Aon Hewitt has listed its Top Five tips gleaned from organisations which had an early staging date for auto-enrolment and have completed the initial process.
Sophia Singleton, head of Aon Hewitt's auto-enrolment specialist team, said:
"Many employers have now reached their staging date and have successfully completed their auto-enrolment implementation. However, it's clear from our clients' experience that implementation really is the start of a process rather than the finish. It's also clear that this is not the time to sit back and relax – it's the time to deal with the issues that implementing auto-enrolment can throw up – and some of these will have been unforeseen.
"After working with employers who have been through implementation, we have identified our Top Five 'lessons learnt' by these organisations. We hope they will provide valuable advice for the next group to go through the process."
1. Be ready for opt-ins
As the Department for Work and Pensions has now confirmed, we have seen fewer scheme members opting-out than had been expected. But the number of members opting-in to auto-enrolment schemes should not be under-estimated. Many employers are taking advantage of having their staging date postponed and - while it has given them more time to get ready - one effect is that we are also seeing higher levels of early opt-ins during the postponement period than was anticipated. Employers need to ensure their systems and processes are ready to manage these opt-ins from the staging date.
2. Multi-employer schemes beware
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. Employers need to monitor any internal restructuring or individual moves between businesses - which may trigger auto-enrolment - to ensure they continue to meet their duties.
3. The Regulator's focus on DC
After auto-enrolment, many employers and trustees are reviewing the suitability of their default defined contribution (DC) investment, as they will need to ensure these funds meet the needs of the new membership. This has become particularly important in light of the new Code of Practice for DC schemes which puts specific focus on the design of default funds, based on robust member data. Appropriate budgeting and planning is vital as this is an opportunity to engage with members and to encourage them to increase their contributions and/or review their investment choices. If it is not done right, it is a missed opportunity.
4. Don't stray off course
We are already seeing cases where different parts of a business have started to move away from standard processes once the initial auto-enrolment project is over – such as when on-boarding new employees. Employers should ensure thorough documentation of processes and ongoing training of key staff in order to maintain control and ensure auto-enrolment compliance remains as business as usual. Experience has shown that the greater the automation, the lower the risk of 'project creep'.
5. Looking longer term
Minimum DC contribution rates for auto-enrolment schemes are set to increase from 2017. Many employers will need to review their DC contribution structures to ensure their auto-enrolment schemes are still compliant at that point. Although there is still plenty of time, we all know how quickly these projects come around and how the planning period for them becomes unnecessarily compressed. Employers should plan ahead to ensure their strategy is decided and communicated well in advance of any changes – and particularly if scheme amendments are needed.
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