Testing times as small firms gear up to auto-enrol
BRITAIN is ‘on the cusp’ of the biggest test of new rules requiring firms to automatically enrol employees into workplace pensions as thousands of small firms are set to comply next year.
The National Audit Office has released a report this month showing 58,000 employers had enrolled 5.4 million people by the end of August. It revealed opt-out rates remained low at less than 14 per cent and 1.8 million employers – smaller firms that will soon start to hit staging dates – are still to implement schemes for their staff.
Nathan Long, head of corporate pensions at fund supermarket Hargreaves Lansdown, said: ‘On the face of it, auto-enrolment is a success. But so far it has been rolled out to only 3 per cent of employers.’
Long also said that only threequarters of the working population are believed to be eligible and ‘given the self-employed continue to be excluded by this legislation, there is still much to do’.
Research from insurer and pension provider Aegon UK revealed that 68 per cent of employers feel a greater duty of care as a result of auto-enrolment, but they are facing barriers as they try to engage with staff. Two in five believe interactive digital tools would be the best way to improve pension engagement.
Glynn Jones, divisional director of group savings and investments at financial adviser LEBC said the scheme is ‘right on the cusp’, with 100,000 employers due to hit their staging dates by March. ‘That’s more than have staged already in total,’ he said. ‘My hope was that by now we would have an obvious website to go to clearly explaining what employers need to do and how to do it. I don’t think we have that.’
He added: ‘There are probably two bits of the market. Payroll is critical in auto-enrolment – it’s where payroll and pensions come together. Payroll is where they put the plumbing together to make things work, but payroll people haven’t done pensions before and pensions people haven’t done payroll before.
‘I think about 70 per cent of small and medium enterprises and microbusinesses use a payroll provider. The other 30 per cent will do it on laptops themselves and it begs the question of what on earth are they going to do. They are going to have to find the information themselves. Where’s the obvious place to start?’
The Pensions Regulator had planned to publish a list of autoenrolment providers but the idea was scrapped.
John Strange, who runs the Crossing Point Cafe in Kirkby Lonsdale in Cumbria with his fiancee Renata Vietoriszova, told The Mail on Sunday the cost of compliance was a big concern.
Fears are also growing that more pension providers will charge small firms for auto-enrolment support following an announcement from provider The People’s Pension that it would levy a one-off £500 fee from November 23, which this newspaper reported last week.
But Helen Dean, chief executive of Nest, a savings trust set up by the Government to provide pension schemes, said: ‘Nest has no plans to charge employers who want to use us. We were set up with a public service obligation to accept any employer. Imposing a charge simply doesn’t fit with that role, particularly as it would negatively impact smaller employers the most.’
vicki.owen@mailonsunday.co.uk