Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

The cost of auto enrolment revealed

by
17th Sep 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

Businesses are facing set-up costs totalling £15.4bn to meet the requirements of auto enrolment (AE) legislation, a new report from the Centre for Economic and Business Research (CEBR) has found.

The report, commissioned by Creative Auto Enrolment, says AE will cost SMEs up to £28,300 per business and take up to 103 man days to prepare for.

The CEBR found the set-up costs “punitively high” at £8,900 for small businesses, £12,600 for businesses with up to 100 employees, £15,600 for up to 250 staff, and £23,300 for those with 500 people. The largest firms in London will face a bill of £28,300 to be compliant with the legislation.

David White, managing director of Creative Auto Enrolment, said: “Hefty fines will penalise those who don’t meet their responsibilities in time. With the clock ticking, businesses need to start thinking now about what their duties are under the new legislation.”

Advisers could also see up to £2.8bn of revenue put at risk for failing to support clients around the introduction of AE legislation, and the accounting profession has the most to lose with £1.86bn of potential revenue at risk by 2018.

The report said AE provides a huge opportunity for the advisory market, with clients likely to need guidance and support in navigating the new legislation. Advisers operating in the accounting, auditing, financial management consultancy and employee communications sectors are set to benefit the most from an increased need for guidance from clients faced with tackling more than 33 administrative challenges to get ready for AE.

The CEBR has predicted that up to 10% of advisers' revenue could be derived from AE-related activity between 2015 and 2018.

White added: “Auto enrolment isn't just a big deal for businesses that need to meet the new criteria; it's also very important for the companies advising them. It's a great opportunity to help your clients with this daunting task and boost profits accordingly, but there's also a risk that if advisers are not armed with the right knowledge and advice for their clients, that they could lose valuable business.”

“This guidance and advice is what will separate the winners from the losers in the advisory market over the next five years,” he said.

Replies (4)

Please login or register to join the discussion.

By jon_griffey
17th Sep 2013 17:21

Son of RTI

Someone from our office went on an IRIS Auto-Enrolment seminar yesterday.

From what they were saying it looks like a bl**dy nightmare that makes RTI look like a picnic.

Thanks (1)
avatar
By Kazmc
18th Sep 2013 08:59

Have to Agree.........

We had a meeting with a pension provider recently regarding our 300+ clients payrolls and I have to say I think it will be an even bigger administration nightmare than we have encountered with RTI.

Thanks (0)
avatar
By P&G
18th Sep 2013 13:51

Buy now ......

Quite agree with both Jon and Kazmc, this is going to make RTI look like a walk in the park.

One area where I think CEBR have underestimated impact is in respect of financial adviser's input. Whilst the very smallest (less than 5 employees) businesses will only have limited choice those with five or more will definitely need financial advice as the legislation specifically states that the employer must choose a scheme that is right for the business and its employees. Simply opting for NEST, NOW or Peoples Pensions is not an option.

Courtesy of RDR at the start of 2013, the number of advisers has fallen. If you say that half the 20,000 or so advisers will be working on Auto Enrolment then the 1.26 million businesses stated in the report works out at 126 schemes per adviser over the next five years. CEBR quote a one off burden of up to 103 days per scheme,well even if we put adviser time at 10 days per scheme that will still make every adviser fully occupied for the next five years! The smallest businesses will eventually be staging at rate of over 100,000 per month, there simply will not be enough hours in the day. 

Only answer is buy now while stocks last!!

Thanks (1)
avatar
By The Black Knight
19th Sep 2013 12:16

No [***] sherlock

I think it is seriously time to consider getting rid of staff.

Where on earth do they think a small business is going to find that amount of cash to spend on admin? and I was thinking of £1,500 not the figure they are quoting above.

IFA salesmen are filling their boots.

viable solutions are

1, outsource (to india)

2, only employ child tax credit supplemented part time employees on the NMW (tesco NIC free scheme style)

3, make all employees self employed.

4, force all employees to use ltd company or umbrella companies

5, incorporate and accept that to comply or not comply will result in insolvency

6,use the crap NEST thing , but i think you are still liable to pay for the IFA advice to the employees that you are not able to give, and now costs a fortune under RDR

7, cease trading

All this on top of being forced to give a pay rise in a recession (I do not want a sales call selling a salary sacrifice scheme)

The easy and workable way was to have said, you need a personal pension plan for your employer to pay in to and their contributions must be.... and yours must be at least.....

Why do these people exist to sow unworkable complexity their help to the UK economy is treasonable.

 

Thanks (0)