Auto-enrolment: halfway there

In October 2015 larger companies will begin re-enrolling employees who opted-out of auto-enrolment when it began in 2012, underlining the pensions revolution that has taken place in a relatively short time in response to an ageing population.

The proportion of employees saving through a workplace pension has risen from under half (45%) in 2010 to almost two-thirds (65%) in 2015, largely due to auto-enrolment, which is beginning to affect companies with under 50 employees and micro-companies during in the summer of 2015. Excluding those earning below the qualifying income tax threshold of £10,000, nearly three-quarters (74%) are now in a pension scheme.

The pensions world continues to change, from this April’s ‘liberation’ of pension pots from the annuity yoke to the introduction of a new flat- rate State Pension next year, not least in the growing awareness by both employees and employers of the importance of pensions as part of reward packages.

Pensions are also an interesting, perhaps unlikely, bellwether for the inter-connected malaises of the UK economy. Research shows people recognise they should, and would like to, pay more into their pensions: CIPD reports the average defined-benefit contribution is 5% while workers would like to contribute 9%.

They need to earn more to do so, but employers cannot afford to increase pay – or pension contributions – unless productivity rises. In the words of CIPD’s Charles Cotton, “this may not be happening any time soon given how poorly employers rate their employer’s ability to manage, reward and recognise employee performance”.

One result of relatively poor pension expectations is that people will work longer, further increasing our demographically-driven ageing workforce when staff can no longer be retired on age grounds, and have the right to ask to work flexibly and part-time.

Pension provision has never been more important, and the finding that younger staff – 92% of 18–24-year-olds and 82% aged 25–34 – now welcome information and guidance (never ‘advice’) from their employer is an added incentive to communicate effectively and regularly about this once sleep-inducing subject.