Will April's pension freedoms throw your automatic enrolment scheme off the tracks?

Doesn’t it seem like your automatic enrolment journey is finally chugging along nicely? At the start there was the surprise of just how many new processes you had to learn and how much administration time it seemed to take up.

Yet now your consultant has helped you understand those things you thought you knew then realised you didn’t, and finally the whole assessment piece is just a few new employees a month which is taking an hour rather than a day.

Your enrolled employees even appear to be engaged and talking about the benefit to them. This auto enrolment thing is easy!

Now we know in order to keep it so we always need to keep one eye on the future and consider how it will affect your company’s scheme. We’ve talked in previous blogs about what the new pension freedoms proposed for April 2015 will mean for your employees, but are there things for the employer to consider?

One thing stands out to me. What happens if an existing employee of 55 or over decides to access their company pension but not retire from work?

Further questions flow from there: Are you aware of whether or not you will need to re-enrol them in to your company scheme? Are your employees aware of the impact this could have on their tax position or what will happen if they use all their savings up? Accessing their pension could reduce their annual contribution allowance to £10,000, do they know this and what are your responsibilities as the employer? What does this mean if you have a salary exchange scheme up and running?

Finally of course is the question your employees will ask you in a couple of months’ time – “Does our pension scheme provide access to facilities to allow all the new pension freedoms in April?”

You may not have heard, but the majority currently don’t….

Now is the time to start thinking about the new freedoms coming in April and how you can keep your automatic enrolment scheme on the right track.

Charles Goodman

Consultant