Aon Hewitt has responded to 'Technical Changes to Automatic Enrolment: Public Consultation on draft regulations and other proposed changes', issued by the Department for Work and Pensions earlier this year, and listed its 'Top Five' additional suggestions for auto-enrolment simplification.
Sophia Singleton, head of Aon Hewitt’s auto-enrolment specialist team, said:
"While the introduction of auto-enrolment has generally gone well, our experience has led us to favour some streamlining of the complex processes involved and generally moving to a more principles-based approach to compliance.
"We are fully in support of the DWP's proposals to reduce complexity. In particular, we favour the proposals which focus on simplifying the quality requirement for employers who offer defined benefit schemes, and those which aim to streamline processes for employers who use contractual enrolment to go beyond the minimum requirements and who actively encourage their employees to save into a pension."
With this approach in mind, Aon Hewitt has listed its top five suggestions for auto-enrolment simplification beyond those already suggested in the DWP consultation:
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Ease the auto-enrolment process, so that associated employers within a group are able to treat group employees more holistically. Currently, a transfer of employment from one company to another within the same group requires an individual employee to be automatically enrolled under their new position, even if they have recently opted out of the very same scheme.
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Create a more principles-based approach to all auto-enrolment communications material. This would enable employers to focus on getting the key messages across and engaging more effectively with their staff in relation to their pension savings.
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Simplify the quality requirements for defined contribution schemes. Currently, employers providing generous defined contribution benefits can have difficulties passing the auto-enrolment quality test due to technicalities around pay definitions. This could be alleviated by allowing more flexibility on pay definitions.
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Simplify the processes for entitled workers - for example, by allowing those employees the same opt-out rights as eligible jobholders. This would allow employers to apply more consistent processes across their workforce, and would help to ease the administration burden.
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Make the definition of 'workers' clearer for auto-enrolment. Defining the status of personal services workers and contractors remains difficult. This might be simplified by aligning with the HMRC categorisation of whether contract workers are self-employed (for tax purposes) as set out in IR35, with the result that any individual who is self employed for tax purposes is by definition out of scope for auto-enrolment. The IR35 considerations are familiar to employers (and the self-employed) so, in Aon Hewitt's view, aligning with these definitions would simplify this area considerably.
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