Employer Support For AE Contribution Increase

1 May 2015

One of the priorities that new Pensions Minister Dr Ros Altmann will have will be the forthcoming Automatic Enrolment review. The previous minister, Liberal Democrat Steve Webb who lost his seat at the last election had suggested that the levels of AE contributions would have to be reassessed in the new parliament. More recently, the Centre for Policy Studies published a series of suggestions for the new minister including that Altmann should carefully monitor the roll-out of auto-enrolment, with a particular emphasis on the opt-out rate for SMEs. In addition, the author of the report, Michael Johnson suggested that the Minister should "prepare the ground for raising contribution rates, today's destination of 8% of band earnings being insufficient".

Surprisingly, new research has revealed employer support for such as move. The survey, commissioned by leading employee benefits consultancy Jelf questioned over 200 senior Finance and HR professionals and found that 75% of employers believed that an increase in their levels of contributions should be made. Just 15% felt that current levels were appropriate.

The findings also revealed that over 85% of employers thought that the increases should be borne entirely, or at least in part by employers. These findings may at first seem a little surprising, with many employers not yet reaching their staging date for auto enrolment, as well as many of those who have not being at their full contribution rate. However, what these findings suggest is that employers are now seeing the true benefits of offering a quality pension scheme to staff. As well as being beneficial in many ways for the employees themselves, companies have realised the value of a quality pension scheme not just in terms of recruitment, but in retaining key staff, a pressing issue for many companies operating in competitive markets.

More than 4 in 10 employers would also consider a more proactive approach to any potential legislated increase by taking early action to increase contributions, thus spreading the higher cost over a number of years, suggesting that more and more employers think that a rise in contributions is not an 'if', but a 'when'.

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