Some of the UK 's largest companies could find themselves having to shell out millions in unexpected costs when auto-enrolment begins in less than 18 months.
The Governments' auto-enrolment scheme will allow millions of people not in company pensions to begin contributing to their retirement fund.
But some of the UK's biggest firms do not have a handle on how much automatically enrolling employees into pensions schemes – due to begin in October 2012 – will cost them, research by Hymans Robertson has uncovered.
Just 17% of companies with 5,000 employees or more are confident they know how much it will cost their organisation, despite the fact costs will be in the region of £3 million for an average large UK employer.
It means that many companies could be in for a shock when the system is implemented next year.
"It is particularly alarming when you consider that in the first six months from October 2012, 600 of the largest organisations in the UK , employing about a third of the UK workforce, will need to auto-enrol employees and comply with the regime," said Lee Hollingworth, head of DC at Hymans Robertson.
"The total figure of unanticipated or unplanned costs for UK plc will be enormous."
Even those businesses that have a rough understanding of how much auto-enrolment will cost face major worries, as many are not confident they will be able to pay for the changes.
Only 55% are confident they will have the budget both for putting in place the necessary systems (including changes to HR, payroll and pension systems) and paying for the extra cash contributions to new pension scheme members.
Almost a third of those surveyed do not think they will be able to find the budget either for set up or contributions.
One in ten firms said they will have the budget for set-up, but not the additional contributions, while 5% think they will be able to fund contributions but not the set-up.
If you are worried about how auto-enrolment will affect your business, this planner from the Pensions Advisory Service will help employers understand what their duties will be when auto enrolment is introduced from 1 October 2012.
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