Marks & Spencer Pension Scheme has successfully completed re-enrolment, having reached the three-year staging anniversary, but experts say schemes should review their processes to avoid tripping over nuances in the rules.
Pension funds are required to re-enrol workers every three years in an attempt to capture those who previously opted out. Auto-enrolment kicked off in autumn 2012 and so many of the largest companies are re-enrolling now.
However, it is unclear how many have gone through the process as many would have postponed their initial staging date.
What will be very interesting is those companies who are now going up to their re-enrolment date, are they using it as an opportunity to review their existing provider?
Alan Morahan
Despite some industry commentators anticipating potential trip hazards with re-enrolment such as payroll and admin, M&S has reported a smooth journey.
“There are no particular issues over and above the auto-enrolment process,” said Julie Parker-Welch, rewards manager for the M&S scheme. “No big changes, we just went through the process.”
Alan Morahan, head of defined contribution consulting at Punter Southall, said those approaching re-enrolment should look on it as an opportunity.
He said: “The sensible thing for any scheme to do as they approach their re-enrolment date is to look at their approach and make sure they don’t exacerbate any mistakes they might have made in auto-enrolment.”
The more common mistakes, he added, were in information supplied to members about opting out, and in providing the Pensions Regulator with ease of access to scheme records.
“We’ve also identified some confusion about the levels of qualified earnings,” he said, with some companies unclear about what parts of an individual’s pay constitutes their qualifying earnings.
Secondary market
In addition to ironing out problems in the existing enrolment process, Morahan suggested schemes could look to overhaul their entire offering.
He said: “What will be very interesting is those companies who are now going up to their re-enrolment date; are they using it as an opportunity to review their existing provider?”
Speculation has been rife over the potential emergence of a secondary market for auto-enrolment providers as employers explore a switch. However, conclusive data has not yet emerged.
Paul McGuckin, managing director of consultancy Charles Stanley, warned of the challenges a secondary market could create.
He said: “2016 will witness the vast numbers of staging micro employers, with perhaps a peppering of newly established larger organisations, competing for auto-enrolment support with those employers reaching their first re-enrolment date,” adding that the “chaotic scene" could shape the secondary market.
A different process
Despite this, McGuckin said schemes and providers should not treat re-enrolment as “simply a question of pressing the assessment button again”.
While certain aspects of the automated elements of re-enrolment are similar, he said, it would be "unwise" to think of it is as straightforward as enrolling everyone that had previously opted out. "Particularly as some of the annoying rules regarding enrolling employees who you know will opt out have now been relaxed; and in some cases re-enrolment is optional.”
McGuckin advised schemes to step back to ensure they fully understand all the implications of the re-enrolment regulations, adding: "Those involved could avoid tripping over a number of obstacles.”
