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  • January 2011
01

DWP sets out new auto-enrolment timetable

Open-access content Wednesday 25th January 2012 — updated 5.13pm, Wednesday 29th April 2020

Auto-enrolment into private sector pension schemes will not be fully introduced until 2018, under a revised timetable published by the Department for Work and Pensions today.

2

Under the schedule, announced by pensions minister Steve Webb, small businesses will have more time than originally planned to introduce the changes. Webb said this would give them 'breathing space' to prepare for the reforms in tough economic times.

For firms with 250 employees or more, however, auto enrolment will begin this October and run until February 1 2014, as previously planned. 'This means that no large employer will have to make any changes to their plans - which are in many cases already advanced,' Webb said.

The timetable then moves to medium-sized firms, who will be re-allocated automatic enrolment dates between April 1 2014 and April 1 2015 - up to nine months later in some cases.

Webb said this would still mean around 70% of eligible workers would be auto-enrolled before the end of this Parliament - compared to 75% under the timetable originally set out by the government.

Auto-enrolment dates of between June 1 2015 and April 1 2017 will then be allocated to small employers, while new employers setting up business between April 1 2012 and September 30 2017 will make the change by February 1 2018. New employers set up after then will have to comply 'immediately' with auto-enrolment.

The final change involves a proposed delay of a year until October 1 2017 in an increase in the minimum rate of employment pension contributions from 1% to 2% of banded earnings. This will then increase to 3% in October 2018.

This means that the implementation dates of some of these employers will be up to nine months later.  Details of the revised timetable will be consulted on 'shortly', Webb said.

The revised timetable was welcomed by Barnett Waddingham, who said it meant they could now start helping clients plan for auto-enrolment with more certainty.

Clive Grimley, a partner at the actuarial firm, said: 'The longer phasing period is good news for employers as it will help them incorporate the financial implications of the changes over a longer period and will help with costs if recessionary pressures continue in the short term.'

He noted, however, that the timeframe stretching into the next parliament meant that the issue of compulsory pensions could feature in manifestoes for the next election.

Rudi Smith, senior consultant at Towers Watson, highlighted the challenge facing large employers in complying with the timetable confirmed today.

'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."

Mr Webb's announcement came as the Association of British Insurers published research showing that 53% of people not already in a company pension scheme plan to remain 'opted in' when their employer sets up an auto-enrolment scheme.

 Maggie Craig, acting director of life, savings and protection at the ABI, said this figure was 'encouraging'. She added: 'Around half of workers are either not saving into a pension or not saving enough, so auto-enrolment will give many people the much needed nudge to save for their retirement and break the 'savings stalemate'.'

'Whilst current financial pressures can mean building up a sufficient pension pot often gets put on the backburner, people should not ignore the opportunity to benefit from employer contributions and tax relief on their own contributions.'

However, the revised timetable was criticised by the general secretary of the Trades Union Congress, Brendan Barber. '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 auto-enrolment and the new system will not now be fully in place until three years after the next general election,' he said.

This article appeared in our January 2011 issue of The Actuary.
Click here to view this issue
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