The Department for Work and Pensions has reported on its annual evaluation of the implementation of automatic enrolment for workers in workplace pension schemes.  The report analyses the progress of automatic enrolment since its inception in 2012 and updates the key indicators the DWP uses to monitor the progress of the policy.

While automatic enrolment continues apace, the evaluation report highlights the need for smaller employers to engage earlier to understand fully the requirements of automatic enrolment and their duties under the legislation. Such employers may wish to consider starting their preparation for automatic enrolment six to nine months before their staging date.

The key findings of the 2014 evaluation report are:

  • Increasing the number of savers

The number of workers automatically enrolled into a workplace pension scheme had risen to over 4.7 million by September 2014, enrolled by around 34,000 employers.  The National Employment Savings Trust, the scheme established by legislation to support the introduction of automatic enrolment, counts 1.5 million members across 9000 employers.

  • Increasing the amount of pension savings

Total savings into workplace pensions rose to £77.6 billion in 2013, an increase of £4.3 billion from the previous year.  This was apportioned as £37.9 billion in public sector pension schemes and £39.7 billion in private sector pension schemes.

  • Opt out rates

Between 9% and 10% of members automatically enrolled into a workplace pension scheme exercised their right to opt-out or leave the scheme.  DWP research undertaken earlier this year with 50 employers showed an opt-out rate ranging between 5% and 15%.  The DWP estimates that, for the employers concerned, overall participation in workplace pension savings has increased by 32% as a result of automatic enrolment.

  • Employer awareness, understanding and activity

The DWP states that surveys have reported a consistently high level of engagement and awareness by employers of their automatic enrolment duties.  However, micro employers (those with one to four employees) are lagging behind and may wish to seek further assistance to prepare for their staging date.

  • Impact on employers

The average cost for employers implementing automatic enrolment between January 2014 and July 2014 was reported to be between £200 and £700.  Many of these employers reported that they were comfortable with the low costs but highlighted that time spent preparing for automatic enrolment accounted for the most significant cost.  Contribution costs were a key factor for employers, with employers who had existing pension provision tending to offer contribution rates above the statutory minimum whilst employers without previous pension provision tended to offer the statutory minimum.