Considering that many commentators have been talking about it for nearly five years, it is not surprising that we are often asked when the capacity crunch is going to start to bite.
The answer is, any day soon! And the situation has become even more of a cause for concern since The Pension Regulator announced in July 2015 that the total number of employers still to stage had increased by an estimated 500,000 between now and October 2018. This massive increase is due to fewer employers ceasing to trade than expected and the greatly underestimated number of start-ups that began after April 2012.
Of these numbers, The Pensions Regulator has estimated that 50% have only 1-2 workers; a figure that casts doubt on the ability of providers running master trust schemes to profitably continue to offer their solutions to this market.
The AE Ready business model means that we will not face this problem. We do not rely on receiving a portion of employees fund management charges as many others do. And, although we offer, and use, all three of the major master trust providers, the fact that NEST has an obligation to take all employers scheme’s, regardless of employee numbers and contributions, is an important factor, never more so than when schemes are being set up two years ahead of staging to avoid the last minute rush that could mean a heavy fine.
The Pensions Regulator is also asking employers to ensure they leave plenty of time before staging when setting up the pension schemes to help ease the pain. Going forward we have to ask the question: how many of the low ‘per employee’ initial charge pension providers will be able to, or wish to, sustain implementing 000’s of schemes containing low numbers and small contributions? Watch this space!