Regulator publishes analysis of automatic enrolment

The Pensions Regulator has published a report setting out the impact of automatic enrolment and its role in increasing participation in workplace pension schemes and a further report looking at how automatic enrolment is understood by employers and intermediaries.

Annual Commentary and Analysis from the Pensions Regulator

The fourth annual commentary and analysis looked at the period April 2015 to March 2016.  Some key facts included:

  • 136,749 employers staged over this period (of which 89,051 staged in the final quarter).
  • 64,283 employers completed their declarations of compliance over this period (representing 58% of the total declarations to date).  The variation in employer numbers between those staging and those completing their declarations reflects that the deadline for declarations is five months after the staging date.
  • More than 95% of the first group of small and micro employers who were required to complete their duties within the period have complied with the law.
  • 54% of the workforce covered by employers staging in this period (2015-16) were automatically enrolled as eligible jobholders (compared with 28% of the cumulative workforce from 2012 to 2016 being automatically enrolled).
  • Employers during this period who selected their chosen schemes decided to use defined contribution (DC) schemes with 8% selecting DB or hybrid schemes.  That 92% divided between 34% GPP and other DC contract-based schemes and 59% trust-based DC schemes.  Within trust-based DC schemes 98% of the selected schemes were master trust schemes.
  • For employers with fewer than 30 staff, 74.4% of selected schemes were DC trusts (with less than 0.5% of those trusts not being master trusts).
  • The breakdown of the population of automatically enrolled members between types of schemes is different (as larger employers tend to enrol more members). 55% of automatically enrolled members went into DC trusts, 36% into GPPs and other contract-based schemes, 5% into DB schemes and 5% into hybrid schemes (numbers do not sum to 100% due to the Regulator’s rounding).
  • On average, over the period, just under 30% of employers chose to use postponement compared to over half of employers in the previous year (of which the majority were medium-sized employers).  Where postponement was used then 81% of employers chose to use a period of between two and three months.

Using HMRC data, the Pensions Regulator has also been able to estimate future staging numbers for employers. Looking ahead it is expected that:

  • Between 431,000 and 459,000 employers are expected to stage in the April 2016 to March 2017 period (compared with 136,749 who staged in 2015-16 and 63,283 who declared their compliance).
  • The breakdown of the size of those employers who are left to stage is 37% who only employ 1 or 2 workers, 19% who employ 3 to 4 workers and 21% who employ between 5 and 9 workers, while 21% employ between 10 and 49 workers.

Research on employers and intermediaries understanding

During spring 2016 an independent market research agency has been researching on behalf of the Pensions Regulator the level of employers’ and intermediaries’ awareness of, understanding of and attitudes to automatic enrolment along with reactions to advertising activity carried out by the Regulator. 

A selection of key findings amongst employers includes:

  • 79% of micro employers (1 to 4 employees) and 95% of small employers (5 to 29 employees) were aware of automatic enrolment – a small improvement from autumn 2015.
  • Overall spontaneous recall of workplace pension advertising was 68%, down from 76% in autumn 2015.  The most frequently recalled messages were “all employers need to comply” (cited by 24%) and “a giant creature” (cited by 23%).
  • The vast majority of employers (90%) continue to be confident of their future compliance with automatic enrolment with 92% of employers having engaged to some extent with automatic enrolment preparations.  80% had found out their staging date and 54% had contacted an external adviser.
  • 89% of those employers surveyed found the Regulator’s website useful and 79% stated they found all or most of what they wanted.

Amongst intermediaries the position was that;

  • Between 97% and 100% of intermediaries were aware of automatic enrolment with 86% knowing that employers had to complete their declaration of compliance to the Regulator.
  • In contrast to employers, there was between 90% and 96% recall of the advertising; the television advertising had led to intermediaries speaking with clients about automatic enrolment.
  • Levels of knowledge about specific features of automatic enrolment could be mixed.  For example 89% had heard of postponement but only around a third understood specific details of using postponement, which was the least understood area.
  • Overall 83% of intermediaries had faced or expected to face challenges in offering automatic enrolment services.  The most common challenge was that employers were “unwilling to pay what was required for their services”, with other common challenges being that the process was too complicated or that employers put it off.