With the Pensions Regulator cracking down on small businesses who fail to comply with auto-enrolment, what can pension managers do to ensure they are AE ready?
The latest figures from the Pensions Regulator suggest that small businesses are in trouble. The number of employers facing a £400 fine for failing to meet auto-enrolment requirements reached 169 by the end of 2014. A staggering 166 of these were issued in the last three months of the year.
The situation is only likely to get worse”
This suggests that the smaller employers are finding the auto-enrolment process more challenging than the big businesses that came before them.
The situation is only likely to get worse as the number of small and micro employers staging over the next few years reaches 1.3 million.
Adam Bexson, a consultant at Barnett Waddingham, explains: “Without having the luxury of large HR, payroll and finance departments that larger employers benefit from, it seems logical that we will see the number of fines increasing at a greater rate as the months go by.”
Small businesses who want to avoid the wrath of the regulator must ensure that they start planning sooner rather than later to ensure that they comply.
Three tips for getting auto-enrolment ready
1) Prepare early
For small businesses faced with the prospect of tackling auto-enrolment, the benefits of planning ahead shouldn’t be underestimated.
“The Pensions Regulator recommends firms begin their planning 18 months in advance of their staging date but it seems their pleas are largely falling on deaf ears,” warns NOW: Pensions.
Companies who leave auto-enrolment to the last minute will leave themselves with limited provider choice and greater administrative stress, as well as running the risk of fines from the regulator.
2) Evaluate current providers
Companies can get caught out by assuming that existing workplace pension arrangements will be satisfactory. However, this is not always the case. Mastertrust Now: Pensions suggests that employers speak to their pension manager or trustees early on to ensure that the scheme qualifies for auto-enrolment and that they are willing to extend it to all employees on the same terms.
It is also worth dealing with current payroll providers to find out what auto-enrolment support they offer and which pension providers they work with as this can avoid unnecessary hassle and complications further down the line.
3) Get data up to scratch
One of the most common hurdles for small businesses is failing to comply simply because data isn’t up to scratch. Taking the time to ensure that payroll data is refreshed can avoid a lot of complications when implementing auto-enrolment.
With more small businesses getting ready to stage and the regulator taking no prisoners, companies need to begin getting ready now to avoid fines.
As Morten Nilsson, CEO of NOW: Pensions puts it: “Approaching auto-enrolment can feel daunting and there are a lot of things to consider, particularly for firms that have never set up a pension scheme before. But a little planning can go a long way and taking a thorough approach will certainly pay dividends.”