Most employers now aware of impending auto-enrolment pension reforms

Its research (76-page / 464KB PDF) showed higher understanding of the regime amongst employers of all sizes since its last survey, in Spring 2012. Automatic enrolment, under which workers between the ages of 22 and the state pension age earning more than £8,105 a year will be enrolled into workplace pension schemes, began for the largest companies on 1 October last year.

"The UK's biggest employers have already embraced automatic enrolment," said Bill Galvin, chief executive of the Pensions Regulator. "Today's research shows that employers of all sizes continue to believe that automatic enrolment is a good idea, and are confident that they can be prepared on time."

Over the next six years, more than 1.3 million employers will begin automatically enrolling workers into a pension scheme which meets minimum requirements or the Government-backed National Employment Savings Trust (NEST). Once the process begins, employers will be legally obliged to make contributions towards the pensions of automatically enrolled workers who do not opt out of the scheme. Between six and nine million of the 11 million people expected to be eligible for auto-enrolment by 2018 will be new savers or saving more than before, according to Government estimates.

Pensions expert Mark Baker of Pinsent Masons, the law firm behind Out-Law.com, said that the figures reflected the firm's experience of discussing changes to pensions with large and medium businesses. Any employer with at least 250 workers "should be starting to make detailed plans now", he said. Companies with more than 500 workers will have begun the process by November 2013, while those with 250 workers must have done so by 1 February 2014.

"One of the key points is to select a pension provider," Baker said. "There is only a certain amount of capacity among providers, and we're already hearing of some providers being slow to quote for business. So employers need to make sure they don't leave selection of a provider too late. And they need to agree terms with the provider as early as possible - both the fees borne by their employees and the contractual terms in the service agreement."

According to the research, 98% of both large (with more than 250 workers) and medium (between 50 and 249 workers) employers are now aware of the three main features of the auto-enrolment regime. These are the existence of auto-enrolment, the need to provide a pension scheme and to contribute towards workers' pensions. Among smaller employers 83% are now aware of the changes, while 65% of "micro" employers with four workers or fewer were aware.

The regulator also reported that the majority of large and medium employers had done some form of preparation for the changes, while only 34% of small employers with later staging dates had started to plan. Four in ten small employers, with between five and 49 workers, and 66% of micro-employers continued to report that they would "leave it as late as possible" before thinking about compliance, according to the figures.

Although the majority of employers of all sizes continued to think that automatic enrolment was a "good idea" for their workers according to the survey, many suggested that the changes would not be easy to comply with. Among companies with more than 250 employees, 51% thought it would be easy to comply with the changes with 40% disagreeing. Companies cited cost and administrative burdens as challenges to compliance.

"It's telling that only 51% of large employers think it will be easy to comply," Baker said. "We're finding that the more employers work through what is involved, the more they come across unexpected niggles and complications. These are time-consuming, and employers need to allow for this in their planning."

He added that it was "surprising" that so many employers, including 79% of the largest, said that auto-enrolment was a good idea so early in the reform programme.

"Whether auto-enrolment works can only be assessed longer term, but in the meantime it must be helpful that employers are able to give the changes their support," he said.