Between now and the end of 2018, an unprecedented number of businesses across the UK will be expected to put in place pension schemes to address the Auto-enrolment Legislation. There are genuine concerns that capacity, particularly at peak times, will not meet demand and it is feared that capacity issues could lead to providers bringing down the shutters, reducing ancillary services and cherry-picking new clients.
In 2014 approximately 34,000 businesses with 50 to 249 employees had to confirm that they have a compliant pension scheme for Auto-enrolment. However, many SMEs may struggle to find a pension provider willing to work with them. One of the markets leading pension providers is already stating that they will not accept any more Auto-enrolment schemes without a long lead time. This will become increasingly common across the sector, resulting in failure for many businesses to find a provider. SMEs that leave staging until the last minute will face the capacity crunch and possibility of a series of hefty fines.
Now for the numbers…
So, how big is the overall Auto-enrolment staging project the Government has set UK Plc and why is there such a sense of urgency? Last year 34,000 businesses reached their Staging Date, which was approximately the same number of company schemes Standard Life has dealt with in total since the early 1970s. In the 2015/16 tax year approx. 153,000 small and micro businesses employing less that 50 people will need to stage, with nearly 617,000 similar sized employers in the following tax year. In 2017/2018 new employers in the market are expected to total 533,000 which amounts to just under 1.4m businesses expected to stage their pension scheme in the next few years. It is clear that the SME sector will struggle to comply in the time left to complete such an enormous task.
Complying with the Auto-enrolment legislation is by no means a simple matter and choosing a pension provider is not straightforward. Many responsibilities, such as planning, testing and implementation ahead of the deadline required, all typically need to be addressed in the six months ahead of each employer’s deadline.
So do something and do it now!
Due to the economies of scale, many SMEs will not have the infrastructure to manage the Auto-enrolment process on their own. For many small ‘owner manager’ businesses, tackling Auto-enrolment is outside of their comfort zone and depending upon outsourced help and advice will be key. Again this issue may cause delays in staging and if left unchecked for too long may leave the employer open to warnings from The Pensions Regulator and hefty follow-up fines.
Seeking professional assistance is crucial so start making enquiries as there is not a moment to spare. The best advice businesses can absorb is do something and do it now otherwise you could be left out in the cold with The Pensions Regulator for company and face a hefty penalty fine.
At the EB Partnership we have helped clients ranging from 5 employees and up and have devised a cost effective solution that will take some of the pain away. Please email firstname.lastname@example.org for details