Employers going above and beyond automatic enrolment pension duties
A new CIPD survey has found that over two thirds (68%) of employers have automatically enrolled eligible workers into a pension scheme and among these, many are contributing significantly more than is legally required to their employees’ pension pots. The survey from the professional body for HR and people development also found that almost half (46%) report that the proportion of eligible workers who so far have opted out from pension saving is less than 10%, which is less than originally forecast by DWP.
The CIPD’s report – Labour Market Outlook: Focus on Pension Auto-Enrolment 2014 – questioned 1,080 employers and found that:
Commenting on the findings, the CIPD’s Performance and Reward Adviser Charles Cotton said: “So far, pension automatic enrolment has been a success. It’s been the wake-up call we needed to get the UK saving for the future. Employers are in many cases going above and beyond the requirements and the majority of workers have opted to stay in the scheme. However, in the coming months, we need to keep a close eye on the number of workers leaving the pension scheme and what can be done to encourage them to stay. We also need to explore ways that we can increase the amount of money going into saving for retirement. To do this, it’s essential that employees are encouraged to look at their employer’s pension contribution as well as their take home pay when thinking about their total earnings. This is particularly important at a time when many people are experiencing either wage freezes or subdued wage growth.”
While many businesses already have automatic enrolment in place, many thousands more have yet to enrol. Among those who report that they have yet to implement auto-enrolment (28% of those surveyed, mostly small and medium-sized employers), 48% anticipate that they will have to limit future pay growth to pay for it while 19% forecast reducing hiring or cutting jobs. Just 26% think that they will be able to simply absorb the new costs while 18% think that there will be no additional expense.
However, of those who have already gone through automatic enrolment, 22% report that there are no significant extra costs, while 38% report that they have been able to absorb the additional expense. By contrast, just 14% reduced or froze wage growth while 13% scaled back on hiring or reduced staff numbers in response to the reforms.
Cotton continues: “It’s concerning that many micro, small and medium-sized employers think that they may have to cut or restrict salary growth or reduce hiring to pay for automatic enrolment. Our survey last year found many organisations predicting negative consequences in terms of employment and pay due to the pension changes, and these do not appear to have materialised. To mitigate any possible negative consequences, firms need to plan in advance, look at the cost implications, examine the potential responses and evaluate which ones meet the needs of the business, its employees and workers.
The CIPD’s survey also suggests that employers are committed to ensuring that their pension schemes are fit for purpose after the initial enrolment period.
Cotton concludes: “Auto-enrolment is just the start. For pension schemes to remain relevant to businesses and employees they must be regularly reviewed to ensure that the plans are performing and that employees appreciate and understand what is being done for them and why.”
Full press release on www.cipd.co.uk
Connect with ADVO Group