No, this is not a wind-up. Auto-enrolment has been delayed for employers with less than 50 employees.

Please see the attached link for confirmation:

http://www.professionalpensions.com/professional-pensions/news/2128192/ae-delay-dwp-statement

This follows hot on the heels of my post last week when this was first rumoured ( http://www.jelfgroup.com/blog/2011/11/auto-enrolment-bit-of-a-surprise/ ), and our recent press release on this topic (also referred to in the above post).

To a degree, this is the Government bowing to the inevitable. The economic situation is unprecedented, and has been for a few years now. I just wonder why it has taken so long to officially recognise that this is likely to have an impact on the success of auto-enrollment.

Given that this is all ‘hot off the press’, and that I am really tight on time today, my thoughts below (in no particular order):

1) As with most of the detail on Auto Enrolment (AE), we don’t have the full detail or revised timetable yet. This presumably will follow with the consultation results expected in ‘Early 2012′.

2) Whilst I (and many of the employers now likely to be exempted for a while) welcome this common-sense decision, I can’t help but wonder where the 50 employee line comes into this? It’s very arbitrary, and there are plenty of employers with more than this number of workers who will still be seriously exposed to the original timetable, admin and costs.

3) This point may be a little cynical, but the delay does ‘park’ the problem until after the next election. Given that small business are those that are likely to be most impacted by this legislation (having both minimal resources to administer AE, and often very low numbers in company supported pension schemes), it could be seen as a major vote loser if implemented the year before the election. But delaying AE for the smallest employers moves some of the political problem to the 2020 election.

4) Given the economic blizzard the UK currently faces, a delay for any grouping is to be welcomed. However, I am still concerned that those employees at the non-exempted employers that do get automatically enrolled may still opt-out in large numbers. Frankly, employees just don’t have any spare cash at present, and with the impact of the austerity years really taking hold in 2012 (and beyond), rising inflation, and stagnating pay-packets, it’s difficult to see any extra spend on pensions being welcomed.

To a degree this may be less obvious with the very largest employers. It’s likely that such organisations will be supporting the employee’s pension savings with significant employer contributions also, thus making the ‘opting out’ decision more difficult for the employee.

But for many SME’s with more than 50 employees, the AE ‘base’ level of employer contribution was all that could be afforded in these difficult times. As a result, it may be that ‘opting out’ will not be seen as such a bad move by employees. This is even more likely if the employee sees the projections of potential pension returns at retirement based on the original 1% from employer and employee.

And if large numbers opt-out as a result of this oversight, where does that leave Auto-enrolment as the answer to the savings gap?

5) For those that have noted the statement that ‘the rate of pension contributions will remain unchanged until all businesses have started auto-enrolment’, don’t get too excited. In actual fact, the first increase in the AE minimum contributions for employee and employer was not due until 2016 for all employers anyway, so I doubt this will actually make much/any difference to those that have already auto-enrolled.

6) And for those that say delay is bad, I would just point out (and as mentioned in point 4 above), that the starting levels of savings are minimal in pension terms (and frankly don’t even scratch the surface). Much better that auto-enrolment starts with a success a few months later, than fails for the sake of sticking to a timetable.

Still, enough carping, good news for a number of UK employers, and will update you on the revised timetable and details as they become clear.

Best regards

Steve