BUSIEST TIME FOR SMES DECIDING ON WORKPLACE PENSIONS IS NOW…BUT DEFERRING COULD BE BAD FOR BUSINESS
July represented the start of the busiest time of the year for the larger SMEs trying to enrol their businesses into workplace pensions, and experts are predicting that surge to continue into the months of August and November. With over 32,000 SMEs with employee numbers ranging from 50 to 249 due to enrol in workplace pensions in this financial year alone, national financial adviser, Lighthouse Group, warns that those leaving the process too late may risk finding themselves at the back of a very long queue.
With 1.6 million SMEs, representing 9.3 million employees, required to enrol into pension schemes over the next four years, the Pensions Regulator has recommended employers start preparing for auto-enrolment at least 12 if not 18 months before their due staging date.
Malcolm Streatfield, CEO of Lighthouse Group, said: “Despite this advice by the industry regulator, our intelligence is showing that many businesses are not leaving themselves enough time to prepare, even though they are aware of their auto-enrolment timelines. A common mistake by employers is the assumption that their existing accountants or payroll provider will provide the necessary advice or support and a ready made solution, which only serves to lull employers into a false sense of security.”
Those SMEs who want to exercise their option for postponements will still face obligations which they have to fulfil before their staging date. The common misconception is that businesses are able to postpone and not think about enrolling until a later time.
Malcolm says: “The reality is that deferment carries its own risks: businesses have to decide which supplier they will use and the structure they will adhere to, while undertaking the mandatory requirement of notifying their employees with all the necessary information. Many employers will want the relative luxury of speaking to an adviser face-to-face for such a big decision. Lighthouse has trained and equipped over 200 of its professional financial advisers, that are positioned locally around the UK to meet demand” Employers will be able to go straight to their local adviser with any questions or queries they have, instead of having to speak to someone over the phone.”
Alongside training their own financial advisers in a purpose built academy, Lighthouse Group has also created a pensions app for both employers and employees. This will allow both parties to view the status of their enrolment and will also provide background support information and applications, all with the goal of reducing admin and man-hours.
Even larger employers, who possess the necessary resources, have been victims of the auto-enrolment process; from payroll systems that have not been able to deal with the demand within the allotted time, to the proliferation of ‘dirty data’ challenges. The problems that have arisen from the demands of auto-enrolment have even caused some employers to switch between suppliers, half-way through the process, or in some cases after they have finished the enrolling, with many businesses regretting their original choice of supplier and looking to change.
Malcolm added: “Many have simply not factored in the length of time it takes to gather the correct personal data of employees and get their payroll systems into shape, which is a mandatory requirement to begin the process. My advice for them is to engage early. Starting early will mitigate the risks of making mistakes and then getting fined as a result, while also helping with the budgeting process and avoiding any market capacity problems. Too many businesses have left the process too late and risk making costly mistakes, by utilising the wrong solution.”
558,000 smaller SMEs with fewer than 50 employees will have to be ready for their staging dates from early next year through to 2016, with over 660,000 micro employers following in 2017. These smaller and micro businesses will have access to invaluable insights from the experience of the larger businesses that have enrolled before them, giving them the opportunity to ensure that they do not mirror the mistakes of their larger counterparts, by allowing enough time for the necessary due diligence, preparation and effective communication.