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Auto-Enrolment - what’s all the fuss about?

Missing the train is bad enough, meetings missed, diaries changed. A much bigger problem is facing businesses that fail to get their auto-enrolment solution ready well ahead of their staging dates: where do you start and, as importantly, finish this stuff?

We are now at the business end of the auto enrolment project. Many employers, including CBC, have received letters from the Pensions Regulator (of whom more later) telling them to get their auto enrolment act together before their Staging Date.

Staging Date - that’s the drop dead date for getting your scheme in place. Yes, you can postpone the date for up to three months but, and it’s a big but, you still have to have your scheme ready on the Staging Date. At the risk of sounding like the compere for a Saturday night TV show, I want to take you on a journey through auto enrolment.

The beginning

Having received the letter from the Pensions Regulator what to do? Firstly don’t panic and secondly don’t file it away in the ‘pending to difficult’ tray.

Think about what auto enrolment means to you as a business owner. Are you looking to do the minimum or is an opportunity to use pensions as a ‘recruit and retain tool’ or something in between? Whatever your policy, you need to prepare to budget because auto enrolment will take up resources, not just money but time and staff. And to do that, you need to start planning.

Finding a suitable provider is not as easy as it sounds. There have been some recent questions about the merits of different providers on the TEAM Linked In site. The point is no one size fits all solution. Finding someone who can work with you to find the best provider for you is essential. If members come to you in the future and say why did you choose this firm over another it’s best that you can demonstrate due diligence with a report comparing different providers.

As, in the jargon, eligible jobholders, that is anyone working in the UK, aged between 22-State Pension Age and earning more than £10,000 per annum (or £833.33 in the month) joins the scheme without filling in an application form or selecting a particular investment, there is an onus on Employers to choose a provider who you can work with, preferably without having to upgrade your existing payroll systems.

As part of this work, you will have to make a preliminary assessment of your workforce. Who are eligible jobholders and who are non-eligible jobholders or entitled workers. The trick here is not to under estimate the number of employees who will join the scheme. This is partly because to opt out the employee has to get the form themselves (if you provide this you will be in breach of the regulations and subject to a fine) and partly because of employee inertia. Take up rate in excess of 80% of the total workforce are commonplace. The lesson here is not to under estimate your financial budget by assuming 50% or less of workers will join.

The middle bit

You will need to make sure that your payroll data is clean, that you hold email addresses for your employees or have another way of ensuring that they all get the right communications at the right time. All of this takes time and is essential to the success of the project. Employees can opt out, opt back in and you need to ensure that your systems can cope with this electronically. Manual workarounds will fall over and you can’t afford to run this risk.

You will need to amend existing employee’s contracts of employment and for future employees as well. An important consideration is that you can postpone new employees from joining your scheme until their three month probation period is complete, but they can opt in during this period.

Not least, we believe you need to allow time to run at least two practice payrolls with your chosen provider to make sure that your data is in shape to pay contributions after you have paid everyone. There is nothing in the 280 pages of regulations that actually says this, it’s just that doing something new for the first time with having tested it first strikes us as running unnecessary risks.

The end game

We cheat a bit here. There is no end game. Auto Enrolment needs to be as business as usual as HMRC’s Real Time Initiative. After Staging Date there is a Declaration of Compliance form to complete to the Pensions Regulator with a mandatory timescale or fines may follow. If you have been blissfully unaware of the Pensions Regulator before be aware that they have teeth and have exercised them on hundreds of employers to date. Being a smaller employer is no excuse for failing to comply with the regulations. The Pensions Regulator has already providence evidence that it is willing to come down hard on Employers who fail to comply with the auto-enrolment regulations. Now is not the time for Employers to stick their heads in the sand.

At CBC we have helped employers make auto enrolment work for them. If you want to find out more please contact us at or telephone us on 0845 4334 199.

Michael Clark

Managing Director