Auto-Enrolment

Auto-Enrolment

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We're starting to think about the question of where we fit in with Auto Enrolment as Accountants and I'm really interested to hear what other firms are thinking.

Having done a bit of research, the main service that I think we would provide would be adding on to the payroll service and providing reports to the potential pension provider on employee's eligibility etc. 

Potentially we could communicate with employees ourselves and get their responses for opting in or out but this sounds like it would be a huge admin burden on the payroll department.

We also need to make a decision on software upgrades which involves the usual suspects, Sage, Iris, Star etc. Does anyone have any strong feelings on which payroll software provider has the best offering for Auto Enrolment? 

The good news is that our client base is mainly SMEs which means the staging dates are pretty far off for now. However, I feel we need to be able to make a decision on our service offering pretty soon so we're clear on what our message is to clients.

There's a fine line with not being FCA regulated and discussing this type of thing with clients which I think we also need to be careful about.

Finally, is it all worth it? Should we just steer clear and let the IFAs do their thing or is it our duty as our client's advisor to let them know about their obligations?

We want to seize the opportunity to do more for our clients but don't want to over-estimate the opportunity and spend too much time on it with not much impact on the bottom line.

Replies (197)

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By Irishdaz
27th Sep 2014 12:36

Hi all.

Can I put my two penn'orth in as an IFA?

As an IFA I am keen to work closely with the Accountancy profession, particularly where these are the providers of Payroll etc. to the client.

It would be a simple task for me to sort the actual pension & make it AE compliant, take my fee & walk away. Suddenly there are extra duties on the payroll provider every pay period, and potentially a need for different payroll software. This will increase the costs for you as that provider, but these have not been factored in anywhere.

However, my preferred option (and that of my IFA colleagues) is to include you in the process, agreeing how you will be able to charge the client for extra work, and maybe even planning the solution to minimise that work. Factored in to this is also trying to make the solution cost effective for the smaller employer too.

For example, the new Sage Pension add on makes things easier, but will cost you extra each month. This cost should be passed on, and I would want to ensure the client understood as part of my presentation & solution. Actually processing the AE data will increase the time taken to process payroll, and then you have to upload the info to the pension provider.

Alternatively some solutions can incorporate the necessary middleware to negate the need for the Sage update, and speeding the process. This might be the preferred option both cost & time wise for you and the client.

Communication letters were mentioned above, which are a major issue for AE. This can be either the clients responsibility or very possibly the payroll administrators (ie you) so again knowing what you are likely to have to do, or are prepared to do, would factor into the solution I would provide.

As an IFA I am definitely NOT going to take responsibility for the communications letters ongoing as this leaves us wide open for being blamed for non-compliance. I would urge any accountant to also be wary. You should be very clear these are EMPLOYER responsibilities. If we agree upfront that neither of us are going to take responsibility then again I will make this clear to the client.

I would welcome any discussion in this area regarding your own clients,or if enough of you would be interested I would happily run a Q&A for you

 

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By petersaxton
27th Sep 2014 12:48

Irishdaz

All of what you said seems very sensible but I think they are exactly what accountants are taking into account.

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Replying to Wilson Philips:
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By Irishdaz
27th Sep 2014 13:03

but the solution might be something better

Peter,

one of the issues mentioned was the very high cost of some solutions being offered.

Many of these are being offered as one-stop solutions by Employee benefit consultants (not to be confused with IFAs)

These are off the shelf solutions, providing duplicate services to what the accountants might, but incur usually a large up front fee (which is separate to the pension scheme itself) and a monthly member fee, which the consultant gets a slice of every month.

Typically these cost £3/5000 up front & about £4 per month per employee (NOT scheme member) on the payroll. There is usually a minimum fee too, making it disproportionately expensive for smaller businesses.

Someone with 50 staff could easily incur £200+ per month ongoing costs on top of the pension contributions, and the payroll administrator still has extra work to do. But a business of only 5 staff might still have £100 per month extra to pay out

If instead they go for fully advised solution that works for them, with a trusted IFA working with their accountant, this cost could be significantly reduced and both the IFA & accountant could generate a regular additional income. Isn't that worth considering?

 

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By petersaxton
27th Sep 2014 13:13

Investment opportunities

AE still limits investment opportunities to pensions when many people are not happy with pensions.

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By [email protected]
23rd Apr 2015 12:43

Directors etc.
In relation to the previous post, the following is a direct extract from TPR's detailed guidance for employers: "If an individual is a director of a company and the company has noother employees, that individual is not a worker by virtue of anyoffice that they hold or contract of employment under which theywork. The company is therefore not subject to the employer dutiesin relation to that individual. However, if the company takes on a second worker, and boththe director and the new employee work under a contract ofemployment, then both the director and the new employee will beworkers for the purposes of the employer duties and the companywill have responsibilities in relation to both of them."

 

If there is only one employee and this employee is a director, the company will still need to stage and then register its compliance with the regulator within 5 months of staging.

In relation to an earlier post, where it was suggested that "If you can leave it well into July/August 2015 you will have a much better selection to choose from.", you would be much better advised to have a payroll solution in place from 6th April 2015 as you do not need the complication of transferring payroll data mid year, no matter which payroll solution you choose!

 

Paul Byrne fca
BrightPay

 

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By [email protected]
23rd Apr 2015 12:49

Apologies

My last post regarding directors was already covered in this thread but did not appear in my feed until I had posted!!!

Apologies

Paul Byrne fca

BrightPay

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By petersaxton
27th Sep 2014 19:08

Paul

So what is the answer to the four scenarios I have set out regarding directors and employees?

I agree that 06/04/15 is the latest time to have software in place if you want things easier.

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Replying to Wilson Philips:
By [email protected]
24th Apr 2015 13:13

4 scenarios

My understanding (from my months of swotting up on AE!) is as follows:

1. One director and no employees - director isn't a worker even if they have a contract of employment - company will still need to stage and confirm compliance to the regulator within 5 months of staging

One director and one employee are both workers if they have contracts of employment - stage and enrol both (assuming both are eligible jobholders). The director can always opt out.

One director (no contract of employment) and one employee (contract of employment) - director not a worker? - stage and enrol both and let the director opt out. The reason I say this is it comes down to the work that the director performs and there does not necessarily need to be a written contract in place to be defined as a worker. Safest thing to do, if uncertain, is enrol and let them opt out.

Two or more directors (no contracts of employment) and no employees - directors not workers? - As above, enrol both and let them opt out.

Paul Byrne fca

BrightPay

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By petersaxton
28th Sep 2014 13:25

Thanks, Paul

I appreciate your opinion. Hopefully the definitive position will emerge soon. 

So unless there's one director and no employees then it's best to enrol and opt out.

It looks like I'll have to either get Sage Pensions Module or switch to BrightPay or some other software for very little use unless I make an effort learning and marketing for AE.

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Replying to Padam Walburn:
By xtraman88
29th Sep 2014 19:21

No need to change

petersaxton wrote:

I appreciate your opinion. Hopefully the definitive position will emerge soon. 

So unless there's one director and no employees then it's best to enrol and opt out.

It looks like I'll have to either get Sage Pensions Module or switch to BrightPay or some other software for very little use unless I make an effort learning and marketing for AE.

Peter

There is software out there that does not require you to update your current payroll software and is billed to the client with no cost to you.

Steve

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Replying to Tax Dragon:
By xtraman88
29th Sep 2014 20:06

Monthly

Peter

Monthly how do you do RTI i thought that it had to be done monthly

Steve

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Replying to sawebs:
By petersaxton
29th Sep 2014 20:15

Not necessarily monthly

xtraman88 wrote:

Peter

Monthly how do you do RTI i thought that it had to be done monthly

Steve

You can still have annual schemes or report a declaration for future months otherwise you have to report monthly but not necessarily pay monthly.

I have some employers that get paid monthly and I report monthly. Other employers only have one director and they are paid in March. I report in April for April to February as nil and then I report in March.

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By chatman
28th Sep 2014 20:12

Penalties on Two-director Companies
I wonder what penalty TPR would impose on a two-director company that didn't go through the communications with the directors.

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By chatman
29th Sep 2014 09:53

"anyone employing 2 or more individuals"

The problem is that it doesn't seem very clear. They only give the examples of one director and one director and one employee with a contract of employment. They don't give the example of two directors with no contracts.

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By SteveB@LPAES
29th Sep 2014 11:33

Straightforward??

...and there was me thinking that AE was straightforward and has no variables or need for discussion.

The preparation that a company will need to do prior to their staging date is the most important part and the more time that is devoted to that the better for the project. Knowing who will need to communicated with...or not is key. As for payroll, we have staged quite a few companies now and I am still finding missing NINO and no current addresses on regular basis. That clearly must be the unique clients that we deal with and I am sure that everybody else's payroll data is perfect!

Whilst on the topic of straightforward, please see below an email I was sent this very AM from a client who did not use us and can demonstrate how simple and straightforward AE is!

I have clearly removed the names for the purposes of this post but have included teh rest word for word. 

We've had an interesting roller-coaster ride with Pensions AE.  The Aviva online portal refused to let me/our Payroll company upload the files from May, June and July so we received threatening letters stating that we hadn't paid over contributions when we were trying to - and only after another 3 weeks of working with their technical teams did the fix finally work.  We then went live in August (successfully), heaved a huge sigh of relief and then I set about registering the scheme with The Pensions Regulator only for them to say we'd staged too early and it should be August 2015!!!!

 

I fell off my chair, got up and then tried to work out what had happened.  It was simple really - the TPR misadvised me over 18 months ago that we had to stage when Company A Ltd would have staged, even though Company A had now become Company B Ltd.  This information was incorrect as we should have taken Company B latter staging date.

 

So - you can imagine the papertrail of information I'm holding just in case we get asked questions by anyone in the business or the TPR themselves.  Talk about conflicting and completely different information.  But, the good thing is that all the team are now saving regularly for their retirement and a couple of the lads from production  have asked to increase their % contributions.  How good is that!

 

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Replying to Insolvency Practitioner:
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By Irishdaz
29th Sep 2014 13:57

multiple staging dates

companies that have more than one payroll can have problems deciding which staging date to use!

Auto Enrolment IS more complex than it first appears, and knowing how to deal with the various pension & middleware providers, and understanding whose systems work best for each scenario is where IFAs add value

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By SteveB@LPAES
29th Sep 2014 13:28

Straight forward cont'd....

For those who have asked....

This is direct from the client so yes it could be user error re the upload and not the providers error and TPR do not "advise" so it is down to the way the client asks questions and reads answer as to whether they have the correct staging date. However experience of this process and an understanding of what has happened in the past might help assist the client and minimise the effect of these sorts of issues.

By the way I applaud this client for having the tenacity and the enthusiasm to persevere with the whole project and DIY the whole thing. I wonder how much time this took to resolve and how many of us could have spared the time,for free, to step in and deal with a project that worked like this one?...multiply that by all of the payrolls a payroll bureau runs or the clients an IFA has and how much time will this take from everyone's day if these things can go wrong. 

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By Tristan Mander
29th Sep 2014 13:37

An outsider's view
Marina Longden suggested I repost my comments from LinkedIn: https://www.linkedin.com/groups/Auto-enrolment-questions-as-asked-380607...

I posted:

Accountants are expected to be the first port of call for many small and micro employers, as they are more likely to already use the services of accountants rather than the services of IFAs or lawyers, for example. Here's yet another article in the pensions press to state this truism, from yesterday: http://www.pensionsage.com/pa/Many-small%20and%20micro%20employers%20do%....
Accountants have an opportunity to play an important role here, thereby enhancing their own services to their clients and confirming "trusted advisor" status. This role is to co-ordinate the many other professionals with involvement in AE, such as IFAs, payroll services and lawyers. Many of the latter tend take a narrow, specialism-focussed approach to AE, whereas a holistic view of where AE fits in with a business is essential for AE to work without hitches. It's often the little, practical things that can derail an otherwise perfectly compliant AE project. To avoid those little things, project management is essential. There's a gap in the market there in relation to smaller employers, and one which accountants could make their own as they have a captive market.

The Pensions Regulator has urged accountants in particular to improve their knowledge of AE. The press release makes for a good read in that respect: http://www.thepensionsregulator.gov.uk/press/pn14-33.aspx

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By SteveB@LPAES
29th Sep 2014 14:13

Multiple staging dates....

...and where you have more than one PAYE ref you can only elect to move your staging date forward to the earliest. You cannot adopt the latest for the whole of your business.

When changing staging dates for multiple PAYE refs it is also important to understand that yo must get TPR approval, in writing, before you adopt this stance and not just do it because it suits your approach without notice to The Regulator. 

Having said that you can coordinate the staging dates but still need to complete your compliance register for each of the PAYE ref's at teh five month point.

I have one client who has six PAYE refs who we brought int one date for the purposes of assessment. When it came to completing the certificate of compliance TPR require one cert for each PAYE ref even though they all staged at the same time. Assessment records had to be kept separately for each PAYE ref even though all had been aligned months before the staging date. 

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By Smartie99
29th Sep 2014 14:38

getting set up in plenty of time.......

is all very well, but what about new employers once the whole AE system is up and running for all in a couple of years?  How much leeway will they be given to setup and enroll employees after initially setting up a new PAYE scheme?

In my view this whole AE thing is just going to make that first step for a new business to begin employing staff all the more of a difficult decision.  There will no longer be the option of giving someone a try for a month or two and seeing how it goes if they will immediately incur a £500 / £800 cost of setting up a pension scheme?   

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Replying to mr. mischief:
By SteveB@LPAES
29th Sep 2014 14:46

Postponement

Smartie99 wrote:

is all very well, but what about new employers once the whole AE system is up and running for all in a couple of years?  How much leeway will they be given to setup and enroll employees after initially setting up a new PAYE scheme?

In my view this whole AE thing is just going to make that first step for a new business to begin employing staff all the more of a difficult decision.  There will no longer be the option of giving someone a try for a month or two and seeing how it goes if they will immediately incur a £500 / £800 cost of setting up a pension scheme?   

New Co will receive confirmation of a staging date as they set up/register their PAYE ref so they should get reasonable notice. They also have no legacy arrangements and so can spend time preparing in advance of starting to trade.

Ref the quote above...there is something called postponement that may help here. It can be a bit like a three month probation period. It means an employer need not enroll said employee for up to three months...unless the employee opts in earlier. You can also postpone an employee as often as you want as long as the postponement periods are not concurrent. This is primarily aimed at employees with fluctuating earnings,seasonal staff and companies withe agency workers for short contracts. 

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Replying to Tax Dragon:
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By Irishdaz
30th Sep 2014 14:00

postponement

Smartie99 is right to a degree.

If you are currently a one man business you need not have an AE scheme at all.

BUT if you decide to employ someone after AE reaches its maturity then if they meet the Age & Wage criteria for AE you must have a scheme set up to auto-enrol them on the day they start. So you would incur potential set up costs, or at least the admin & hassle of DIY.

Postponement might seem like a good idea as it allows you to defer AE until they have passed a 3 month probationary period.

However, you still have to have a scheme set up in order to postpone, so it doesn't help.

Furthermore you should remember that the new employee also retains the right to say no to postponement and immediately Opt in. If they do so the employer must start contributing as soon as they join.

Steve you are incorrect. A person can only be postponed once, and must be auto enrolled as soon as they qualify again (eg fluctuating earnings can be postponed the first time, but enrolled the second time they become eligible)

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Replying to Tax Dragon:
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By J_G_W
30th Sep 2014 15:48

No

Irishdaz wrote:

Steve you are incorrect. A person can only be postponed once, and must be auto enrolled as soon as they qualify again (eg fluctuating earnings can be postponed the first time, but enrolled the second time they become eligible)

Not the case. Steve is right, you're wrong.

You can postpone someone as many times as you like, as long as its not directly one after the other. i.e. Postponed three months, assessed after three months - if eligible they must go in. If not eligible they are assessed the next pay reference period, if eligible the next pay reference period they can be postponed again three months.

Ideal for clients who have employees with earnings spikes.

 

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Replying to Maslins:
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By Irishdaz
30th Sep 2014 17:50

Which proves why you need an IFA

You are obviously reading incorrect information somewhere

The TPR guidance for advisers clearly states that an employer can only choose to use postponement on certain dates. These are:

a) Their staging date

b) the employees first day of employment if after the staging date

c) "the date a staff member FIRST becomes eligible for auto enrolment" (a direct quote from TPR)

Note it says FIRST not every time

It also says "You cannot apply a further period of postponement even if postponed for less than the three months allowed" (a direct quote)

Further, it specifically says you cannot use postponement again at the next Auto enrolment (i.e. the anniversary)

It is obvious really, otherwise employers would be able to postpone indefinitely, which defeats the object.

 

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Replying to Payrollgal:
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By J_G_W
01st Oct 2014 10:01

Still wrong

Irishdaz wrote:

You are obviously reading incorrect information somewhere

The TPR guidance for advisers clearly states that an employer can only choose to use postponement on certain dates. These are:

a) Their staging date

b) the employees first day of employment if after the staging date

c) "the date a staff member FIRST becomes eligible for auto enrolment" (a direct quote from TPR)

Note it says FIRST not every time

It also says "You cannot apply a further period of postponement even if postponed for less than the three months allowed" (a direct quote)

Further, it specifically says you cannot use postponement again at the next Auto enrolment (i.e. the anniversary)

It is obvious really, otherwise employers would be able to postpone indefinitely, which defeats the object.

Thank you for that, but I've read in numerous times by now. 

Your revelation is key, as you will need to speak to the largest retail businesses in the UK who have all used the postponement method discussed for staff with earning spikes. I would recommend that you contact the pensions regulator, as they are also wrong as far as your concerned. 

Q to TPR

Q. Can postponement be used more than once for a single employee? A. Where postponement was used to defer automatic enrolment of an eligible jobholder (for example, when they reached age 22 etc.), then provided that the individual is an eligible jobholder at the end of the postponement period, they must be automatically enrolled. Postponement cannot be used again in respect of this individual. However, if the worker is not an eligible jobholder at the end of the postponement period they would not be automatically enrolled. If they become an eligible jobholder at some point in the future, the employer must then automatically enrol them or can use postponement again. The key part... is 'or use postponement again'. Retailers have used it to postpone workers at busy times where there is a spike in their earnings at say December and again during the holiday season i.e. July. You simply can't have two postponement periods one after the other. That's it.     

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Replying to Payrollgal:
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By J_G_W
01st Oct 2014 10:07

I liked your comment heading

Irishdaz wrote:

You are obviously reading incorrect information somewhere

The TPR guidance for advisers clearly states that an employer can only choose to use postponement on certain dates. These are:

a) Their staging date

b) the employees first day of employment if after the staging date

c) "the date a staff member FIRST becomes eligible for auto enrolment" (a direct quote from TPR)

Note it says FIRST not every time

It also says "You cannot apply a further period of postponement even if postponed for less than the three months allowed" (a direct quote)

Further, it specifically says you cannot use postponement again at the next Auto enrolment (i.e. the anniversary)

It is obvious really, otherwise employers would be able to postpone indefinitely, which defeats the object.

Also, I like you headline to your comment.

Which proves why you need an IFA

Just for clarity Daz. I am an IFA, and I clearly understand the legislation better than you. I have had clients that have used the multiple postponement and I have had meeting almost two years ago with TPR about that very subject (and others areas). But thanks anyway.

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By petersaxton
29th Sep 2014 15:46

Rules

All these rules lead to people getting it wrong. If there's a good reason for the rules I can accept them. As I see it most people don't want a pension scheme else they would set one up themselves. Some people may say that they need the incentive from the employer's contribution but all that does is reduce what the employer will pay the employee in wages.

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By chatman
29th Sep 2014 15:52

The rules have a purpose

The government already has a pension scheme set up, and an established method for taking contributions. It is called the National Insurance fund. This is just their way of (i) claiming to reduce tax (although this is effectively a tax) and (ii) handing a bit of money to their mates in the private sector.

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By SteveB@LPAES
29th Sep 2014 16:06

Rules

Opt out rates continue at below 10% and in some employers (MacDonalds being a case in point) where opt out were less than 5%.

Seems like employees do want a pension scheme after all.

All of the regulators surveys done to date show that 90% of employers are aware of AE, 50% know the rules affect them and 80% think its a good idea. So if 90% of employees are staying in and 80% of employers think it's a good idea then the idea that employers and employees don't like the whole AE thing doesn't really hang together.

I know that at outset people did not see the whole thing working out this way but in reality so far this seems to have been a real good news story for all employees and not so bad for employers??

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By petersaxton
29th Sep 2014 16:11

If it's such a good idea

why didn't many small employers set up a pension scheme before?

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By ireallyshouldknowthisbut
29th Sep 2014 16:15

.

Can I just confirm for the micro employer (so the 2 director payroll taking their £8k annual bonus), the latest staging date (ie the one everyone will use) would be 1st April 2017?

My understand is the worst you are going to get for ignoring the actual staging date is a snotty letter, which presumably can be responded to with "go away until April 2017?"  Job done.

A good % of payrolls we run would actually be shut inside 3-4 year of starting the company, so the deferred dates for recently formed companies are helpful too.  By the time all this catches up with them they will often have shut down in any case. 

 

 

 

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By Henry Tapper
29th Sep 2014 16:19

Role of accountants

Getting back to Lucy's question, I suspect that over time it will become easier to operate auto-enrolment as clients have simpler issues and payroll software improves in scope and quality.

It is probable that the choice of providers will become more important to small companies. Many so far have already had a workplace pension (not necessarily a very good one) but for most of the 1.2m employers still to stage, choosing the right workplace pension will be quite a daunting task.

While technology has provided solutions on the payroll side, as several comments on this thread have hinted at, there are few technology solutions out there that help people choose a pension.

 

But accountants are going to be called upon, where no financial adviser is available, to provide help here. I think that in a world where B2B advice on pension choice is not regulated, that accountants hook up to sites like Nurture,PensionPlaypen and Autoenrollme and get a game plan.

 

In practical terms, you don't have to do a lot, except navigate, to help clients to sensible solutions.

 

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By SteveB@LPAES
29th Sep 2014 16:20

Good idea...

These are businesses answers not mine so I have no idea??

Maybe inertia has now caught the better of them but the stats quoted have been released today and so are as current as you can get. Opt out rates are what they are and maybe this is a factor of 1% contributions in many cases?...1% is not much to miss and many employees who would n't chose to be in a scheme by teh same token can't see the point in opting out of 1% contributions???

Maybe the UK's workforce is starting to buy into this whole saving for the future idea and maybe the latest reforms allowing members to spend their whole fund in one go if they want has made it all more attractive?

I don't know, but you cannot get away from the facts of what has actually happened so far.... Steve Webb is walking around with a smile on his face and why wouldn't he when he could be said to be responsible for making 5 million people save for their future into low cost arrangements when they weren't before?

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By J_G_W
29th Sep 2014 16:28

Lets see

what the opt out rates are when we start expecting a 5% employee contribution. 

I had clients that staged in April 2013 doing QE. Most of their employees didn't even notice they were enrolled! £6 a month or £1.50 a week etc. Lets see of those same people start asking questions when its no longer 1% employee contribution, its 5% and its now £30. 

And that's just QE. What about Basic.

An employee on £20,000 gets enrolled paying £13.34 a month. Suddenly in October 2017, its £40. Oh no, in facts its now £66.67 a month. What's the opt out rate going to be then? 

For low earns that will mean more opt outs. Forget the 10% opt out rate, that's mainly been NEST anyway which is pretty much all QE. Most people couldn't care less about a couple of quid.

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By Henry Tapper
29th Sep 2014 16:41

Opt-out rates

M&S didn't phase contributions, thinking it would lose a high proportion of the AE population, It didn't.

So far, there is no evidence that people bounce out of AE because of the cashflow- the major area of opt-out is age related - 28% of those over 60 opt out, less than 5% of those under 30.

 

 

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By petersaxton
29th Sep 2014 16:48

£66.67 per month

Is £800 per year. 

Once everybody has taken their cut it's unlikely that any employee would do much better than get the money back.

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By J_G_W
29th Sep 2014 16:48

We'll see.

Marks and Spencer's set up a website, communicated beautifully to their workforce the changes and provided a high level of staff interaction. Which is key in this exercise. If you want you staff to feel this happening with them, rather than to them.

However, most employers won't have that level of interaction, so its a bad example.

We'll wait and see, but I'd be amazed if it was still 10%. 

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By petersaxton
29th Sep 2014 17:05

If invested correctly?

The charges you refer to are the charges on the balance. You have forgotten about the charges for churning the investments.

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Replying to IANTO:
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By J_G_W
29th Sep 2014 17:15

Still not sure what you mean.

petersaxton wrote:

The charges you refer to are the charges on the balance. You have forgotten about the charges for churning the investments.

Still not sure what you mean. What charges, other than the AMC, come out the employees contribution each year? Other than possibly an additional AMC for using external funds.

Since RDR, the charges for a scheme are paid for by the employer. The default fund comes without a premium cost, as does choosing their own funds. Churning only existed in a commission environment, which ceased in 2012.

If an employee wishes to seek financial advice to asset allocate their investment then that would a separate fee agreed between the client and their own financial adviser. Although, I can't see many employees paying in £800 net per annum seeking independent advice on such matters. 

Simply put, an employee who is automatically enrolled should only pay an AMC.

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By ireallyshouldknowthisbut
29th Sep 2014 17:18

.

"A pension, if your serious about long term savings for retirement, is the only way to invest in my opinion"

Funny, they are way down my list.

Tax relief doesn't make up for getting screwed on all the fees, and you have the risk of what the rules might or might be when you retire. Could well be heaps worse than now, and the rate of tax might be higher than the relief you are getting too.  Very risky if you are in your 30's or 40's to guess what the rules might be in 30 or 40 years+ time when its all paying out. The rules have changed hugely in the last 10.  

I fill my ISA's have BTL property and have bought a stupidly big house. they are my investments. 

The only pensions I have are legacy from old employers who contributed so I put the max in at the time.  They perform poorly compared to my basic tracker funds in the ISA.

 

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Replying to EasyMTDVAT:
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By J_G_W
29th Sep 2014 17:26

Each to their own

ireallyshouldknowthisbut wrote:

"A pension, if your serious about long term savings for retirement, is the only way to invest in my opinion"

Funny, they are way down my list.

Tax relief doesn't make up for getting screwed on all the fees, and you have the risk of what the rules might or might be when you retire. Could well be heaps worse than now, and the rate of tax might be higher than the relief you are getting too.  Very risky if you are in your 30's or 40's to guess what the rules might be in 30 or 40 years+ time when its all paying out. The rules have changed hugely in the last 10.  

I fill my ISA's have BTL property and have bought a stupidly big house. they are my investments. 

The only pensions I have are legacy from old employers who contributed so I put the max in at the time.  They perform poorly compared to my basic tracker funds in the ISA.

Each to their own. Although, if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long. 

Your comments about the tax advantages of a pension being unpredictable in the future apply to ISAs equally. The difference with ISAs is;

- You could lose it if made bankrupt (that big house may get the better of you), Pensions are ring fenced out your estate

- You get your full marginal rate tax relief with pensions, so compound growth plays a large factor

- You can invest in the same funds as an ISA and still have had an extra 20%/40% growth on your investment from outset

- ISA is only £15k per annum whilst a pension is £40K

If your pension has performed badly, you should have reviewed it or transferred. 

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By petersaxton
29th Sep 2014 17:24

Charges

What about charges when shares are bought and sold with kickbacks as a sweetener?

Pension funds are a pond for criminals to drink from.

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By petersaxton
29th Sep 2014 17:38

If only he had said that

"Each to their own. Although, if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long. "

There does seem to be a tendency to omit words: What about "BLT property"?

 

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Replying to G Webber CTA:
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By J_G_W
29th Sep 2014 17:47

.

petersaxton wrote:

"Each to their own. Although, if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long. "

There does seem to be a tendency to omit words: What about "BLT property"?

There does seem a tendency to omit civilised discource at times Peter. Try to remember that I'm making these comment in my own time for no benefit to myself.

Great, if you don't need to sell while markets are low, have the property occupied at most times and have the kind of capital required to pursue such financial endeavours. But to the average Joe, which the legislation is aimed at, they need something a little bit different.

 

 

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By petersaxton
29th Sep 2014 17:42

Performing badly?

"If your pension has performed badly, you should have reviewed it or transferred. "

It's strange but they usually do perform badly!

 

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Replying to G Webber CTA:
By Ian Batterbee
29th Sep 2014 21:46

For clarity

petersaxton wrote:

"If your pension has performed badly, you should have reviewed it or transferred. "

It's strange but they usually do perform badly!

 

What does "badly" look like, Peter?

Compared to what?

I'm interested to know, as I often here this comment.

What would you consider to be "not badly" or even "good"?

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By ireallyshouldknowthisbut
29th Sep 2014 17:42

@JGW - I think you have hit the nail on the head with " if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long "

Which is I am afraid why IFA's have a poor reputation. Most of the advice is what might make them rich, not their clients.

 

 £30k a year into an ISA or pension is a lot. (£15k each for a couple)

I understand how the tax relief works- however the 'extra growth' is an illusion as it gets taxed at the other end.  Or to be correct, RIGHT NOW 1/3rd is tax free any one third is taxed at 20% or 40%. When I retire, who knows the rules might be. All I know as a fact is that it will be different to how it is today. 

ISA's however have much less uncertainty. Its post tax cash, and the income is tax free. Even if the income is taxable at some future date in time, the capital is still your money and you are in control of it and can pull it out at any time.  Far less risky than pensions. 

And i wouldn't worry about my going bust. That made me chuckle. However if i DID have a problem, i can draw down the ISA's as stop gap whilst selling the house.  A pension would not be as easy to do that with at my age.  

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By petersaxton
29th Sep 2014 18:05

I realise that

"There does seem a tendency to omit civilised discource at times Peter. Try to remember that I'm making these comment in my own time for no benefit to myself."

So you think that some light ridicule is OK? You made out that ireallyshouldknowthisbut's investment plan was ridiculous by saying “Although, if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long.”. Why did you leave out the BLT property? Was it an error or was it a straw man?

Try to remember? What is the point of that comment? I think the vast majority of people on here are making their comments in their own time for no benefit to themselves. How is it relevant?

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Replying to dmmarler:
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By J_G_W
29th Sep 2014 18:20

My point

petersaxton wrote:

"There does seem a tendency to omit civilised discource at times Peter. Try to remember that I'm making these comment in my own time for no benefit to myself."

So you think that some light ridicule is OK? You made out that ireallyshouldknowthisbut's investment plan was ridiculous by saying “Although, if my advice to my clients was to only use ISAs and buy a 'stupidly big house' I wouldn't be in business for long.”. Why did you leave out the BLT property? Was it an error or was it a straw man?

Try to remember? What is the point of that comment? I think the vast majority of people on here are making their comments in their own time for no benefit to themselves. How is it relevant?

My point Peter was that I'm not interested in arguing with you. Its my free time and I won't spend it bickering.

Your comments on here since I made my comment were directed at me. I was simply responding as I didn't understand what you were inferring. From that, you suggested that the AMC isn't the only charge it's kick backs and illegal activity. What did you really expect me to say to that? As for my comment to ireally.... it was a jovial comment that is often hard to pick up when written. I'm still not clear why your so upset?

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By J_G_W
29th Sep 2014 18:06

I think you haven't

ireallyshouldknowthisbut wrote:

Which is I am afraid why IFA's have a poor reputation. Most of the advice is what might make them rich, not their clients.

Some IFAs have a bad reputation. Unfortunately, we sometimes get tarred with the same brush. Some accountants do as well. Many people perceive accountants to charge for everything they can whenever they can. It would be wrong to suggest all are money grabbers. Just as it would be very wrong to assume that I have an interest in only making myself rich and not my clients. Everything I do is for my clients. 

ireallyshouldknowthisbut wrote:

I understand how the tax relief works- however the 'extra growth' is an illusion as it gets taxed at the other end.  Or to be correct, RIGHT NOW 1/3rd is tax free any one third is taxed at 20% or 40%. When I retire, who knows the rules might be. All I know as a fact is that it will be different to how it is today. 

I'm glad, as an accountant you understand how tax relief works. You'll also understand that getting tax relief at the beginning results in growth on a bigger fund which results in compound growth. If the tax friendly wrapper of an ISA is withdrawn in the future what would happen? Can you say with certainty that wouldn't happen? Or is it only pensions that have uncertainty? 

ireallyshouldknowthisbut wrote:

ISA's however have much less uncertainty. Its post tax cash, and the income is tax free. Even if the income is taxable at some future date in time, the capital is still your money and you are in control of it and can pull it out at any time.  Far less risky than pensions. 

If an ISA, in the future, becomes taxable as you say. It becomes similar to a pension, only without the tax relief at outset. How is that less risky? 

ireallyshouldknowthisbut wrote:

And i wouldn't worry about my going bust. That made me chuckle. However if i DID have a problem, i can draw down the ISA's as stop gap whilst selling the house.  A pension would not be as easy to do that with at my age.  

I was simply giving an example. It wasn't personally, but I'm glad I made you chuckle.

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