Pensions and Auto-enrolment

Pensions and Auto-enrolment

Dr Susan Sayce

Back in 2010 Norwich Business School’s Dr Susan Sayce ran a seminar workshop with Lucas Fettes that focused on companies’ readiness for the introduction of auto-enrolment that came into effect in autumn 2012. The aim behind auto-enrolment was to address the failure of many in society to save for their retirement if they had no access to an occupational pension plan.

A key point that came from the organisational participants in the seminar about implementing auto-enrolment  was that with the present means testing of pensions they could not advise employees adequately. They could not advise employees whether they would be better off making pension contributions or opting out. Employers with lower paid workers, such as street cleaners and those who have a history of interpreted work employment- many of which are women- are particularly affected.

Confusion still reigns according to the DWP’s recent ‘Attitudes to Pensions’ survey. The major finding is that over three-quarters of the respondents do not know what their income will be on retirement or even at what age they can retire. The Standard Pension Age is currently 67. Those closest in age to retirement of the 2,000 respondents were more aware of these changes, possibly as they were more likely to be affected by them.  What was worrying was that young people and 6 out of 10 women did not know their SPA, or underestimated their retirement age, and this has major implications for pension planning.

The minister for pensions Steve Webb agrees that the pension area is complex:

We are taking the hassle out of saving in a pension through automatic enrolment, we are working with the industry to restore trust and confidence in pensions and we will reform the state pension to make it simpler and clearer to understand.

However, confusion about pension savings will remain while people are still unclear about the age at which they can claim a State pension and how much income they will receive. The minister did announce that the flat-rate state pension reform is going ahead and is timetabled for November 2013. Nevertheless details of the White paper needed to begin the formal process of legislation have not yet been released. Presently, it is predicted that this reform will give a universal pension incomes of around £140 per week.

Without knowing these exact details it still remains extremely difficult for business organisations to advise their employees accurately about the benefits of auto-enrolment for them. Organisations require more detail from the government about the new universal pension benefit.

What is also needed is a breathing space from more legislative changes.  Organisations want time to digest the recent and potential changes in retirement legislation around age, income or process. They need time to get to grips with the major changes required of auto-enrolment. Time will also help them to evaluate how this is working out for them at an organisational level. It can then be used to improve communications to individual workers about pension entitlements, an area where the CIPD in their recent survey to HR personnel on pension auto-enrolment ( have indicated organisations need to do more.


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