• Around two-thirds of companies are only just starting to consider impact of requirements
• 15% either don’t know what the requirements are or haven’t given them any thought yet
• Few companies plan to lower contribution levels to minimum requirement
Around two-thirds of companies are only just starting to prepare for auto-enrolment, a delay likely to cause a serious squeeze on the provider market in 2013, according to Mercer. Amongst 200 respondents to a recent survey* 15% are either unsure of what the requirements mean for them or have not given them any thought yet. Twenty-two percent are some way into planning already, whereas only 1% said they’re already implementing and a further 1% are almost ready to deliver subject to final regulations.
Rachel Brougham, Principal and Head of Mercer’s auto-enrollment initiative, said: “It seems that lots of people have returned from their summer breaks and have acknowledged that they need to start thinking about auto-enrolment. For a successful and compliant introduction of the new requirements by 2013 they need to be getting into the detail of the planning now. Delay too long and they could well find provider capacity exhausted, leaving them facing the prospect and consequences of non-compliance or trying to engage with NEST at the last minute.”
Ms Brougham added: “Provider capacity aside, employers need to consider the significant impact that auto-enrolment will have on HR and payroll systems and processes too.”
Only 2% of survey respondents said they plan to level down benefits as a result of auto-enrolment -ie reduce contributions to the minimum requirement for all employees. Sixteen percent think that they will maintain current levels for existing members and plan to introduce minimum contributions for new hires and auto-enrolled employees. However, the majority of the respondents (54%), are planning either to maintain existing scales for everyone or allow employees a "voluntary upgrade" to a better scale subject to eligibility requirements.
“It’s very encouraging that, despite the current economic environment, we’re not seeing a wholesale rush to level down although it is inevitable that some employers will have to go down this route.” said Ms Brougham. “Although that’s not to say that all current contribution levels are high enough to provide members with a decent income in retirement. Most pension schemes still have some way to go to reach that goal.”
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