Are we up for the challenges ahead as we move through the auto-enrolment implementation period, asks the Pensions Management Institute's Tim Middleton.
We are now six months into the revolution of automatic enrolment. Already, over one million eligible jobholders have been enrolled into a workplace pension scheme. The employers affected so far have been the largest organisations with well-established traditions in offering workplace pension schemes. They have had the resources to appoint a range of professional advisers to guide them through the compliance minefield. Things have been fine so far.
However, for those employers who have yet to reach their staging date, the position is likely to be more complicated.
Over the twelve months to April 2014, approximately 6,000 employers are due to stage. They will be followed over the next year by an additional 40,000 smaller employers. This is where things start to get a bit tricky.
For many smaller employers, any past experience of workplace pension provision is likely to be limited. In many cases, it will consist simply of making contributions to a designated stakeholder arrangement. The maze of automatic enrolment means that there is going to be a huge leap in the number of firms seeking advice, which may prove to be too thinly spread, too expensive, or both. Smaller employers are unlikely to be able to afford the services of an employee benefits consultant, and there will be insufficient Corporate IFAs to meet the sheer volume of demand. How is this problem going to be solved?
I suspect that smaller employers are more likely to seek automatic enrolment advice from their usual advisers; in the majority of cases this is likely to be their accountant. In any event, conventional wisdom suggests that smaller companies are less likely to be attracted to the administrative challenges of establishing their own qualifying scheme and so by default are likely to be drawn to NEST or one of the other Master Trust schemes.
The Pensions Regulator (TPR) has at least spotted the potential for the 'advice gap' and so has put some very useful information on its website. The Regulator has also done some excellent work liaising with those providing automatic enrolment advice to see how the requirements of SMEs can best be met. However, if automatic enrolment is to succeed, it is important for all of us to remember that the problems of implementation – and the appropriate solutions – will change as we move through the implementation period. This will require flexibility and originality. Are we up for the challenge?
Written by Tim Middleton, technical consultant, the Pensions Management Institute
