the various salary levels?
- Will you open the scheme up to those who don’t qualify but wish to make voluntary contributions?
- Does your current scheme even qualify under the new regulations?
2016 may seem a long way away but taking steps now will help you manage the financial burden and minimise the disruption to your organisation. Burying your head in the sand is not an option!
Here are 5 tips to get you started:-
- Find out your staging date – so that you know exactly how long you have to prepare
- Set a timetable – once you know your staging date you can work backwards to prepare your plan
- Review your existing pension scheme – does it qualify under the new regulations?
- Analyse the cost – how many of your employees are likely to be eligible and what impact will this have on your cash flow?
- Administration – will your current payroll system be able to cope and do you have sufficient resource for ongoing administration of the scheme?
AND A BONUS TIP:
Communication – how are you going to communicate the requirements to your employees and ensure they are fully aware of their options?