Blog: The importance of ongoing auto-enrolment governance

More than one million employers have now automatically enrolled staff into a qualifying workplace pension, the latest figures reveal.

This auto-enrolment milestone means around 9.3 million people are now saving into a pension, with a large number of new savers under the age of 30.

Since October 2017, new start-ups have to comply with workplace pension legislation immediately and it is estimated that circa 16,000 new businesses will be required to enrol eligible staff into a pension scheme.

The statutory pension duties for employers, aiming to boost the UK’s retirement saving, was rolled out in 2012, with all employers given a mandatory date when their pension duties would commence.

With auto-enrolment now well established, the workplace pensions focus has also moved on to re-enrolment. This is to be completed every three years after the company’s original staging (start) date with the employer putting any members into the scheme who had previously opted out.

More than 38,600 employers have now met their re-enrolment duties since September 2015, the latest research shows.

Clifton Wealth auto-enrolment expert Peter Harvey said: “We have taken many businesses through automatic enrolment, ensuring the business meets their duties and is fully compliant.

“I am of a mind, however, that ongoing scheme governance is of greater importance. Given all existing companies would have staged, The Pensions Regulator will inevitably be looking to ensure that their six DC (defined contribution) principles are being met to ensure good governance.

“It is therefore worth considering if your current arrangements are fit for purpose and whether scheme governance is being regularly reviewed.”

From April 2018 the minimum employer contribution, will double from 1% to 2%, with the minimum employee contribution rate increasing from 1% to 3%. Depending on how the scheme chose to define pensionable pay, it may be higher.

Contribution rates will increase again in April 2019, where they will stabilise at a minimum of 3% for employers and 5% for employees.

The Government’s recent auto-enrolment review recommended extending auto-enrolment to young people from age 18, potentially introducing a further 900,000 young people to saving for a pension.

Further recommendations included calculating contributions from their first pound earned, rather than from a lower earnings limit, with earnings trigger remaining at £10,000 for 2018/19.

The review estimated there are still around 12 million people under-saving for their retirement, 38% of the working age population.

Peter Harvey DipFA,
Senior Adviser, Clifton Wealth,