UK pensions industry 'not ready' for auto-enrolment, experts say
UK - A panel of pension experts has warned that large parts of the pensions industry are not ready or for auto-enrolment, just weeks ahead of its launch.
Trustees and smaller employers are often not prepared for the huge administrative and IT challenge of so many new savers joining pension schemes, they said.
Dean Wetton, lead adviser at pension consultants Dean Wetton Advisory, said: "Many organisations are still in a head-in-sand mode. Auto-enrolment is lost somewhere between payroll, HR and the pensions department. Many still see it as a pensions issue, when there are many implications for other parts of the business."
Steve Delo, chief executive at trusteeship and governance services provider PAN Group, agreed.
"Employers are still largely focused on defined benefits schemes and not always up to speed on auto-enrolment," he said.
"Yet anyone who gets auto-enrolment seriously wrong will face public scrutiny, so stress testing and delivery are crucial."
The panel suggested that larger employers were generally well prepared and organised - the problems lie elsewhere, they said.
Stephen Nichols, chief executive of the Pensions Trust occupational pension scheme, said: "It is proving difficult to get other employers engaged - auto-enrolment is just not on their radar yet, so the key is raising wider awareness."
Administration was one of the key areas providers needed to get to grips with.
Andy Cheseldine, principal at Lane, Clark & Peacock, said: "As auto-enrolment is introduced, there will be 320,000 new savers every month, and over half a million events such as opt-outs every month by 2017. Are providers ready to deal with that scale of work?"
The size of the challenge is reflected in the cost.
Cheseldine said he expected final costs to be much higher than the original estimate of £100 (€125) per employer projected by the Department for Work and Pensions.
One retailer has already set aside £2m to pay for implementing AE, it emerged.
The panel agreed that, over the long term, only the fittest would survive in this environment.
It was felt that the industry should not be wasting time trying to explain complicated investment issues to members but instead improve its communication with them.
Nichols said: "Member communications should focus on outcomes and how members can influence those outcomes."
One of the determinants of those outcomes will also be the default funds to which many of the new members will entrust their savings, he said.
Despite the challenges ahead, Wetton believes auto-enrolment will be the beginning of a new era.
The roundtable was brought together by defined contribution pensions provider AllianceBernstein.