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Steve Bee: advisers can win from auto-enrolment for years to come

Although many advisers have been working hard to get ready for a 12-month window of opportunity to advise firms with 50-250 staff, it is likely a secondary market will spring up to mop up thousands of smaller employers, predicts pensions' expert Steve Bee.

A secondary market is on the cards

Although many advisers have been working hard to get ready for a 12-month window of opportunity to advise firms with 50-250 staff, it is likely a secondary market will spring up to mop up thousands of smaller employers.

Implementation of auto-enrolment is becoming very real for ordinary businesses. The numerically few large companies are now through the process and the vast bulk of the 1.3 million firms to be affected are reaching their staging dates.

A secondary market is on the cards

Although many advisers have been working hard to get ready for a 12-month window of opportunity to advise firms with 50-250 staff, it is likely a secondary market will spring up to mop up thousands of smaller employers.

Implementation of auto-enrolment is becoming very real for ordinary businesses. The numerically few large companies are now through the process and the vast bulk of the 1.3 million firms to be affected are reaching their staging dates.

A lesson in early preparation

The main lesson employers have learned is that early preparation is essential if they are to comply properly with their new duties, and early engagement with employees is the key to low opt-out rates.

In short, employers need to engage with their new duties early and ensure their staff are doing so too. That has worked spectacularly well for the larger employers. It is hoped the same will be the case for small-to-medium-sized enterprises (SMEs) and the even smaller micro firms as they reach their staging dates.

Around one million of the 1.3 million firms affected by auto-enrolment employ fewer than 10 people.

Smaller employers in the dark

In our experience this central message has not hit home with many smaller employers.

The TV advertising campaign has raised the general level of awareness among employees, but a couple of letters from the Pensions Regulator (TPR) have not had the same impact on employers. A more hard-hitting approach to generate a sense of urgency and an appreciation of the size of the task ahead for employers would have been better.

However, we could not have expected the regulator to be able to engage directly with smaller employers ahead of their staging dates, as it did with the larger ones. That was only possible because there are fewer large firms.

Underestimating the task

Many employers still underestimate how much they need to do, both in the months leading up to their staging dates and on every pay date afterwards on an ongoing, permanent basis.

I do think employers want to comply with these new regulations, but doubt they appreciate how onerous such compliance may turn out to be for them. Many will only fully understand the realities of the processes they are required to put in place once they have passed their staging dates and are struggling to comply with the do-it-yourself processes they will have concocted.

When that happens I doubt it will lead to many being fined for non-compliance. I do not believe the TPR will fine employers that genuinely try to comply. The fines are there as a deterrent to wilful non-compliance, not to punish failed attempts at compliance.

Learning to walk

Failed attempts will not be unusual, however. No amount of TV advertising could ever have provided more than a million employers with an in-depth knowledge of what auto-enrolment is all about.

A few weeks or months of trying to cope with the intricacies of assessing workers will get the message home: categorising them; corresponding with them; explaining the mind-bendingly complex postponement rules; auto-enrolling them; allowing them to opt in, join in or opt out while re-enrolling others; deducting contributions; running a pension scheme for them (itself a new area for most employers); and, above all, keeping detailed records of everything.

Secondary market is inevitable

It is likely that a large secondary market to help hundreds of thousands of smaller employers to construct robust systems and processes to help them deal with the ongoing realities of auto-enrolment will spring up soon.

This market will be driven by employers wanting their key administrators’ time freed up once more, so they can resume the task of keeping the businesses they work for afloat and running smoothly. At smaller firms there is always someone, or a small group of people, who are responsible for the smooth running of everything, and they are rarely the employers themselves.

These essential people are the ones who do the payroll, holiday and absence admin; pay the bills; manage outward correspondence; run the internal communications; oversee the temps and contractors; and, in short, handle all the red-tape while making sure the coffee machines and water dispensers, and a whole host of other day-to-day bits and pieces, are in place and work properly.

There are 1.2 million such people in the 1.2 million businesses that are about to hit their staging dates. Employers will expect these people to run all of the auto-enrolment and compliance work when it hits them. They will appreciate pretty much straight away what is required to comply, and they will be the drivers of this enormous secondary market.

 

Steve Bee is chief executive of Jargonfree Benefits

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