PENSIONS
Securing better financial futures through pensions
Andy Coles, deputy head of pensions and benefits, Dorset Healthcare University NHS Foundation Trust, reflects on the challenges posed by automatic enrolment (AE) compliance and the potential for further legislative changes
I t’s hard to get excited about compliance. We have so much to contend with already that the thought of adding more hoops to jump through can fill even the hardiest professional with dread. For every attempt at simplification, it seems that two more complications spring up to tie us in knots. Sometimes a simple enquiry can lead you down a rabbit hole of definitions and interpretations that leave you less sure than when you started out. New rules and requirements can be frustrating but while complaining can be a healthy part of coping, it’s easy to forget that these strictures haven’t sprung from nowhere. We might question or disagree with them, but they have been designed by professionals like us to improve existing procedures or to close loopholes that less scrupulous employers might seek to exploit. The introduction of AE In our own payroll and pension department back in 2012, trying to get our heads around the intricacies of the new AE legislation, it was hard to focus on the positives. Poring over diagrams explaining pay reference periods, lists of employee statuses, requirements for compliant schemes and a dozen other things felt like a nightmare. As an NHS employer, shouldn’t we have an exemption? Everyone knows we have a great pension scheme and we put just about
everyone in it, so why do we need to jump though all these hoops? “The scheme’s design – insisting on opt-outs rather than opt-ins – takes the inertia and procrastination that were previously significant barriers to retirement saving and turns them into ways to get people into a pension scheme” Of course, over time the rough edges get worn down and much of it becomes business as usual. The payroll software improves and probably does a lot of it for you now, and you’ve learned how to streamline your own internal procedures. If you’re very lucky, even those employees who really don’t want to be in a scheme have realised that three-yearly re-enrolment is just as much of a pain for you as it is for them and have stopped giving you a hard time. But getting to that point hasn’t been a smooth ride. Some aspects of AE can seem overly complex and designed to
irritate both employer and employees. Those strict rules around opting out of the scheme that caused innumerable angry calls and emails from our reluctant enrollees in the early years are at the heart of AE. It’s funny how something that caused us so much grief was a clever bit of behavioural economics at work. The scheme’s design – insisting on opt-outs rather than opt-ins – takes the inertia and procrastination that were previously significant barriers to retirement saving and turns them into ways to get people into a pension scheme rather deterring them. Compliance as a force for good. A success story so far Looking back, it’s easy to see what a success AE has been, even if there are concerns that it doesn’t go far enough. Overall participation in workplace pension schemes has increased from 55% of eligible employees in 2012 to an impressive 88% by 2021. That 33% increase represents millions of workers now actively saving something for their retirement. It might not be enough but it’s an improvement over what came before. The impact in the private sector has been even more pronounced, with membership more than doubling from 42% to 86% over the same period. The scale of this transformation is remarkable. By February 2022, more than
| Professional in Payroll, Pensions and Reward | November 2024 | Issue 105 52
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