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5 steps to achieve auto enrolment compliance

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12th Feb 2016
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Auto enrolment is here, but many accountants and small businesses aren’t ready for the pension changes coming down the line, Charles Counsell, Executive Director at the Pensions Regulator told more than 1,300 Xerocon London attendees this week.

He explained the combination of longer lifespans and falling retirement savings has created a case for compulsory pension savings in the UK.

“We should be making provisions for ourselves for retirement, but we haven’t been. Auto enrolment is about reversing that… We need to give people a nudge to start saving for their retirement,” he said.

Despite the name, there isn’t much that is automatic when it comes to setting up your operations to handle auto enrolment and small business owners will be heavily reliant on their advisors to help gear them up.

Counsell said the Pensions Regulator has been helping employees get ready for their staging date, but research released at Xerocon London 2016 by the Pensions Regulator showed around two-thirds of UK small businesses will contact an advisor for help.

So far around 5.8 million workers have been automatically enrolled and around 79,000 employers have notified the Regulator they are now compliant.

Counsell had five steps accountants need to follow to help their small business owners become compliant ahead of auto enrolment.

1. Confirm who to contact

Make sure you let the Pensions Regulator know who will be handling your client’s auto enrolment process.

The regulator will be in contact with that nominated person to let them know when their staging date is approaching and keep them up-to-date with what steps need to be done and when.

2. Find a pension scheme

Small business owners should figure out which scheme they’d like to use about six months before their auto enrolment start date.

“The reality is about 60% of small businesses are doing it between two and six months before their start date,” Counsell said.

3. Work out who needs to be added to a pension scheme

You’ll need to figure out which employees need to be added to their pension scheme. The criteria is largely based on the level of monthly gross income.

“We advise employers to use your payroll software to do that and integrate this with your payroll processes,” Counsell said.

Xero has built (and is building more) features inside Payroll that will automate and streamline the work associated with auto enrolment and workplace pensions.

From assessing which employees should be auto enrolled, to distributing the information to the various pension funds – our vision is to automate the entire process, save partners’ time, lower risks and enable them to grow their business.

4. Communicate

Communication really is key in this process. Encourage your clients to keep their employees in the loop. About six weeks before their staging date, they should write to their employees so they know what’s going on and what to expect once they’re enrolled.

5. Declare compliance

Once you’ve helped your client chose a scheme, enrolled employees in a pension scheme and let them know what’s happening. You need to declare that you’re compliant to the Pensions Regulator.

But your client’s auto enrolment responsibilities don’t cease after their staging date. Small business owners and their advisors need to continuously use the payroll process to assess staff, deduct and pay contributions, and keep records.

Paul Bulpitt is Xero UK’s Head of Accounting.

AccountingWEB 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.

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By User deleted
13th Feb 2016 01:30

The fact is ....

“We should be making provisions for ourselves for retirement, but we haven’t been. Auto enrolment is about reversing that… We need to give people a nudge to start saving for their retirement,” he said.

 ...  the government have been taking 20% + of salaries from everyone for years with the promise we would have pensions and healthcare, but it has been squandered - so it is they not us who have not been making provision for our retirement, we thought we had, by naively trusting the government to keep its promise - the government has acted no better than Maxwell for decades!

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Replying to fawltybasil2575:
By Henry Tapper
14th Feb 2016 11:38

Past performance isn't a guide to the future!

Old Greying Accountant wrote:

“We should be making provisions for ourselves for retirement, but we haven’t been. Auto enrolment is about reversing that… We need to give people a nudge to start saving for their retirement,” he said.

 ...  the government have been taking 20% + of salaries from everyone for years with the promise we would have pensions and healthcare, but it has been squandered - so it is they not us who have not been making provision for our retirement, we thought we had, by naively trusting the government to keep its promise - the government has acted no better than Maxwell for decades!

If we simply react to failure by blocking progress, nothing much would improve. I agree with your assessment of the past 20 years but not with your objection to auto-enrolment.
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By User deleted
14th Feb 2016 15:17

I don't say we don't ...

... need to do something, yes, we have been royally shafted by those we trusted to look after us but that doesn't change the fact there in no money left and we need to redress that.

My objection to auto-enrolment is that it is a [***] piece of legislation, implemented in the most [***]-eyed ham-fisted and costly way to business possible - and laughably those who need it most, those on low income don't get opted in, and if they do opt in get no contribution from the empoyer.

The mature answer should have been everyone in regardless, those earning less than LEL employer pays all the contributions, they get paid over to NEST by default unless employers chooses an alternative, and at the end of the tax year employee gets a statement of contributions which they can keep in nest or move to an approved fund of their choosing.

Simple, cheap and easy - job done - instead of this complete load of b*llocks we are left dealing with and that way we wouldn't have the software house, IFA's, middleware providers etc.ripping people off by preying on the confusion and fear they have nurtured to go with it.

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Locutus of Borg
By Locutus
15th Feb 2016 11:16

In a sane world
The state would have put some of the NI contributions into a ring-fenced state fund, which the worker should be able to move to / between different companies in the private sector if they feel there is they can get a better return there.

The advantage with such a system is that the employer doesn't have to do anything different to what they are already doing and all employees would be enrolled (I am sure AE will eventually be compulsory for all workers, in any case).

Employees and employers NI would have to rise, just as employees and employers have to pay with AE.

What we have with the current system is an unnecessarily complex system and a regulator that will be overwhelmed by penalty appeals from employers of home helps, nannies, gardeners and micro employers who were unaware that AE actually applied to them. And in 40 years time, you will have lots of retirees with lots of piddly little pension pots funded from minimal contributions that just give them a bit of pocket money.

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FT
By FirstTab
18th Feb 2016 14:14

I did not know you could do this

My blogs will also appear on my WordPress site.  

https://www.xero.com/blog/2016/02/auto-enrolment-compliance/

They are many  other examples that have been posted this week by the great and the good. 

 

 

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