Research carried out by the Institute of Directors amongst its membership shows more than two thirds (67.8 percent) think auto-enrolment is a good idea. Most members of the Institute of Directors represent small employers and so are yet to have undertaken auto-enrolment.
Interestingly, the study also showed; Businesses now feel increasingly likely to fund auto-enrolment pension contributions from profits rather than limiting pay rises. Almost half of respondents (48.34 percent) suggested profits would fund the additional pension contributions up from 14.74 percent in 2013. Only 16.59 percent intend to meet the cost of auto-enrolment by limiting pay rises. This could also point to a growing confidence amongst Directors as to the strength of the economy. Employers seem more prepared for auto-enrolment. The proportion claiming to be extremely confident in coping with the legislation increased from 18.2 percent in 2013 to 25.02 percent in 2014.
Of the employers yet to stage, 13 percent still do not know which pension provider they will use for auto-enrolment. This is down from 18 percent in 2013. However 34 percent are staying with their existing provider. Much has changed with pensions. Does this represent the correct choice, or the one that is easiest to make given an apparent lack of available advice on the subject? The new pension freedoms have proved popular with Directors; 60 percent feel the changes have made saving in a pension more attractive. Despite this, many respondents were nervous about future changes to legislation taking away these new found freedoms.
Nathan Long, Head of Corporate Pension Research;‘This latest research will likely leave Steve Webb breathing a sigh of relief. In order for auto-enrolment to continue to be as successful, it requires the huge numbers of small and micro employers to successfully navigate their staging date over the next couple of years. Given more than two thirds of Directors believe auto-enrolment is a good idea, the Pensions Minister at least has the people who can make this work onside. Employees should also be encouraged by this research, as it suggests the cost of auto-enrolment being met directly by their employer rather than freezing pay rises. A sign perhaps of greater confidence in the UK’s economic recovery.
Whilst there seems to be a growing level of confidence from employers as to their readiness for auto-enrolment, the project should not be underestimated. Smaller employers are unlikely to have quite the complexities in their workforce compared to their larger counterparts, but it remains clear, those who bite the bullet sooner rather than later are likely to cope better. Much is being made about the lack of capacity or indeed willingness of pension providers and advisors to help smaller companies, however there are still firms happy to operate within this market. It is perhaps more important than ever to seek help given the significant changes to workplace pensions. Auto-enrolment, default fund charge caps and pension freedom mean the existing company pension scheme may no longer be fit for purpose.
It was also interesting to note the huge numbers of micro-employers coming through in 2016/17; one for the diary, given that it will come soon after the pension freedoms and the introduction of the new state pension. Many respondents voiced concerns about the impact of future pension changes. Perhaps the introduction of the pension freedoms in April 2015 may allow the Government to press pause on any future reforms for a prolonged period of time. It certainly seems doing so would improve confidence with pension saving.’
