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Auto-enrolment – Meeting the Regulator

Tax Partner, Paul Whiteley and Tax Manager, Malcolm Bannister met this week with Charles Counsell, Executive Director for auto-enrolment at The Pensions Regulator.  The purpose of the meeting was to make sure Keens Shay Keens MK are on track with the advice we are giving to clients on auto-enrolment, and for the Regulator to sample what is happening at grass roots level.

In our blog entry of 11 June, we outlined aspects of auto-enrolment.  By way of quick reminder, the essential points are:

  • All employers have to automatically enrol virtually all employees into a pension scheme which meets specified criteria.
  • Employees will have the right to opt out.  Those who do so must be automatically re-enrolled every three years (but can continue to opt out).
  • The requirements are being introduced over a period of years according to each employer’s “staging date”.  Initially, this is dictated by the number of employees on your payroll.  This started for firms with 120,000 or more in October 2012, and finishes up with those with fewer than 30 from 1 June 2015 onwards.  The timetable for those small employers is then staggered (having regard to the last 2 characters of the PAYE reference number) over a period to January 2018.
  • The Pensions Regulator is the body responsible for overseeing the introduction of auto-enrolment.  It estimates that it will take most employers up to 18 months to prepare.  All employers will need to register with the Pensions Regulator no later than 4 months after their staging date to confirm that they have completed the process.

During a two hour meeting, we explained that there are still a couple of things standing in the way of giving the complete advice we would like to be able to provide to all our clients:

Advice on selecting a scheme for small employers

There are a number of pension schemes out there which are suitable to meet auto-enrolment requirements for small employers (say, up to 50 employees).  However, the wider regulatory system means that Financial Advisors cannot simply point employers at an “off-the-shelf” solution without a great deal of fact-finding.  Typically, just the selection of a scheme can incur many thousands of pounds in fee costs, payable to an intermediary adviser.

We are pleased to see that the Regulator’s website is giving increasingly useful information to help small employers who find that the only viable way forward is to sidestep intermediaries, and to make their own selection.

Software administration platforms which integrate with existing payroll

Following the recent introduction of “Real Time Information” requirements for PAYE, it is perhaps not surprising that the payroll software industry is not further forward in producing fully integrated administrative systems, to run auto-enrolment as part of the normal payroll process.  We have seen some stand-alone offerings designed to cope with auto-enrolment.  But it makes no sense at all to be keying the same basic information (about employees) into two separate databases.  Integrated systems must be the way forward.

We are aware that many payroll providers are now putting some serious resource into the development of such solutions, to be available later this year.  It is good to learn that The Pensions Regulator is working hard to encourage and facilitate such development.

The crunch?

The growing fear now is that, as we head towards 2015, we may see large numbers of employers trying to set up pension schemes and administrative arrangements in a very short space of time.

Will the pensions industry and related professionals have the capacity to service the requirements of everyone in time to meet all staging dates? 

Only time will tell.  Our advice remains the same.  The more work you can do now to start preparing for auto-enrolment, the better.

Let’s hear it for The Pensions Regulator’s website!

Finally, we took the opportunity to congratulate Mr Counsell and his team on the quality and ease of use of The Pensions Regulator’s website.  Arguably, a head and shoulders above any other government department or quango.  This sets out very clearly the process all employers need to go through, and provides stacks of helpful extra advice.  If you want to know more about auto-enrolment (including checking your staging date), by all means talk to us.  Or you may just want to explore that website:  www.thepensionsregulator.gov.uk

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