Debate: Will the government overburden small firms by extending auto-enrolment to 18 year olds?

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Will the government overburden small firms by extending auto-enrolment to 18 year olds?

Andrew Drake, director of JLT Employee Benefits, says yes.

Smaller companies have historically struggled with the costs of technology to automate many of their processes. As a result, they tend to complete auto-enrolment assessments manually.

In fact, one of our recent surveys found that firms with one to 249 members of staff were 25 per cent less likely to use technology for pensions compared to those with more than 5,000.

Meanwhile, workers under the age of 22 are typically prone to fluctuating earnings, and are often yet to settle in employment.

This change means there will be a larger population that will need to be assessed and communicated with, but without the advantages of technology. That is an administrative burden on top of what companies already have.

If the government is going to extend auto enrolment then it should consider subsidies in the short-term to cover the cost of implementing technology to help with this – particularly at a time when there is so much focus on productivity and investing in technology of the future

Jamie Clark, business development manager for Royal London, says no.

For the majority of employers, it’s unlikely that this will increase the burden. In fact, it might actually make things easier.

Most employers won’t have a workforce concentrated at younger ages. It’s also more likely that younger people will be paid less than older workers. So, overall, the financial cost of employer contributions will be proportionately modest.

But the real savings could come in the form of a reduced administration burden, as employers would no longer have to monitor a worker’s age before auto-enrolling them at the age of 22.

Instead, they can use the same process for all workers, regardless of age.

Employers with a large proportion of younger people in their workforce will arguably be more affected.

But even then, some employers already have their own rules so that 18 year olds are enrolled under the contract of employment, especially where a financial adviser has been involved in promoting the value of a workplace pension scheme.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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