Business awareness of the auto enrolment charge cap is increasing among SMEs, but fewer are taking action to ensure they are prepared, according to the latest research from Close Brothers Asset Management.
The 0.75% cap on the annual charge that pension schemes can apply whilst continuing to meet the qualifying criteria for auto enrolment will come into force on 6 April this year. Worryingly, 29% of employers surveyed said they had not heard of this nor been informed by their adviser or provider. However, this was down from nearly a third (31%) in September last year.
The Close Brothers Asset Management’s latest Business Barometer survey, which questions over 900 employers across the UK, found that while 37% of businesses said their scheme’s annual management charge (AMC) was already below the cap, 28% are still awaiting revised terms from their provider.
Just one in 20 (5%) said they were looking at moving to a new scheme as their existing provider intends to apply an additional employer charge, compared to 6% at the end of last year.
One impact of the cap is that pension providers will cease paying some types of commission to pension advisers, meaning these advisers will look to replace this with fee arrangements. One in five (21%) of businesses surveyed had not been made aware of this issue by their adviser, however this is less than the 23% who were in the dark on this issue last year. A further 38% have already discussed the need to pay a fee for services with their adviser, up from 34%.
Maxine McIntyre, Head of Corporate Proposition, Close Brothers Asset Management said: “While it may only be a small increase in the number of employers aware of the charge cap, it is nonetheless encouraging to see. Given we are within touching distance of the new regulations coming into force, the more businesses are clear on what changes are coming up, and of how they can address these, the faster they can introduce cost-effective solutions. There are still not enough who are either in conversations with their adviser or aware of the cap altogether, but taking steps to meet auto-enrolment obligations does not have to be a burdensome task. Doing so now will pave the way for a far easier process when April comes around.”
Awareness of the cap is at its highest in Northern Ireland, at 53%, followed by Scotland at 36%. Awareness is lowest in the North East of England, at 19%.
Close Brothers Asset Management offers CloseToMyPension SMART, a platform which helps to smooth the auto enrolment process for small businesses. The platform aims to reduce the amount of back-office administration and supports a single, automatic enrolment contribution structure, a single monthly payroll and compliance with simply scheme rules, providing support pre and post staging.