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Are you allowing enough time to set up an auto enrolment workplace pension scheme?

In a recent discussion, Howard Northover of E.S. Walton and I shared our concerns about whether there is the necessary capacity in the pension industry to handle the growing demand for auto enrolment workplace pension schemes. Howard explained that this will present many employers with problems as they have no choice but to operate such schemes.Auto Enrolment

Howard highlighted that staging dates have been set for 1.3 million businesses, explaining that some people consider that there could be more than 700,000 that do not operate workplace pension schemes and that auto enrolment will make it necessary for up to 10 million employees to enter eligible schemes. He anticipates that in some months there could be up to 30,000 employers requiring a scheme.

Is it all under control and do employers have plenty of time?

When I asked Howard this question he said “you would like to think so” but referred to the comments made by many of the leading pension providers who say that you should not delay and that you need at least six months to prepare employees for auto enrolment.  He was keen to mention that the schemes have a huge impact upon payroll systems and that employers need to engage with their staff ahead of their auto enrolment staging date so that they understand fully all of the ramifications.  He emphasised that it is vital that each employer comes to terms with the cost implications not just for the organisation but also for the employees.

Surely there are enough pension providers?

When I asked Howard this, he responded saying that employers run the risk of pension providers turning their backs on them should they not do things in a timely manner.  Pointing out that the employer is compelled to operate a workplace pension scheme but there is no obligation for your preferred pension provider to provide one.

The difficulty for the employer appears to be that pension providers are cherry picking from the vast quantity of organisations that are compelled to have an auto enrolment scheme.

So what will happen if an employer cannot find a suitable provider in the market place?

The Government has tried to provide a safety net with the introduction of the National Employment Savings Trust, which is managed by the NEST Corporation.  Howard and I shared the concern and agreed that, given the cautious response of the pension providers, we can only hope the Government and the NEST Corporation have fully anticipated the demands that could be placed upon this organisation.

The role of the Pensions Regulator

We then went on to discuss the role of the Pensions Regulator. Howard explained that this is a non-departmental public body which holds the position of the regulator of workplace pension schemes in the UK and was created under the Pensions Act 2004. He brought to my attention that they have been given enormous powers to force employers to comply with the legislation.  He further explained that they have already reported instances of non-compliance, many of which are being investigated and will no doubt lead to significant penalties being levied.

Howard’s parting shot was:

“Penalties start from £50 per day for the smallest employers and go up to £10,000 per day for larger employers so act now to ensure that you are only paying pension contributions and not fines as well.”

My conclusions from this discussion are:

  1. Employers have no choice but to comply with the law;
  2. It is vital that employers avoid being fined for non-compliance by The Pensions Regulator;
  3. Employers and employees need to be properly prepared for auto enrolment;
  4. You not only need to comprehend the legal requirements but you also need to explore the many practical considerations and challenges that you are likely to face when introducing auto enrolment to your organisation; and
  5. Don’t be surprised if your preferred pension provider cannot help you because they are overwhelmed with business.

How can UK Training help you?

UK Training is presenting a series of online seminars which will help you get to grips with what you and your organisation need to do. For details of the first live online seminar please go to this webpage.

Stephen Smith
Managing Director
UK Training (Worldwide) Limited


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