I spend a great deal of time working with the SME community and two characteristics shine through.
Firstly they enjoy being their own boss and secondly they run a tight ship when it comes to budgets.
So what has that got to do with workplace pensions?
Well, to link it to the first point, if a smaller business wanted to offer a workplace pension to its employees they will have historically done it on their own terms and budgeted accordingly. The introduction of Automatic Enrolment (compulsory workplace pensions) often makes them feel that their arm is being twisted by the Government and in part explains a reluctance to start the process.
To link it to the second point, the workplace pension market has been broadly divided into two camps:
- Traditional â€œHigh Streetâ€ providers who remain open for business – some have become more selective of whom they want to work with and most have become more expensive for employers, often charging a one-off or ongoing employer fees to set up and run a pension scheme.
- Auto Enrolment also triggered a wave of â€œnew providersâ€ that often had a simpler proposition but would work with any business and were free to use for employers.
That dynamic fundamentally changed last year when a number of the newer providers also started charging fees, and whilst I’m sure there are sound commercial reasons for doing so, it represents another layer of costs the SME community may not have budgeted for.
Most advisers, whether they work in payroll, HR or pension advice have been encouraging the SME community to start planning for Auto Enrolment as early as possible. Ultimately this gives business owners what they want control over, the process, and realistic costs to budget for.
The trend for employer fees leaves me somewhat conflicted; part of me hopes that this will be a call to arms for the SME community and will help focus their minds on securing a quality pension solution sooner rather than later.
I really hope it does not become another reason to ignore it and hope it goes awayâ€¦