How would you approach Auto-enrolment?

[AllanM]

As more employers become involved in the Auto-enrolment process it is probably worth reminding ourselves why we are doing this. Those sad individuals among you may remember the Turner Report which was presented to the Labour Government in 2003. The review was undertaken because of the alarming speed at which employers were closing their "Final Salary" Pension Schemes.

The Turner Report's first recommendation was the creation of a low cost, nationally funded pension savings scheme which individuals would all automatically be enrolled into, with the option of opting out.

So here we are over 10 years later in the throes of implementation. This has presented many challenges which have mainly arisen as a result the ridiculous complexity of the legislation. So your choice is either to comply with the legislation and embrace the administration challenges that it presents thus taking on board the additional work involved or to think outside the box and create a pension arrangement which allows you to comply with the legislation but is easy to administer and creates a higher level of benefits for you employees. Surely a "win win"?

 

[Anonymouse72]

i'll hazard a guess here, do you happen to have

"a pension arrangement which allows you to comply with the legislation but is easy to administer and creates a higher level of benefits for you employees. Surely a "win win"?"

by any chance?

 

[sjbeale]

There is nothing easy about the administration of pension auto enrolment as I have found supporting some of my clients with the process. Many small businesses are going to come unstuck if they don't seek early advice and support well in advance of their staging date.

 

[Claire Dymond]

I'm going to approach it when the time comes by sacking my only employee who incidentally runs his own SIPP so I would have to pay about £8000 (accountants estimate) to set up the auto-enrollment scheme for him to opt out.
The other business in which I'm one of two directors was going to employee someone next year but after much consideration (two minutes) I've decided we'll purchase an auto loading robot (about £30k) which can work 24 hours a day without going sick or taking holidays.

 

[HRinMinutes]

Totally agree with Sandra. Its an unwieldy process and for many small businesses will see them operating on a lean/outsourced model rather than employing staff.

 

[Paul Kelly ICHYB]

AE is a minefield, but there is hope on the horizon.

Companies will need to run AE, but pension companies are under no obligation offer a pension for the scheme!

Most SMEs will not have a staging date until next year, so, whilst there is no immediate problem, they should start looking at things now.

Organisations like the FSB have schemes that cost a few hundred pounds to set up, but, there is normally a lot more than just setting up:
Who is eligible?
When are they eligible?
How do I report monthly?
Does whatever I do speak to my payroll system?
Once I know all of this, where do I go for a scheme?

Several payroll system providers are writing software that does the AE guts, but will either not jump the final hurdle to getting a pension scheme or will be tied to one provider.

There is software/middleware available that can talk to various payroll systems and produce the reports, but, again, the last hurdle is not being jumped automatically.

I know of at least one system that is being developed that is a 'cradle to grave' product, which will cost several hundred pounds to initiate and then a couple quid per employee per month, which will then either take you to a choice of providers or allow you to do your own thing.

A few things are certain:
1- AE is coming
2 - to many businesses know nothing about it
3 - when the staging dates arrive, too many businesses will fail and be fined
4 - the 'system' will fall over, due to the number of businesses having to participate and the service providers lack of readiness in really expecting/understanding the volumes.

This is a FUBAR in gestation!

 

[Anonymouse72]

all of our employees (& us) have said that they want to opt out for various reasons & when i last checked with NEST, they advised that there wouldn't be any set up/on-going cost to do this. we'd sign up with them & start the scheme, then everyone opt out & re-confirm opt out when required. this was a few months ago when i checked & i'll check again 6 months before our staging date in 2016.

still a bit of a performance to comply with the never ending red-tape for schemes that are supposedly here to help SME's & their employees...

 

[JamesSco]

Can you just set up with NEST at no cost even though all your employees are going to opt out?

 

[Newchodge]

There is no cost to set up with NEST. You cannot be sure that all your employees will opt out until they actually do so.

 

[JamesSco]

There is no cost to set up with NEST. You cannot be sure that all your employees will opt out until they actually do so.

I am aware of that, however I suspect all will. I attempted to bring in a Private Medical Scheme in. However, they all said no due to the fact they would have to pay a very small amount of tax on it. I suspect they will all say no to this as well.

I was not sure of any costs associated with this so its good to know it can be done for free. If anyone does opt for it then I can just make adjustments to the next pay rise to recoup the funds.

 

[asfred]

Having read a few comments on this thread, I have thought it wise to sign up and put a few things straight.
Firstly, you will need in a scheme in place if you have qualifying employees, even if you "think" everyone will opt out. This is because up until your staging date, or the deferred date if required, your employees can still agree NOT to opt out. If you do not have a scheme in place, you will have failed to meet your obligations, and therefore liable to a fine.

Secondly, you cannot sack/ remove a qualifying employee so that you do not have to pay their contributions.

And thirdly, and most importantly, the cost of setting up the pension must be paid by the employer not the employees. Any deduction now or in the future, whether that be for the scheme set up fee or additional contributions that the employee must pay (i.e. reducing any payrises in the future) because an employee did not opt out is a breach of employment law.

 

[Karen Bennett]

Interestingly the Pensions Regulator is trying to find a way to make it easier for everyone to understand what is involved in complying with Auto Enrolment. Came across this yesterday from the Regulator who are seeking some 'technical changes to AE'. They are basically looking for help from all employers, advisers, etc to simplify the process as confusion grows in the industry.

As a new member I can’t publish links yet but if you go onto the Pensions Regulator’s website and search for Technical Changes to Automatic Enrolment you’ll see it there.

 

[Karen Bennett]

BrightPay has written a three part series ‘A beginners Guide’ to Auto Enrolment. It details the bare facts that you need to know to comply with your Auto Enrolment responsibilities. It’s a good and easy to understand guide.

 

[Karen Bennett]

BrightPay is running a series of free Auto Enrolment webinars over Feb & March. The webinars are free for payroll providers. Discover how AE can become a new revenue stream. With 7 guest speakers there will be something there for everyone.

To find out more click here

 

[Banksbroo]

Many people on this forum are self-employed sole directors, but will be obliged to go through this sham in order to become "compliant" and then opt-out. The sheer waste of government / NEST resources in registering the self employed in order for them to opt-out shows what a shambles the process is.

The cost of administering these non-participant companies (ie. sole director who is sole employee) leads me to suspect that common sense may break out and the scheme amended to exclude sole employee companies.

What am I doing then? Waiting until it's either abolished, or my staging date of 2017 when I will register with NEST then opt-out the same day.

 

[Newchodge]

I take it you mean ltd companies with a single (director) employee. It won't apply to the self employed.

 

[Banksbroo]

Yep, sole director of limited company. That adds up to a lot of companies when you think about all the personal service companies and real trading companies in the UK.

 

[sjbeale]

If you are a sole trader or a sole director in a company you do not have to auto enrol. Anyone who is unsure about their obligations can contact the Pension Regulator. Anyone who has received a staging date letter and believes they do not need to auto enrol should write to the Pension Regulator. There is a lot of confusion about pension auto enrolment and I am trying to dispel some of the myths with my clients.

 

[Banksbroo]

Hi SJ. Thanks for info. I hope you're right. Although technically not a worker (no contract of employment) I am on a PAYE scheme, so await with interest getting confirmation from Pensions Regulator. I'll keep you posted how I get on.

 

[gwokka]

I run a ltd co where I am the director and my wife is an employee and shareholder. obviously we wont be opting in but what do I have to do to comply with the requirements of this farcical government legislation? There must be thousands of ltd cos in this situation but ive searched the internet and cannot find the answer

 

[PuddlePayroll]

You'll need to have a qualifying pension scheme in place, give yourself a letter on your staging date informing yourself and wife of the scheme and you'll be auto enrolled, auto enrol yourself, opt out and refund any contributions if any have taken place and then carry on as normal.....

Oh and then do the process again in 3 years...

A very brief late night summary!

 

[gwokka]

thank you for your response. So on the basis that neither me or my wife want to be auto-enrolled or make any contributions the govt is still making me go through the process of setting up a pension scheme. I thought they were promoting less red tape in business not more! Anyway reading posts above there is a scheme NEST that appears to be free to set up? so presumably I just sign up with them then opt out with no cost to my business? there must be thousands of businesses like mine in a similar situation. would be interesting to see what others are going to do.

 

[sjbeale]

If you would like advice on your specific circumstances please contact me.

 

[gwokka]

has the government changed its stance on auto-enrolment, in the sense that as long as your employees are not eligible and don't want to join a scheme you don't have to set one up. the reason I ask this is I went on pension regulators website yesterday and clicked on duties checker which leads you through the process of auto enrolment. When i get to the page that states what i need to do and by when it tells me i need to write to my employees on my staging date and then within 5 months of my staging date i have to fill in declaration of compliance, but no need to set up pension scheme. Have they changed the rules recently as i was under the impression that you had to have a scheme in place even if you had no staff eligble or wishing to join.

 

[Paul Kelly ICHYB]

@gwokka - No!

 

[Karen Bennett]

There has been recent changes alright. From my understanding some employers may not have to set up a pension scheme if they do not have eligible employees. However this changes if a non-eligible or entitled worker wants to opt in or join a scheme. The employer will still have other automatic enrolment duties too.

There is another forum on this subject which you can look at. One response that TPR sent to an employer stated:

An employer will need a pension scheme in place when necessary this is where a worker meets the eligible job holder criteria or when an employer receives a valid opt in notice. Please click here for categories of worker.

Please note that if the employer does not have any eligible job holders on the staging date the employer may not need a pension scheme in place. However if any of the above occurs the employer will need to have a scheme in place and ensure active membership is achieved within the six week joining window.

- http://www.accountingweb.co.uk/anyanswers/question/auto-enrolment-16

 

[gwokka]

thank you for your response. having read that thread on the accounting web forum it does indeed seem that they concur that you do not need to set a pension scheme up if you have no eligible staff. I'm a limited co that employs me and my wife and I'm guessing there are lots of cos like mine that wont now need to set up a scheme now.

 

[Karen Bennett]

Leave it with me and I'll see if I can get a link from TPR's website. This change only happened recently so I'll see what I can dig up.

 

[gwokka]

I did try posting the link to tpr duties checker but I wasn't allowed to as I haven't got enough posts in

 

[john1989]

If you and your wife are both directors, then my understanding is that you don't have to auto enrol.

 

[gwokka]

she's not a director, only an employee/shareholder

 

[Karen Bennett]

I found this so yes if you don't have eligible jobholders you don't have to set up a pension scheme. Some light reading here - http://www.thepensionsregulator.gov.uk/docs/detailed-guidance-2.pdf

If the employee is an eligible jobholder you have to set it up even if you know they will opt out. You'll have to set one up though if the employee choose to opt in or join. This is an extract from TPR guide.

68. If an employer only has jobholders with a right to opt in, or entitled workers with a right to join, there is no requirement to select a scheme in advance of the staging date, although they can if they wish.

 

[gwokka]

thanks for the pdf. that's good news it seems I can now avoid the hassle of setting up a scheme.

 

[Karen Bennett]

Glad to help. Auto Enrolment is certainly evolving and TPR is trying to make it easier.