Robin Hames: Learning from auto-enrolment experience

This article has been supplied by Capita Employee Benefits.

Auto-enrolment, unsurprisingly, featured prominently in the Employee Benefits/Capita Pensions Research 2013.

But the big difference this year is that there is now a significant split in respondents: about one-third of respondents have now hit their auto-enrolment date, with two-thirds still awaiting their step into the new world.

So, those waiting to take the plunge now have the opportunity to gain insights from their peers with larger payrolls. And, thanks to this survey, that insight is based on the combined feedback of a significant number of employers, and not anecdotal.

The biggest piece of advice offered by employers that have auto-enrolled is simple: plan as early as possible. This was the overwhelming top tip from over 55% of employers that have staged.

This corresponds closely with our own experiences, having worked with a number of clients on their auto-enrolment strategy, from specific tasks such as scheme administration or software solutions through to a full end-to-end service incorporating consultancy, middleware and administration.

Employers that have given themselves the most time to plan have enjoyed the least bumpy ride. That preparation has often revolved around the mundane and the practical, such as a genuine appraisal of how on-boarding processes for new employees really work on the ground. It has also involved determining whether those IT quick fixes that ensure everyone gets paid will bear the weight of the data demands and employee segmentation requirements of auto-enrolment.

Cost assessment

No preparation would be complete without an assessment of the forecast financial costs of auto-enrolment, and opt-out rates are an obvious place to start.

Opt-out rates have been the success story of auto-enrolment. The majority of employers that had the time and opportunity to complete the analysis indicated that opt-outs had been lower than predicted: only 3% of respondents reported higher-than-expected opt-outs.

This suggests a need for employers to revisit the financial assumptions underpinning their project: 59% of employers that have auto-enrolled reported opt-out rates at, or lower than, 10%. Clearly, if this trend persists, more conservative assumptions may need to be factored into employers’ financials.

Given the increased costs, effective communication takes on increased importance. The research shows that employers value the importance of communicating pensions, with 84% claiming to want to give their employees as much information as possible and 67% wanting to demonstrate the value of their pension scheme.

However, there is a risk of the pensions message getting lost between employer and employee, given that just under 30% of employers ask their employees about their preferred method of communication.

Earlier this year, we conducted our own survey of 3,000 employees. This showed a clear mismatch between employee preferences and employer methodology; this was particularly striking in the use of technology.

Demand for communication online and via social media, in particular, was not being met. Perhaps once the strain of complying with auto-enrolment duties is over, this may be pensions’ next stage of evolution.

Thank you to those who have shared their experiences and good luck to those waiting in the wings.

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Robin Hames is head of marketing at Capita Employee Benefits

Read the Employee Benefits/Capita Pensions Research 2013.