Re-enrolment and encouraging pension sign-up

Traditionally, encouraging employees to enrol in pension schemes has always been a difficult task. Such was the lack of uptake into private pension schemes, that the government was required to introduce pension reforms, through the Pensions Act 2008. Worried about the lack of retirement savings, increasing life expectancy, and the long-term repercussions that this would have on the State Benefits system, the law requires all employers to offerworkplace pension schemes and to automatically enrol eligible workers into the scheme.

Since its phasing began in 2012, auto-enrolment has had a significant impact on the amount of people saving for retirement. In 2019, 62% of employees in the private sector had some form of workplace pension provider, up from 47% in 2017. However, employees opting-out of the scheme remains a challenge. There was a slight increase in 2019 of employees making the active decision to stop saving, with young employees more likely to choose to opt out of a workplace pension scheme. This was likely as a result of the statutory minimum employee pension contribution increasing from 3% to 5% in April of 2019.

When is the best time to encourage enrolment?

Re-enrolment can be a great opportunity to engage with these employees. Re-enrolment requires employers to assess their employees’ eligibility and re-enrol them into a pension scheme every three years. To encourage employees to enrol in the workplace pension scheme, consider:

  1. Their financial education: A lack of understanding of pensions and financial planning is impacting employees’ decisions to save for retirement and to understand how much they should contribute each month. You cannot assume people know how to calculate their forecasted earnings or decide how much they’ll need to save for a comfortable pension without sacrificing too much now. To address this issue, employers can provide employees the opportunity to hear from and speak to pension providers and financial advisors.

  2. Highlight the employer contribution: When onboarding new employees or when re-enrolling employees into the scheme, emphasise the contribution the business is making to their pension. Explain how this contribution could make the difference between a good lifestyle in retirement and merely ‘getting by’.

  3. Use technology: Online webinars and tutorials can be an effective method of making pensions more easily understood. An online employer and employee portal can also offer significant help with this. With such a portal, an employer can send pension information directly to an employee's phone and alert them to it using a push notification, which is 7 times more likely to be opened than an email.

  4. Commit in advance: In the bestselling book, Nudge, the authors describe a program called Save More Tomorrow. It requires participants to commit themselves in advance, to a series of contribution increases which coincide with their pay increases. By committing in advance, employees never see their pay cheque go down and as such don’t view their increased retirement contributions as a loss.

Remember, employers must not actively encourage their staff to opt out of their workplace pension. Any decision to opt out must be taken freely by the staff member without influence from the employer.

While repetition of the facts and clear communication can help persuade reluctant savers of the benefits of saving for the future, employers will also need to consider how much time they are spending on assessment and enrolment. BrightPaypayroll software includes full auto-enrolment functionality at no additional cost. The payroll software automatically assesses employees for eligibility in the background each pay period, notifies you of auto enrolment duties that need to be performed, and prepares the employee’s enrolment letters which are personalised depending on the employee’s circumstances. BrightPay is also integrated with numerous pension schemes and enables you to batch enrol multiple employees into a pension scheme at the same time.

To learn more about auto-enrolment and how BrightPay Payroll can save you time,book a free demo today.

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Karen Bennett
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