Over the next four years 1.6 million mainly small and medium sized firms representing 9.3M employees will by law need to set up pension schemes, most for the first time. Many will reach their staging date to enrol staff into a pension scheme from this month, as the Government’s auto-enrolment implementation gathers pace, but they should ensure their qualifying scheme is set up well in advance or they could face daily fines of up to £2,500 if they miss their allotted date, warns Lighthouse Group.
From April this year those businesses with 50 to 249 employees began the enrolment process, with staging dates stretching out until April next year but with big peaks in July, August and November. Then, in a year’s time, from August 2015, tens of thousands more firms with 30 to 49 employees will start paying in for the first time and should start their planning now. 2016 will see 512,000 firms caught up for the first time and another 661,000 in 2017 – all of them small businesses.
The auto-enrolment pension reform requires all employers to enrol eligible job holders in a pension scheme automatically, and to pay mandatory minimum contributions for those employees. Lighthouse Group, the UK’s largest autonomous national firm of financial advisers, has launched a pension’s master trust specifically designed to help SMEs planning their pension roll-out and save them from the challenges of assessing and categorising workers, adapting payroll systems and communicating the changes to workers.
“We are finding that businesses are leaving it too late to start the auto-enrolment process. Many have simply not factored in the length of time it takes to gather the correct personal data of employees and get their payroll systems in to shape, which is a mandatory requirement to begin the process,” said Lighthouse CEO, Malcolm Streatfield. “My advice for them is to engage early and make a virtue of the need to make pension provision, which can be positioned as a highly attractive feature for existing and prospective employees in a fiercely competitive job market. Starting early will mitigate the risks of making mistakes and then getting fined as a result, while also helping with the budgeting process and avoiding any market capacity problems.”
Lighthouse Group has trained up over 200 local advisers to help SMEs with planning their preparation, including HR/payroll administration, handling the employer’s communication programme, scheme registration, and ensuring full compliance. Its Pensions Master Trust apps for advisers, employers and members are a ground-breaking development, helping promote member engagement, transparency and accessibility.
The Lighthouse Pensions Trust also benefits from the highest standards of governance, with independent trustees, and an innovative age-profiled range of default funds.
Malcolm added: “Some 75,000 SMEs will need to engage over the next 15 months. They should realise that, as long as they are in business, they will be contributing an ever increasing amount into the pension scheme with compulsory phased increases already set for 2017 and again in 2018. So SMEs should spend time upfront now to do their research and make sure their pension scheme is fit for purpose, that it’s set up properly and that they fully understand how it works and operates. Being an early adopter makes good business sense.
“The future-proof flexibility, independence, and governance of the master trust model will help to ensure that good member outcomes and value for money are at the core of the Lighthouse auto-enrolment proposition, whilst making it easy for employers to meet their legal obligations.”
Smaller firms, with fewer than 30 employees, are due to start auto enrolment from November 2015. By 2018 the Department for Work and Pensions estimates there will be between six and nine million people newly saving into pensions through auto-enrolment schemes with current assets of £400 billion to double in the next 15 years.
