Recently the executive director of auto-enrolment at The Pensions Regulator suggested that ‘significant challenges still lie ahead’ for auto-enrolment legislation, and he’s not wrong – there are issues that desperately need to be addressed if we are to continue to make auto enrolment a national success.
Earlier this year our calculations estimated that the number of employers forecast to stage will increase 11-fold over the next year, jumping from 46,300 in 2015 to 512,000 in 2016.
Since this research, The Pensions Regulator has amplified its forecast of the number of businesses staging by 500,000, stretching demand still further.
As the size of companies staging continues to shrink, so too will the resources they have available to manage auto enrolment. This means they’ll need more assistance than ever before, while the volume of businesses staging will be greater than ever.
The question is where does the breaking point lie when unpaid contribution notices are on the rise, fixed penalty notices are in their hundreds and only 5 per cent of businesses have staged so far?
This dramatic increase in the number of businesses who will need to tackle their auto enrolment preparations presents a triple capacity crunch threat.
With the huge uplift in demand for auto enrolment from businesses, pressure will be placed on pension providers to be able to cover all companies and their employees.
Pension providers have already buckled under the pressure of the number of businesses that have staged by changing their underwriting criteria in order to manage capacity. The Pensions Regulator itself will also be under increased pressure to process auto enrolment demands.
We know that 84 per cent of financial advisers (approximately 12,200 firms ) plan to offer support on auto enrolment, but the third wave of the capacity crunch is likely to hit advisers.
Couple that with our own research which found that 8 per cent of small businesses plan to ignore auto enrolment and 11 per cent don’t know what it is and also throw into the mix the latest forecast of businesses yet to stage, and the numbers start adding up to a huge supply and demand issue which poses a real threat to the ability of advisers to deliver the level of support that small businesses will soon be demanding.
With no extra market capacity available, advisers need to be questioning if their solution offering is fit for the job. Capacity to support clients is key, as current clients, as well as additional businesses, will expect support. By thinking carefully about their solution, advisers can handle the surge in demand and not fall victim to the triple threat of the capacity crunch.
David White, managing director of Creative Auto-Enrolment.
