Many Companies Still 'Dragging Their Heels' on Auto-Enrolment Preparations

Friday, November 09, 2012 by Mercer Marsh Benefits

Around a third of companies due to start automatically enrolling all employees into pension schemes in the first half of 2013 are still considering their strategic response to the new regulations, according to a Mercer snapshot survey of more than 300 clients with staging dates in 2013 or later. The data showed that around two-thirds of employers staging in the second half of 2013 are already considering their strategic response.

"Experience shows the implementation stage of auto-enrolment to be the key challenge, so those not yet decided on their strategy will have their hands full in the coming months," said Rachel Brougham, head of Mercer's auto-enrolment group.

"Auto-enrolment is primarily about systems, processes and data flow and many companies are now realising they have a lot of ground to cover before their staging date."

When considering what pensions arrangement to use, around a third of companies replied that they have not yet made a decision. The majority of these are due to stage in the second half of 2013. However, there is still a sizeable number (roughly 15%) of employers with earlier staging dates that have yet to decide.

A further third of respondents indicated that they would use contract-based arrangements and close to 20% plan to use unbundled trust arrangements (i.e. where investment and administration are supplied by different providers). Around nine percent intend to use a master trust, while 20% of this particular group have yet to decide which one and half of those planning to use master trusts indicated they may use NEST.

"The range of pension solutions that companies can use to comply with auto-enrolment covers trust or contract based DC schemes, master trusts and low cost auto-enrolment providers such as NEST. At the moment there doesn't appear to be a distinct pattern in choice of solution among those that have decided," said Ms Brougham.

"Employers need not wait until they have identified their solution before looking at processes however. They need to understand where their data comes from and how it flows through their current systems so they can identify what needs to change for auto-enrolment purposes.

"What is very clear is that data quality becomes extremely important for the purposes of implementation, especially with the Regulator's focus on record keeping in general, and for the purposes of auto-enrolment in particular. Indeed the data requirements may be key to the choice of solution."

Ms Brougham added: "Some employers who already run existing pensions arrangements are looking to simply use those existing arrangements for auto-enrolment. However, early engagement with their providers, and any new providers for that matter, is essential to determine whether the same terms will be available, and if so, at what cost. Engaging early means more time to consider alternatives should the preferred route be blocked or prove too expensive. The alternatives may lie in the master trust, and in particular, the low cost master trusts mentioned above."