Paul Nelson, Broadstone, examines what employers should be reviewing as they reach re-enrolment.
For large employers, keeping up with the raft of pension change following automatic enrolment probably makes the original challenge of staging fade to distant memory. Unfortunately, it does not diminish the obligation to comply with the statutory Employer Duties.
The Pensions Regulator (TPR) reports a 450% increase in its quarterly compliance actions(1) and with re-enrolment approaching, it might be timely to review your pension and automatic enrolment processes.
Your re-enrolment checklist should look like this:
- Select the re-enrolment date
- Identify, assess and automatically enrol all ‘eligible workers’ who opted out, ceased membership or reduced contributions below statutory level between staging date and 12 months before your selected re-enrolment date
- Decide whether or not to extend the above period to include the 12 months prior to re-enrolment
- Consider applying Regulatory easements that provide discretion on automatically enrolling: employees with Lifetime Allowance protection, Company Directors, LLP Members and employees in their notice period
- No postponement permissible
- Issue prescribed communications within 6 weeks of re-enrolment
- Complete the re-declaration of compliance by the deadline of five months after the third anniversary of the staging date - even if there are no re-enrolments. Most employers will need to wait until the end of the opt out-window before submission.
So, plenty to consider, especially if you have high staff turnover, multiple payrolls, legacy pensions, or have changed internal systems since staging.
If alarm bells are ringing don’t ignore them…
Some common issues
This must fall within three months (either side) of the third anniversary of your staging date and is for internal planning (TPR does not need advance notice). It may be tempting to push it back, but explore the implications first. Consider timing of annual bonus payments, pay reviews, or other busy administration periods. If you operate multiple payrolls the re-enrolment assessment may occur part-way through at least one pay period – which may prove challenging if your workers have unpredictable earnings.
Who holds the opt-out data?
It is an Employer Duty to maintain opt out records, but providers frequently hold it on the employer’s behalf. Once you have chosen your re-enrolment period the data should be requested. Comparing pension provider data with your records will highlight any discrepancies for further investigation.
Leaver or upgrade?
Employers who allow employees to upgrade to a separate ‘Qualifying Pension’ will need to cross check opt out, joiner and leaver records across schemes. A leaver may be a potential re-enrolment or an employee changing pension schemes.
Returning to the fold
Employers with high turnover, transient or seasonal workers need to check for workers who left and then returned. These staff may be identified as potential re-enrolments because they are both a pension leaver and employed – or it may be an error in service records.
Would a Review be prudent?
Re-enrolment probably marks at least the third year with your existing pension provider. That fact alone may justify a review, but combined with recent changes to pension rules, automatic enrolment regulations and wider market developments, it becomes a very worthwhile exercise.
Many employers were caught off guard by the time, effort and resource required for automatic enrolment staging. It was often easier to remain with the existing provider - even if this meant establishing another scheme when terms were not offered for new enrolees - and adapt the payroll process, rather than source a superior pension and assessment tool. As a result some employers bear a heavy administrative burden and unnecessary compliance risk, due to the level of manual intervention required.
Payroll systems, automatic enrolment platforms and benefits systems have improved since automatic enrolment started. If a three year platform contract is due for renewal, a review may result in a cheaper, more efficient solution.
Re-enrolment occurs every three years but the need to comply with your Employer Duties is continuous. Sanctum Software’s recent research indicates that most staged employers would fail at least one compliance point and more than 25% have breaches serious enough to cause financial detriment.
Are you confident that you can continue for another three years without change? If not, a thorough review of your pension/processes makes sense, why not contact us and will be happy to talk you through the next steps.
Contact: Paul Nelson
Phone: 020 7893 3967
(1) The Pensions Regulator, Automatic enrolment, Compliance and enforcement, Quarterly bulletin, July –September 2015, and October – December 2015