To delay or not to delay . . .

With less than a week to go to the Autumn Statement, the airwaves are buzzing with rumours about the Government’s latest financial plans. Alongside the usual stories of cutting pensions’ tax-free cash, the Daily Mail today reported automatic enrolment for firms with less than 40 employees will be put back about a year.

There’s no doubt times are hard - and about to get harder – for a whole host of people in the UK, and small employers, the lifeblood of industry, must be feeling the pinch at the moment. So, I can understand why this might be seen as a Good Idea by those wishing to cut these employers some slack.

But I think, although it’s well-intentioned, it’s misguided.

Automatic enrolment is being introduced to help those millions of people who just haven’t got around to starting to save for their pensions. Survey after survey shows us that people are nervous about saving, reluctant to start, and often citing unaffordability as a reason, without thinking about the consequences of what not saving at all means for them. Automatic enrolment should be a lifeline to them. What we need to do is to educate and persuade people to kickstart the savings habit, however, unsavoury it first appears to them.

Smaller employers aren’t due to start automatic enrolment until 2014, once the bigger firms have already taken the plunge, automatically enrolled millions, and hopefully gone a step towards making saving the norm. And when they start they are being asked to contribute 1% the first year, 2% the next, and only then 3%. So softly softly to help finances.

It was hoped this approach would make the contributions more manageable.

If we really want to help these employers, then I would suggest another approach. I don’t know if you have had occasion to look at the Pension Regulator’s pages on automatic enrolment, but it’s scary! The whole thing is a minefield. Just waiting to trip you up with rules and regulations about how to deal with employees (or workers, eligible jobholders and non-eligible jobholders), and what information to send out to whom and when.

Yes, let’s make it easier for employers. And let’s start by looking again at this quagmire, while we still can, and simplify it to make it more outcome-based. Because complying with these complex, and some would argue unnecessary, rules is where the time, effort and pain of smaller employers is going to be felt. Not the 1% contribution.

Rachel Vahey

25 November 2011

@RayVay