Mike Bull, Customer Support Manager at Sage UK outlines why organisations of all size need to start rethinking their approach to pensions

In an era where pension deficits are high, the economic outlook is uncertain and just one in three people are contributing to pension schemes (according to Office of National Statistics), a huge number of people are either saving too little for their retirement or nothing at all. Since Lord Turner's Pensions Commission in 2008, the UK Government has been looking for ways to boost the low level of pension savings among UK workers, and the UK Government has taken a step in the right direction with the introduction of its auto-enrolment programme.

This initiative aims to resolve the growing pension shortfall by making it a requirement for businesses to automatically enrol employees into qualifying pension schemes. From October 2012, larger organisations will need to ensure that qualifying workers are enrolled into a workplace pension scheme requiring them to actively opt out if they don’t want to be a member. Initial contributions will start at 1% from the employee and 1% from the employer, with rates rising at different stages over the next few years. This scheme is expected to be implemented across all companies by April 2017.

As auto-enrolment becomes widely implemented, employees will start to see pensions as a valued part of their benefits-package. This is good news for employees as it will encourage up to 10 million people to start saving for pensions, and for some workers this will be the first time that they’ve ever contributed to a pension scheme.

Naturally, the introduction of auto-enrolment will mean businesses need to, in some cases radically, adapt their approach to pensions. Each qualifying scheme must meet minimum standards in the benefits it provides and the amount of contributions paid to it. It must also automatically enrol all eligible workers, or new employees that meet the criteria.

As a first step to meeting this new body of guidelines, we recommend that companies work with existing software providers to identify what level of compliance they need to achieve and what their staging date will be. By having a holistic view of current pension arrangement, businesses can identify the processes and platforms that need to be implemented in order to enable auto-enrolment. Finally, companies need to consider whether auto-enrolment is a process that can be managed in-house or whether it needs to be outsourced to a third-party that has the specialist skills to handle pensions effectively.

While many have complained that it will be four years until auto-enrolment is rolled out across the UK, the reality is that companies need to start preparing for this next set of changes now. Implementing basic measures that lay the groundwork for auto-enrolment now, will mean that businesses can stay ahead of the curve with an efficient pension system that accommodates employee’s best interests.