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Employers feel the cost of auto-enrolment

Auto-enrolment has had a financial impact on more than two thirds of employers. In a report by the CIPD, 70% of the employers had to take the financial cost of auto-enrolment into consideration.

The most common reactions to increased costs were:

  • absorbing costs or taking lower profits (21%)
  • stopping or reducing wage growth (10%) 
  • reducing other elements of pay (10%).

The report points towards improving productivity as a way to increase pension contributions without cutting back on other parts of the business. Of the 32% of companies that increased salaries by more than 2% in 2015, 28% reported productivity gains as the key reason.

The Public Accounts Committee recently highlighted that current contribution levels pose a risk of leaving savers disappointed with their pension pots if they only pay the minimum contribution rates.

Commenting on the committee's report, Morten Nilsson, CEO of NOW: Pensions, said:

"Auto-enrolment minimum contributions will not be enough for a comfortable retirement. In order for the success of auto-enrolment to last into the future, contributions to workplace pensions need to be increased."

Charles Cotton, CIPD performance and reward adviser, said:

"This research encouragingly shows that most employers and employees are contributing well in excess of the minimum rates required under automatic enrolment.

"However, employers are clearly taking a hit and this is likely to become more of a problem as the introduction of the national living wage and the apprenticeship levy in 2017 edge ever closer.

"What all employers need to do is review the way their organisations operate and identify the areas where improvements can be made."

Get in touch to talk about workplace pensions today.