The pensions watchdog has chastised the first company to breach its auto-enrolment duties. Jenna Towler discovers there could be more trouble ahead for bosses and their advisers
The Pensions Regulator (TPR) flexed its auto-enrolment enforcement muscles last week when it contacted the first company to breach the new pension rules.
The Brighton-based watchdog said it had sent the unnamed firm a non-compliance notice and told it do better. It also revealed a further 38 warning notices were sent out to other businesses.
This points to teething problems with auto-enrolment which will eventually affect all businesses in the country. All employers, however small, will have to comply or face penalties.
Pension advisers: ‘Our worst fears are developing’
But wealth manager English Mutual, part of Sanlam, believes there is a bigger problem to deal with - getting schemes up and running in the first place.
Head of employee benefits Elliott Silk said: "It seems that the worst fears of many pension advisers are already developing. We are struggling to place schemes that a few years ago would have had seven or eight providers beating down our door."
The businesses in question are firms with more than 100 employees, payrolls in excess of £5m a year and average salaries above £40,000 a year.
"These employers are also looking to implement schemes far ahead of the minimum contributions laid down by the legislation but we are finding it difficult to offer them any choice. On most occasions, there are only a couple of high street names prepared to give us terms," he explained.
"Former large players in the group pension arena have announced that they are not going to allow auto-enrolment on their existing book of business. Others have said that they will not take on new schemes within six months of their staging date. To add to concerns, at least one provider has capped their new business intake to a relatively small number of arrangements each year."
While the emergence of new occupational schemes and master-trust arrangements should help with capacity issues, Silk said employers were weary of the schemes.
Outfits such as Now: Pensions and B&CE's the Peoples Pension are competing with the National Employment Savings Trust (NEST) in the auto-enrolment space.
Capacity to cope
He said: "Bar NEST, most employers haven't heard of these pension providers and are concerned about recommending non-household names to their business and their employees. Maybe we all need to do more to raise the profile of these companies?
"I have real concerns about how we as an industry are going to cope with helping 12,700 employees per month in the spring of next year let alone with the vast numbers of SMEs and micro-employers in the years to follow."
Hargreaves Lansdown head of corporate research Laith Khalaf said 29,000 companies are due to automatically enrol in the first half of next year.
"That's an awful lot of employers who will need support from their pension provider, adviser and payroll provider, and an awful lot of companies for TPR to police.
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