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Auto-enrolment: 10 Key Questions

Auto-enrolment: 10 Key Questions

Sarah Phillips

We held a “lunch & learn” session for over 100 clients in our Aberdeen office last week.  The aim of the session was to introduce our highly regarded pensions team to the Aberdeen market and to highlight the “10 Key Questions” that companies need to be asking themselves as they prepare for pensions auto-enrolment.

Members of the audience came from a real mix of companies, sectors and industries; some are about to “go live” with auto-enrolment and some do not “stage” until later this year and even into 2014/15.  But what became clear very quickly was that there are a number of sector specific auto-enrolment issues in the Aberdeen market.

One of the key questions in preparing for auto-enrolment is: who is covered?  Companies must assess their workers to establish who they have to automatically enrol into a qualifying pension scheme.  With its mobile workforce and industry specific arrangements this is not a straightforward exercise in the oil & gas sector.  Working arrangements that, at first sight, may not appear to be covered could be (depending on the specifics of that particular arrangement).  Companies will have to carefully consider the circumstances of the people they engage to establish whether they fall within the legislation.  Particular issues arise around offshore and international workers, secondees, agency workers, seafarers, limited company consultants, day rate workers and ad hoc workers on a call-off or assignment basis.  The key point to note is that in enforcing the auto-enrolment legislation, the Pensions Regulator will not be guided by labels in contracts; the Regulator will look at whether the contract reflects the reality of the relationship between the company and the individual concerned. 

Another big issue for companies in the oil & gas sector is how existing pension arrangements fit in with the new employer duties.  Employers in this sector are (generally speaking) more generous in their benefit packages, including pension provision, than other private sector employers.  They have to be in order to attract the skilled workers they require.  But what happens where an employer already has a generous pension arrangement in place?  The short answer is that if the existing scheme is to be used for auto-enrolment purposes it will need to meet certain minimum criteria.  If it does not, it will either need to be amended so that it does meet those minimum criteria, or the employer will need to put in place a new arrangement for auto-enrolment.  Either way, the existing arrangements will need to be analysed, and the various options considered.  Employers do need to ensure that they not only comply with their  auto-enrolment obligations but that they do not inadvertently remove existing rights to benefits.  

Communication can also be a tricky issue with an offshore workforce.  The auto-enrolment legislation has very prescriptive communication requirements in relation to information and notices to be provided to workers.  With a non-desk based and mobile workforce, that clearly has particular challenges.  

All of the evidence from those companies that have already implemented auto-enrolment is that there is a 12-18 month lead in time in order to ensure full compliance with the legislative requirements.  That in itself indicates the complexities of the issues to be addressed.  If you would like a copy of our “10 Key Questions” to help you get started (or to check that you have not missed anything), please get in touch. 

Sarah Phillips
Partner

LChalmers