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Auto enrolment FAQs

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29th Mar 2017
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Automatic enrolment staging dates surge in the months ahead for small and micro businesses, but there still remains many unanswered questions among accountants.

AccountingWEB has put together a selection of AE-related questions from Any Answers and further afield.

Here Robin Armer, senior business development manager at NEST, and Steve Brice, senior consultant at LP Auto Enrolment Solutions, tackle some of the AE hot topics.

Q: Starting early: My client wants to start AE early and the employee is agreeable. At what point is the standard letter to be sent to the employee and are there any differences to how the declaration of compliance is to be completed?

Steve Brice: It is not a problem to move your staging date forward to an earlier date, but this must be agreed with TPR in advance. When you do this the date for your submission of your Declaration of Compliance moves as well and will be five months after your new staging date. You submit this in the same way as you would have. Employee communications always follow an assessment and so any statutory letters should follow as soon as is practical but no later than six weeks after an assessment has been done. Assessments will need to be done either shortly before or shortly after your staging date depending on whether your payroll software runs on calendar months or pay reference periods. If in doubt ask your payroll provider well in advance of your staging date. They should understand the difference. If they don't then maybe consider alternative payroll support.

Q: How can I analyse auto enrolment default funds and make sure my clients are getting the best outcomes for their employees?

Robin Armer: Until recently, identifying high quality default funds certainly hasn’t been an easy task. Comparisons on websites and in magazines have been thin on the ground, and many have been fairly questionable and inaccurate, often comparing apples with oranges. The good news is Defaqto, the financial research group, has recently published an independent report, How to analyse auto enrolment default funds. It analyses leading default funds in various ways, such as through the comparison of annualised returns over time, the asset classes used, the fund’s detrimental volatility and the charges imposed. The report, which is the first of its kind, also outlines the criteria you can consider and evidence as part of your assessment to help ensure the recommendation you make delivers the best outcomes for your client and their workers. One of the clearest messages of the report is that to really assess value for money we need to focus on the big picture. That is, assessments should not be limited to investment performance or cost alone. This is evident from the Pension Regulator’s guidance which places an emphasis on strong governance and protecting members’ interests. So while cost and performance are obviously important considerations they should be weighed against other differentiators, like how the scheme manages risk. After comparing funds against a range of differentiators, the report concludes that some providers and funds are ‘clearly more competitive than others’. We were delighted that NEST’s default fund ranked highly across all of the measures. See how the funds compare in the full report, available here.

Q: AE set up: As a micro business with only two staff what can we do to assist clients setting up for AE? Where should we start with things like the engagement letter and advice around which provider to use?

Steve Brice: There are a number of considerations when deciding upon your chosen pension provider. Tax relief, compatibility with payroll software, employer costs and employee costs. There are a number of providers who will accept a micro business now and so if you are going to assist that business with provider selection being aware of the main differences between the scheme features is actually pretty essential. There are specialist service providers who will offer choice to micro's for fees in the hundreds and not thousands many of whom work with payroll regularly. This may be the easiest way to protect your reputation if you do not want to get involved in this area. If you do want to get involved in recommendations, which is not illegal, then make sure that you are clear on what you are offering. If you only offer one provider for all of your clients then be clear that others may be available and may be more suitable but that you have chosen to work with this one because… If you offer a choice of more than one provider then be clear on how you have distilled the market down to these names and how often you revisit this shortlist. What criteria have you applied to sift down to this number. As long as the client knows what they are paying for they can decide whether your service is for them. But don't be fooled into thinking that defaulting to one provider is any different for your reputation than providing choice. If you are involved in scheme selection, you are involved in scheme selection and will be responsible in your clients eyes.  

Q: With so many companies staging over the coming year how can I make sure I’m set up to deal with it?

Robin Armer: A straightforward solution is to make sure you’re taking advantage of the technology available. It’s an easy way to scale up without increasing your wage bill or having to re-think your business model.

So what’s out there? Some schemes offer an online portal you can use to streamline your work. At NEST we offer NEST Connect, our free online hub. It enables you and your colleagues to build a direct relationship with NEST and act as delegates for multiple clients. Using the hub, you can see all your clients on a personalised dashboard, using one login, and provide a complete service from set-up to on-going maintenance. This removes the need for individual passwords for each client enabling you and your team to manage everything from one place, saving both time and money. Does it actually work? We’ve worked with a number of advisers, payroll providers and accountants to find out how NEST Connect helps them. They explained that being able to approach clients with a ready-made business model saved them both time and resource across the auto enrolment lifecycle. And, professionals are voting with their feet. Since its launch in November 2014, more than 15,000 intermediaries have signed up. Dealing with AE and payroll? Web services is another innovation that can help you with the heavy lifting. This technology enables you to set up and manage auto enrolment for your clients through payroll software, and automates many of the processes. This means you don’t need to manually input data, which reduces both administration and the risk of human error, leaving you free to help more clients, in less time.

Q: Charges to clients: As an accountant what should I be charging clients for setting up and looking after a few AE schemes?

Steve Brice: As above, care should be taken with scheme selection and choice of provider. If you charge for it then you have recommended it, not illegal at all but certainly you are then responsible. If you choose to charge for scheme set up then ensure you know what each provider requires to establish a scheme. Some are simpler than others and some will always cause you pain! Price accordingly and learn from experience. Once an employer comes to you having chosen their provider you will need to understand the implications of them choosing that provider for your own resources. No matter who the provider is, it is never as simple as the on line demo. Lastly assessments, communications and enrolment. These are legitimate additional services that you can offer your clients. Security of data is also a consideration. If you are emailing payroll data around to a number of employers and providers it is only a matter of time before something will go wrong. DPA breaches are expensive errors and can easily lose you a client in one fell swoop. Establish a secure method of exchanging data between the employer, your business and the provider. Charge an ongoing monthly fee for this service even if it is a small fee. Some pay periods will sail through effortlessly while others will take up your time. API connections between payroll and provider are helpful but again, they are not a silver bullet and problems/complications can still occur. You will have to step in manually sometimes so being able to talk to the provider is essential. This is sometimes a good way to help qualify the providers you offer to work with. It doesn't mean that others are bad pension choices but it may mean that you will either charge more to work with difficult ones than easy ones. After all that is exactly what the providers do, they charge employers they perceive as harder to work with more than those who they perceive as easier to work with. Never be frightened to make a fair charge for an additional service. Once you start doing this at a loss/free you will soon find it takes up more and more of your time and other services will suffer as a result of stretched resources. If you cannot provide the service internally at a competitive/fair price then partner with someone who can. There is no harm in using specialists in certain areas and sharing the reputation/business risk, especially in this one.

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