By Kalpana Fitzpatrick
UK employers have called on the Government to simplify the auto-enrolment regime and make modifications ahead of implementation in 2012.
A survey by the Association of Consulting Actuaries (ACA) found that the high costs associated with auto-enrolment will inevitably result in employers levelling down – with 41 per cent of large employers saying they were considering it to help mitigate costs. The new rules will require employers to auto-enrol millions of extra employees into workplace schemes.
However, the ACA found that although three quarters of employers support auto-enrolment, a large number of those surveyed felt the rules were complex and certain aspects should be removed – such as having to auto-enrol those with less than three months service, or having to auto-enrol those who opt out every three years.
Seventy three per cent of those surveyed said they wanted minimum pension contributions to be based on a percentage of basic pay rather than full earnings.
Sixty per cent argued that employers with fewer than five employees should be exempt from auto-enrolment.
Commenting on the establishment of the National Employment Savings Trust (NEST), almost a quarter said they would prefer commercial organisations to fulfil the NEST role, and 29 per cent argued that they disagreed with the entire concept.
A large number of employers said auto-enrolment should be delayed until legislation allowing greater freedom and flexibility to employers has passed.
Stuart Southall, ACA chairman, said although auto-enrolment costs will not hit employers until 2017, “it is only right that the costs of auto-enrolment, including the administrative challenges are addressed and tested as soon as possible”.
Joanne Segars, NAPF chief executive, added: "There's a significant risk of levelling-down post 2012, as many firms have yet to make up their minds about contribution rates. This is a risk that the government is underestimating. To counter that risk the rules around auto-enrolment for good quality existing schemes must be kept as simple as possible. If we end up with widespread levelling down because of the 2012 reforms then that would be a pyrrhic victory."
In its evidence to the auto-enrolment review, the ACA called for a higher earnings threshold before employees are auto-enrolled; a delay in auto-enrolling employees of micro employers; a shorter staging period than the current five years to reduce the risk of levelling-down; a relaxation of the rigid timescales; and clarity over the anti-inducement procedures, which stop employers encouraging employees to opt out.