Personal Pension  

Advice capacity questions as small firm staging looms

This article is part of
Future of Auto-Enrolment - April 2015

With the deadline for all firms to be ‘staged in’ to the auto-enrolment system looming closer and the sizable rump of smaller businesses in the economy, making up the majority of companies by volume, to hit their dates in the next two years, concern over capacity is on the rise.

By April of 2017, all employers must provide a qualifying defined contribution workplace pension scheme for all eligible employees.

Focus has now fallen on those with less than 50 employees, who are being enrolled in stages now until October this year. Those with less than 30 employees will begin hitting their dates from January next year, with a 15-month window set aside to get through this sizable group.

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It has been cited as a big business opportunity for advisers, however research conducted by Defaqto for Now: Pensions in November 2014 shows that around one in five advisers will not advise the smallest companies on their auto-enrolment obligations.

More than half of the 244 advisers polled said that micro and small firms will not represent profitable business for them, with three out of 10 believing at that time that there is too much administration involved, and a further 25 per cent deterred by how much time it will take.

Need for advice

A spokesperson for The Pensions Regulator says that the organisation’s latest research shows that the majority of small and micro employers think that auto-enrolment is a ‘good idea’ and understanding of their new duties remains high.

The research also shows that eight out of 10 employers surveyed last autumn who are due to reach their staging dates this summer had already started preparing for auto-enrolment.

Tim Jones, chief executive at the National Employment Savings Trust, admits it is difficult to predict how auto-enrolment for smaller firms will pan out, but says that the signs are positive.

“Now it’s the turn of small and micros and it’s worth pointing out that they are supportive of auto-enrolment: around seven out of 10 agree that workers should have access to a workplace scheme. But they want it to be quick and easy - and so do we.”

For this reason smaller firms state they are planning to intermediaries to help them enrol, which raises the prospect of a crunch if too few advisers are picking up this business.

“Our research shows that three-quarters of small and micro employers intend to turn to someone for support such as an IFA, accountant or payroll provider. Of those, 59 per cent expect to turn to an accountant and around one in 7 expect to turn to an IFA.”

Henry Tapper, founder of auto-enrolment service Pensions PlayPen, says that what is noticeable is significant regulatory simplification for small and micro enterprises and a general easing of complication around the processes, with the major hurdle being the selection of the scheme.

“As the payroll complexities fall away, payroll agents will incorporate auto-enrolment processes into ‘business as usual’. Where there is likely to be problems is in the choice and on boarding of the pension itself. We see this as the bigger challenge.”