With exactly a year to go from 1 October until employees must
start being automatically signed up to workplace pensions, many
companies in the Midlands are uncovering huge complexities as they
strive to comply with these significant reforms, according to
PwC.
Pensions experts at the firm say that employers face an enormous
administrative and cost burden getting everything in place, on top
of the costs of the actual pension contributions of 3% of earnings
that they will need to start making for all workers.
To comply with auto-enrolment, the Government has estimated that
administrative costs averaging at £6,000 will apply for each
of the 6,000 largest employers. However, this now seems far too
optimistic and this figure could even be exceeded by some small and
medium-sized businesses as they take into account all the necessary
systems, process and communications changes, combined with the cost
of management time. Costs could be even higher if systems are not
ready in time, with firms facing fines for failing to meet the
timescale, or a further administration burden if contributions are
deducted incorrectly.
Jeremy May, partner and pensions specialist at PwC in the
Midlands, commented:
"Auto-enrolment is an important step in tackling the pensions
crisis, but the pressure it will place on businesses large and
small cannot be underestimated. The amount of preparation needed
over the next 12 months will put tremendous strain on HR and
finance functions at a time when many are already struggling with
cost reduction programmes."
"Getting the preparations right will save damaging repercussions
later and success will depend largely on whether payroll and other
systems providers are ready in time. This is likely to be
challenging, particularly given the final auto-enrolment
legislation is yet to be published. For instance it's still
not 100 percent clear which employees will be excluded from the
reforms.
"Providers are telling us that their systems won't be ready to
go live until spring or summer, and this leaves little time for
essential configuration by individual employers. It's crucial
employers start bringing together the different parties involved to
help marry up their individual plans. Large employers would be wise
to secure additional resource now."