Out-Law News | 28 May 2014 | 4:07 pm | 2 min. read
Research by workplace pension provider NOW: Pensions found that firms in the financial, property and business service sectors were likely to be the most generous, with 18% of those surveyed saying that they intended to pay more than the minimum employer contribution once automatic enrolment began for their employees. A further 10% said that although they would not do so initially, they planned to do so in future.
The pension provider surveyed 450 small and medium-sized enterprises (SMEs) with up to 250 employees. On average, 8% of firms surveyed planned to contribute more than the minimum to their employees' pensions while a further 9% planned to increase their contributions over time.
Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the firm's research showed that auto-enrolment was not "just a compliance issue".
"At least some employers recognise that encouraging pension saving is a good thing and that it can help with the recruitment and retention of workers," he said. "It is heartening that it isn't just the largest employers than recognise this."
Auto-enrolment began for the largest employers on 1 October 2012, and 'staging dates' by which smaller companies and new companies will have to begin the process run until 2018. This month, more than 12,000 firms employing between 90 and 160 people will have to ensure that they comply with the new requirements. Under the programme, more than 1.3 million employers will have a legal duty to automatically enrol workers into a pension scheme which meets certain minimum requirements, and will be legally obliged to make contributions towards the pensions of those that do not opt out.
Pension contributions by both employers and employees under automatic enrolment will be phased in, rising to a minimum total contribution of 8% of earnings by October 2018. Of this, a minimum of 3% will have to be contributed by the employer. The current minimum contribution is 2%, of which 1% must be contributed by the employer.
According to the NOW: Pensions survey, more than half of those employers intending to contribute more than the minimum would do so to help with the recruitment and retention of employees and 39% hoped that their higher contributions would encourage employees to do the same. Nearly one quarter of those firms said that they intended to contribute 1% more than the legislative minimum, while 54% said that they had not yet decided how much more they would contribute.
Of the 40% of firms planning to make minimum contributions, 41% said that it was because their focus was on ensuring compliance while 33% said that they wanted to "keep things simple" and thought that paying more would complicate matters, NOW: Pensions said. Just over a quarter of firms said that they were conscious of the need to keep costs low while 21% said that trading conditions were too difficult to offer any more. Of the firms planning to be more generous, 43% said that the statutory minimum contribution rate was not enough.
The results of the NOW: Pensions survey emerged shortly after the Pensions Regulator published its business plan for the next three years, which included a substantial increase in the amount it planned to set aside for expenditure related to automatic enrolment. Total auto-enrolment expenditure for 2014/15 will be £40.4 million, almost double the £21.3m that was spent in 2013/14, according to the report.
At the end of April, the regulator revealed that it had issued 15 compliance notices against employers that had not fully met their automatic enrolment obligations.