Learnings from the UK rollout

How can organisations in Ireland benefit from recent hindsight?

Learnings from the UK rollout of auto-enrolment

Looking back on this process and assessing its ongoing impact yields some useful insights for organisations now starting the journey in Ireland.

The impact of pension auto-enrolment in the UK

A decade on from the introduction of auto-enrolment, data published by the UK Department for Work and Pensions revealed how the landscape had changed.

Pension participation increased significantly in every industry, occupation, and region of the country. In 2012, only 47% of employees had an occupational pension; by April 2021 this had risen to 79%.
Personal service occupations in public administration, education, and health saw the largest growth: from 14% to 86% pension participation.
Annual contributions in workplace pensions rose from £81.7 billion in 2012 to £114.6 billion in 2021.
Employer contributions grew beyond minimum levels. In 2021, almost every industry had over 50% of eligible employees with employer contributions above the statutory requirement.
Opt-out rates peaked at 11% during the pandemic summer of 2020, fell back to 7%, then rose again in summer 2022, at a time of increasing inflation.

Annual contributions in workplace pensions rose from £81.7 billion in 2012 to £114.6 billion in 2021.
Employer contributions grew beyond minimum levels. In 2021, almost every industry had over 50% of eligible employees with employer contributions above the statutory requirement.
Opt-out rates peaked at 11% during the pandemic summer of 2020, fell back to 7%, then rose again in summer 2022, at a time of increasing inflation.

Learnings for organisationsZellis provides payroll and HR software, managed payroll services, and consultancy to private and public sector employers in the UK and Ireland, from FTSE 100 companies to smaller employers.In the run-up to the UK launch of pension auto-enrolment, we were heavily involved in helping a wide range of organisations to prepare, creating a dedicated team to lead activities and advise customers. Drawing on the experience of our internal experts, these key learnings from the UK rollout may be useful in the Irish context.

1. Don't underestimate the time and effort required

While some organisations did get ahead early, many others underestimated the work involved and delayed preparations. This led to a more difficult and stressful process for them as the deadline approached.Enrolling the entire workforce into a scheme (and then continuing to administer it) can be a significant demand on resources: time, finance, and human capital. There are both financial (penalties) and reputational (employer) risks associated with missing the deadline.

→ Assemble a team of key stakeholders and build a plan of action, with timelines and clearly assigned actions and responsibilities.

2. Communicate and engage the workforce

It’s crucial to keep employees informed and aware of the auto-enrolment schedule and process. The organisations that communicated early, clearly, and frequently with their workforce had a smoother transition and avoided problems further down the line. Remember that pension contributions will have a visible impact on employees’ take-home pay. This is likely to be felt more by those at the lower end of the pay scale, particularly during difficult economic times.

→ HR and internal communications teams should collaborate on an employee information schedule, with input from payroll and finance, where appropriate.

3. Compliance is key – and the devil may be in the detail

While the big-picture requirements may be clear, smaller details of compliance run the risk of being overlooked. For example, during the UK rollout, organisations had to take extra care with offering voluntary opt-out, as a part of the scheme. However, those who gave it too much prominence or appeared to present it as the ‘easier option’ risked penalisation for going against the spirit of the scheme or acting to reduce their contribution costs.

→ Dedicate the time and resource to fully understand all requirements. Establish communication with the relevant authorities and experts to clear up any uncertainties.

Key differences between the UK and Ireland schemes

There are three key differences in the new Irish scheme. Compared to the UK, Ireland’s system looks set to be more straightforward, but will require significantly larger contributions from employers.

	Participation and staging	Phasing and size of contributions	Selection of providers and investment plans
UK	The staging timeline allowed smaller companies more time to prepare for the new regime. Initially, only the largest employers were required to participate. This was gradually extended to all over a period of six years.	The initial minimum contribution was 1% from the employer and 1% from the employee. This rose to 2% and 3% in 2018, and finally to 3% and 5% in 2019 (totalling 8%). The government contributes 25% in the form of tax relief.	Companies had to choose between a range of private pension providers offering different schemes and investment plans.
IRELAND	From the very beginning, all companies will be required to auto-enrol any eligible employees who are not already enrolled in an occupational pension.	The initial minimum contribution is set at 1.5% each for the employer and the employee. This even split will be maintained as the contributions rise every three years by 1.5% each time. Eventually, it will reach 6% each, totalling 12% per worker. The government contributes 33% in the form of tax relief.	There will only be one pension provider, offering a choice of four investment funds at different risk levels. The Central Processing Authority (CPA) will take responsibility for overseeing and operating the auto-enrolment system at a national level, reducing some of the administrative burden on individual organisations.