According to recent research published by The Pensions Regulator (“TPR”), the majority of employers do not have any difficulty with ongoing duties relating to automatic enrolment, finding them less onerous than they expected.
The Pensions Act 2008 requires UK employers to automatically enrol eligible workers into a workplace pension scheme and contribute towards it, unless the worker is already a member of a qualifying pension scheme. Jobholders may opt out of the regime but employers must not offer them any inducement to do so and workers who opt out will be automatically re-enrolled every three years. Under the automatic enrolment regime, employers have five key ongoing legal duties:
- keeping accurate records;
- assessing the age and earnings of workers each time they are paid to check whether they are eligible for automatic enrolment;
- enrolling staff into a qualifying scheme if they reach the eligibility criteria and writing to them to explain how automatic enrolment applies to them;
- managing requests from staff to join or leave the pension scheme; and
- calculating and paying the correct pension contributions for every worker enrolled in the pension scheme.
The recent “Ongoing Duties Survey”, which surveyed 300 micro employers (with 1-4 members of staff), 300 small employers (with 5-49 members of staff) and 200 medium employers (with 50-249 members of staff) revealed a high level of awareness of each individual ongoing duty with awareness measured at 93-100% across all three employer sizes. The report also revealed that almost all of the employers surveyed (97% of micro employers, 98% of small employers and 99% of medium employers) were confident that their organisation was fully compliant with their ongoing duties despite typically spending no more than two hours per month on carrying out those duties.
April 2018 saw minimum contribution rates increase from 2% (made up of a minimum contribution of 1% from the employee and 1% from the employer) to 5% (made up of a minimum contribution of 3% from the employee and 2% from the employer). The rates are scheduled to increase again in April 2019 to 8% (made up of a minimum contribution of 5% from the employee and 3% from the employer).
Despite concerns that these increased contributions would prompt employees to opt out of their pensions, the survey revealed that only 2% of micro employers and 5% of small employers had experienced one or more members asking to leave their scheme following the April 2018 increase. Whilst the proportion rose to 17% among medium employers, the figures show that the vast majority of employees are continuing to save into their pensions at higher levels. Almost half of the medium employers surveyed also confirmed that they are currently paying more than the minimum level of employer contributions in respect of some or all of their employees.
Commenting on the findings, TPR’s director of auto-enrolment, Darren Ryder, said: “It’s great news that employers are continuing to find their ongoing duties quick and easy to do, staff are saving more and we are continuing to build on the success of automatic enrolment.”