200,000 businesses in the UK will hit their staging dates by October 2015. Frances Kemp DipPFS of Nurture Financial Planning asks how many will be ready – and what does it mean for the advice community?
By April 2017, all employers based in the UK must provide a qualifying defined contribution workplace pension scheme for all eligible employees. Businesses with fewer than 50 employees are now hitting their staging dates, with those employing between 40 and 49 staff required to adhere to the rules by 1 August 2015, while those with 30-39 must do so by 1October 2015. This means that in this period alone some 200,000 businesses will reach their staging dates.
In February The Pensions Regulator revealed that, from October to December 2014, a total of 166 employers were fined for failing to comply with their workplace pension duties. Some 1,139 warnings were issued in the same period.
The scramble to comply
The regulator is committed to ensuring total compliance of these pension rules. It recognises that around 1.3 million employers have yet to enrol their staff in workplace pensions, and that they need to increase staff to cope with the demand – indeed, the budget to meet the auto enrolment burden was increased by some 80 per cent.
The capacity crunch caused by this demand is now well known, and new providers offering ‘total solutions’ are popping up all the time. Surprisingly though, we have found that many companies and their accountants, still have not put together a plan to ensure compliance. In fact a number of accountants are still unsure as to whether they will even offer auto enrolment as a service.
There have been many changes in the marketplace since auto enrolment was introduced. Price sensitivity has become very apparent, with these rules being received most negatively by the micro-small businesses, especially those with just a handful of staff. Professional fees charged in respect of ensuring compliance of these small schemes can sometimes be far greater than the first year’s pension contributions. Consequently, many of these micro-small businesses are keen to ‘get compliant’ far in advance of their legal staging dates.
The evolution of employee benefits
So what of the future of auto enrolment? Personally, I believe it will be led by payroll providers. As the software supporting this function continues to develop in order to cope with the legislative requirements, in years to come this will inevitably lead to the end of standalone ‘middleware’ offerings.
However, this shift will ultimately depend on the companies’ individual requirements, as many regard auto enrolment as being the first step on the road to a full employee benefit package. Regardless of requirements, one thing is abundantly clear: there has never been a greater need for multiple strands of professional advice working together.