The Government's workplace pension reforms represent a
significant challenge for small firms, many of whom will have to
offer their employees an occupational pension scheme for the first
time. This research report identifies how ready small businesses
are for the reforms and how financial advice can help.
Purpose of research
- Automatic enrolment is a potential game changer for UK pension
provision - bringing an estimated 10 million people into long-term
saving for the first time.
- Successful implementation depends on the decisions made by 1.1
million micro and small firms who employ 30% of Britain's
workforce. These firms need to make the right calls on what pension
scheme they will offer their employees, how they will start-up and
administer the scheme, and how they will advise staff members on
- Financial advisers may be able to help in this regard though
there has been some debate about whether, and how, firms might seek
advice in the run-up to implementation of the reforms.
- There have only been a few attempts to ask small firms for
their views about the reforms and financial advice. This paper
helps to fill this gap with up-to-date evidence from a
representative sample of Britain's micro and small businesses on
awareness and support requirements.
- Our results suggest that only a minority of small firms are
ready for the reforms with only a small proportion of firms having
made plans and the majority unaware of the Government's proposals
in this area.
- A small number of firms have already sought external assistance
ahead of auto-enrolment. Nearly half of this group have consulted a
financial adviser though this only equates to around 6% of firms in
total. The vast majority of these firms were satisfied with the
advice that they received.
- Out of all the firms we surveyed financial advisers were the
most popular potential source of assistance on auto-enrolment above
accountants and pension providers - consistent with a past DWP
- There also appears to be a clear willingness to pay for advice
for certain services particularly one-off tailored advice on
setting up a pension scheme and ongoing advice on the pension
- Those firms with the greatest levels of knowledge about
auto-enrolment and the highest levels of turnover in terms of sales
were the most likely to consider paid-for advice.
- Firms place specialist knowledge and trustworthiness at the top
of the list of attributes they look for from advisers.
- Small firms will be crucial to successful implementation: The
success of auto-enrolment depends on small firms making the right
decisions before and after their staging dates.
- Awareness: Raised awareness is vital to ensuring firms choose
the right workplace pension scheme and offer their employees
appropriate assistance. Improved communications from government,
industry and the regulator will be necessary as staging dates draw
- Financial advice is favoured: Small firms are increasingly
likely to look to financial advice to help them navigate
auto-enrolment as 2015 approaches.
- Reducing the pensions gap: Advisers may be able to play a
crucial role in reducing the nation's pensions gap by providing
appropriate assistance to firms in need.
- Professional standards: Small firms place knowledge and trust
at the top of the list of attributes they look for from advice.
Continuing to demonstrate high professional standards will
therefore be key to ensuring that intermediaries benefit from
improved levels of trust and confidence.
To view the full report, please see the Document Links box.