National Audit Office head, Amyas Morse, has warned the main players in the sector that they should not rest on their laurels.
Quoted recently on the Workplace Savings and Benefits website, he said:
“The Department for Work and Pensions (DWP), The Pensions Regulator (TPR) and The National Employment Savings Trust (NEST) have worked closely together to introduce the automatic enrolment programme. They all have a clear understanding of their roles and the programme has so far delivered value for money. And more people are now saving for retirement.
“But significant risks remain. The volume of smaller employers will impose significant pressures and DWP will need to ensure that more widespread enrolment translates into higher retirement incomes.”
Lack of resources at small firms mean that AE is at a “critical turning point” according to Now Pensions chief executive, Morten Nilsson.
Research from the provider revealed one in five small firms had not given any thought to AE while three quarters of micro firms admitted they had not thought about it.
Late for Auto Enrolment
Furthermore, of the companies which signed up with Now Pensions in the second quarter of 2015, nearly one in three (32%) completed their application either very close to their staging date, or after the deadline had passed.
“These smaller employers are fundamentally different to those that have gone before them. Most do not have any in-house pensions expertise and they are less likely to have the help of an expert adviser. At best they may have somebody managing finance and payroll but many small business owners will be fitting auto-enrolment around their other day-to-day responsibilities.”
The last statement will come as no surprise to small businesses battling with the day-to-day difficulties that are commonplace. Many critical decisions are left to the last minute when resources are stretched.
In today’s edition of Professional Pensions the difficulties for small businesses was recognised by the FSB:
Auto-enrolment (AE) would be easier for small employers if the National Employment Savings Trust (NEST) was the default provider and had been from the outset, says the Federation of Small Businesses (FSB).
Speaking to the Public Accounts Committee, Federation of Small Businesses policy director Mike Cherry argued micro employers did not have a sound grasp of pensions.
According to Cherry, for AE to work for them it was vital NEST succeeded. However, this was not helped by the state provider having to compete with other providers.
“Had NEST been purely a default scheme rather than having to compete in the marketplace, I think smaller employers would have a greater understanding and be able to cope a little better [with AE] perhaps,” Cherry said.
“What we see at the moment is that NEST needs to be really effective if it is to become the default depositor for small employers and their employees. Micro employers do not have a good understanding of the financial sector and a lot of it comes down to affordability,” he continued.
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