The end of the story?
Pensions professionals are hoping they have seen the last of slips in the auto-enrolment implementation timetable. John Greenwood reports
The DWP’s publication of the revised timetable of staging dates for auto-enrolment has been both welcomed and condemned, with some organisations saying it makes implementation more manageable while others slamming it for dragging out the process unnecessarily.
The revised timetable has tripled the number of dates for employers in the 50 to 249 employee bracket in a bid to remove bottlenecks in demand for advice and information.
But the TUC has described as ‘disappointing’ the delay in the increase of employer contributions to 3 per cent to 1st October 2018, meaning employees will have had to wait 13 years after the Pension Commission’s report before they receive their full contribution.
The increase in the minimum rate of employer pension contributions from 1 to 2 per cent of banded earnings will be delayed from 1st October 2016 to 1st October 2017.
Large employers, those with 250 or more employees, will not face any change in the date they are due to start enrolling their staff, a fact that has been welcomed by firms operating in this target market. The latest employee staging date will now be 1st April 2017.
A consultation and draft regulations with more detailed information will be published shortly.
Minister for Pensions Steve Webb says: “We have done all we can to ease any burden on business the reforms will bring and employers of all sizes now know the date they need to start enrolling their staff.”
But TUC general secretary Brendan Barber has been critical of the delay of full implementation well into the next parliament. Barber says: “This is a deeply disappointing delay. Everyone agrees that we face a pensions crisis, with two out of three private sector workers not in any kind of workplace pension.
“Yet successive governments have delayed the introduction of autoenrolment and the new system will not now be fully in place until three years after the next general election.
“Contributions are being phased in, with the final stage delayed until 2018 – thirteen long years after the Pensions Commission recommended auto-enrolment. It all adds up to a classic case of ‘make me good, but not yet’”
“This announcement does not just hit the staff of small employers. What’s worse is that even workers autoenrolled this year will now have to wait until the end of the staging process before they get their full contribution. “This is because contributions are being phased in, with the final stage delayed until 2018 – thirteen long years after the Pensions Commission recommended auto-enrolment. It all adds up to a classic case of ‘make me good, but not yet’.”
Rudi Smith, senior consultant at Towers Watson, says: “The Government is saying there will be no further delays regardless of what happens to the economy, and employers will have to plan on this basis.”
“Some large employers will be able to keep contributions lower for longer where they do not think all employees attach sufficient value to their main pension offering. However, the latest delays do not give large employers any more time to work out how they will comply with a panoply of complex rules and regulations, some of which are only now being finalised.
“As employers get their teeth into these rules, they are finding that many things do not work quite as they thought. They are also waiting for the Government to finalise standards that existing pension schemes will have to comply with. Large employers won’t have much time to firm up their plans after these are published.”
But Robin Hames, head of technical, marketing and research at Bluefin, says his firm has not seen any evidence of employers deciding to pull back increases to full contributions on account of the delay.
Clive Grimley, partner at Barnett Waddingham, says the stretched timetable could put compulsion on the agenda for the next general election, and affects providers’ and advisers’ sums when it comes to remuneration.
“The delay prompts all parties to watch developments as the timeframe spreads into the next government’s period of office. Could compulsory pensions be a feature in the next election manifestos?” he says.
“And while the financial impact of the longer phasing period on Nest is unknown, the entrance of new competitors to Nest’s and to the insurers’ marketplace means that we can anticipate re-pricing of current pension arrangements in the lead up to employers’ staging dates.”
Those implementing auto-enrolment can only cross their fingers and hope this delay is the last. As Towers Watson points out, minimum contributions will now only be fully phased in almost 16 years after the Pensions Commission was asked to investigate under-saving for retirement, a year later than under the timetable published in December 2009, two years later than under the September 2009 timetable, and three years later than had been indicated in 2006. The chance of the timetable slipping in the next six years cannot be ruled out.