Spence & Partners latest blog for Pension Funds Online –
In October, Auto Enrolment celebrated its first anniversary and those of you who remember your school days will know that you were given an overall grade at the end of the year (well you were at my school anyway).
Now you were judged on many things, attendance, behaviour, manners, punctuality, and effort, to name just a few. It was a good year if I crept into B– territory but that is another story; so let us turn our attention to auto enrolment and what grade it should get.
Now if you believe everything that the pensions minister Steve Webb says, then you would definitely be heading towards an A grade, but of course not many people believe anything a minister says so we can probably discount that one.
Let us examine a few facts – according to a Department for Work and Pensions survey of 50 employers with between 6,000 and 12,000 employees each, the opt out rate is around the 9% level, which is much lower than some had anticipated. However there are a number of exclusions from this figure such as those who left after being opted in, and those who did not meet the qualifying criteria in the first place. I think it is also fair to say that as smaller employers reach their staging date, then this figure might well increase. However that is for the future and so we are now probably looking at a grade of A-.
The complexity of the legislation perhaps surprises no-one within the industry, but for your average man on the street it is still very hard to fathom. Once it is known that you work in pensions (assuming you are careless enough to let this slip), try explaining how a person can be eligible one month and not the next and so on and so forth. As was said to me at the end of a long evening, why not say “if you work and earn, then you have to join, end of story”. Ah, if only it were that simple, then it almost certainly wouldn’t be called a pension.
Anyway the legislation itself is still being tinkered with and that alone probably brings the grade down to a B+.
And finally, how do you actually communicate with a member? How do you explain how and why this is all happening? Is it a good thing for them or a bad thing? What will it cost them? All of this is time consuming and costs the employer money.
Having said all of this auto enrolment is without doubt a step in the right direction and despite some teething issues it is recognised that this is bringing some focus to the need for people look to their future.
Overall my grading would be a B; a very good start, but mainly with large employers so there is still a lot of work ahead and many hoops to jump through. But auto enrolment is a necessary evil because people are living longer and do need to save something for their retirement.
Let us hope that next year the grade has improved and that the numbers of people enrolling stay at their current respectably high levels.