£535 million of pension contributions have been lost over the last 3 years, due to employees opting out of auto-enrolment, according to new research published by NOW: Pensions.
Employees earning £26,500 have lost £1,247 of possible contributions with £624 being paid by their employer. In contrast, employees earning £40,000 have lost £2,062 with £1,031 contributed by their employer.
Auto-enrolment legislation states that employers must re-assess workers who have opted out of an auto-enrolment scheme every 3 years. Re-enrolment provides the opportunity for employees to re-consider their plans on pension contributions.
October marks the third year anniversary of the re-enrolment process for small and medium businesses. Re-enrolment must be planned accordingly, particularly for smaller businesses.
NOW: Pensions has outlined some tips for employers:
• re-enrolment dates can be any date within three months before their staging date anniversary
• if you have more than one payroll, choose a date that works well for all of them
• an accurate and up-to-date record of staff memberships is important. Employees that opted out within 12 months of re-enrolment do not need to be re-enrolled. This also includes staff who have handed in their notice or have protection from life allowance tax changes
• re-enrolment must be done every three years and re-declared compliance with the pensions regulator
• two months is available from the re-enrolment date to re-declare compliance. If you don’t have anyone to re-enrol the deadline is three years from when you declared compliance
• communicating employees about re-enrolment is crucial as some workers can feel pressured or frustrated so be prepared to assist them and answer their questions.
Nigel Holland from Holland & Co Chartered Accountants said:
“ In most cases peoples circumstances change from time to time. When the legislation for auto enrolment was set up this factor was taken into account and the re-enrolment rules were included. Re-enrolment allows the employees to think again. It is very important for employees to consider all their options because if they opt out they are effectively taking a pay cut.
My firm has been proactive with auto enrolment and we are in the process of assessing the situation for every individual client as they approach there staging dates.
It is more complicated for firms who initially opt out and then re assess their position and re-enrol. It is important that professional advice is obtained.”