Out-Law News 2 min. read

Regulator "inundated" with auto-enrolment queries from confused businesses


Pensions watchdogs have been "inundated" with thousands of enquiries from businesses and individuals confused about new regulations that will see many workers automatically enrolled into a pension scheme for the first time, according to figures.

According to a Freedom of Information (FOI) request made by Pinsent Masons, the law firm behind Out-Law.com, the Pensions Regulator received more than 5,000 enquiry emails, letters and telephone calls about the changes over the past five months. The figures also show a 50% increase in enquiries in October, when auto-enrolment began.

Mark Baker, a pensions expert at Pinsent Masons, said that the figures could be seen as evidence of "last minutism" by firms. He warned that, if this was the case, companies could be hit with higher management fees as they left themselves short of time to negotiate the best possible deal.

"It is particularly striking that there was a spike in enquiries in October, which looks as though many companies had not focused on auto-enrolment until it hit the newspaper headlines," Baker said. "The issue will be that, if this is evidence of 'last-minutism', businesses could be paying over the odds in management fees. There is a real danger that companies will leave their planning too late and not have time to negotiate the best deal for themselves and their employees."

The largest employers, such as banks and supermarkets, began automatically enrolling eligible workers into a suitable workplace pension scheme on 1 October this year. Smaller employers are due to follow in a staggered implementation programme, with 'staging dates' running until April 2017. By the end of 2013, all companies with 500 employees or more will have begun automatic enrolment.

Once the process begins, employers will be legally obliged to make contributions towards the pensions of automatically enrolled workers who do not opt out of the scheme. Between six and nine million of the 11 million people expected to be eligible for auto-enrolment will be new savers or saving more than before, according to Government estimates; while Pensions Minister Steve Webb has described minimum employer contributions as "effectively getting a pay rise".

"Any company with more than 500 workers now has less than a year to complete its planning," Baker said. "Businesses really need to be taking steps sooner rather than later to ensure they are in a good position to negotiate on fees."

The expert warned that it could take up to 18 months for a company to fully prepare itself for automatic enrolment. Although smaller companies, which might be making a pension scheme available to their workforce for the first time, would face particular challenges, Baker said that large companies with more complex personnel arrangements would also have issues to consider.

"Auto-enrolment is the biggest change to pensions in a generation and will ultimately affect every worker and business in the UK," he said. "The expectation will be that larger businesses are well-equipped to deal with compliance, but it is worth remembering that they also have complex issues to consider, such as how they treat contractors or staff who move into or out of the UK as part of their duties."

"For other, smaller businesses with less than 500 workers, there will be different issues. For some it might mean implementing a pension scheme for the first time, for others making sure that what they have in place is adequate. Preparing for this change can take up to 18 months, so people need to think ahead," he said.

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