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SMEs face struggle

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As I write this column, we are entering the last week of the Money Marketing Retirement Planning Invitational seminars being held around the country. For me, it has been time to catch up with some old friends – Mike Morrison has been chairing the seminars and Fiona Tait from Scottish Life has been a speaker – so it has been a lot like old times for me.

I have been chained to my desk for the last 10 months building the Paradigm Pensions programme. That work done, I will soon be taking to the speaking trail again as we take the pension reform message to employers, accountants and solicitors around the country so the Money Marketing seminars have been good for me in many ways.

One thing about speaking at IFA seminars is the feedback you get both during the seminars and during the breaks. I still get most of my own knowledge of develop-ments in the pension market from talking to IFAs. The big issue pretty much all over the country is the effect these new pension reforms will have on the small to medium-sized employer market.

Now the Government has confirmed that Labour’s pension reforms are to go ahead largely unchanged (albeit with complications added in the cause of simplifying things), I sense a new urgency. There has, up to now, been a “well, it may never happen” attitude prevailing. That has changed and the mood has become one of “Let’s get on with it then.”

But this set of reforms is presenting a large group of employers, the SMEs, with a doozy of a problem. Normally, reforms come along with product solutions in tow (stakeholder pensions, for example), but not this time. There is no product solution to the HR nightmare that auto-enrolment will visit on SMEs.

Many SME firms have already established workplace pension arrangements for their employees, most offer groupings of personal pensions. These schemes will need to be reviewed in light of the 2012 reforms and may need amending. But the biggest problem smaller employers will need to resolve will be tying up HR processes with their pension scheme management processes to ensure ongoing compliance with the auto-enrolment duties laid on them by the 2008 Pensions Act.

For bigger employers, this will not be a problem, their pension schemes will already be run by their HR departments and the very big employers will have their own pension department within their HR functions. For very small employers, it will not be too difficult to keep track of employee movements and experience with workplace pension arrangements. This is not the case for the heartland IFA sector of SME businesses, most of which will not have an HR department.

Steve Bee is managing pensions partner at Paradigm Pensions

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