With 1.2 million small and micro businesses set to begin staging from June next year, new research conducted by independent financial researcher Defaqto on behalf of NOW: Pensions, reveals that these employers could be heading towards a pensions disaster.
Nearly three quarters (72%) of advisers say employers are coming to them for advice either very close to, or after, their auto enrolment staging date, while the majority (87%) are concerned that employers lack the knowledge to make informed decisions on the appropriate auto enrolment solution for their employees.
Of the 244 advisers questioned by Defaqto, half (50%) say firms have turned to them very close to their staging date, while 22% say they’ve had firms approaching them both very close to and after their staging date.
Morten Nilsson, CEO of NOW: Pensions said: “While auto enrolment has been successful so far, it is important that smaller employers and the industry do not get lured into a false sense of security.
“As small and micro companies begin to tackle the complexities of auto enrolment, many will lack the know-how, experience and resources required. While it is fairly common for employers to come to us late in the day or after their staging date, we urge those who will begin staging next year, to plan ahead. We are of course happy to accept latecomers and will do all we can to get them back on track, but in the case of auto enrolment, it is worth remembering that a little planning goes a long way.”
Over half (51%) of advisers say the volume of auto enrolment business they’ve received to date is as expected, while 6% say it’s more than expected and nearly a third (31%) say it’s less than they hoped. However, looking ahead, half (51%) are confident that auto enrolment represents an opportunity for them to grow their business.
Scott Gallacher, Chartered Financial Planner at Leicester based IFA Rowley Turton said: “To date it has been the larger employers that have been hitting their staging dates; consequently it is frightening that NOW: Pensions has already experienced some of them failing to put in place an appropriate scheme in time.
“If these larger employers with well-resourced HR departments can’t adhere to the rules, it does not bode well for 1.2 million of the UK’s small and micro businesses.
“Unfortunately auto enrolment is not something employers can just ignore, and with a predicted capacity crunch looming as traditional pension providers shun the smaller end of the market, and many financial advisers choose not to advise on auto enrolment entirely, smaller employers need to act now to avoid potential non-compliance fines of £500 per day.”
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