Auto enrolment: Crunching the numbers

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In the spring of this year, The Pensions Regulator (TPR) asked more than 130 accountants dozens of questions about automatic enrolment. Their answers help us to understand what the market place is doing, what it plans to do and, crucially for my colleagues and me, what we at the regulator can do to help, says Neil Esslemont of TPR.

We carry out similar research every six months with hundreds of different types of business advisers. For the past two years, we have examined their awareness, understanding and activities both current and planned.

We believe that around a quarter of employers becoming subject to the new duties in late 2015 and early 2016 could turn to their accountant for help. This means that accountants will have tens of thousands of small and micro employers - existing clients - seeking support in meeting their automatic enrolment duties.

You can see the full results of the latest research on The Pensions Regulator website.

Accountants and pensions

There’s been some discussion on AccountingWEB around the role accountants might play in helping their clients select a pension be that for a workforce of three or for 63 workers.

Advising employers on scheme selection is not in itself regulated activity, although there could be a risk of straying into the regulated advice space if the individual representing the employer is, or will be, a pension scheme member, as they could be investing their own money into the pension scheme. We do know, though, that accountants will be asked about scheme selection and your clients will expect some information.

We recommend accountants stick to fact-based communications on this matter, but this does not mean they cannot assist clients. To assist accountants, in the summer of last year TPR published ‘A quick guide to pensions scheme selection and automatic enrolment’.

The guide highlighted the kind of assistance all accountants might offer clients, “you should be able to direct employers to sources of information, guidance and advice to help them select a good quality scheme.”  The guide provides questions that employers should ask when assessing a pension scheme, as well as background to why these issues are important, and is available on our website.

Working together

Almost half of the accountants we surveyed intended to partner with other advisers to offer automatic enrolment services to their clients. These professionals were most likely to be financial advisers, IFAs or brokers. It looks like many accountants are choosing to signpost their clients to a regulated adviser when it comes to scheme choice.

The regulator is here to help too. We already have a wealth of information on scheme choice aimed at advisers and at employers. We are listening to the discussions taking place among the legions of accountants still considering how to respond to automatic enrolment.

It is a dynamic environment. At the moment we are refreshing our communication products, the website, guides and tools we provide to ensure it meets the ever changing audience. Two years ago, we were talking to the UK’s biggest employers, last year to medium employers and their advisers and now a new audience of small and micros employers is on the horizon.

A core message has remained throughout, that employers need to allow time to prepare for automatic enrolment. Accountants too need to take time to consider the impact on their business, both the challenge and potential.

We would suggest that accountants find out when their clients’ duties start (their staging dates) and plan accordingly. You can look up the staging date of an employer on our website, if you have their PAYE references - and you can also look at our handy planning tool which shows the tasks an employer will need to do to get ready and gives a timeline.

We also regularly publish new information and updates which advisers (e.g. IFAs and accountants) find useful, including holding live webinars. 

Anyone interested in receiving regular updates should subscribe to our ‘News by Email’.

Neil Esslemont is the head of The Pensions Regulator’s industry liaison team. TPR’s latest AE webinar is planned for 28 October.

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 Neil Esslemont

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21st Oct 2014 09:53

A Chocolate teapot

Fan as I am of your outreach, your work on a common data standard and your website, I do not think that the quick guide to scheme selection is of much more value than a chocolate tea-pot!

The incidence of the purchasers of workplace pensions being members is already high and is likely to get higher. But is there a risk?

Owners of companies have to pay themselves , set up their own paye scheme and arrange all kinds of benefits for themselves as well as their staff. It is daft to suppose that the pension is some kind of mystery item that has to be treated with such care!

I would say that there is a risk of decisions being taken out of ignorance and that the impact of poor pension selection is going to be felt for many years to come.

We need regulatory permissions to do good work. We have spoken with the Institute and Faculty of Actuaries who regulate First Actuarial (the advisers to www.pensionplaypen.com). They have stated that we can provide allow non-regulated individuals and regulated individuals working in a non-regulated individuals to use our website to help employers choose a pension. They refer us to your statement in March.

The statement the FCA and tPR put out a  in March  was perfectly clear, it stated that when advising an employer about a workplace pension, that advice was unregulated, when advising an employee about participation in such a scheme, that advice was regulated. Employers know the difference, accountants and book-keepers know the difference and IFAs know the difference.

So these qualifications from yourselves are simply muddying the waters.

It's time that tPR and FCA and people like me who want people to pay attention to the pension, got together so that accountants, employers and advisers can move forward into 2015 collaboratively. That is the spirit of Friends of Auto-Enrolment, No one gets left behind and indeed the Pension Playpen.

I have been to the DWP to ask their opinion and speaking with a senior civil servant , there was  no doubt that advising the employer was an unregulated activity. I was advised to press on with our work.

Pension Playpen will continue to offer help to accountants, employers and indeed IFAs as it currently does, we have skill and knowledge and know how to advise on a business to business basis.

A year ago, the OFT remarked that the by side for workplace pensions was among the weakest it had encountered, how will we engage ,educate and empower employers to choose good pensions unless we can do so without fear of some ill-defined regulatory threat?

 

 

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21st Oct 2014 12:39

No one disputes the regulators statement in March

Henry,

I do not think that anyone, including Neil, disputes the statement that was issued in March is true. Selection of a pension scheme for an employer is an unregulated activity and as such, in theory, anyone can provide this service.

I think the detail that followed was the issue for most in that, from my understanding, the same body also said that they would expect this service to be provided by someone who has the relevant skill, knowledge and experience.

Playpen and First Actuarial are a first class firm who clearly demonstrate that they have the relevant knowledge etc to provide this service. I would beg the question, "who else would we put on that list?"

Many who grace these pages with their thoughts will sit on that list I am sure but not all professionals associated with this area understand the impact of RDR on charges and commission (this was apparent in a recent article and its follow up comments). RDR changes have been far reaching in terms of perception and actual product provision.

How many understand the charging cap which will come into being in April of next year for all QWPS's?

How many are still calling this the NEST legislation?

You yourself still quote a well known BBC newsreader who thought that NEST was the only flavour and this a well educated and well informed individual. 

Not all are wanting to stray into this area for all of these reasons and as such the selection and journey will be better for the involvement of people who do have this skill, knowledge and experience. This is not every accountant.This is not every adviser in fact. This is not everyone in payroll.

I think that we can rest assured that the regulator is happy for this to happen where an audit trail of why the recommendation was made exists. My concern is that some will align themselves with one pension provider for all of their clients because its easy and because that provider has done a great sales job on the firm concerned. That firm may not know the full picture and will believe all they hear, why wouldn't they....this is already starting to happen. Employers and employees will suffer en mass because of this and I would not want the regulators statement outlining a lack or regulation to mean that anyone can do this because I do not think that they actually...practically ...can!

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By Locutus
21st Oct 2014 13:14

I'm one of many accountants scratching their heads with AE

Firstly, I'm puzzled why such a complex and costly system for administering workplace pensions for small employers was adopted in the first place.

The article says that a quarter of employers planned to ask their accountant for help with AE.  That may be true for large employers, but the figure for small / micro employers is likely to be closer to 90%.

The trouble is, I don't know anything about AE, other than it's a lot of hassle, with a lot of paperwork, that will hit my first client in about 2 years time.  I don't know whether my software will do everything that AE requires or whether to even get out of payroll altogether.

One thing I know is that I definitely don't want to get involved in giving financial advice to employers about which scheme to choose.  The problem is there won't be enough IFAs to go around. Perhaps pensionplaypen and other website based solutions will be able to help.

I suspect I will still be scratching my head well into 2015.

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By Ed Holt
22nd Oct 2014 08:13

Accountants 'in the firing line'

[quote=Locutus]

Firstly, I'm puzzled why such a complex and costly system for administering workplace pensions for small employers was adopted in the first place.

The article says that a quarter of employers planned to ask their accountant for help with AE.  That may be true for large employers, but the figure for small / micro employers is likely to be closer to 90%.

 

Locutus

You are absolutely right about the 90% - in DWP research published in July the figure was 84%, and in Nest research from Q1 it was 90% ............. so absolutely spot on!

The other troubling finding from the Nest research was that only 50% were prepared to pay additional fees for AE work. Which is a bit of an issue for both accountants / payroll bureau and the AE software/service suppliers such as ourselves!

Your point about complexity is of course right but it is unlikely to change, even if the2015 election gives us anew flavour of government - and Steve Webb indicated at the recent Capacity Crunch conference that further changes were highly unlikely.

You are 'in the firing line' for AE - better to embrace it if you can (there are models where you can make money) and be pro-active

Steve Brice pointed you at sources of possible help around the pension scheme(s) selection - I would encourage you to sign up to the Friends of Automatic Enrolment (it costs nothing) to get information and support from others in the field

Ed

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21st Oct 2014 13:46

Help

Locutus,

You say you have a little time before your first clients stage, why not start by attending your local Friends Of Auto Enrolment meetings?

There is a group on LinkedIn where you can find the local branch as well as a website which will be updated very soon, you can google it.

This will provide you with the ability to meet and discuss/debate these issues and share with those around you who may know more or less than you. You may even get to the stage where you make contact with people you can trust to work with your clients and solve the problem that way.

Nice and easy with no sales pitch!!

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23rd Oct 2014 14:30

Re. Locutus - from Neil Esslemont

“Locutus, you may find it useful to look at the AE information available on our website, as it’s aimed at advisers like yourself: www.tpr.gov.uk/getready

“You may have already checked your clients staging dates and know they do not stage until October 2016, but it is worth pointing out to others that have not checked that the first small and micro employers have to meet their duties next summer. In addition, as over a hundred thousand employers are due to stage between summer 2015 and spring 2016, it may be worth your clients considering bringing their staging date forward.

“Our message to employers is ‘Act now. The law requires all employers to provide a workplace pension for certain staff. Find out how the change in law will affect you’”.

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By SJBeale
27th Oct 2014 16:57

Start early with pension auto enrolment

As an HR consultant experienced in helping small businesses with pension auto enrolment I am advising all to start early and if possible to bring the process forward rather than postpone the inevitable.  There can be many hiccups along the way of getting the process implemented  and there is a lot of work involved so starting early makes good sense.  

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15th Dec 2014 15:24

78% of small businesses will look for Advice

According to The Pensions Regulator 78% of small businesses will look to their bookkeepers, accountant, payroll bureau or advisor for advice. There is a really interesting report published by the Regulator which covers employer automatic enrolment research. An interesting fact was that only 23% of accountants and 26% of bookkeepers of small and micro payroll bureaus were aware of their clients staging dates. For those who have AE knowledge, there is a real opportunity for bureaus to offer AE as a service and charge a fee to handle the admin side; comply with staging, handle employee communication, assessment, etc.

 

@Loctus there are quite a few seminars, webinars out there on AE which do simplify the whole process. Some of the larger payroll providers are adopting a scare mongering approach so I would avoid them. BrightPay will be running a series of webinars in feb and march next year too. I agree with @Ed Holt  ‘be pro-active’!

 

You could also subscribe to the Pensions regulator’s newsletter, a lot of information available there - https://forms.thepensionsregulator.gov.uk/subscribe.aspx

Once I confirm webinar dates I’ll put the link up here as you might be interested.

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20th Jan 2015 14:41

The other 22% will be in for a shock!

If 22% of SMEs and Micros will be doing it al themselves I think they are in for a nasty shock. I wouldn't be surprised if the Pensions Regulator will have their work cut out as thats over 250,000 employers who probably won't have the faintest idea of what they are expected to do.

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