- 7.5% of auto enrolled companies have seen segments of their workforce turned down by their current pension provider
- 1 in 5 employers yet to enrol have seen providers fail to guarantee acceptance onto their schemes
- Companies facing auto enrolment have underestimated the time needed for the process by over a month
- 49% of companies do not know the future costs for technology involved in implementing auto enrolment
A growing segment of the workforce is likely to face refusal from their company’s current pension provider in the auto enrolment process according to analysis from Close Brothers Asset Management’s “Auto enrolment – One Year On” report.
The independent survey of 275 employers, conducted by Newsquest, shows that 7.5% of companies who have auto enrolled have seen segments of their workforce refused entry by their current pension provider.
This is set to grow as smaller firms auto enrol. 80% of companies yet to enrol have spoken to their current provider, with that provider refusing to guarantee to accept their employees onto the existing schemes in one in five cases (19%).
Nearly half of employers yet to auto enrol (46%) would consider moving their existing pension provider entirely if part of their workforce is refused entry to the current scheme. In order to address this issue, employers should engage with their corporate advisers as early as possible and not wait until a few months before their staging date. Advisers should be monitoring capacity amongst pension providers closely and can help employers to address any concerns that they have.
Charles Gillespie, Head of Corporate Advice at Close Brothers Asset Management, comments: “A year into auto enrolment, capacity has become strained among providers, which has been demonstrated by providers being more selective and accepting only the more lucrative sectors of workforces at the expense of temporary and part-time employees.
We are going to see the number of auto enrolment orphans – employees refused entry by a company’s current scheme – climb rapidly, especially as new auto enrolment schemes continue to rise. This trend is likely to accelerate as medium and smaller size companies look to auto enrol, causing further delays and costs to the process. In this context, it’s crucial that employers that haven’t yet spoken to their provider do so, as soon as possible so that they can consider all options well in advance.”
Preparation Perception Gap
Nearly nine in ten employers who have not yet enrolled believe themselves either very or fairly prepared for auto enrolment; yet there is a clear awareness gap to be addressed.
56% of companies who have auto enrolled said the process took longer than expected, taking an average of 9.6 months. However, those who have yet to enrol estimate it will only take them an average of 8.5 months – 11% less time than enrolled employers required. In fact, the time to build took longer than a year for 22% of firms who have enrolled, however just 15% believe it will take more than 12 months
Equally, many still appear to be unaware of the cost implications of delivering their auto enrolment scheme. Nearly a quarter of employers have spent more than £20,000 on technology for auto enrolment to date, with the average expenditure standing at £16,400. However, almost half of employers (49%) are not sure how much the future technology cost involved will be.
Separately, the research found that one in five employers yet to enrol are considering using a master trust to meet their auto enrolment needs, a figure that Close Brothers Asset Management forecasts will climb substantially as medium and smaller size companies stage.
Recent Comments on Stories