UK Companies Look to Postpone Pension Auto-enrolment

Over half of UK companies due to start automatically enrolling all employees into pension schemes are looking to postpone when an employee joins the scheme, according to a snapshot survey conducted by Mercer of over 300 clients with auto-enrolment staging dates in 2013 or later.

The consulting group adds that data also showed that approximately two-fifths of companies with an auto-enrolment strategy have opted for statutory minimum contributions to their auto-enrolment scheme, while many have not yet made any decision at all.

Mercer’s data showed that 56% of companies have opted to use postponement before enrolling employees into a pension scheme, while 44% of companies are planning not to postpone. Postponement offers up to a three month window for employers to enrol an employee into a scheme; from the date that the company is obliged to begin auto-enrolment, or on the first day of an employee joining the company.

“Postponement is seen by many as a way of deferring costs and easing the on-going burden on payroll and human resources (HR systems),” said Rachel Brougham, head of Mercer’s auto-enrolment group. “However, it is not a case of one size fits all; postponement can be used differently for different parts of the workforce which in turn could further relieve the burden on payroll systems, for example by aligning entry into the pension scheme with a complete pay period.”

Companies with qualifying schemes under the new regulations also need to contribute a statutory minimum of 8% of required earnings by 2018, comprising 5% gross employee contributions and 3% gross employer contributions. For those schemes where pensionable salary is not equal to qualifying earnings, the alternative is for the company to self-certify that contribution levels and pensionable salary to their scheme will meet certain criteria.

According to Mercer, 43% of companies of all sizes are opting for statutory minimum contribution levels, although 37% are looking to comply with the Tier 1 self-certification requirements (combined eventual contributions of 9% of basic pay). “Companies of all sizes are considering what is either the cheapest auto-enrolment option or most convenient, with many looking to self-certify through one of the three alternative sets of criteria”, said Brougham.

Mercer’s data also showed that around three quarters of companies are intending to keep existing schemes open to current non-members and new entrants. “This appears to finally dispel the expectation that there is likely to be a blanket move away from ‘good’ existing schemes to minimum compliance,” added Brougham.

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