Pensions World

Know your staging date as the first step in preparing for the challenge of auto-enrolment advises John Foster, Aon Hewitt.

When we carried out the last annual Aon Hewitt “Benefits & Trends” survey, we were surprised to find that 60% of UK businesses were not planning pension changes, despite the impending auto-enrolment and new employer duties regulations.

A few months on, and – hopefully – many of those organisations have realised the need for action, especially the larger among them, whose staging dates for auto-enrolment may be as soon as October 2012.

Be prepared

For those still deciding how they will tackle auto-enrolment’s challenges, we have some suggestions for how a potentially painful process can be made more straightforward.

1. Make a start. It sounds trite but, with fines for non-compliance potentially reaching £10,000 a day, there is a good incentive to be prepared. Make sure you know your staging date and work project plans back from this. Get a feel for the scale of the task – will your current scheme, with a few tweaks, make the grade as a qualifying scheme, or will you need to introduce a totally new pension scheme?
2. The data aspects are key to success as clean scheme data will be vital for ensuring the success of your communications. Are you confident that your record keeping is fit for purpose? A data audit might be a good first step.
3. Look at your systems and processes. It is crucial that the relevant parts of your business work together. Auto-enrolment requires your processes and systems to dovetail: there are strict time limits around enrolment and opt out communications; terms and conditions; postponement; refunds on opt out and automatic re-enrolment. This goes beyond the remit of the pensions team; payroll, HR and possibly other departments will need to work together.
4. Involve your providers and stakeholders from early in the process. All the issues auto-enrolment raises will need involvement or approval from a number of stakeholders: trustees; employees; employers; the Pensions Regulator. The input of your providers – from payroll to pensions administrators, insured benefits providers to communications consultants – will also be crucial and their time will be increasingly in demand as the deadline approaches.
5. Think about your membership. After auto-enrolment, many of your scheme members will be members by default rather than by choice. This will change your membership profile and should affect the way you communicate and engage with members. Communications will need to move up the agenda and may need to be re-thought to ensure its relevance.
6. Investment is another key area. Qualifying schemes are required to have a default fund. Your current scheme may not have one – or if it does, it might not be appropriate for your changed membership profile. Your other investment funds will also need reconsidering to ensure you have the correct range and type.

Everything in place

As you can see from just a brief overview, there is much work to do before the first staging dates draw near. The range of stakeholders, providers and internal teams/systems that need to be involved make compliance with auto-enrolment and the new employer duties a complex and lengthy challenge.

Our advice is to start now and use the suggestions above as a guide to the key areas to address. Early preparation will be the key to success for organisations with over 500 employees and with staging dates in 2013 or as soon as July 2012 for the largest employers. Make sure all parties know what they will need to do and by when to ensure everything is in place for the staging date.