Who'll be left holding the Auto-Enrolment hot potato?

Henry Tapper
Managing Director
Pension Playpen
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Auto-enrolment is a hot potato, we know it will taste good eventually but for now it's capable of getting our hands burnt and no-one's too sure they want to have hold of it.

Which is why I was pleased to read this article. It's written by an IFA called Bridget who I've never met but have heard good things about on-line.

In the article Bridget, an IFA , asks a rhetorical question.

"Do you as a qualified accountant suddenly want to become a pensions adviser? Of course you don’t, so you need to find somebody specialising in Workplace Pensions that you can trust and offers a good service".

The trouble with rhetorical questions is that they risk putting people's backs up - I expect that a few of you reading this will reckon you know a good deal more about pensions than many of us !

What's more both the FCA and the Pension Regulator are actively encouraging accountants to advise employers on both auto-enrolment and the choice of workplace pension.

But I am sure Bridget is right in most cases, accountants have enough on their plates not to have to worry about the intricacies of investments, the legalities of salary sacrifice and the potential risks of messing up the algorythms of auto-enrolment.

In response to Bridget's question, I think there are three answers that predicate three credible strategies

  1. Agree; in which case beat your path to Bridget's door because there are few IFAs around who are competent and have capacity
  2. Disagree; in which case you may well have a pensions advisory practice or be looking to set one up in-house.
  3. Keep an open-mind; in which case you'd be well advised to research the market a little.

Research conducted by the Pension Regulator (and endorsed by NOW pensions in a separate study) suggests that over 50% of employers staging from April 2015 will do so with the help of their accountant and/or payroll bureau. The percentage increases into 2016 and again in 2017 as the numbers of employers staging increases but the support from advisers remains static. 

There are only 23,000 registered financial advisers left in the UK, AccountingWeb alone has 105,000 regular subscribers and over 400,000 accountants and book-keepers read these pages.

Keeping an open mind

I don't suppose that we are going to see 400,000 workplace pension experts emerge between now and 2018 when the implementation of auto-enrolment is completed. But nor do I see the 1.2m employers still to stage being advised by the handful of the 23,000 financial advisers.

There will have to be a third-way that will allow employers and their advisers to choose workplace pensions and stage auto-enrolment ,without regulated financial advice but with the precision and integrity that we expect from our book-keeping, auditing and payroll management.

The answer must lie with technology; there must emerge a self-service solution that allows employers and their accountants and payroll managers to set up workplace pensions on-line, to learn how to assess workforces, decide on contribution structures and leave a proper audit trail to future-proof these decisions.

The pensions industry is reluctant to offer this third way; it sees the secrets to a good workplace pension, to salary sacrifice and to auto-enrolment compliance as their intellectual property. But that is plain daft!

By playing dog in the manger, IFAs and pension providers are likely to bring the pensions they rely on into disrepute.

At www.pensionplaypen.com , we believe in sharing. We share our knowledge of auto-enrolment and we share our knowledge of workplace pensions. We have been criticised by the pensions industry for being to open and providing too much "IP" for free. We accept this criticism. Were this business as usual for IFAs, pension consultants and actuaries, what we are doing would be commercial suicide.

But it is not business as usual.

There simply is no way that we can introduce 1.2m  new employers to workplace pensions through conventional means. Which is not to devalue conventional means , and the service that Bridgit is offering.

A technology solution?

For most employers and accountants; a simple on-line solution is needed. This solution cannot cost thousands of pounds, we estimate that the total cost of sorting auto-enrolment ,choosing a workplace pension and providing yourselves with future-proofing should be no more than £500.

Of course this doesn't take into account the employers contributions to the pensions or ongoing management time managing the auto-enrolment algorythm but these are costs that are BAU for any employer as much as VAT, NI and PAYE.

Since we arrived at AccountingWeb two months ago, more than 200 accountants have registered to use our free service. You can register here www.pensionplaypen.com/register. 

About Henry Tapper

I'm best known for helping small employers and business advisors with their problems with pensions. These are typically over choosing the right pension for auto-enrolment though through my work with First Actuarial, I get involved with big occupational schemes too.

I'm on this site as I see accountants as the missing link between the pensions industry and the business community - especially small businesses.

I've a Cambridge MA and 30 years in finance behind me, but I'm looking forward to the next ten to twenty years (my flexible "corridor to retirement") to help restore people's confidence in pensions.

 

 

Director- First Actuarial

 

Writer- www.HenryTapper.com and many magazines and papers,

 

Owner- www.pensionplaypen.com

 

Manager; Pension Play Pen linkedin group, Pension Auto-Enrolment Linked In Group

 

Choices Champion; Friends of Auto-enrolment

 

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By Ed Holt
08th Jul 2014 18:43

AE Compliance - a lifetime of managing the 'Hot Potato'

Henry is absolutely right to say that the answer must lie with technology - and that pension scheme selection / initial guidance should be available for £500, rather than the thousands being charged to mid size employers by IFAs and middleware service providers today. But the problem with that assertion is that it does not go far enough.

The owner / manager of a SME employer of 30 staff will not have anyone with the expertise (or the inclination) to fill in the forms to set up a pension scheme under today's manual entry model. Who is going to do that for them? Who is going to set the policy on postponement? Decide on whether to go for PRPs or Tax Periods? Send the initial employee communications and make sure all the right instructions are given to the employer at each assessment? Ensure the right contributions reach the right provider (for example if it's a split scheme for different categories of worker?). Manage the opt out process? Ensure that the provider and payroll systems data is kept 'in sync'.

And they certainly won't have the expertise / tools / inclination to manage the AE process every payroll run - and that is what it is going to take, it is a continuous Compliance Management process that employers must follow every payroll, whether weekly, fortnightly, monthly, lunar or any other cycle - even quarterly or annual bonuses must be processed by payroll and assessed to see whether they trigger an earnings limit (and therefore a change of category and new communications), or just additional pension contributions.

There is a lifetime of record keeping and audit trails for AE that an SME (or his Accountant / Bookkeeper) must keep for audit purposes should tPR 'come a' calling'.It highlights the (slightly amended) adage that " AE is for life, not just for Christmas"!

£500 to choose a Qualifying Workplace Pension Scheme is good value, compared to services available in the market today. £500 per annum to take away all the hassle and administration would be equally good value for most SMEs. They pay their bookkeeper / accountant to do VAT, annual audit and annual accounts - a modest fee to manage all the administration on an outsourced (but online) basis would probably represent an equally good investment.

Ed Holt 

Thanks (0)
10th Jul 2014 15:24

The solution is on it's way!

Ed, I understand your concerns. The option an employer has is to pay on average £8,400 to have someone to everything for them or do it themselves for nothing. Neither are attractive for small employers.

The problem we are now facing is there are over a million small businesses in the UK and less and less resources to help these small businesses. It's also not economically viable for financial advisers to provide a consultancy service at that level.

At the Auto Enrolment Advisory Group we have developed an online service called AE in a Box which will help the employer to do nearly everything you mention above and for less than £500pa including VAT. The site isn't complete yet but you can view it here

I would be interested to hear your thoughts.

Matthew Walne

 

Thanks (0)
15th Jul 2014 16:54

AE in a Box

I've seen this AE in a Box and am impressed- it's certainly a lot cheaper than it's competitors and a good project management system

 

Matthew's company's nothing to do with mine but we may be hooking Pension PlayPen into their solution which would be handy.

 

The only way for companies to go from here on is digitally, there is not time in people's diaries to manage another 1.2m employers through auto-enrolment using manual process.

 

That said, this could be high value work for people who get it right!

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