Small firms urged to plan for pension auto-enrolment of staff as deadline looms for those with up to 249 workers
Auto-enrolment publicity: The Apprentice's Karren Brady
A pensions crisis is brewing for small firms that have yet to plan for the Government’s auto-enrolment scheme, with a warning many could struggle to find a provider in time.
This year, 40,000 firms with up to 249 employees will fall under rules requiring them to offer pensions to staff, starting next month.
But Andy Seed, a pensions director for accountant KPMG, warned: ‘We’ve already heard of a number of suppliers who won’t put themselves forward unless a firm has come to them at least three months ahead of their staging date.
‘If your business does not take planning seriously it may struggle to find a suitable pension supplier. If the arrangement is not set up in time this could leave you in breach of statutory requirements, while staff miss out on the intended benefits.’
Firms face a range of sanctions, with the Pensions Regulator pledging to punish persistent and deliberate non-compliance.
Auto-enrolment was launched for big firms in a blaze of publicity two years ago with adverts starring The Apprentice’s Karren Brady. But a survey of 450 smaller firms released today by provider NOW: Pensions found 44 per cent had not given any thought to how they would find a scheme.
Just 2 per cent had secured a plan, 22 per cent hoped to use their existing pension provider, while 23 per cent intended to research the matter, either through an accountant, adviser or on their own.
This is despite the fact that 40 per cent said they think offering a good pension scheme would help retain staff.
Morten Nilsson, chief executive of NOW: Pensions, said: ‘Companies planning to rely on their existing provider are taking a gamble. Day after day we hear of firms let down at the last minute. Make sure you have alternative plans in place.’
Patrick Heath-Lay, chief executive at B&CE Benefit Schemes, which runs The People’s Pension, said: ‘Most pension providers think dealing with firms with high staff turnover and low earners is difficult.
‘The number coming to us will be ever increasing as smaller firms’ staging dates come in, especially as we get to firms with fewer than 30 staff. That is an awful lot of firms.
‘Questions are being asked about whether the pensions industry will be able to cope with so many.’ Recent research from the National Association of Pension Funds found that 87 per cent of employers were concerned about the pension sector facing a ‘capacity crunch’.
Though the Government-backed option, the National Employment Savings Trust, has a duty to accept firms, Heath-Lay warned that leaving it late would prevent employers from shopping around.
He pointed to a lack of transparency in providers’ fees and warned it would be hard for firms to judge which offered best value, adding: ‘Some providers are saying they will have a sign-up fee of £1,000.’
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