This auto-enrolment case study from The Specialist looks at the University of Edinburgh's staging experience, including how many and what type of employees have rejected workplace saving.
For the full The Specialist report on auto-enrolment, click here to download the PDF
Pensions manager Ann Banks says the institution has not had as many queries from new starters or other auto-enrolees as anticipated.
University of Edinburgh staging stats:
The institution has experienced an auto-enrolment opt-out rate of 23 per cent.
Around 5,500 employees at the university are members of the USS and more than 2,300 are members of its Staff Benefits Scheme.
The university has enrolled between 80 and 100 workers a month since launching auto-enrolment in March.
SBS assets are worth around £240m.
“The biggest area of query comes from those who want to opt out and are disappointed when they hear we can’t give them an opt-out form,” she says.
“But as soon as we tell them how to obtain the form they are actually quite happy.”
The university has been enrolling around 80 to 100 employees a month since going live with the reform in March.
Opt-out results
Banks says it has been impressed with the 23 per cent opt-out rate, particularly as previous figures for its staff schemes were between 35 and 40 per cent.
The majority of the recent auto-enrolment opt-outs have been foreign nationals who hold short-term contracts with the university – not younger workers as Banks had expected.
“They think it is not worth staying in and they are going to go back to their home country or elsewhere in the world after this employment,” she says.
Edinburgh is using Nest to enrol some workers, who mainly comprise catering employees, cleaners and accommodation staff.
It also has the Universities Superannuation Scheme, which staff of grade 6 and above enter into. Workers of grade 5 and below were previously placed in the employer’s £240m defined benefit Staff Benefits Scheme.
Raising awareness
These workers now default into Nest, but the SBS is open to them if they wish to switch into it from the state-sponsored plan. Since going live, the university has seen some workers take up this option and opt in to the older plan.
“Auto-enrolment has helped raise awareness and has been beneficial for those who haven’t had any pension provision,” says Banks.
“They now think, ‘Oh yeah, I forgot I could join my pension scheme, and it is a DB scheme, so I’ll join that’.”
To gear up for the changes the university focused closely on communications with staff. This included writing messages on employees’ payslips and conducting roadshows.
Payroll problems
It also timed its communication drive for January to avoid bombarding people with information too far in advance of its March staging date.
For the full The Specialist report on auto-enrolment, click here to download the PDF
But despite most of its implementation of auto-enrolment running smoothly, it has not all been plain sailing.
Edinburgh has experienced problems with its payroll system, says Banks, which was not able to cope with the volume of those being enrolled.
“Our payroll system has let us down a bit; it is not as good as we thought it was going to be,” says Banks.
“We are having to do a manual workaround every month, but we’re getting to grips with what we need to do on a monthly basis.”
Eye off the ball
Payroll providers were widely criticised in the run-up to the launch of auto-enrolment last October.
Concerns were raised about whether they could cope with demand and deal with complicated issues like pay reference periods.
Rachel Brougham, principal at consultant Mercer, says payroll providers were generally quite slow with their preparations.
You only really know how to navigate your way through the process once you have started implementing it
She puts this down partly to a focus on other regulatory requirements that were happening around the same time, mainly HM Revenue & Customs’ real-time information project.
“I think some eyes were off the ball for auto-enrolment, so [providers] have probably come to it a little bit late and thought, ‘Oh my goodness, how an earth can we deal with this?’.”
The operational side of things has been the most challenging for its employer clients, says Brougham.
“This has included having data in the right place at the right time and assessing it, and getting people auto-enrolled into a pension scheme within the fairly tight timescale [required],” she adds.
Lobbying
There are potential challenges that could arise for employers with more than one scheme in place, as Edinburgh has experienced.
Banks says employers should lobby payroll providers to ensure they are ready for this scenario.
“For a payroll provider they expect one pension scheme, and that everyone will be auto-enrolled into that one scheme. When you start to deviate from that, that is where problems can arise,” she adds.
It had been anticipated that larger employers would find the reform easier to implement, although Edinburgh’s experience demonstrates that certain areas are likely to be tricky for organisations of all sizes.
How to assess workforces has proved quite difficult for a number of employers so far, says Simon Tyler, legal director at law firm Pinsent Masons, who has dealt with a number of queries from employers on the issue.
Queries
“Assessing the workforce has been quite complicated for a lot of employers, especially those that have got overseas workers or complex forms of pay with different allowances,” he adds.
For the full The Specialist report on auto-enrolment, click here to download the PDF
Tyler says trustees have been less affected by the new duties because it is the employer that is “on the hook”. But the main question from trustees has been whether they can continue using schemes already in place.
Overall he thinks most large employers have been able to successfully implement auto-enrolment. But he expects small and medium-sized employers will find the process more difficult to deal with.
“The larger employers have been able to use the services of employee benefit consultants; they have been able to afford to do that and get the best advice possible,” he says.
Personal experience
With thousands of smaller employers set to launch the reform next year, what kind of experience should they expect?
Banks says you only really know how to navigate your way through the process once you have started implementing it.
“We were one of the first people to go live, apart from your big supermarket chains,” she says.
“It is just through experience of the legislation coming in and looking at your own practices that you are able to see how it is working and the bits that are not working quite so well.
Sade Laja is a former reporter at Pensions Week
