Thousands of SMEs 'underestimating' impact of auto-enrolment

Published:

The first wave of SMEs reach the staging date for auto-enrolment today, with pensions experts warning some may be underprepared for the undertaking.

Research carried out by law firm Irwin Mitchell, in which it surveyed 260 companies, was released this week. Some had already staged for auto-enrolment and some had yet to do so.

Of the companies who had, half said they wished they had taken more time to prepare. Ongoing administrative issues and challenges around HR systems were the changes that most companies reported as being the biggest issues, with half citing one or the other as the most pressing concern. 

Only 28% of the SMEs surveyed said they thought implementing the changes would be a problem. Hargreaves Lansdown head of corporate research Laith Khalaf told HR magazine recent changes to pensions could make the task harder then people think.

"Almost all default funds will need to be reviewed to make sure they come in under the 0.75% charge cap and don’t just blindly de-risk people on the assumption they will buy an annuity, which three quarters of defaults do," he said.

Nigel Bolton, pensions partner at Irwin Mitchell, said that larger companies had reported finding the process harder than they expected and was concerned SMEs reaching their staging date were failing to take onboard these lessons.

"Smaller firms are underestimating what the true impact of auto-enrolment will be," he said. "As they do not have the same back office systems as the bigger companies, the problems could be worse."