Smaller Firms Must Not Forget Legal Obligations

The vast majority of independent financial advisers (IFAs) expect the majority of pension providers will not offer their auto-enrolment schemes to small and medium-sized businesses, according to new research.

The study by Defaqto on behalf of NOW: Pensions, found that almost nine out of 10 IFAs don’t think schemes will be offered to the sector.

Over half (55 per cent) say they have concerns about their ability to provide a service to the increasing number of firms seeking help with auto-enrolment.

Auto-enrolment will mean that all UK employers must automatically place certain members of their workforce into a qualifying pension arrangement. All employers must contribute to that pension arrangement and must monitor and keep records of their workforce’s membership of the scheme.

The laws came into effect for the UK’s largest businesses in 2012 and from April 2014, firms with a PAYE scheme size of between 249 and 160 will need to be ready. Firms with fewer staff members will be required to comply with the rules by a particular ‘staging date’ according to their size up until 2018.

It is anticipated that 30,000 companies will stage over a four-month period in mid-2014.

The survey revealed some interesting findings in relation to the willingness of IFAs to get involved with auto-enrolment.

Out of all the advisers which were questioned, 17 per cent said they had no intentions of advising on auto-enrolment. Of those not planning to advise, 42 per cent said it is not profitable, while 27 per cent consider the administrative burden too heavy.

Expert Opinion

“These findings are certainly worrying, particularly at a time when many SMEs which are approaching their staging date should be finalising their plans for auto-enrolment. <br/> <br/>“In addition for the need for financial advice, SMEs should be seeking expert legal advice in relation to the impact which it has on a company’s existing pension arrangement and contracts of employment. <br/> <br/>“In our experience, for example, a number of companies are overlooking the fact that they may need to undertake pension and/or employment consultations ahead of a company’s staging date. <br/> <br/>“With so many businesses approaching their staging date, it is vital that they take these steps soon.” <br/> Nigel Bolton - Partner