Aon Hewitt has announced the results of a survey covering actions planned for introducing auto-enrolment. The results show that compared with a similar survey in 2011, more pension schemes are planning to reduce the level of their contributions to DC schemes. The latest survey was of 119 organisations from a broad range of industry sectors, with auto-enrolment staging dates which ranged from late 2012 to late 2014 onwards.
James Patten, head of Benefit Design at Aon Hewitt, said:
"The findings of this survey show that more employers are planning to lower their DC contribution levels for the purpose of auto-enrolling current non-pension scheme members than when we ran the same survey in 2011. Nearly one in three respondents with DC arrangements that have considered the matter, are planning to do this - presumably as a mechanism for controlling the cost of auto-enrolment. This is up from one in seven in the last survey.
"While 15% of our respondents were yet to decide, when we compare the findings of our 2011 survey with those from 2012, it does seem likely that a good proportion of these organisations will also look to lower their contribution rates for auto-enrolment purposes.
James Patten added:
"In line with the 2011 survey, this year's results suggest that the vast majority of employers are likely to use their existing DC vehicles as their main arrangements for auto-enrolment. Many employers looking to lower contribution levels for auto-enrolment purposes are therefore likely to be doing so within their existing schemes. Given the complexity of implementation it may well be that some employers are simply reluctant to change vehicle if it means adding further difficulty to the implementation process. However, our survey suggests more employers are looking to use alternative vehicles, such as master trusts, for certain categories of workers, such as contractors."
Aon Hewitt's survey also found that human resource departments are commonly playing a key role in leading auto-enrolment projects.
James Patten said:
"The challenge of auto-enrolment encompasses pensions, payroll, communications, and financial issues. It's not surprising therefore that around half the respondents have their HR departments taking the lead on auto-enrolment."
Aon Hewitt's survey also shows that more organisations have a plan for implementing auto-enrolment, compared with the previous survey.
James Patten added:
"Three in every four respondents have decided how to implement auto-enrolment, with around two-thirds of these looking to outsource processing, and the other third then retaining the processing themselves. Outsourcing processing to existing bundled DC providers seems to be proving popular where this is an option."
The survey also covered progress with communications on auto-enrolment projects.
James Patten continued:
"We know from a separate survey we ran in the summer that only a small proportion of non-pension scheme members had heard of auto-enrolment. Our new survey suggests that so far only 23% of respondents had reached a view on their communications approach - presumably as most were naturally focused on the pension strategy and processing requirements. While the government's advertising campaign will have helped raise awareness, many employers may struggle to answer questions from their employees at staging date if they haven't managed the communications approach well in advance, either with warm-up information or by putting member helplines in place."
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