Sovereign delivering auto-enrolment for all our futures

The members of Generation Z, the oldest of which are now in their 20s, are expected to live to 100 and beyond on average. With higher life expectancy and higher expectations of retirement, governments are increasingly looking to shift the responsibility of financing retirement onto the shoulders of employers and individuals because tax reliefs alone were no longer providing a sufficient incentive.

New Zealand was one of the first countries to grab the bull by the horns when it introduced regulations in 2007 making it mandatory for the workforce to save for retirement. The UK followed suit in 2012 and ‘auto-enrolment’ is now a fixture of UK pensions policy.

Put simply, auto-enrolment means employers must now automatically enrol employees, if they meet specific criteria, into their workplace pension scheme. Auto-enrolment contributions are made by the employee and the employer. This money then builds up in a pension pot.

Previously, employees either had to ‘opt in’ to their employer’s workplace pension scheme or had no employer pension provision at all. The situation is now reversed. Under auto-enrolment, employers must automatically enroll employees into a workplace pension scheme, and employees only have the right to opt out.

The legislative requirement was introduced under the UK Pensions Act 2008 and was implemented in phases. Large employers with more than 250 employees were required to automatically enrol all eligible employees into a workplace pension from 2012 and this was extended to all employers by 2018.

In April 2019 the phased introduction of auto-enrolment was completed when the minimum contribution increased to 8% of qualifying earnings, with a minimum of 3% contributed by the employer.

Gibraltar brought in similar regulations, with a phased delivery under the Gibraltar Private Sector Pensions Act 2019 and, as a significant pensions provider, Sovereign has been assisting employers to meet their obligations to provide a workplace pension scheme in a user friendly and cost-effective way.

The island of Guernsey has also now followed suit with the coming into force of the Secondary Pensions (Guernsey and Alderney) Law 2022. Sovereign was selected by the government of Guernsey to deliver a state auto-enrolment pension scheme that is open to all employers.

Known as ‘Your Island Pension’ (‘YIP’ for short), auto-enrolment is a major step for both employers and employees, so implementation is being delivered on a phased basis over a 15-month period.

The deadline for the largest employers – those with 26 or more employees – was 1 July 2024, while the deadline for employers with 11 to 25 employees fell on 1 October. The schedule continues into next year, with the deadline for employers with six to 10 employees falling on 1 January, 2-5 employees 1 July and finishing on 1 October 2025 for employers with only one employee.

The minimum level of contributions is also subject to a phased introduction. Initially the rate is 2% of earnings, with at least 1% paid by the employer. This will gradually rise to at least 10% of earnings, of which at least 3.5% must be paid by the employer, after eight years.

For Sovereign, it’s been an exciting journey to deliver a simple and affordable pension scheme to a diverse population in terms of age, financial knowledge and employment sector. There have been two major drivers of delivery.

The first has been to ensure we communicate in a way that puts our audience at ease and allows us to deliver the core messages required in language that is readily understandable and in an environment that is comfortable.

Pensions can be an intimidating subject for a lot of people. Small employers in particular are concerned about getting it right and are worried about any impact on their resources. Many employees, meanwhile, were oblivious to the need and worried about any impact on their earnings.

We therefore mapped the customer journey for the various stakeholders and created a range of different case studies to help us understand who we were communicating with and what formats would best enable them to access and digest the material. We also engaged with Guernsey’s Disability Officer to better understand the needs of everyone in the working community.

We’ve held drop-in sessions around the island in different types of location, such as sports clubs, so that we could meet with people in a more informal environment and in a place with which they were familiar. We’ve also supported employers to get the message across to their employees by giving on-site talks, whether to hairdressers, pre-schools or builders.

Pensions is very much a people business, and this programme of engagement has helped both employers and employees to appreciate that Sovereign is a Guernsey-based business delivering a Guernsey-based solution, as well as to understand the reasons behind the changes and why it is so important for everyone’s future.

Our other key focus has been on delivering stress-free administration, so that it has minimal impact on employers who are busy doing what they do. Employees can engage directly with our online knowledge hub and administration system, and many have found the process empowering.

Ensuring that onboarding is as simple as possible for employers, in terms of understanding what they need to do, how and when. We streamlined the documentation required and have invested in resources to ensure that onboarding is quick and painless.

We recently carried out a survey to help us benchmark how we are doing, and we are delighted with the results:

 95% agreed that the application form is easy to complete and understand.
 95% agreed that the onboarding process is simple and easy.
 The responsiveness of the team was rated as an average of 4.53 out of 5.00.
 The engagement of the team was rated as an average of 4.53 out of 5.00.
 95% stated that they would recommend YIP to others.

Sovereign has provided a paperless digital administration system for YIP, which means that users can log in, load data or make changes in real time. This allows users to engage with their pensions at times when it is convenient for them and also means that the service is not negatively impacted by sudden spikes of activity.

Implementing the YIP scheme in Guernsey has enabled the Sovereign Group to gain invaluable experience of, and expertise in, delivering pension change to populations. With the impact of higher life expectancy expected to be felt all around the world, we believe that auto-enrollment will soon be the direction of travel for many other locations, and we are well placed and resourced to play a part in effecting the transition.