Less than a quarter of 2014 stagers ready for auto-enrolment

More than 25,000 mid-sized employers are expected to auto-enrol this year, potentially putting strain on pension providers and advisers. 

The report released by Nest revealed that the majority of mid-sized employers due to stage this year do not understand the scale and complexity of auto-enrolment.

“At a high level [employers] know about it, but when it comes to the details there is room for improvement,” said chair Lawrence Churchill at the launch of its Nest Insight report. 

There is some concern among industry figures that employers could be scared off by the complexity of auto-enrolment.

“If we start off with a narrative of complexity it will put people right off,” said Martin Freeman, a director at JLT Employee Benefits. “People need to get started and then they’ll realise what’s needed.”

Despite the low number of schemes prepared for their staging dates, delegates heard that a high number of schemes had signed up for a monthly email alert from the mastertrust detailing what preparation they should have done and what was coming next.

Solutions for mid-sized employers

There is debate among the industry as to what set-ups pension providers and advisers can supply.

Freeman said these intermediaries have been proactive in educating employers about auto-enrolment, but their own commercial interests can undermine the importance of their message if they are seen as partial.

He added, knowledge sharing will be key to the success of the next stage, as many advisers that helped schemes through the last stage would no longer be involved.

“The starting responsibility [for educating employers] should be with the government,” said Alan Morahan, head of defined contribution consulting at actuarial consultant Punter Southall. “The work they have already done has raised the profile of auto-enrolment, but people still don’t know how much work needs to be done.”

Many providers that implemented the reform last year have said payroll providers are best placed to meet the needs of staging employers as they have the necessary data and often interact with employers on a weekly or monthly basis.

“Integration of payroll is key to this,” Tim Jones, chief executive of Nest, told the audience. “Ninety per cent of the process is about compliance and following the processes you need to follow; 10 per cent is about the pensions.”

The report also revealed that 53 per cent of employers are aware they can postpone implementation for up to three months and 12 per cent plan to do so. Around half of last year’s stagers applied a waiting period.

Advisers stress that waiting periods can be useful for synchronising payroll or to ensure the employer is set up in time.

But Freeman warned using a postponement to delay getting started on implementation could be problematic. “It increases cost and makes the process more complicated,” he said.

¹The survey covered employers staging between February and July 2014. The original version of this story incorrectly stated this period to be the first quarter of 2014.