A pension provider has warned a 40% increase in the Pensions Regulators (TPR) analysis of how many SMEs will need to comply with auto-enrolment will cause an unprecedented rush for the industry.
Last week TPR said there were 1.3m SMEs preparing for auto-enrolment, but new figures show that in fact 1.8m SME employers will need to meet new pension duties over the next three years.
As a result TPR now estimates the summer of 2017 will see a peak of around 350,000 small and micro employers whose automatic enrolment duties will come into effect, compared to earlier predictions of a peak of around 220,000 in mid-2016.
Will Wynne, co-founder and managing director of auto-enrolment firm Smart Pension, said: "It's going to be an unprecedented rush, with vast numbers of SME owners with no previous pensions experience setting up a scheme for their employees. Pensions is a slow moving market and nearly all existing pension firms rely very heavily on traditional, manual processes which are likely to bend and break under the strain."
TPR said the figures had changed because of more start-ups and fewer business closures.
TPR's executive director of automatic enrolment Charles Counsell said the analysis "demonstrates that significant challenges still lie ahead".
He said: "As a result of more new employers starting up and fewer going out of business, the pensions sector will need to plan for larger numbers reaching the start of their duties. Thanks to automatic enrolment, saving for retirement is becoming the norm and we know most employers want to do the right thing by their staff."
Steve Elliott, auto-enrolment specialist at Barnett Waddingham, said the 40% increase would add "substantial amount of pressure" to the industry.
He said: "The overall economy has picked up, there is a lot of optimism in the economy. I'm not surprised with this kind of change, the anticipated closures haven't happened. The reasons sound very valid when you look at the economy overall."
Morten Nilsson, CEO of NOW: Pensions, said: "The updated staging data from TPR is essential in helping us to plan for future volumes. There are only a handful of providers in the market that accept all employers and, as one of those providers, we need to make sure we have the right resources in place at the right time."
Last week TPR published a list of master trust pension schemes to help small employers. In March it decided not to publish a list of providers due to “significant challenges” in managing and monitoring the schemes. TPR explained the new list was a master trust assurance framework, which would be easier to monitor.
The master trust assurance framework provides a set of standards and was developed by the Institute of Chartered Accountants of England and Wales in association with the regulator.
The framework currently contains the names of three providers, but just two are open to all employers. The regulator said it would also direct firms towards the National Employment Savings Trust (NEST), a government-backed scheme which accepts all employers.
Elliott said the regulator was under pressure like the rest of the industry and the publication of three "well-known master trusts" was "relatively simple".
TPR's latest analysis also shows that by the end of March 2015 a total of 5.2m people were automatically enrolled and around 35,000 employers had completed their declaration of compliance between April 2014 and March 2015.