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Automatic enrolment awareness improving, but small UK firms must act now, says regulator


Targeted communications from the Pensions Regulator are having a "major impact" on pension reform awareness among small firms and the intermediaries that they are likely to consult, according to research.

However, research conducted on behalf of the regulator (30-page / 606KB PDF) showed that more than 20% of the firms due to begin automatically enrolling their employees into a workplace pension scheme between June and November this year had not yet drawn up plans to meet their duties by the end of last year. The Pensions Regulator has recommended that employers start preparing 12 months ahead of their 'staging date'.

"While it is encouraging to see that awareness of automatic enrolment is improving, there are still too many employers failing to identify their staging date," said Charles Counsell, the regulator's executive director for automatic enrolment. "As hundreds of thousands of small and micro employers prepare to stage in the next two years, we cannot be complacent."

"We know from the research that employers will turn to advisers for help in meeting their duties and so I am encouraged to see that awareness among intermediaries is almost universal, but there is scope for better knowledge and understanding. The regulator's website should be the first port of call for all employers and their advisers as it offers essential information about each task an employer will need to accomplish in order to comply and avoid penalties," he said.

Automatic enrolment began for the largest employers in October 2012, and will ultimately result in up to 10 million people saving more towards their retirement or saving for the first time. Under the programme, employers will have to automatically enrol workers into a defined contribution (DC) pension scheme which meets certain minimum requirements, and will be legally obliged to make contributions towards the pensions of workers that do not opt out of the scheme once enrolled.

The Pensions Regulator now writes to firms one year ahead of their staging date to remind them of their duties. Its research showed that over two thirds of those staging between June and November 2015 knew their staging date as of November 2014, while eight in ten employers had begun preparing to meet their duties. Almost all smaller medium employers were aware of the programme; as were 86% of small employers and 65% of 'micro' employers with only a few employees. Small medium employers have been 50 and 60 employees; while small employers have between five and 49 and micro employers have fewer than four employees.

Eight in ten 'smaller medium' and 'small' employers said that they had either consulted an adviser or would do so as part of their preparations, while 65% of 'micro' employers said that they would do the same. There was an almost universal level of awareness of the reforms among intermediaries (59-page / 656KB PDF), ranging from 95% among accountants to 100% among payroll administrators, while most also understood the main elements of the programme. Bookkeepers and accountants continued to demonstrate the lowest levels of understanding, at 70% and 77% respectively.

The Pensions Regulator is currently consulting on whether to provide a basic automatic enrolment assessment tool for smaller employers that use HMRC's Basic PAYE Tool (BPT). Currently, around 200,000 small and micro employers use BPT in place of payroll software, but this system does not provide the right functionality to allow employers to meet their automatic enrolment duties.

Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that although the rollout of automatic enrolment had been successful so far, it would be more of a challenge for organisations with only a few employees to comply with the requirements.

"These employers may well lack all the resources and advice to implement the requirements smoothly," he said.

"The government, through the Department for Work and Pensions, has simplified some of these requirements since auto-enrolment was first launched, and the Pensions Regulator has done much to raise awareness. But compliance is not straightforward, and we shall have to see whether the government's and the regulator's efforts to assist with compliance pay off," he said.

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