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.
Hi Karen, these figures were quoted at a recent seminar I went to. I don't know the original source of them.
Choosing a pension scheme is the easiest of the 33 tasks. What about choosing a definition of pensionable pay? Should the employer use the default for everyone or self certify? Should they use Postponement and if so for everyone or just certain staff? Should they use salary sacrifice? What additional software do they need? Have they agreed with their Accountant or Payroll Bureau as to who does what? These are just some of the things an employer needs to consider.
That can't all be done in a couple of days then then they have to have a 'dry run' to test everything works before they get to their staging date. Going to Nest actually creates a lot of work for an employer as they provide the least assistance.
Interesting that you say this largely benefits the Pensions Industry as most of the pensions providers don't want the business except for the non-for profit organisations such as Nest, who are legally obliged to take on anyone.
AE works very well in countries such as Australia, Chile and Denmark, where they have full compulsion and much larger contribution rates.
Quite simply our State provided pension system can't cope but I totally agree it's far too complicated and potentially expensive for Employers, who seem totally oblivious to what's going on.
Of course that's the simple answer but what SME employer is going to pay for advice when it costs £000s? I agree a streamlined approach is needed but this doesn't need advice as such.
The shift from a small number of large employers to a large number of small employers makes it unattractive for the more traditional pension providers and for financial advisers charging fees for their work.
The reality is that most of the small companies with 50 or less employees will most likely to have to do most if not all the work themselves and will expect their accountant to help.
We have come up with AE in a Box, which launches on 1st October which will help employers to work in conjunction with their accountant or whoever does their payroll to ensure each and every task is completed when it's. Not just in the lead up to their staging date but for as long as they're in business.
AE in a box is a tool designed to empower the employer to do the job. To do this we’ve broken down what they need to do in clear and simple tasks and provide guidance on how to complete the task. The employer will be able to choose a suitable pension scheme, choose a middleware solution (if required) and work out which basis of earnings to use with our Scheme Certification Calculator.
It's also a lot cheaper than hiring a financial adviser!
I agree with point 1 whole heatedly. Point 2 would make no difference to the employer as far I could see. Contributions are paid to the provider alongside PAYE now. Point 3 would make it very expensive to administer and would push charges up on pension schemes at a time when costs are being forced down or the employer would suffer the cost burden. Point 4 is an excellent idea but surely they should inform the pension provider and not the employer as the employer is surely given even more work to do?
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.
My answers
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.
Hi Karen, these figures were quoted at a recent seminar I went to. I don't know the original source of them.
Choosing a pension scheme is the easiest of the 33 tasks. What about choosing a definition of pensionable pay? Should the employer use the default for everyone or self certify? Should they use Postponement and if so for everyone or just certain staff? Should they use salary sacrifice? What additional software do they need? Have they agreed with their Accountant or Payroll Bureau as to who does what? These are just some of the things an employer needs to consider.
That can't all be done in a couple of days then then they have to have a 'dry run' to test everything works before they get to their staging date. Going to Nest actually creates a lot of work for an employer as they provide the least assistance.
It's going to be an interesting few years!
The pensions industry doesn't want this
Interesting that you say this largely benefits the Pensions Industry as most of the pensions providers don't want the business except for the non-for profit organisations such as Nest, who are legally obliged to take on anyone.
AE works very well in countries such as Australia, Chile and Denmark, where they have full compulsion and much larger contribution rates.
Quite simply our State provided pension system can't cope but I totally agree it's far too complicated and potentially expensive for Employers, who seem totally oblivious to what's going on.
Who's going to pay for it?
Of course that's the simple answer but what SME employer is going to pay for advice when it costs £000s? I agree a streamlined approach is needed but this doesn't need advice as such.
Maybe AE in a Box is an answer?
AE in a Box
The shift from a small number of large employers to a large number of small employers makes it unattractive for the more traditional pension providers and for financial advisers charging fees for their work.
The reality is that most of the small companies with 50 or less employees will most likely to have to do most if not all the work themselves and will expect their accountant to help.
We have come up with AE in a Box, which launches on 1st October which will help employers to work in conjunction with their accountant or whoever does their payroll to ensure each and every task is completed when it's. Not just in the lead up to their staging date but for as long as they're in business.
AE in a box is a tool designed to empower the employer to do the job. To do this we’ve broken down what they need to do in clear and simple tasks and provide guidance on how to complete the task. The employer will be able to choose a suitable pension scheme, choose a middleware solution (if required) and work out which basis of earnings to use with our Scheme Certification Calculator.
It's also a lot cheaper than hiring a financial adviser!
Find out more at www.aeinabox.co.uk which goes live on 1st October 2014
Ok I see what you mean.
I agree with point 1 whole heatedly. Point 2 would make no difference to the employer as far I could see. Contributions are paid to the provider alongside PAYE now. Point 3 would make it very expensive to administer and would push charges up on pension schemes at a time when costs are being forced down or the employer would suffer the cost burden. Point 4 is an excellent idea but surely they should inform the pension provider and not the employer as the employer is surely given even more work to do?
Worst piece of legislation ever?
This has been hugely successful in Australia, Chile and Denmark.
Given our ageing population and the burden on the State and our antiquated State Pension system not sure we had an alternative.
Not sure I would trust the Government to ring fence 20 million+ pension funds.
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