The double entendre is deliberate. There are a lot of matters regarding auto-enrolment that advisers and their corporate clients must consider. And, yes, auto-enrolment is not something we or our clients can ignore – it really matters.
It is nearly two years since I wrote about auto-enrolment. In that time there have been a lot of changes in the world of pensions. But one thing that has not changed is that if your corporate clients have not done anything about auto-enrolment they are headed for a whole world of trouble. One other thing that has not changed is that if your clients are headed for a whole world of trouble they will probably find a way to include you in that trouble too.
By August 2017 even the smallest of employers who were around in 2012 will have had to set up their auto-enrolment system. By the end of 2017 even all the newest small employers will have to have done likewise.
Just as a quick reminder, the penalties for not implementing auto-enrolment include a £400 fixed penalty, up to £10,000 per day for not complying with a statutory notice, and up to £50,000 for not paying the required pension contributions. This is something our clients ignore at their peril.
Despite all the publicity there has been, there are still far too many clients who are simply not prepared and who will find their staging dates arriving before they have given any thought to setting up their auto-enrolment system. In the January 2016 edition of “Tax Adviser”, the professional magazine for chartered tax advisers and taxation associates, it was noted that many employers believe auto-enrolment does not apply to them as all their staff have said they are not interested. Those employers are setting themselves up for large penalties and a lot of last minute work once they realize they are mistaken, which will divert too much of their attention from their core business.
The government has not made the task easy by any means. Many small employers use HMRC basic tools to administer their payroll. They are probably blissfully unaware that HMRC have done nothing to ensure the tools are compatible with the requirements of pension providers in the auto-enrolment market.
Many employers simply assume that because they already have a good staff pension scheme, with employer and employee contributions higher than required under the auto-enrolment rules, they have nothing further to do. In all likelihood those schemes will not be “auto-enrolment compliant” and will therefore have to be replaced. Whether or not the schemes are compliant there will still be all the administrative tasks to complete.
Others assume they can just use the default NEST system and not have much work to do. This idea could not be further from the truth. NEST will happily collect the premiums but it is still down to the employer to do all the necessary work. This work will be very time consuming, especially for the smaller employers who may not have a personnel or payroll department to take on the administration.
While on the subject of NEST, I wonder how many clients appreciate that as well as an annual management charge of 0.3%, NEST charges 1.8% of each contribution. The product may be very basic, but the charges do not reflect this. For that level of charges they could have a better product, perhaps one which you are ready to recommend.
If you have any clients who employ even just one other person, and you do not want those clients to face a nightmare in perhaps just a few months time, you really need to check that they have addressed the problem of auto-enrolment. There are plenty of firms out there that will happily do all the work for you and your clients, have no interest in poaching those clients for other business, and will pay you what is effectively just an introducer’s fee.
Who knows, perhaps while you are helping them address this problem you may find other mutually profitable business!