£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.
Morten Nilsson, CEO of NOW: Pensions said:
“People’s circumstances change and while they might not have felt in a position to save when auto enrolled initially, over the course of 3 years, they may feel differently. Re-enrolment gives them an opportunity to think again. This is really important as by opting out you are essentially taking a pay cut by turning your back on your employer’s contribution.
“For those that have previously opted out, being put back into a scheme may be frustrating and confusing. It’s important that employers clearly explain what’s happening and why.