close menu

Auto enrolment for SMEs: Why burying your head in the sand could cost you more

by Mike Abbott | May 28, 2014
  • Small businesses tend to make the mistake of thinking that automatic enrolment is tomorrow's problem. However, the looming ‘capacity crunch’ among pension providers and master trusts is beginning to surface, with over 12,000 business rushing to comply with their legislative requirements in time for their staging date. Auto-enrolment is coming, and directors, partners and SME owners need to be prepared.
    auto enrolment

    In the dark

    Since 1 October 2012, large companies have been required to enrol their employees in a workplace pension scheme and contribute a percentage of their employees' earnings to this scheme. The new law requires every employer (whether large or small company) to automatically enrol workers in a workplace pension scheme by 2018. 

    However, many people are still in the dark about auto-enrolment, despite the fact that it will affect virtually every employee in the UK by 'forcing' them to enrol in a pension contribution scheme. According to the Department for Work and Pensions (DWP), automatic enrolment is the best way to overcome people's "savings inertia" by encouraging them to save. 

    Auto-enrolment has been created to encourage employers to help more people save for their retirement. Every single employer must now be responsible for their employees' retirement savings as well as their salaries, so employers need to pick a pension scheme that works best for their workers.

    Capacity issues

    Employers are faced with the difficult task of having to comply with their legislative requirements at a time when there will be an unprecedented demand for the services of pension providers and financial advisers. However, most of the financial adviser sector is choosing not to advise on auto-enrolment.

    Sable Wealth have reliably learnt that some pension providers are already refusing to take on new clients unless they have at least six months until their staging date, or meet their minimum contribution levels. Either way, this could leave some businesses out of pocket.

    Scottish Life previously said it may be forced to close its doors to new auto-enrolment business in 2015 due to capacity issues. According to FT Adviser, Aviva also admitted that, owing to capacity issues, it may have to leave the auto-enrolment market post-2015 once the staging date arrives for smaller businesses. 

    Planning ahead

    The Pensions Regulator recommends that businesses begin planning 12-18 months before their staging date to avoid being left out in the cold. The advice gap is large and growing; the illustration below demonstrates what is coming.

    Proactive management

    The Centre of Economics and Business Research has estimated that the implementation and management of auto-enrolment for a typical firm with one to four employees will cost an average of £11,300 in man-hours. This cost is likely to increase the longer auto-enrolment is delayed.

    Auto-enrolment is far more than just a simple case of setting up a scheme - the Pensions Regulator's guide for employers is complex, running to over 600 pages. The trickiest parts are the initial and ongoing staff communication, the opt-in/opt-out management, and the integration with the payroll function on an ongoing basis. The need has never been higher for an ongoing relationship that covers full set-up, implementation, communication, and ongoing compliance oversight. 


    We are one of the few advisory firms able to offer a complete outsourced auto-enrolment service. We do this by proactively managing your auto-enrolment project and driving the engagement with you. Contact us on +44 (0) 20 7759 7519 or email our team.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

    • Lightbulb working
      South Africa’s Retail Distribution Review – slow but important changes for investors and advisors
      Mar 05, 2019  |  by Mike Abbott
    • Typical-english-house
      Common mistakes that first-time homebuyers make
      Dec 06, 2018  |  by Ian Henning
    • Man-on-a-rocket
      Are you a UK contractor? Maximise tax-efficiency by using your pension
      Sep 25, 2018  |  by Bill Monty
    • terraced-houses-in-london
      Are you a UK contractor? Here’s how to get your mortgage approved
      Sep 12, 2018  |  by Marlon Borez
    • property-feud
      The hidden dangers of not having a will in the UK
      Sep 07, 2018  |  by Sherron Alexander-Bedingfield
    • typical-english-house
      You can receive your rental income tax-free if you don’t live in the UK
      Jul 12, 2018  |  by Ian Henning
    • carrot-incentive-running-track
      UK pensions: Between a QROP and a hard place? Or is it a damp SIPP?
      Jun 21, 2018  |  by Niel Pretorius
    • piggy-bank-dollar
      What to do with your living annuity when you retire abroad
      Jun 11, 2018  |  by Niel Pretorius
    • house-london
      In the UK, mortgage inaction is pickpocketing thousands of homeowners
      Jun 07, 2018  |  by Bill Monty
    • Hand-currency-blue
      Saying goodbye to South Africa? Financial emigration can give you access to your RA before you turn 55
      Apr 13, 2018  |  by Niel Pretorius
     
     

    South Africa

    Cape Town

    Regent Square
    Doncaster Road
    Kenilworth 7708 +27 (0) 21 657 2120

    Durban

    25 Richefond Circle
    Ridgeside
    Umhlanga 4320 +27 (0) 31 536 8843

    United Kingdom

    Croydon

    One Croydon
    12-16 Addiscombe Road
    Croydon CR0 0XT +44 (0) 20 7759 7514

    Australia

    Melbourne

    9 Yarra Street
    South Yarra
    VIC 3141 +613 (0) 8651 4500

    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

    We use cookies to provide the best website experience for you. Using this website means that you agree to this. How we use cookies.