Auto-enrolment – will it be boom or bust for SMEs?

By Linder Myers

25 Oct 2013

By Sue Beaumont, pensions consultant at Linder Myers Solicitors

One year since its launch and auto-enrolment has been hailed as a great success with far fewer employees opting out of the scheme than predicted prior to the launch of the government’s ‘flagship’ pension reform.

Only time will tell if this success will continue however, with the unexpectedly low opt-out rate can smaller businesses whose staging dates loom afford it if the trend continues?

Prior to its launch, the government predicted that 30 per cent of employees would opt-out. The reality is that only nine per cent have done so in the first tranche of those auto-enrolled onto the scheme.

This is good news for the government in its quest to encourage individuals to save for retirement but for small to medium sized businesses who may not have factored in the additional costs, this could be a car crash waiting to happen.

For some, the unexpected financial burden may prove the tipping point between survival or otherwise – many business owners may also not be aware that the costs of auto-enrolment are not exclusive to simply the cost of the initial one per cent contribution per employee (which is set to rise to eight per cent over the next five years).

The initial set up and administrative management thereafter are additional costs some employers may have overlooked in their financial planning.

Some will remember the days of OPRA, the pensions regulator which had little powers.

Those days are gone with the new Pensions Regulator (TPR) gaining greater powers and the complacent legacy left behind by OPRA could come back to bite.

The Pensions Regulator has sent out a very clear message that it will heavily fine schemes which are found to be non-compliant. Issuing 38 warnings already to large employers in the first round of staging, TPR is taking no prisoners.

This is worrying for small to medium sized businesses who are unlikely to have the large teams of people afforded by the bigger players to advise and manage the auto-enrolment process.

A further complication and risk will be for businesses who are reliant on short term temporary and casual staff because they operate in markets with fluctuating demand such as the catering industries or tourism sector.

If not handled correctly, all employees have to be automatically enrolled on day one of their employment, for a casual employee hired for a week’s stint as an example, this can prove an unnecessary administrative and financial burden.

This can be addressed by putting in place waiting periods of up to three months before an employee needs to be automatically enrolled into a qualified pension scheme – but without appointing the right specialist advisors, few employers will be aware that they can do this to protect themselves from the consequences of not doing so.

Getting ready for auto enrolment takes time, a round a year to be precise, to ensure compliance. For those who have left it to the last minute, not least of their issues will be in finding an insurance provider willing to take on their scheme. With a limited number of providers on the market, insurance companies are cherry picking the schemes which will prove the most profitable for them.

Without insurance, employers will be left high and dry and will find themselves defaulting to the government’s National Employment Savings Trust (NEST). The terms offered by NEST however, may not be beneficial to either the employer or its employees. Fraught with potential risks and pitfalls, auto enrolment could prove the biggest threat to the survival of SMEs if they don’t act quickly and appropriately.

Enjoyed this? Read more from Linder Myers

Latest news

1

Napthens advises Calico Homes on land acquisition for £23m Dovestone Gardens extra care facility in Burnley Paul Hardy

Napthens advises Calico Homes on land acquisition for £23m Dovestone Gardens extra care facility in Burnley

21 May 2025

2

Construction begins on new Civil Service office building in Talbot Gateway Alan McBride Muse Will Town Defence Infrastructure Organisation Jennifer Chard Defence Business Services Cllr Lynn Williams Blackpool Council Garry Bowker Vinci

Construction begins on new Civil Service office building in Talbot Gateway

20 May 2025

3

Skiddle raises over £750,000 for charities Skiddle cheque presentation to Alder Hey Hospital

Skiddle raises over £750,000 for charities

20 May 2025

4

Former Victorian Hotel approved for residential conversion The site

Former Victorian Hotel approved for residential conversion

19 May 2025

5

REVOLUTION PARK: Work starts on Darwen’s new home of advanced manufacturing Oliver Webber, Tracy Clavell-Bate and Tim Webber from Barnfield Group with Cllr Phil Riley, second from right, Leader of Blackburn with Darwen Council

REVOLUTION PARK: Work starts on Darwen’s new home of advanced manufacturing

19 May 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV122 May/June Launch Event
121 Lancashire Business View Magazine Launch
Networking
21 May 2025

LBV122 May/June Launch Event

Lancaster and Morecambe College, Lancaster, LA1 2TY

08:30 - 10:30

Sub36 Networking
Networking
11 Jun 2025

Sub36 Networking

British Jewellery School, Scorton, PR3 1BA

15:00 - 17:00

Lancashire Net Zero Carbon Conference
Net Zero Carbon Social 1200pxtrident 2
Networking
18 Jun 2025

Lancashire Net Zero Carbon Conference

Crow Wood Hotel & Spa Resort, Burnley, BB12 0RT

08:30 - 13:00

Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
02 Apr 2025 - 08 Oct 2025

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 15:30

The Business Network Central & East Lancashire
LBV Hub Networking
22 May 2025 - 22 May 2025

The Business Network Central & East Lancashire

Mytton Fold, Langho, BB6 8AB

11:30 - 14:15

Preston Freelancer Meet-Up: May
Freelancer Meet-Up May.png.png
LBV Hub Networking
22 May 2025 - 22 May 2025

Preston Freelancer Meet-Up: May

society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Amber River True Bearing quarterly investment seminar
LBV Hub Seminars
22 May 2025 - 22 May 2025

Amber River True Bearing quarterly investment seminar

Cottons Hotel & Spa , Knutsford, WA16 0SU

16:00 - 18:00

Liverpool Business Expo 2025
https---cdn.evbuc.com-images-881365363-4862066883-1-original.20241023-085714.jpeg.jpg
LBV Hub Awards
23 May 2025 - 23 May 2025

Liverpool Business Expo 2025

Aintree Racecourse , Liverpool , L9 5AS

09:00 - 15:00

Advantage: AI – A Workshop for Business Leaders – May 29
Artboard 15.png.png
LBV Hub Seminars
29 May 2025 - 29 May 2025

Advantage: AI – A Workshop for Business Leaders – May 29

Door4 Office, Burnley Wharf, Manchester Road, Burnley, BB11 1JG

09:00 - 11:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin