Ask the expert: What is auto-enrolment?
With thousands of small and medium-sized enterprises (SMEs) hitting their auto-enrolment (AE) pensions staging dates this year, we speak to AE Project Manager Dee Myhill about what auto-enrolment is and why 2017 is a key year for UK businesses
Alan Boswell Group: How long have you worked with automatic-enrolment pensions?
Dee Myhill: Since it was first announced in 2012. I originally handled it for a pension provider in 2012, helping some of the biggest companies to negotiate the process. I moved to Alan Boswell Group in Norwich in 2013 and have worked with a wide range of clients since then.
It was stressful when auto-enrolment pensions were first announced. No one knew what AE was, how it was going to work and what it was going to look like. Now we’re in a stronger position to see what’s what. We know who needs to do what and when, which is vital as smaller businesses reach their staging dates.
ABG: How many businesses have you helped with AE in that time?
DM: More than 250. We started off with just five businesses in 2012. Now I deal with around 30 businesses a month. We’ve already confirmed that we’re working with 200 businesses in 2017 and it’s only January!
ABG: Why is 2017 such an important year for AE?
DM: Because the biggest volume of businesses will be enrolling. Approximately 750,000 businesses will be hitting their staging dates this year. Some of them may only have one or two staff, but the process is fundamentally the same whether they have one employee or 1,000.
Approximately 750,000 businesses will be hitting their staging dates this year.
ABG: What sort of deadlines will new businesses and startups face?
DM: At the moment they’re given at least a year’s notice to get a scheme in place. We expect that timeframe to remain consistent in future.
ABG: How long, on average, does it take to get an auto-enrolment pension scheme in place?
DM: At least six months. That said, the lead time businesses give us varies. Some are really organised and give us two years. At the other extreme, we have worked with businesses that are beyond their staging date. We’d always recommend that you give as much time as possible!
ABG: Can businesses put an AE scheme in place themselves?
DM: They can. There’s a facility on the Pension Regulators’ website, but there are 331 pages to read through. We have a free downloadable guide available online, which has condensed everything into a more manageable document. It’s a simplified guide to help businesses through the process.
We find that most businesses like a bit of guidance rather than going it alone. We’re flexible with the service we offer. Some people only want the pensions, so they’ll come to us and say: “We’ve got everything in place. Can you give us a recommendation on an auto-enrolment pension provider?”
However, the majority of businesses want help with staff communications to explain the process in more detail, as well as payroll support. Our services are built around what the employer wants and we tailor it to what they need. Not every company is the same and they benefit from different things.
ABG: Are there any advantages of using an independent financial services company to arrange the scheme for you?
DM: Of course. Our recommendations are based on experience. Clients will get our insight into how the pension schemes work, their performance, their customer service on so on. Plus, some employers might only know about the big providers who may not be the best fit for your business. We can advise accordingly.
ABG: Are there any common challenges among smaller businesses?
DM: Payroll is probably the biggest challenge. A lot of people just use the basic tools from HMRC to manage that, but those tools can’t handle auto-enrolment. If that’s your business, we will look at other pension providers that might have their own software to help you manage that.
In fact, the majority of my day is looking after payroll departments and helping them with online systems. It’s important to get the two working together. We try to find out the best option based on your existing systems.
ABG: Are there any steps that businesses can take to prepare for AE?
DM: It’s nice to know if they would rather pay an employer charge, rather than a monthly charge, for example. Some pension providers carry a one-off charge at outset, or they might charge a monthly employee fee. That’s something we have to take into account.
Also, we like to know who is going to be involved in the process. For example, if you have an accountant, we like to work with them from the outset, because they’re likely to be running the scheme.
ABG: What are the risks if businesses don’t meet their staging date?
DM: The process is generally as follows: They’ll receive notification of their staging date, which is the date they’ll need to have a scheme in place. Every employee should be in the pension scheme within six weeks of the staging date, unless they opt out. In that time, the company should have sent relevant communications out to staff and completed some legal admin.
They then have five months to complete a Declaration of Compliance. That’s basically an automatically generated online survey from the Pensions Regulator. It asks them to confirm they’ve set up a scheme, how many people have gone in, how many they have on their payroll and so on.
If they don’t complete that, they get a reminder and another 28 days to complete the form. If they miss that, they’ll receive a £400 fine – and that’s reassessed daily. We’ve had two companies come to us for help after they were issued with fines because they didn’t do anything about AE. They thought it would just go away.
ABG: Is that common?
DM: We’re likely to see more of that this year, but the simple answer is that it’s not going to go away. Legally, you have to comply with it. If you don’t, the fine can be anything from £400 to £10,000. The Pensions Regulator is hot on that these days.
In the first year, I think they only sent out four fines, but it has increased. In the last quarter alone they sent out 96 escalating penalty notices. Plus, companies don’t just have to pay the fine. They have to backdate the pension contributions to the staging date too, so it ends up costing a lot more if they put it off.
Businesses don’t always realise there’s a continuous process of review and renewal
ABG: Once the staging date has passed and they have their schemes set up, is that it?
DM: Not quite. Businesses don’t always realise there’s a continuous process of review and renewal, which can be time-consuming. We provide an annual review service, which helps our clients make sure the scheme’s still suitable. We’ll make sure that the AE pension provider is performing the way it should be, that customer experience is still excellent and that the client is happy. Schemes also have to be recertified every 18 months to make sure they are still suitable for the workforce.
We’ll provide support throughout the year too. If clients have questions about payroll, or if there have been changes to the system, we can help. We may also catch up with the members if they’re approaching retirement, answering their questions about pension transfers and so on.
ABG: What about the bigger three-year auto-enrolment review process?
DM: By law, businesses have to review their AE scheme every three years. They have to go through the process of setting up the pension scheme again, and all employees are put back into the scheme, even if they opted out. We can manage that process and make sure it’s communicated to staff.
Read more: Best private pension: how to find the right pension for you
ABG: If someone has been managing AE themselves, but decide they need support with the review process, is that possible?
DM: Definitely. They can sign up for a review with us at any point. And if a business isn’t happy with its current pension provider, we can help them find another. Companies are usually locked in for a year or two, but after that they can look to move it. We can look at the secondary market to see who else is out there and move the scheme to another provider for you.
There’s so much to consider with auto-enrolment that it often helps to have an independent adviser keeping an eye on it for you. That’s why we offer a full service. Our clients can leave it in our hands and trust that everything will be done. We make it as stress-free as possible.
If your company is due to hit its auto-enrolment staging date in 2017, or you want to review your existing scheme, call us on 01603 967967 and Dee and her team will be happy to help.
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