What is Auto-enrolment?

A Major Challenge for sure!

A question for all Business Owners…

Do you know how to meet the challenges of Auto-enrolment?

OK, there has been some publicity in the mainstream Media in the past months, but has it furnished you with the information or tools you need to plan and deliver an Auto-enrolment solution for your business, or more pertinently, prepared you for the depth of the far-reaching challenges you will face to even begin the implementation of such a scheme?

Right now, for many businesses, the answer is a resounding “No“! Having delivered many seminars on the subject, Neil Mutton, Director of QnA People Matter, has a forthright opinion on the question of what the three most important requirements are; “Planning, Planning & Planning.” is his answer.


So why was Auto-enrolment introduced?

The answer to this is all too obvious.

Individuals haven’t saved enough money to fund their retirement which, combined with the fact that as a Nation, we are living significantly longer beyond retirement day than ever before, means we will all – when our time comes – have (relatively) less stashed in the coffers that will need to stretch further than others before us.



Successive Governments have appreciated that the situation needed to change in order for individuals to stand any chance of having something approaching a reasonable retirement pot to to fund themselves into the ‘Autumn’ of their lives and beyond. Thus, the Pensions Act 2008 became law – placing the onus on Employers to create a pension scheme for their staff to pay into and for they themselves to contribute towards.

The term ‘Auto-enrolment’ was spawned from the requirement for Employers to “automatically enrol’ all staff above 22 years of age, earning above a minimum amount (£10,000 in this tax year), into that Pension scheme. 

OK. So how BIG is the task?

There are 1.8m businesses in the UK today who do not have a Pension scheme in place for their staff. Are you one of them?

All of these organisations now have a set date by which point, they must comply with the legislation.

This date will be between today and 2018, depending on the number of staff (or if under 30 staff, determined by their PAYE reference number). These dates were set for every business on 1st April 2012 and the ONS estimates this could benefit in the region of 8 – 10m new Pension savers.

…and how much are the contributions?

By October 2018, contributions will be a minimum of 8% of ‘qualifying earnings’. (a band of earnings – see the table on our Auto-enrolment page).

These percentages are being phased in as follows**:

  • Until 05/04/18 its 2% (Employer/Employee combined)
  • Until 05/04/19 its 5%
  • Thereafter its 8%

** If Qualifying Earnings basis selected for pension contributions

Alternatively one of 3 other ‘pensionable pay’ definitions can be selected, depending on the business, its strategy and drivers.

Budgeting is a significant component of Auto-enrolment, however the workload (ie dealing with the reporting requirements, compliance and administration) can easily be under-estimated. From registering the scheme(s) with the Pension Regulator, to proving all staff that should be auto-enrolled – have been enrolled, to ‘opting-in’ those who choose to be so, to re-enrolment, to new starters…the list goes on. The Pension Regulator estimated some time ago that the compliance and administration could cost between £7 – £14 per employee per month, an ongoing monthly commitment!

Seem like a large project to you?

That’s because it is!

…and all parts need to be co-ordinated. A key project factor is that planning needs to start between between 9 & 12 months before the scheme commencement date (referred to as the ‘Staging’ date). Scheme guardians need to be aware of the potential impacts on HR and Payroll, other Stakeholders (e.g. Unions, current Trustees) and the Design, Implementation and ‘Run’ phases of the project, all of which are equally important to ‘get right’ in their implementation.

Can a business ignore Auto-enrolment?

The short answer is a resounding “No”!

There are BIG penalties for non-compliance and for changes to recruitment practices in an effort to circumnavigate regulations. These penalties are up to £10,000 per day for the larger firms, and equally significant penalties for small and micro firms. The Pension Regulator has already outsourced many aspects of their administration to the private sector, so it would be dangerous to assume that, with 1.2m firms launching new schemes in the next few years, the administration could be over-awed and a particular business could escape the spotlight within that timescale.

In any case, as a responsible employer, the key positive to take from the challenges presented to us all by the Auto-enrolment legislation, is that it will enable millions to save appropriately and adequately for their retirement – something which is unlikely to have happened without it.