In November, The Pensions Regulator (TPR) launched a consultation which presented its proposal for mitigating the risk that small and micro employers cannot identify a pension scheme to use for auto enrolment.
The Pensions Regulator’s proposal was that it would publish on its website a list of pension schemes that are directly available to any employer.
NOW: Pensions, along with many other providers, were supportive of this approach but in March, TPR published the response to its consultation and said that it won’t be pursuing the publication of a list of providers at this time due to “significant challenges relating to setting objective entry and exit criteria that could be applied fairly and evenly to schemes.”
This news is a major disappointment and a serious blow for small firms trying to comply with the legislation.
A study carried out by The Department for Work and Pensions (DWP) shows that around one in five small and micro employers won’t seek advice on auto enrolment and will be making their own pension scheme decisions.
Of those that intend to make their own decisions, around one in ten don’t know how to select a scheme or think it will be difficult.
Against this backdrop, research carried out by NOW: Pensions in March with 400 SMEs across the country revealed that nearly two thirds (61%) of SMEs would welcome the publication of a list of providers that accepts all employers.
It’s a great pity that despite the majority of consultation responses being supportive, TPR encountered obstacles that meant it was unable to find a way to get this pragmatic initiative off the ground.
The industry, NEST, DWP and government should all be lending their support to any measures that will help employers identify high quality schemes and ease capacity constraints in the market.
Starting in June, employers with fewer than 30 staff will reach their staging date and next year over half a million employers will have to comply with the legislation.
The 2016 market presents a huge challenge and while TPR yesterday published a step-by-step guide to auto enrolment aimed at small employers, it still offers no specific guidance on providers and only explicitly mentions NEST.
It is foolhardy to think that NEST will be able to handle every employer and taking action now to help channel these firms to the right places is critical otherwise we run the risk of a pensions train crash which would seriously derail confidence in auto enrolment.
A list would have helped employers avoid wasting their time with providers that aren’t interested in their business, supported those that are committed to serving the whole market and helped manage the vast volumes of employers that will be seeking a scheme.
As a trusted source of information on auto enrolment, The Pensions Regulator has considerable influence. It has direct communication with every company about auto enrolment but has only ever actively promoted NEST.
The publication of a list of providers would have helped to level the playing field and encouraged employers to think more carefully about which scheme is best for them and their employees.
At a minimum, TPR need to honour its commitment to publishing a list of all master trust schemes that hold the independent assurance framework (AAF 02/07) as this will at least signpost employers to high quality master trusts. But time is running out and decisive action needs to be taken soon to give these small employers the guidance they so desperately need.