Auto-enrolment into workplace pensions could have a real impact on the charity sector

Our latest survey highlights the concerns charities have when it comes to complying with the auto-enrolment legislation

pig money box

 

            

 

Charities (and small businesses) with less than 50 staff are next to be affected by the automatic enrolment legislation. With approximately 22,000  charities are due to stage in 2015 and beyond, 36% are fearful of not being able to offer their staff pay rises and bonuses as a result of setting up a workplace pension scheme.

Furthermore, more than two thirds (70%) of employees who work in charities with less than 50 staff are concerned that their future pay rises may be affected as a result of putting in place a workplace pension.

The findings come from independent research  conducted by Enrolsme; a guided online automatic enrolment solution designed for charities and small businesses.  

With the recent announcement of the increase in the minimum wage , employers, especially charities, are finding themselves under mounting pressure to meet legislation, at a time when the sector could do with a helping hand.

Alarmingly, just over one third (34%) of charities with less than 50 staff advise they won't be able to take on more staff, and - unfortunately - 7% think they could go out of business as a result.

At a time when charities' services are in greatest demand, funding is being cut. Between 2010/11 and 2011/12, total income from the government to voluntary sector organisations fell by £1.3 billion in real terms.

Matthew Mitten, director of Enrolsme, said: "It seems that for small charities, automatic enrolment has come at the wrong time. Affordability and resourcing remain key issues when it comes to complying with the legislation, and this seems to be reflected in the results. A third have said that automatic enrolment will impact on pay rises – will employees welcome a pension contribution instead of an increase in their take home pay? Unlikely in a low paid sector."

Commenting, Jessica Spearman, FD of charity chiefs’ group ACEVO said: “It’s important that there is greater awareness around pension rights and responsibilities within the sector. Our analysis suggests that pensions are nothing less than a ticking time bomb. We have an undercapitalised sector within an ageing population and we need to be prepared for more charities reporting holes in their balance sheets following the changes to this years SORP. As the sector’s leading voice, ACEVO is committed to deepening charities’ understanding of the changes afoot.”
The survey also highlighted that one third (38%) of charities still don't know what automatic enrolment is. And this rises to 44% of charity employees that still haven’t heard of automatic enrolment.

"The Pensions Regulator (TPR) does seem to be attempting to do more to raise the profile of automatic enrolment and workplace pensions through a media campaign," added Mitten. "But given the fact that around 22,000 charities are yet to comply, I still find the lack of awareness at this current time a concern."

Of those charities that are aware of the legislation, more than half (57%) don't know when their staging date is.

Other survey findings included:

Complying
•    It is good to note that 95% of respondents state they will comply with the legislation. Whilst only 5% advise they won't comply. Whilst this seems a relatively low figure, it equates to approximately 1,100 charities in total.
•    But, when it comes to the employees, 42% are either unsure, or they don't think their employer will even provide a workplace pension for them.

Planning
•    8% of the charities surveyed stated they wouldn't plan and that they would leave staging until the very last minute - just before they had to, in order to avoid a fine. A further 6% advised they wouldn't plan and would be likely to stage late.

For and against automatic enrolment
•    24% of charity employees questioned stated they would opt out of the automatic enrolment pension scheme when offered to them, yet 88% of employees worry about having enough money in retirement.
•    More than two thirds (71%) of employers are still not sure whether or not it is a good thing for their employees.
•    Conversely, 94% of employees are in favour of automatic enrolment.

Matthew Mitten said: "While nearly all employees seem to think automatic enrolment is a good thing, the reality is that one third (33%) think that they won’t be able to afford to join their pension. Many in the sector are concerned that employees are going to retire into poverty, which goes against why the legislation was introduced in the first place."

Download White Paper