By Claire West, Fresh Business Thinking
The vast majority of business owners are unprepared for Auto-Enrolment (AE), have no idea of the costs and almost half do not even understand it, according to new research from Clifton Wealth.
The research, conducted during October 2013 amongst SME owners , highlights a critical lack of understanding and preparation for pension Auto-Enrolment, despite the government initiative having just passed the first anniversary of its launch.
Around a half of business owners claimed they did not understand what AE is and, equally seriously, 82 per cent of respondents did not know the “ball-park” cost of AE for their companies. The research arguably shows, in the opinion of Clifton Wealth, that AE has not been effectively communicated to SME owners by the Department for Work & Pensions (DWP), The Pensions Regulator (TPR) and the financial/business advisory community.
The research also found that business owners are leaving their preparation for AE too late, with 90 per cent stating they had not even started preparing for AE – even though their staging date is within the next 12 months. This presents a significant issue for the companies and their advisors, particularly in the light of recent news that many pension providers are declaring they will not accept any AE business from new or existing customers unless stringent criteria is met, and without a minimum of six months’ notice.
Anthony Carty, Group Financial Planning Director of Clifton Wealth, commented: “We have been warning SME owners for some time that AE is not something that can be ignored and requires planning. However, our research has shocked us in terms of just how serious the situation actually is. We are extremely concerned, both for employers and for specialist AE advisors, such as ourselves, that an avalanche of requests to plan and implement AE is only months away.”
Anthony Carty continued:
“The administration and compliance elements of AE are not easy and it is not a simple matter of transferring an existing scheme over to the new regime. With more than 95% of the UK’s business economy comprising SMEs, many with fewer than 50 employees and staging dates starting from April 2015, capacity issues are of great concern.”
Clifton Wealth has identified one misconception and two key areas of AE, it believes, could be the downfall of small business owners if they fail to take them seriously, or do not address them quickly enough. These are:
1. Your staff are likely to opt-out – This is very unlikely as latest government figures found that fewer than 10 per cent of employees have chosen to remove themselves from their company scheme, which could lead to a nasty surprise for those UK small business owners banking on a significant opt-out rate.
2. Don’t leave it too late - Owners with less than 50 employees believe there is still plenty of time to sort out auto-enrolment before the staging deadline of April 2015 and beyond, but many auto-enrolment specialists have already reported a 'log-jam' as business owners seek specialist financial advisors, payroll providers and software suppliers.
3. Compliance is key - Auto-enrolment is not just about pensions but also about compliance and TPR is already taking its role extremely seriously. Since October 2012, the Regulator has launched 89 enquiries on firms that are large employers, with presumably greater in-house resources at their disposal than small businesses.