Partner Article

Auto-enrolment – are we heading for a capacity crunch?

Small business owners may be waking up to the implications of auto-enrolment (AE), but will there be enough expert advisors to go around. Anthony Carty, Group Financial Planning Director of pension specialists Clifton Wealth considers a crunchy problem.

The government’s auto-enrolment pension initiative is well underway. More than 2,200 employers have now confirmed their registration and one and a half million of the UK’s employees have signed-up to company pension schemes. So far, the large corporates appear to have coped well with the infrastructure changes and communication.

Despite predictions that around 30 per cent of staff would opt-out, even The Pensions Regulator (TPR) itself has been surprised that only 10 per cent have actually done so, according to government figures.

The initiative has not been without its teething problems and TPR is already heading towards its 100th AE-related investigation, although it claims many of these are supportive rather than aimed at imposing penalties. However, there is every indication that TPR will be equally rigorous when it comes to small businesses’ AE implementation.

Whilst staging dates for the smallest businesses – those with fewer than 50 workers - are not imminent, starting from April 2015 onwards, there are already indications that small business owners arelagging behind their larger counterparts when it comes to planning. As the staging deadlines draw ever nearer, and the implications of setting up an AE infrastructure dawn, they are likely to be casting around for specialist advisors to help with implementation.

With hundreds of thousands of small companies in the same AE boat, there is already clear evidence that a resource crunch is looming for the limited number of UK pension and payroll experts - arguably, the people with the best understanding of AE issues. They are already coming under pressure to meet the AE planning and implementation demand and that pressure is only likely to increase.

Whether a company has 10 employees or 1,000, the steps to reaching the staging date and beyond are more or less the same. The greatest challenge in ensuring everything is in place and compliant is achieving a smooth interaction between payroll and the pension scheme.

For those businesses using accountants to run their payroll, it is highly likely those practices will have spent considerable time and resources developing relationships with trusted ‘middleware’ advisors to link the payroll data to the pension provider. However, the same strong relationships are also needed between the business and the pension providers.

This situation is only likely to worsen and the financial penalties of non-compliance are significant. So, our recommendations are simple. If you haven’t already done so:

1. Know your exact AE staging date.

2. Be clear about which members of staff are eligible for AE.

3. Begin planning at least nine months before your staging date.

4. Ensure the advisors you talk to and employ fully understand and are compliant in managing the AE processes and pension schemes.

Whichever route you take, the final destination of AE is unavoidable. A clear road-map now could save you heading down a very crunchy path and paying the penalty.

This was posted in Bdaily's Members' News section by Anthony Carty .