An eightfold rise in the number of employers reaching their auto-enrolment staging date next year could leave many struggling to secure appropriate legal advice to complete the process, industry experts have said.
Pensions lawyers are required by sponsors to advise on things such as the implementation of AE, to review schemes’ service provider contracts and to establish the different categories of worker. But the specialised nature of the work means such lawyers will be in short supply come 2014 as the number of employers staging reaches peak volumes.
“If they’re all coming the month before staging date with documentation that needs signing off, that looks like a capacity crunch,” said Ian Curry, an associate at law firm Wragge & Co.
He added that one thing that could lessen the demand is if documentation becomes standardised, leaving less room for negotiation between employers and pension providers.
“We’re already starting to see that now… Providers have finessed terms and are showing marked unwillingness to move on those, so it might be that that limits the amount of legal work,” he said.
However Mark Folwell, partner at consultancy LCP, said smaller and medium-sized employers will have less in-house expertise and so may need to lean further on their lawyers. And while lawyers will have done much of the groundwork with large employers, standardising the process will not be that easy.
“The problem is that many clients have unique combinations of circumstances and issues so the efficiency savings are not as great as you might think,” he said.
He caveated that by saying the types of issues smaller schemes face may be more straightforward than those of larger ones, adding: “Given the 2014 stagers will be small and medium-sized employers, they may be less inclined to take legal advice.”
Folwell said there are other legal factors that could arise such as whether the scheme chosen for AE purposes changes any internal dynamics or the covenant towards an existing defined benefit scheme. This “grief factor” can be avoided by trustees engaging with advisers early, he added.
However, Tom Barton, senior associate at law firm Pinsent Masons, said the spike in enrolments presents an opportunity for lawyers, and added: “It is only a concern for those firms that have only dabbled in auto-enrolment and have no meaningful experience to capitalise on.”
He advised trustees to ensure they seek both quality and value for money when choosing legal support. “The usual lawyers might not be right for this particular job. It is highly specialised, complex and completely different to traditional pensions law,” he said.
“Getting the right people in now can spare a lot of pain and cost correcting systems, processes and documents – and of course in some circumstances non-compliance can attract fines, penalties and even criminal sanctions.”
But Curry warned that while 2014 should bring more certainty in terms of simplification and a greater awareness of who is performing better in the auto-enrolment market, “there’s going to be a lot of people clamouring for advice and there’s only so much business [lawyers] can underwrite”.
