The article below originally appeared in a Special Report on Pensions distributed in The Guardian on 2 October.
Employers should seek help from an adviser at least six months before they are due to start auto-enrolment.
The Pensions Regulator published its first in-depth analysis of the initial implementation of auto-enrolment. It revealed that by the end of March 2013, the Regulator had launched investigations into 89 employers for possibly failing to comply with the government’s new rules.
If even these companies have struggled to understand the complexities surrounding the new legislation, how many small and medium employers are likely to fall foul of the Regulator when it’s their turn to adapt to the new system?
Awareness of auto-enrolment is near universal among medium-sized employers, but only just over a quarter are actively preparing for implementation, according to figures from the Regulator. ‘This is a concern and highlights the understandable lack of appreciation around the complexities of what is required to comply with the legislation,’ says Vanda Cox, Director of Benefits at Broadstone.
For example, the option to ‘postpone’ the start of contributions for up to three months does not release the employer from the requirement to satisfy other arcane obligations that apply from their actual staging date (the date when auto-enrolment becomes a legal requirement).
‘The details of the employer’s obligations often prove unfathomable to anyone outside the pensions industry,’ Vanda says. ‘For the typical employer, with limited internal resource, busy concentrating on running its business, it is easy for them to be misinterpreted.’
Employers also assume that their existing pension or payroll arrangements will suffice. Experience shows that for the majority, this will not prove be the case. There are also concerns that next year’s ‘pension tsunami’ (in terms of the number of employers starting auto-enrolment) will result in pension providers reaching saturation point and reducing employers’ options. For these reasons Vanda says, ‘Organisations that leave their planning until the last few months may end up with less competitive rates.’
Vanda recommends partnering with an experienced consultant who can help employers understand what needs to be done "Companies often approach us within a few months of their staging date," Vanda says. "When we ask them why they left it so late, they say they did not realise how complicated it was and mistakenly thought they would be able to cope by themselves."
She adds: "the vast majority of employers are yet to commence automatic enrolment, with tens of thousands of medium-sized companies due to stage in 2014. Our call to action to employers is to engage with an experienced consultant at least six months before their staging date in order to avoid a panicked iplementation... and even potentially falling foul of the regulator."