UK Group Climbs aboard Auto Enrollment Bandwagon

June 16, 2005 (PLANSPONSOR.com) - At a time when automatic retirement plan features have become a hot discussion topic on Capital Hill and in the US retirement services industry, a UK trade group has proposed automatic pension enrollment in that country.

A Web statement  from the Association of British Insurers (ABI) with a statement from Stephen Haddrill, director general of the ABI, said employees would be put into their employers’ pension plans unless they opt out.

There is no single ‘magic bullet’ solution to  Britain’s pension problem,” Haddrill said in the   statement. “We need a package of reforms to encourage a new savings culture throughout every part of our society. Our proposals are both affordable and effective and we recommend them to the Pensions Commission and the government. We believe that a package approach is also the best basis for achieving the political consensus that the government seeks.”

>Also as part of its proposed  UK pension reforms, ABI suggested:

  • that employers without their own pension plans be required to make pension payments into any pension program the employee designates
  • creating a Pension Contribution Tax Credit to refund to employers their National Insurance payments, provided they make a set level of contribution to employees’ pensions and that at least two-thirds of their workforce are members of the company pension
  • introducing a Workplace Advice Credit, particularly targeted at small businesses, which would allow such companies to claim back 50% of the cost of providing a set amount of financial advice to each employee.

>The ABI pension reform package report is here .

In the US, the latest Congressional effort to encourage automatic plan features  (See Senate Pension Bill Eases Auto Enrollment, Auto Increase Provisions) came in a proposal by US Senators Gordon Smith, (R-Oregon), and Kent Conrad, (D-North Dakota). Under the proposal, employers who adopt auto enrollment, auto increase, an accelerated vesting schedule and a certain level of contributions will receive relief from complex nondiscrimination testing and top-heavy rules.

>Also, this week Hewitt Associates released the results of a poll of 450 large firms that found that just under o ne in five (19%) automatically enrolled employees in their 401(k) plans, compared with 14% in 2003 and more than a quarter (26%) provided automatic rebalancing, up from 11% two years ago (See Hewitt: Auto Plan Features on the Rise in 2005 ).

«