Companies struggling to get ready for pension changes

COMPANIES in the Midlands are uncovering huge complexities in workplace pension provision as they strive to comply with new regulations set to be introduced in 12 months time.

Pensions experts at PwC said employers faced an enormous administrative and cost burden getting everything in place. This is on top of the costs of the actual pension contributions of 3% which all firms will need to implement.

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, PwC said this now seemed far too optimistic and the figure could be exceeded by some SMEs as they take into account all the necessary systems, process and communications changes, combined with the cost of management time.

The firm warned 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, said: “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.”

He said getting the preparations right would save damaging repercussions later and success would depend largely on whether payroll and other systems providers were ready in time.

This was likely to be challenging, particularly given the final auto-enrolment legislation is yet to be published.  For instance it is still not clear which employees will be excluded from the reforms, he added.

“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,” said Mr May.