Choose the right AE provider for your clients

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Over the next 18 months, accountants are bracing themselves for the influx of new and existing SME clients asking for help around auto enrolment.

According to The Pension Regulator 99,000 firms are required by law to set up a workplace pension over the next three months alone. By early 2018 more than 1.75m additional companies are expected to enrol staff – that’s 30 times the total number of companies that have auto enrolled to date.

Experts expect those firms, which include a high proportion of tiny one-man-band micro businesses, are likely to approach their accountant, book keeper or an IFA for help to identify, set-up and administer the scheme.

But how do you know which pension offerings are going to best suit these smaller clients – and critically, which will provide a financially viable – and workable solution - for advisers for the long-term?

It’s an important question because a poor recommendation can mean drawing from personal indemnity insurance if things go wrong. This quarter we’re already seeing a much higher volume of sign-ups coming through as the number of companies auto enrolling swells. This trend will only accelerate ever more dramatically over the next two years.

As time runs out, we’ll see more and more small firms turn to advisers and trusted accountants to help them handle their new pension responsibilities. Some existing pension providers in the marketplace are much more geared towards large employers with a well-populated HR department. Others have developed systems that understand the much more complex small business environment, and offer better value and efficiency as a consequence.

So what should advisers look out for when selecting an auto enrolment package on behalf of their clients?

Up front set-up fees

These vary and range between free to £1,500 or even higher. A fee attached does not guarantee extra support or that you are signing clients up with a more reputable scheme. You should also avoid annual maintenance fees for clients too. This is often a fixed fee and can be anything up to £1,500 a year for a company or a per employee fee. Look out for schemes that are free to employers to set up and run ongoing, like NEST and Smart Pension.

Quality of the pension

There are a number of ways to check the quality of a provider’s pension, with Defaqto probably the best. Defaqto rates all pensions on a scale of one to five stars, five being the best. You can see Defaqto's auto enrolment ratings here. Also make sure they have high quality underlying funds.

Set-up time

This can vary from minutes to hours, days and quite often weeks per client. It largely depends on the efficiency of the system and time taken to authenticate data. Check the small print as it should be clear how long the sign-up process is estimated to take and if official papers need to be submitted, meetings held or if the process can simply be completed online. Smart Pension’s advanced technology adviser platform makes bulk client input possible in one sitting.

Payroll compatibility

According to auto enrolment champion Henry Tapper, the biggest bottleneck for those running pensions on behalf of clients is compatibility of payroll and how that links data with pension providers. Look out for schemes that offer data links via existing APIs, the industry standard PAPDIS or the intermediary pensionsync, or all of the above. Failure to do this could result in hours of laborious manual data input on an ongoing basis, making client handling less efficient.

Ongoing management and internal communication

Check if employee assessment and letter generation is done automatically by the pension provider. A lot don’t do assessment and don’t generate letters, so the onus is on the employer - or those managing the scheme on their behalf - to manually assess all staff every month and create the communications with employees themselves. This is easy to get wrong – the rules on assessment are fiddly and subject to change. Choose a provider that assesses staff and generates the letters automatically so clients are compliant with the Regulator’s requirements. Failure to comply with this element means a £400 fine for your clients.

Administration costs to client employees

This is the annual fee taken from an individual employee’s funds under administration. The Government introduced a fee cap in April set at 0.75 per cent of assets under management but some providers bump that up to and even above 20% in year one with monthly transaction fee charges to employees. Choose a provider that doesn’t charge transactions fees or clients may be faced with disgruntled employees as a result.

Guaranteed acceptance

According to research, guaranteed acceptance on a pension scheme for all employees was one of the most important considerations for advisers. It’s felt in the adviser industry that some larger firms will stop accepting companies with fewer than 30 employees. It’s wise to check this before wasting time enrolling. Smart Pension guarantees to accept all employers and employees.

To see a fee comparison table of the main players look here. Will Wynne, co-founder of Smart Pension, the specialist auto enrolment provider for small firms.

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 Will Wynne


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26th Jan 2016 11:51

Not an IFA

I'm not an IFA, so I cannot recommend which pension scheme any of my clients decide to use, hence avoiding the incoming PI claims!

Luckily I don't deal with any payrolls above 5 people.

I am using 12Pay with it's AE module and it's a breeze.  Default scheme will be NEST, with all clients told to go and speak to an IFA to get advice (we know an IFA).  Our total charge for getting a company through AE will be £250plus VAT.

People are making a mountain out of a mole hill.  Most of the information is all ready on the payroll system, the rest is pretty much standard letters educating the employees and employers and then processing their choices, then the system does the rest.  Dates, reminders, letters, compliance pretty much automatic.

If you are running larger payrolls then get your IFA involved in doing a presentation to the employees about it, with his recommendation for the scheme, on a fee basis.

It's really not that complicated, but as the article rightly points out, there are a number of expensive traps out there for the unwary- don't let your clients be ripped off by the many sharks circling this area looking to make a quick buck.

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26th Jan 2016 16:44


I thought there was only nest...didnt realise anyone else was interested..

Nice list of providers

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26th Jan 2016 16:47


Does it matter if the payroll has less than 5 then Ian Mc?

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28th Jan 2016 11:18

Sage AE Module Costs

I have my own small service company & do my own payroll, 10 -20 employees

I have Sage 50 (25) payroll & instant accounts.

I currently pay £28+ VAT a month for payroll & this only covers online support, annual update etc.

Sage want an extra from £15+ a month for the AE module.

Firstly I am astonished & disgusted they can ask for any money for what must be considered a basic requirement of any payroll package let alone I think it will be £20+vat per month.

I think my £336+ per year would be enough to cover a little extra development cost & I would think that all this info must be already in the software & only a tiny amount of extra to make in the format to send to nest etc. To determine who is eligable etc must also be a simple operation. The only time I ever need their online support is when their software updates corrupt my data.

I do my own database programming for my company so know a bit about programming but of course little about the accountancy/payroll but surely there are people who know about this stuff and can say there really is not much involved & how can they charge so much. Where is the FSB.

I perhaps would not have minded a one off £50 fee but even that I would think excessive.

What I don't understand is there is little fuss made about this. I know IFA etc can pass the costs on my I guess their customers won't be too happy

Sage know they have us/me over a barrel, migrating Payroll & ultimately Accountant is just a lot of work & worry. I have nominal postings which does make it easy so both packages really.

The Guy who has 12Pay, did you have to buy the AE Module?

I really hope someone perhaps writes a detailed, step by step guide right from setting up a suitable AE pension scheme in Sage to what reports & what info we could export to perhaps a spreadsheet and later csv to Nest or whoever.

Sorry a bit of a moan but Sage just seem desperate to charge what they think they can get away with. I did (& paid) for all their online training for RTI which was basically all the stuff we already knew but the things I really wanted to know ref. integration with the Sage software were missed out as well as there buggy software.



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