The Question - From 2012 do you expect demand from employers for auto-enrolment communication programmes that achieve high levels of employee opt-out?
Steve Herbert, head of benefits strategy, Origen
NO, I would not expect to see many employers communicating the issues of auto-enrolment in any other than a positive way. Few employers will actively want to risk being accused of ‘soft coercion’ initially, although this has the potential to change over time once the true parameters of auto-enrolment are really understood by UK plc.
There are of course areas that will require more thought however. The potential impact of means testing has received an awful lot of publicity to date. Employers who already have a pension package in place for employees can expect their advisers to be addressing this issue for those that join the existing scheme, so extending this service across auto-enrolment should not be that problematical. Employers who do not offer a pension scheme currently (and are unlikely to do so post-2012), will probably offer no view on this at all, and will point employees towards websites that will presumably be developed in the run-up to 2012 to minimise problems on this point.
Robert Reid, director, Syndaxi Financial Planning
Yes, employers will want advisers to explain the costs of staying in the scheme in terms of reduction in take-home pay. And for many people that will be enough to persuade them to opt out. But the majority of this communication will go on in the staff canteen and not through staff reading their automatic enrolment brochures.
This problem is a viral one and the economics of opting out will be discussed in many situations.
If you go back to the 1970s, when you had the five year refund rule in Glasgow you would get bus drivers that used to resign before their five years were up, get their money and then rejoin.
The big problem for employers is going to be the administrative hassle of dealing with the people who leave, so if I was in their shoes I would put in place a scheme capable of postponement. Those who want to leave will be gone by the time you have to sign them up, and those you want you will keep in the scheme.
Bob Brassington, Smith & Williamson
Although employees will be able to opt out of membership of their employer’s personal account scheme, employers will face hefty fines if they are found to be inducing individuals, in whatever way, to opt out. So do we expect demand from employers for communication programmes which will lead to a low take-up?
Absolutely not! And if we were to get such requests, we might candidly remind employers that if businesses don’t offer a stakeholder plan when they should, fines of £50,000 can be imposed. Firms falling foul of the personal accounts legislation should expect similar penalties from The Pensions Regulator.
Employers must plan now for the cost implications of personal accounts and ensure they have efficient systems to explain the benefits of the pension scheme.
The DWP and Pada have emphasised that auto-enrolment is the name of the game – whether it is to an existing qualifying workplace scheme or a new pension scheme set up under the personal accounts regime. Therefore, firms must demonstrate that enrolment into a pension scheme is the default option.