Already, five million employees employees of large and medium-sized firms have benefitted from this new drive towards filling the £28bn pensions black hole, but what follows over the next two years will be more complex as an estimated 1.8 million small and micro companies begin to offer retirement saving schemes.
And according to analysis from the Pensions Regulator, 50 per cent of small firms still don’t understand the implications of the new legislation. For busy small company founders, there is an obvious need to generate new business, understand marketing, company finances, supplier issues and staff shortages, but there is much less enthusiasm to understand the ins and outs of pension schemes.
According to advice from The Pensions Regulator, companies should allow 12 months to get ready for the workplace pension.
All of this is unknown territory when it comes to small and micro firms with a handful of employees, says auto enrolment platform Smart Pension CEO and co-founder Andrew Evans.
Andrew said: “Recently published research suggests it takes 103 days to set up a pension scheme, which equates to £15.4bn in lost hours and would take 450,000 working years to comply.
“It’s simply not the case it has to take this long! There are platforms that can do this much quicker, and at Smart Pension we bring this time down to less than an hour per company.
“Our system was designed for speed, reliability and security – it’s also free to enrol. It’s so simple it can even be done on a smart phone.”
Here are the most important five things small firms need to consider when researching a pensions provider:
- Up front set-up fee. These vary and range between free to £1,000. According to Andrew Evans, a fee attached does not mean extra support or that it is a more reliable scheme.
- Annual maintenance costs for employers. This is often a fixed fee and can go anything up to £1,000 a year for a company.
- Set-up time. This can vary from minutes to hours, days and weeks. It largely depends on the efficiency of the system and time taken to authenticate data. Check the small print as it should be clear how long the sign-up process is estimated to take and if official papers need to be submitted, meetings held or if the process can be simply completed online.
- Transaction costs. These are more technical costs associated with investing in different stocks and securities. Check this carefully as some providers do administer a charge for this and it can be unpredictable.
- Administration costs to employees. This is the annual fee taken from an individual employee’s fund under administration. The Government introduced a fee cap in April set at 0.75 per cent and some providers charge £18 a year per employee.
Over the next few months, the number of companies enrolling in a scheme is going to increase dramatically from 10,000 per quarter to around 200,000. This will have a potential time implication so firms that insist on face-to-face meetings and paper compliance will begin to take much longer.
