One in four businesses have yet to take any action to prepare for the introduction of the new mandatory workplace pension scheme, which is due to come into force at the start of next year.
Over half of the businesses surveyed by global professional services firm Aon cite cost as their main concern around the introduction of auto-enrolment, which will see around 800,000 workers between the ages of 23 and 60 who are earning more than €20,000 automatically signed up to a pension called My Future Fund.
The Aon survey looked only at their existing pension clients – companies that already operate occupational pension schemes. The picture is expected to be worse among smaller businesses that do not have any pension scheme up and running already.
Companies with occupational schemes are required to put arrangements in place to cover any workers who have either opted out of the existing workplace scheme or are not signed up to a company scheme for a period after starting employment – generally around six months.
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Vesting periods on occupational schemes – where workers who leave within two years get their own pension contributions back – also present issues with auto-enrolment.
Aon’s study found that the majority of its 202 clients intend to enrol everyone into their existing pension schemes to “enhance efficiency and avoid the complexity of running both an occupational scheme and the auto-enrolment scheme in parallel”.
However, as people cannot be forced to join a company scheme, this will require an extensive education and communication campaign.
The group found that almost six in 10 businesses have developed a strategic roadmap for auto-enrolment. However, it says more work remains ahead to make sure businesses are fully prepared for the looming changes for payroll, staff and processes.
“Only 7 per cent of organisations have fully updated internal systems and legal documents ahead of the launch, while just 4 per cent of businesses have reached the stage of communicating to employees around the implementation of auto-enrolment,” Aon said.
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Companies remain concerned about elements of the incoming auto-enrolment system, with 85 per cent of respondents raising various issues. Chief among those was the additional cost burden likely to fall on companies to manage auto-enrolment (52 per cent), with 48 per cent worried about the complexity of running their existing occupational pension scheme in parallel to auto-enrolment.
“The introduction of pension auto-enrolment provides a once in a generation opportunity to create a more equitable pensions system in Ireland,” said Caroline Rowan, head of retirement consulting at Aon Ireland.
“With the launch of the new system now only a matter of months away, it’s crucial that organisations across the country ready themselves for the landmark scheme and fully harness the opportunity ahead to secure a dignified retirement for their people.
“Auto-enrolment is a landmark moment in pension reform that will pave the way for a more equitable pensions system in Ireland.
“While more than half of men receive a private pension, fewer than one in three women receive the same benefit. By bringing more than 800,000 new savers firmly into the pensions safety net, auto-enrolment can help to close the gender pensions gap in Ireland and create a fairer system fit for the future.
Ms Rowan said that while the survey showed a majority of businesses were making progress in preparing for the new regime, “it is concerning to see a sizeable minority of businesses yet to take any action to prepare for the scheme”. She added: “Given the big transformation required across payroll, people and processes, these businesses will need to urgently accelerate their preparations over the coming months.”
