Seven auto enrolment myths dispelled
At the end of last year more than five million people were automatically enrolled into a pension scheme as a direct result of auto enrolment.
Despite this, a wide range of myths and misconceptions still exist around the planning and implementation of AE for both businesses and advisers.
Drawn from the results of Buzzacott’s recent auto enrolment research report, carried out by Meridian West, here are the seven myths about auto enrolment:
- Myth 1: Auto enrolment is a low priority for organisations
According to Buzzacott’s research it’s top of the agenda for those who haven’t gone through it yet. It’s about legislation and strategic importance over and above the pension. “It’s the biggest change in a long time,” Kimberley Bradshaw managing director of the firm’s HR consultancy said.
- Myth 2: Auto enrolment is merely a compliance exercise
AE is not a tick box activity – it provides an opportunity to review strategy.
- Myth 3: Three to six months is more than sufficient to plan and implement auto enrolment
One of the main learnings from the report was that it will take longer than you anticipate. It takes a lot of time, typically between 12 and 18 months. It’s not necessarily about your business or accounting firm, but engagement with other pension providers takes time.
- Myth 4: Auto enrolment requires only minor tweaks to systems and processes
Many payroll systems are not compliant.
- Myth 5: Organisations with existing pension provision will not need to make any changes
Many pension schemes are not compliant.
- Myth 6: You need to be a pension expert to implement auto enrolment
Many people taking responsibility for AE are just normal managers. You can seek external advice.
- Myth 7: Most employees will opt out of auto enrolment
As part of the budgeting and planning process you can get it wrong. At the moment opt outs are around the 10-15% mark, much lower than originally anticipated at 30%.
Time management is key to AE success - you need to have a clear timetable and project plan in place. Establish clear lines of responsibility, communicate and identify the potential risks.
Buzzacott partner Rachel O'Donoghue explained that implementing AE was often more difficult for smaller organisations.
She outlined five key questions to ask your (or your client’s) organisation:
- Timetable: Have you allowed sufficient time to plan and implement all the changes required in advance of the staging date?
- Planning: Have you reviewed your existing provision to understand whether it qualifies for auto enrolment or whether you will have to make significant changes?
- Team: Have you received input from all the appropriate teams and individuals across your organisation such as Finance, HR and Payroll?
- Communication: What is the most appropriate way to communicate changes as a result of auto enrolment to employees in your organisation?
- Implementation: Have you reviewed all the options open to your organisation to assess what best suits your needs?
AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.