Many employees of larger Umbrella Companies will have already seen staging dates for the government’s pension auto-enrolment scheme and, according to pensions minister Steve Webb, early feedback suggests phase one has been a stunning success.
Mr Webb was speaking at a recent conference organised by the human capital management technology firm Ceridian. A fellow speaker at the event, Asda’s pension manager Steve Jones, told the audience that his company’s opt-out rates had been a trifling 8% – far lower than the 37% suggested by a recent report from Aviva.
Another panellist at the event, Neil Latham – principal of the pension advisory firm Punter Southall – was more circumspect. Early indications of high employee uptake should be approached with a degree of caution, he suggested. Many of the employees being enrolled are not especially good at paperwork, Mr Latham noted, and may not immediately navigate the difficult process of opting-out. He added that by the time many of these workers receive their second or third payslip, the situation may change:
“At this point, if affordability is the issue, members will cease their contributions, leaving the scheme provider with all the costs of setting up a policy with a tiny value and the government’s initiative in ruins. A further wave of leavers could follow the first annual statement, when they realise how little the contributions they have saved are worth.”
Ceridian MD Doug Sawers told the conference: “Auto-enrolment represents the biggest change to the cost of employment to hit UK businesses in the last 15 years.” Choosing the right technological solution to reduce costs and ensure compliance, he said, was critical.