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Pension auto-enrolment is underway. If you have 2,000 staff or more, you should by now have your auto-enrolment system up and running. If you have fewer staff, your turn is just around the corner. So what’s the state of play?

Pension auto-enrolment

First, a brief recap: Pension Auto Enrolment is the Department for Work and Pension’s response to the fact that too few of us are saving for retirement. Rather than the previous opt-in system, every employer must now offer a suitable pension scheme, and every employee will be automatically enrolled onto it (although they can then opt out).

If your business employs what the Pensions Regulator calls ‘eligible jobholders’ (22 – pensionable age, earning more than £9,440 in the tax year 2013/14), then you are required to:

  1. Provide a qualifying scheme (if you don’t already do so)
  2. Enrol all eligible jobholders
  3. Pay contributions – a minimum of 3% of each jobholder’s qualifying earnings by October 2018; and
  4. Register the details of your scheme, and the number of employees enrolled on it, with the Pensions Regulator

Progress report

According to the Pensions Regulator, by the end of June 2013 1,153 employers were part of auto-enrolment. The number may sound small, but auto-enrolment began with the country’s largest employers. Those 1,153 account for almost 7 million workers, although it’s fair to say that, as large employers, many of them already operated pension schemes.

2,000 and counting

The real challenge of Pension Auto Enrolment starts now. From August 2013 organisations with 2,000 qualifying employees or fewer will join the scheme. Two years from now companies with fewer than 30 staff will be auto-enrolling.

The further the scheme progresses, the less likely it is that the employer will have an existing, operating pension scheme. They’ll be discovering auto enrolment and pensions in general at the same time. Whilst that may be a daunting prospect, kicking the planning and administration into the tall grass is not the answer.

“There is a lack of understanding among some smaller employers in terms of what model of pension they want to use. In addition, the administration side of things tends to get put on the backburner,” says ITM director John Broke, speaking to Professional Pensions.

“IT, payroll, HR and internal communications all need to be involved,” says JLT regional director Mark Adamson.

Planning for change

One way of making auto-enrolment implementation easier could be to rationalise your payroll. A modern payroll system with integrated HR will almost inevitably lead to a far more successful auto-enrolment experience than with most legacy systems.

“I think many smaller businesses see auto enrolment as some kind of organisational threat,” says Just Payroll Services director Karen Healy. “But actually there’s a real opportunity to renew your administrative processes. A rationalised payroll could help you introduce auto-enrolment seamlessly and painlessly. It’s an opportunity to make your other back office functions easier too.”

You can find your company’s auto enrolment staging date here. To start planning your integration talk to your payroll services provider.

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