We recently highlighted some of the practical matters you should be considering as you approach your auto enrolment staging date.  One year on from 1 October 2012, the date on which the first UK companies passed their auto enrolment staging date, we consider two of the recent auto enrolment news items.

The bad news

It is perhaps no surprise that complying with the auto enrolment is likely to cost each business a significant amount.  Figures provided by the Centre for Economics and Business Research suggest that the smallest British businesses (i.e. those with between 1 and 4 employees) will have to pay out £8,900 each in start up costs for auto enrolment.  SMEs will have a set up bill of at least £12,600 and for the largest, London based SMEs the bill is likely to be up to £28,300, with up to 103 man days being spent in dealing with the implementation of auto enrolment.

Messages are mixed on the question of whether SMEs are recognising the need to plan early for auto enrolment.  Research carried out for the Pensions Regulator in August of this year suggests that employers are recognising the need to allow time to plan for auto enrolment.  However, a survey carried out by Clarity Surveys on behalf of the employee benefits adviser Secondsight suggests that nearly a third of SMEs have no intention of complying with auto enrolment.  Bearing in mind the significant penalties for non-compliance which may be exacted by the Pensions Regulator, we hope this survey is not a true reflection of the nation’s businesses as a whole.

The good news

There is likely to be a Government crackdown on pension schemes which are delivering poor value for money.  The Office of Fair Trading has produced a report advising the Government to consider improving the transparency and compatibility of schemes.  It is concerned that management charges may be too high, but the report stops short of recommending a cap.  However, Steve Webb, the Pensions Minister, confirmed at the Liberal Democrat Party Conference that he still intends to consult on whether to introduce such a cap, perhaps at 1% of fund value.  It is clear that Steve Webb wants this matter to be concluded before April 2014, when the number of SMEs passing their staging date increases significantly.  There is concern in Government that excessive charges could lead to more people opting out of auto enrolment schemes.  Clearly the Government’s intention is that as many people as possible should be saving for their future.

What does year two of auto enrolment have in store?

It is widely anticipated that year two of the implementation of auto enrolment will see difficulties not experienced to date, as a huge number of businesses pass their staging dates. So far, the largest organisations have staged.  Those organisations have, on the whole, been in a position to put the necessary systems in place.  Smaller businesses may not have the capacity and personnel to deal as effectively with the demands of auto enrolment.  This, combined with the sheer volume of businesses involved, could mean that providers and advisers alike are overwhelmed by requests for help.  We hope that the Pensions Regulator will continue to educate and assist such businesses, rather than using its powers to fine those employers who struggle to fulfil their new obligations.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.