By Matthew Mitten, Director, Enrolsme
A survey conducted by Sage UK found that only one in 100 independent financial advisers believe small businesses are well prepared for automatic enrolment, and just one in five (21%) agreed that small firms were aware of the legislation.
Given the fact that many small businesses will need to comply over the next few years, or face heavy fines for not doing so, I find these stats, and the general lack of awareness when it comes to the legislation concerning.
Auto-enrolment is here to stay and - to date - amongst larger firms, opt out rates have been relatively low. The Department for Work and Pensions (DWP) has just reported that the five millionth person has recently been enrolled into a workplace pension (December 2014). However, what we have to remember is that this only represents 3% of businesses in the UK. There are a further 97% to go - more than one million business have yet to comply.
Automatic enrolment is a government-led initiative, yet I am constantly surprised by how little of their message seems to be getting through. I know there have been a number of campaigns about “I’m in, we’re all in”, but speaking to people at events, most either haven’t seen it, or didn’t know what it related to.
In any small business, time is precious. Business owner managers rarely have the capacity to read journals or attend events - or do anything that detracts them from the day job. Getting the automatic enrolment message across to this audience is not an easy task. More needs to be done or there is a real danger people will leave it too late or get fined.
When it comes to pensions, not only are people likely to be turned off (many view them as pretty boring) but there is also a lack of trust. Auto-enrolment needs to disassociate itself with historical context of hard sales and commission charges, and to create a stake in the ground to move forward with.
The first automatic enrolment fines for non-compliance were issued in October 2014, and this was a real sign of The Pensions Regulator beginning to clamp down and delivering a warning to those yet to comply. Maybe now businesses will start taking action sooner, rather than later.
I really believe now is the time for the government to issue specific warnings to small businesses not to put automatic enrolment on the back-burner, and to emphasise the role it plays towards saving for the future. The messaging needs to highlight that it doesn't need to be complex or boring. It doesn't have to be about the fear of the unknown; there are providers and partners who can guide businesses through the process quickly and easily. And this messaging needs to be communicated across the board, via trade and industry bodies, the Department for Work and Pensions, accountancy firms, banks and so on...
Failure to communicate effectively will inevitably result in more late-stagers and small businesses being fined. It will also continue to fuel the confusion around the whole area of automatic enrolment, and the benefits it brings to millions of people not already saving for their future(s).
Accountants are expected to be at the forefront of these changes, they will be the people on the frontline promoting the legislation to their clients. However, from my experience, we are only just beginning to see automatic enrolment coming on to their radar. Too late in the day, in my opinion. December and January are really busy times for small accountancy businesses, if they are as unaware of automatic enrolment this time next year there could be real problems. There are 110,000 small businesses due to stage in Q1 of 2016 , they are likely to turn to their accountants. I hope they are not too busy to help them.
When it comes to automatic enrolment, the industry is dealing with so many unknowns. Collectively we need to begin promoting its importance - more frequently and more effectively, but I would be first to admit that getting the message out is no mean feat.