More than three quarters (76%) of micro employers in the UK are still not covered by any workplace pension scheme one year after the Government’s ‘I’m in’ television campaign to raise awareness of the need for firms to prepare for auto-enrolment first aired, according to a new report from the Personal Finance Society (PFS) entitled 'Are we ‘in’ yet?'
This, along with other findings from the research, presents a huge and real opportunity for financial advisers who remain the preferred source of advice for small firms in the UK. Nearly half (49%) of firms with 1-49 employees said they would turn to an adviser when choosing a pension, representing over half a million businesses. A third of small employers (about 60,000 businesses) would turn to a financial adviser for setting up and running a pension, increasing quite significantly for more successful, higher turnover firms.
The research – which follows a similar survey conducted by Populus on behalf of the CII Group in 2012 – revealed that over two-thirds of micro (1-9 employees) and small firms (10-49 employees) do not currently offer their employees any form of workplace pension scheme. This, if reflective of the micro/small firm population, represents nearly five million employees not yet covered by employee pension.
Upon closer analysis there has been discernible progress among small firms, with almost half (48%) now offering and contributing to a workplace pension whereas only 16% of micro employers can say the same.
Keith Richards, chief executive of the Personal Finance Society, commented: “Our research into small firms’ readiness for the workplace pension reforms provides unequivocal proof that financial advisers have a major role to play in helping guide thousands of small and micro employers, covering millions of the UK’s population, into auto-enrolment and ultimately pension provision for the very first time.
“The fact that since last year more small employers have introduced a workplace pension is positive and encouraging news. It’s testament that the Government’s auto-enrolment television advertisement, featuring Theo Paphitis among other business leaders, has had some impact. However, it’s clear that more needs to be done to educate especially micro firms that the auto-enrolment reforms will apply to them and they need to prepare sooner rather than later – possibly through a more focused awareness campaign.”
About one in 15 (6%) of firms questioned believe auto-enrolment is irrelevant to them. This reflects at best, a lack of understanding of how the reforms work, especially in the context of younger or lower paid employees. At worst, and possibly more likely, it suggests confusion among micro firms that the reforms will not apply to them because of firm size.
Keith Richards said: “It is a concern that some micro employers still believe that the reforms will not apply to them. Whether this is due to a lack of certainty or lack of awareness, the Government must do as much as it can to clarify that auto-enrolment applies to all employers, and that they should start preparing as soon as possible. A decisive media campaign, particularly targeted at micro employers and encouraging them to seek advice if unsure, would do much to dispel any misunderstanding or confusion.”
The research found that the main services firms of this size want, and are prepared to pay for, are ‘one-off tailored advice and setting up a pension scheme’, and ‘ongoing tailored advice on the pension scheme’. Presentations and individual financial advice to employees, on the other hand, were the least preferred options, although a third of firms said they would be prepared to pay for these services as well.
The research found that turnover is as important a factor as firm size in determining whether employers would want financial advice. Firms with turnover of £500,000+ were up to 15% more likely to want to pay for these services, whereas firms with lower turnover were up to 10% less likely. Financial advisers who are looking to provide advice but are unsure about the firms’ financial position, might want to offer them a narrower range of services.
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