A new survey from Mercer has found that more than half of U.K. pension plans due to start automatically enrolling all employees into pension plans are “postponing” when an employee joins the plan.
Mercer’s data showed that 56% of companies have opted to use postponement before enrolling employees into a pension plan.
Postponement offers up to a three-month window for employers to enrol an employee into a plan—from the date that the company is obliged to begin auto-enrollment or on the first day of an employee joining the company.
Companies with qualifying plans under the new regulations also need to contribute a statutory minimum of 8% of required earnings by 2018, comprising 5% gross employee contributions and 3% gross employer contributions.
For plans where pensionable salary is not equal to qualifying earnings, the alternative is for the company to self-certify that contribution levels and pensionable salary to their scheme will meet certain criteria.
According to Mercer, 43% of companies of all sizes are opting for statutory minimum contribution levels, although 37% are looking to comply with the Tier 1 self-certification requirements (combined eventual contributions of 9% of basic pay).
“Postponement is seen by many as a way of deferring costs and easing the ongoing burden on payroll and HR systems,” said Rachel Brougham, head of Mercer’s auto-enrollment group. However, it is not a case of one size fits all; postponement can be used differently for different parts of the workforce, which, in turn, could further relieve the burden on payroll systems, for example, by aligning entry into the pension scheme with a complete pay period.”
The data also show that approximately two-fifths of companies with an auto-enrollment strategy have opted for statutory minimum contributions to the plan, while many have not made any decision at all.