Finances can be very tough outside football's moneybags Premier League – just ask the directors of Ipswich Town Football Club. With its European conquering heyday over three decades past, the club which gave us England managers Sir Bobby Robson and Sir Alf Ramsey is consigned to exile in the championship. But off the pitch, Ipswich's reduced circumstances make the challenge of being a major employer in the local area – 600 people rely on the Suffolk club for a living – ever more acute.
And like any medium-sized employer the club is facing up to the extra costs and bureaucracy of auto pensions enrolment. The scheme, which is just over a year old, is gradually seeing millions of workers automatically enrolled into their company pension scheme or a new-style, off-the-peg scheme designed to be low cost and easy to understand, such as the government-sponsored National Employment Savings Trust, or NEST. The next big tranche of auto enrolment is here with all employers with more than 500 workers, like Ipswich Town's, having complied by November 1. In total some nine million Britons are being auto enrolled by 2018.
But as Denise Booth, Ipswich's management accountant, explains the transition to the world of auto enrolment is far from straightforward: "Because we have a large number of matchday staff we had to ensure any scheme we choose could cope with enrolling these staff if they wished to join. Also ensuring that their contributions would not be wiped out with administration costs." Ipswich chose Now Pensions, the Danish rival to NEST, to run its auto-enrolled scheme and costs were at the heart of this decision: "The main challenge was finding a scheme that covers all the staff and is low on administration charges, both for the employee and employer. Also, choosing a scheme that will benefit the employee in the long term." Everyone is eligible for the scheme, even those who work for a few hours on a Saturday such as matchday programme sellers and stewards.
Having appointed Now Pensions to administer its scheme Ipswich seems to have been better prepared than many firms for auto enrolment; early signs are that far more staff are likely to allow themselves to be co-opted into a workplace pension than was thought. Figures from the Department for Work and Pensions show only 9 per cent of staff auto enrolled into a workplace scheme have exercised their right to leave. But these are still early days and the full costs to employers and employees have not been felt as pensions contributions are being phased in over the next five years. The costs will be so great that investment management group Blackrock believes the percentage of workers opting out of auto enrolment could more than double.
The group's Global Investor Pulse Survey found last week that 17 per cent of workers would opt out of retirement schemes requiring personal contributions of 4 per cent of salary, while a further 29 per cent said they "didn't know" if they would opt out or not.
"Auto-enrolment is clearly the right way to boost pension saving in the UK, but it shifts the risk and responsibility to the individual for their future income in retirement. The reality is people are three times as likely to spend time planning holidays than thinking about their retirement plan, so all of us – government, employers and providers alike – need to redouble our efforts to prevent people from opting out and get them saving more for their retirement," Paul Bucksey, the head of pensions business development at Blackrock said.
If lots of workers do choose to opt out of workplace pensions the influential think-tank the Pensions Policy Institute has said it may be necessary to abolish the opt-out clause: "Making saving into a workplace pension mandatory might need to be considered if large numbers opt out as a result of higher contributions," Chris Curry, the research director of the PPI, said.
However, there are those in the pensions industry who think that the advent of auto enrolment, whether with an opt out or not is far too little to deal with the chronic problem of under-saving among millions of Britons. "Anyone in the industry knows that auto enrolment is too little, too late. In fact, it's way too little, way too late. It's the retirement equivalent of rearranging the deckchairs on the Titanic. It will make not a jot of difference to the final outcome," John Fox, the managing director of pensions firm Liberty Sipp said.
According to Mr Fox, what is needed is a fundamental rethink of pensions. "Members of Canadian pension schemes, for example, can take a tax-free loan from their funds to help towards the purchase of their home. Our own pensions system, by contrast, has a finality and an inflexibility that puts people off. It doesn't reflect the challenges of modern life," Mr Fox said.
Whether or not auto enrolment is indeed "too little too late" millions of Britons are about to be subject to it, while firms like Ipswich Town football club are having to work a way to provide a pension for all their staff not just the chosen few.
Case study: James Moss, 31
James has worked for Ipswich Town for 10 years in the back office and has just been auto enrolled into the Now Pensions scheme. “I am comfortable with the situation as it stands for me at this stage of my life. It is the next logical step to start planning for the future now while I have working life available to build a reasonable fund,” James said. Contribution levels are low – just one per cent of salary from him and one per cent from the employer, well below what is recommended to provide a comfortable retirement even for someone of James’s young age. But James does have one eye on boosting what he pays in as and when finances allow: “I want to take control of the pension in the long term and increase my contribution as my circumstances allow. For the first year, I plan to let the scheme run its natural course and get settled before making any changes.”