A rising number of small employers are missing their auto-enrolment staging deadline, a new study has shown, as experts highlight the importance of being prepared and planning ahead to make sure employees benefit from a pension.
While auto-enrolment has been deemed successful so far, the Department for Work and Pensions is reviewing the arrangement by focusing on coverage, engagement and contribution levels.
Employers are better off preparing in good time than relying on the goodwill of the regulator
Tim Gosling, PLSA
Earlier this year, the Pensions Regulator found that so-called micro employers behave much like individuals when it comes to auto-enrolment compliance, with some people preparing as soon as they can and others leaving it to the last minute.
A recent study carried out by mastertrust Now Pensions shows that the number of companies missing the auto-enrolment staging date rose to 25 per cent in the first quarter of 2017, from 18 per cent at the end of 2016.
Of the companies that signed up with Now Pensions in the first quarter of this year, nearly half did so either very close to or after their staging date deadline had elapsed.
However, “at the other end of the spectrum, around 35 per cent of small firms had planned a clear six months or more ahead of their staging date”, according to the paper.
Being prepared
Morten Nilsson, Now Pensions chief executive, said there are “ranging levels of understanding about auto-enrolment thus far, and varying degrees of preparedness amongst employers for the new legislation”.
Nilsson said he hopes that “the DWP’s campaign to educate employers and employees will start creating further awareness and mobilise employers to start considering what needs to be done well in advance – at least six months before their staging date”.
Tim Gosling, policy lead defined contribution at the Pensions and Lifetime Savings Association, said the mastertrust is right to highlight that auto-enrolment is complex and employers should take time to prepare.
“So far the Pensions Regulator’s approach to enforcement has been sensible and proportionate, but employers are better off preparing in good time than relying on the goodwill of the regulator,” he said.
More government and industry support
Gosling added that, more generally, the research is not a sign of an underlying problem with auto-enrolment. “So far the programme has proceeded smoothly and we are cautiously optimistic about the remainder of staging,” he said.
Lydia Fearn, head of DC and financial wellbeing at consultancy Redington, said: “Small employers need more support from both the government and industry.”
She added that the industry “should work with them to help set up an auto-enrolment scheme that will work for them in the long run as well as demonstrating the benefits to their employees to save for their future”.
AE compliance action holds steady amid calls to expand
Auto-enrolment enforcement action is rising, but remains limited to a small proportion of employers enrolling, the Pensions Regulator said in February, as experts called for action to widen the scope of the policy.
Fearn explained: “For auto-enrolment to continue to be a success, and as contributions increase, we need to let smaller businesses know that whilst it is not their priority, a good workplace pension will make a huge difference for them and their employees”.
She said the industry needs to be honest about the amount that needs to be saved to provide a reasonable income during retirement, “and the beauty of a small employer means communicating to the firm can be relatively easy”.
Raising awareness for small firms
Nathan Long, senior pensions analyst at platform provider Hargreaves Lansdown, is not surprised that there has been an increase in the number of employers missing the auto-enrolment staging deadline.
He said many “businesses that are going through auto-enrolment probably haven’t got a workplace pension currently, so they have to go and source and find where to direct those contributions”.
He said it was good that these data are available now because they help to raise awareness. Dealing with auto-enrolment may be something “that these business owners haven’t had to do before, and as a result it’s almost falling by the wayside”, Long added.
Even if there are a few months until the deadline, employers should give themselves time to plan and consult the Pensions Regulator's website. “You can start to look at what you need to do and when,” he said.
