Simon Palmer asks a question about pension auto enrolment: is it all over? Well, do not take your eye off the ball just yet…
As auto enrolment (AE) hits its fifth anniversary, the Pension Regulator reports that since 2012 nearly 800,000 employers have undertaken their AE duties with more than 8.5 million people beginning to save in a workplace pension, it is understandable that many businesses may consider the “fuss” about AE is over.
That is not, however, the case. AE isn’t about a one-off project to get a business over the line, it will most definitely impact businesses both large and small for the long term. There are also still many areas that can easily trip up a business if it doesn’t get things in place correctly at the start. Accountants are expected to play a pivotal role in ensuring that the processes and systems used by their clients for AE ensures they are compliant with the Pension Regulations now and in the future.
Evolving needs of the business
It’s a fact that businesses don’t stand still. As they evolve and grow, AE will need to be considered across areas including staff recruitment and changing patterns of work as well as financial forecasting. New businesses are starting up in the UK at a phenomenal rate every day and from January this year they all have a legal responsibility to put their employees into a pension scheme from the moment they employ them. The challenges that accountants will face will be that new employers may not know what they are meant to do and this is where their role becomes so important in the process.
It is clear that ongoing assessment of employees for the purposes of AE therefore needs to be fully ingrained into the HR process and financial forecasting of the business, as the provision of a workplace pension becomes part and parcel of running a business.
Businesses will continue to need help understanding how the cost implications of pensions will impact on their profitability. This is evidenced by recent research by The Pensions Regulator where 65% of accountants interviewed reported that they planned to be heavily involved in the processes around the minimum contribution increases.
The cost of non-compliance
Despite the much-publicised high penalties for non-compliance and wide ranging promotion of the AE changes there are still considerable numbers of businesses that fail to take action either through deliberate act or simply failing to realise that they are impacted.
The Pension Regulator in its quarterly briefings reported another increase in the number of enforcement actions being taken for non-compliance. According to their report, the quarter ending September 2017 accounted for around 25% of all of the AE enforcement actions ever taken and a more recent report in December 2017 stated that 80% of accountants felt their clients would not realise the implications of non-compliance.
While focus is often on the compliance around businesses moving into the process it’s important for businesses to realise that monitoring and enforcement isn’t just around the setting up of a workplace pension. The Pension Regulator is working directly with pension providers to identify schemes that have been set up but contributions and schedules are not received.
It is clear therefore that as the backlog of businesses stage, ongoing compliance will shift its focus on areas such as missed contributions. Businesses need, therefore, to ensure that systems are in place to support ongoing administration as the business changes, and not just to get them over the initial hurdle and they will need their accountants support and guidance to help them navigate through this process.
Next stage: automatic re-enrolment
It should be clear from above that AE is an ongoing process, changes to the make-up of the business will mean constant assessment of its workforce. There is also the fact that every three years every business will have to go through the re-enrolment process.
While many SMEs have only just, or are about to, start their AE journey, larger organisations have already started the process of re-enrolment and numbers will be increasing every year.
Auto re-enrolment should be straightforward if the right systems and processes are in place from the start, but it can still cause businesses a headache if not properly prepared for and managed.
Accountants interviewed by The Pensions Regulator for their December 2017 quarterly report also stated that they would be required to help their clients with aspects of re-enrolment including:
- Choosing their exact re-enrolment date.
- Assessing certain staff to work out if they need to put them back into their pension scheme.
- Helping employers in the process of writing to staff to tell them they have been put back into the scheme.
- Helping employers meet their legal duties for re-enrolment by completing a re-declaration of compliance.
Increasing pension contributions
April 2018 sees the first increase in the contribution payable by both businesses and their employees to their workplace pensions. The total minimum contribution from 6th April will be 5% (2% from Employer and 3% from Employee) which will not only have an impact on business overheads but employees take home pay in a climate of lower than inflation salary increases.
It is the responsibility of the business to ensure that these higher contribution levels are implemented on time to ensure that the pension remains a qualifying scheme. If this doesn’t happen the business will not be meeting its legal obligations and can face enforcement action.
Businesses therefore need to ensure that their pension product, payroll systems, and internal processes are ready to implement these increases.
So as to the answer to the question, is auto enrolment all over? We believe not yet. It is clear that it is only by businesses and accountants working together they can guarantee the ongoing management and compliance of their workplace pensions.
- Simon Palmer is the Sales and Marketing Director at Qtac Payroll. If you need help and advice about Auto Enrolment get in touch with the team at Qtac – https://www.qtac.co.uk
Accounting Practice Online is part of the ICPA, which is an organisation designed to provide support and guidance for accountants in practice. With 35+ practice specific benefits there has never been a better time to join. Take a look at the routes to membership today.