Jeremy Leslie-Smith, industry liaison manager at The Pensions Regulator (TPR), joined the Bristol Friends of AE branch to answer questions on small companies, opt outs and re-enrolment.
The Q&A session with the regulator went as follows:
1. If an employer operates two auto enrolment schemes, one very generous and one that meets minimum requirements, what flexibility do they have when it comes to re-enrolment for those that have opted out, specifically if someone has opted out of the generous scheme does the employer have the flexibility to re-enrol them into the less generous scheme?
The employer can choose the scheme that they would like to operate - whether this be the bare basics or more generous. If an employer offers two options (one basic and one generous) simultaneously, and the employee opts out of the generous one, the employer is under no obligation to re-enrol them into the more generous option. If an employee qualifies for AE and the employer uses a pension scheme which is specific to their sector, there are contractual issues that may be taken into account.
2. What is the deal with those smaller companies that have later staging dates, do they really need to do anything?
If you are deemed as an employer, you will have a staging date - by this date you will need to have completed your preparation for your duties. If you are a small employer you don’t need a scheme straight away if you don’t have eligible staff to enrol. However one potential issue in adopting this approach is when a non-eligible job holder suddenly becomes eligible or decides to Opt-in, will you have time to implement an auto enrolment scheme?...and will a provider be available for your one employee in the timescales needed to be met? This may be possible to do now, but will it in 2017 or 2018? You need to be prepared; if a provider can't do it in time, the employer will be at fault. Employers should at least have agreed terms before staging.
3. What do I have to do with my one director clients in order to comply?
Employers who have PAYE, but who aren't employing anyone else, are exempt from AE. If they have no workers, then the business owner needs to let TPR know. You must ensure that you have no employees or personal service workers. However, it is advised that they consider the fact that their situation will change as soon as they employ someone; it would be beneficial for them to be thinking ahead in order to future-proof their business.
4. If a company has no workers do they need to set up an AE scheme, even if it was not going to be used, and would they be required to complete the compliance declaration?
If a company has no workers (ie excluding any exempt single employee/directors) on its staging date, then it has no duties under automatic enrolment and would not need to set up a pension scheme or complete a declaration of compliance.
If this is true on their staging date and if the company has received a letter from us, we ask that they inform our Help Desk by email (see below).
N.B. We are able to identify many single person directors and where we can identify them, we will not write to them with a staging date. Therefore, we only need to be notified that they are not an employer in cases where we have written to them.
So, should its circumstances not change by its staging date (i.e. it has no workers on the staging date), then please send an email to [email protected] stating the following:
a. I confirm that [company name] is a not an employer for the purposes of automatic enrolment for the following reason – (select one option from the list below):
b. there is only one director and there are no other staff working for the company
c. the only people working for the company are directors and none of them has an employment contract
d. the only people working for the company are directors and only one of them has an employment contract
e. if there is some other reason why you believe you do not have any automatic enrolment duties (please provide a brief explanation)
- The letter code for the company is: [The letter code is a 10 digit number which can be found on all letters sent from TPR]
- The PAYE scheme(s) reference
- The Companies House number (where applicable)
- The name, email address, address and telephone number of the contact at the company
Once this has been received our customer support will update our records to reflect that this is not an employer and we will stop any further communications to them.
5. In broad brush strokes what flexibility will be given to a new business that has employees post October 2018 onwards i.e. will TPR be expecting them to have a pension arrangement with employer and employee premiums going the first time they run payroll (assuming no postponement is applied)?
None. Each new business will be expected to budget for this expense in the same way that NI and Tax are included at the full level from day one in any new business.
6. How many fines have you actually issued right now and are you thinking these will increase in time?
At the end of September 177 statutory notices and three fines were issued. By the end of December that had gone up to 1,300 notices/investigations and 169 fines. There has been an increase in the number of statutory notices and fines quarter on quarter. The majority of fines issued are due to late filing of the Registration of Compliance and many different excuses were given for not doing this in time.
7. Can a third party complete the Registration of Compliance on behalf of the company concerned?
To assist with this, TPR has offered employers the opportunity to nominate two points of contact - direct and third party (the third party is able to complete the deceleration on their behalf if they are granted the authority, usually via an access code). The TPR is also sending out 1.5 million letters to warn that AE needs to be prepared for.
8. Why use unique reference codes on this submission?
TPR recognises that security in this area is of absolute necessity so to stop scamming or to prevent hacking the third party must possess the company’s unique code to allow this to happen.
9. Do we see any relaxation in the rules post-election?
It’s not in my remit to answer that. But what I would say is that why would a government make any changes? The initial legislation was suggested by one party ratified by another and in theory implemented by a third who is left to change the legislation now? Also would it be fair to relax the rules on one part of the market whilst enforcing the rules to the letter with existing stagers and issuing fines? I don’t see a relaxation in the penalties either.
10. Are accountants getting enough support?
There will be 100,000 businesses staging in January 2016 and our research tells us that they are planning for it. We hope they don’t all go looking for a scheme at the same time. But small and micro employers are an unknown at the moment.
11. Tell me about the proposed TPR assessment tool will it replace the need for my Sage/IRIS/Star etc. module?
The launch of TPR’s assessment tool has been deferred - we just don’t need to launch it right now. If the market says we need to cater for a market shortfall we will but we’d rather not. If we feel we need to launch it, we will. It all depends on what happens in the marketplace.
12. Provider X have supplied the employer with an opt-out form to give to employees. It is our understanding that the employer cannot hold these forms, and neither should the form be held in any co-branded middleware, what is TPR’s view of this?
There are two important elements to handling a statutory opt out (i.e. an opt out after an automatic enrolment or after a jobholder has decided to opt out):
The opt out process, up until the point the worker confirms they wish to opt out, must be handled by the pension scheme administrator or their agent and this may not be delegated to the employer. The pension scheme administrator can outsource the process to a third party (excluding the employer), such as an IFA or EBC, providing the appropriate legal agreement is put in place.
It is important that the employer is not involved in the opt out process apart from:
i. the provision of information about the worker's right to opt out and the process of opting out (e.g. how to do it and/or who to contact)
ii. the processing of any completed opt out notices received (e.g. stopping deductions and refunding contributions)
The perception of the worker should be that the opt out process is handled by the pension scheme administrator and not by the employer. So, any web pages which take the worker through the opt out process should have the appropriate branding. Any web pages or system of the scheme administrator (or agent thereof) should not appear to be the employer's web pages or system and so should not have the employer's URL or brand displayed (unless the pension scheme is co-branded and any pension scheme literature/web pages would normally show the employer's brand together with the scheme administrator/provider's brand). The wording on these web pages should be that supplied by the pension scheme administrator. If the employer (or agent thereof) has any web pages which address or explain opt outs, they should only explain the worker's right to opt out and should link to the scheme administrators own opt out web pages for anyone who wishes to opt out or know more. To address a specific point if asked: "do we need to have the opt out pages branded for each provider or can we have only the adviser brand or even no brand?"
iii. There are a number of questions that should be considered:
1. If the opt out system or web pages do not include the scheme administrator/provider's brand and only has the advisor's brand (or no brand at all), would it be reasonable to conclude that a worker who viewed them would perceive this as the scheme administrator's system/web pages?
2. Is the adviser's brand also visible on systems or literature owned or provided by the employer (e.g. a flex benefits system or HR portal), such that the adviser's opt out web pages could be perceived as being provided by the employer?
3. Why is the scheme administrator/provider's brand absent?
4. If the adviser is acting as an agent of the pension scheme administrator, has the scheme administrator confirmed in writing that they approve the wording and branding?
5. The employer could be deemed non-compliant and guilty of breaching the employee safeguards, so has the employer's approval been gained?
In the absence of any brand at all, the worker's perception could be unclear (ie the system or web pages would not obviously be perceived as the scheme administrator's) and so this is unlikely to be considered satisfactory.
The next Friends of AE Bristol meeting takes place on 21 April at Racks Bar and Grill in Clifton. Contact Steve Brice or Rob Lovell if you would like to attend.
AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.
About Robert Lovell
Business and finance journalist