Yes Minister? Auto Enrolment faces review
Oval’s Nick Allen examines the latest twist for the National Employment Savings Trust

Did you know?
Today, around 50% of British workers are not members of an employer-sponsored pension scheme.1 Auto Enrolment will bring millions of UK employees into the workplace pension equation for the first time. It’s a big change.

It’s a classic case of hurry up and wait. On the table since 2005, the precise shape of NEST - the company pension scheme compulsory for all employers – may still yet change. On 24 June 2010 the new Government announced a review of how best to roll out automatic enrolment into workplace pensions and the coalition has confirmed its intention to introduce automatic enrolment. Bearing in mind the whirlwind of economic change since the Pensions Commission published its recommendations in 2005, we agree that it’s wise to make a reassessment.

Whitehall Review underway

An independent team of industry experts is conducting the review. It will weigh up whether the current approach strikes the right balance between costs and benefits to individuals, employers and for the taxpayer - particularly in the light of life post-2008. It’s underway now and will end on 30 September.

What’s interesting under the existing implementation schedules is that dates for compliance are concentrated between January and June 2014 for companies with 50 to 500 employees. As the majority of the UK’s ltd companies employ between 50 and 500 staff, what does this mean?

• Employers without an existing pension arrangement will receive their compliance notices starting between October 2013 and March 2014
• Employers with an existing pension arrangement but without 100% take up (average pension plan enrolment is around 50%), will need to consider whether their plan is:
  
  1) compliant and measures up to a Qualifying Workplace Pension Scheme (QWPS)
  
  2) ready to handle an increased take up and cost
• They will also need to consider whether early adoption of Auto Enrolment may help employees who are required to make contributions.

We can help shape NEST for you

Given there is no choice on whether an employer wants to provide pensions for its staff, what does an employer prefer?  Minimum compliance or something that can be seen as an employer sponsored benefit? Our view is that while any type of compulsion is going to be unpopular, there’s a tremendous opportunity for an employer to make the most of the situation.

• By designing an arrangement that maximises the association with the employer and differentiates itself from minimum compliance - NEST – you can turn the pension plan into an attractive recruitment and long term retention tool.
• This does not mean that contributions need to be above those required by NEST, rather through other tangible differentiators such as employee engagement, financial education, investment options and retirement choices.
• It will be difficult to deliver these value-added extras through NEST but they can easily be integrated working with an adviser or provider.

The review is welcoming comments until 13 August and you can send in your feedback here:
caxtonhouse.auto-enrolmentreview@dwp.gsi.gov.uk.

More updates in the next issue!

1 Office for National Statistics, May 2010

Like to find out more about what NEST means for your business?
Contact: Nick Allen on 07584 171067or email: nick.allen@theovalgroup.com