Auto-enrolment deadline extended to 2015

The government has confirmed that auto-enrolment and personal accounts will be gradually rolled out over a period of three years from October 2012, and not 18 months as previously stated.

It also says that it will be October 2016 before all employers are obliged to pay the full 3 per cent of banded earnings. However, the ABI has slammed the delay as unacceptable. It says the reforms will be put at risk because the rate of saving will be too slow.

The revelation comes in draft secondary Pensions Act legislation on pensions reform for consultation issued by the DWP. The draft legislation covers the staging and phasing of contributions and rules for self-certification for exempt schemes and outlines the penalties for non-compliance. There is a six week consultation period, closing on 5 November, half the normal consultation period.

Following industry feedback, the DWP has also published revised guidelines for automatic enrolment which, among other things, extend the period for employers to auto enrol eligible jobholders from 14 days to one calendar month.

Rachel Vahey, head of pensions development at Aegon, says: “The DWP has been in listening mode on auto enrolment and has made significant changes to its original proposals which will give employers some welcome flexibility. However, the process could be made even simpler and easier for all parties if employers weren’t obliged to deduct member contributions until after the opt out period closes.

“We hope the DWP will stay in listening mode, and review the new draft regulations to offer employers more flexibility and practical help, for example in the area of self-certification. An employer who is engaged with pension saving is the most valuable thing an employee starting off saving can have, as it will lead to bettercontributions and better communications. And we need to make sure employers moving to the new rules encounter as little hardship as possible. We must avoid employers levelling down contributions to a percentage of band earnings which will hit women and lower earners hardest.

“Above all we need to remember that auto enrolment doesn’t mean auto engagement. Employers need to be committed to maintaining generous pension schemes and employees encouraged to stay in the scheme and save.”