We are now over a year into Auto Enrolment – the major pensions reform – and in 2014 thousands of small to medium businesses will be setting out on what some employers and employees feel is still a journey ‘into the unknown’.

Large companies are currently ‘settling into’ working with the new regulations, but are the Auto Enrolment ‘goalposts’ about to be shifted, for all businesses, be they large, medium and small?

The Chief Executive of the National Association of Pension Funds, Joanne Segars, used the NAPF annual conference to announce the need for Auto Enrolment (AE) contribution rates to increase from 8% to between 12% and 15%.

The NAPF feels that current rates aren’t high enough to ensure employees get a decent pension.

The NAPF Chief Executive stated: “We are going to have to brave up to this issue, as 12 or 15% are more commonly seen as being the right kinds of benchmarks. We need to start managing expectations now – and set the trajectory so it is a gradual increase.”

But how soon are we to expect to see these increases?

The NAPF Chief Executive said: “This is a challenge for the next government – not the one after that or the one after that.”

However, CBI director for employment and skills, Neil Carberry, said the suggestion is “deeply misguided” and would upset the “delicate balance” of the market as AE is extended to small employers.

He commented: “The current system is a delicate balance designed to deliver the consensus that has made AE a success so far. We should always remember that AE is one part of a much wider set of responses to the challenge of an ageing society.

“The Pensions Commission chose 8% for a reason. Any suggestion of a change, just a year into the roll-out and before the vast majority of firms are involved at all, is deeply misguided. State mandated minimum contributions must be affordable for all companies and workers.”

Carberry agreed that “more could be done” by employers to encourage workplace saving, but said decisions should be made in light of the circumstances of individual companies.

He added: “This is also a discussion that needs to be seen within the wider economic context of a slow recovery and falling disposable incomes, not just the narrow lens of pensions policy.”

Hopefully, commonsense will prevail.

Here at Lifetime we are hopeful that employers will be able to take some respite in the fact that the discussions over potential increases won’t take place until after May 2015 and further beyond for policy change.

We certainly want the cost of Auto Enrolment to bed in properly for employers.

Given that there is a degree of certainty about the need for contributions to increase to provide a decent pension for employees, planning, and potentially staging early, will provide employers with much needed foresight in terms of budgeting and managing the impact and costs of Auto Enrolment.

Got any queries about Auto Enrolment. We could help. Get in touch, either by telephione (01226 208600) or by email: [email protected]