What is auto-enrolment?
The law on pensions has changed, all UK employers must set up a workplace pension scheme, put certain staff into it and contribute towards it. This is called ‘Automatic Enrolment’. There’s a long list of tasks employers must complete to comply with the law; including assessing employee eligibility, pension scheme set up and payroll integration. This pension scheme must then be continually maintained through any company changes.
In addition, every 3 years, each company must complete their re-enrolment duties, that means doing everything all over again and then looking at your pension options and consider switching into a better arrangement.
What problems has it caused for business?
Employers have found auto-enrolment to be harder than expected. They have underestimated the amount of work involved in setting workplace pension schemes up and started to look at duties late, missing key actions and deadlines. Many have been offered ‘easy’ and ‘cheap’ solutions that have turned out to be far from it. Many have declared their compliance incorrectly. The Pensions Regulator has issued thousands of fixed penalty fines of £400 and hundreds of escalating penalty fines, £500 per day based on 5 to 49 employees.
And, what problems has it caused for business advisers?
Business advisers have found auto-enrolment to be more time consuming and complicated than expected. At first their clients ignored letters reminding them of the need to set up a workplace pension scheme. Then they have turned to the business adviser for advice. It has proved to be a distraction from their core business activities. Few advisers are well equipped to answer all the questions. The business adviser often lacked the expertise, experience or insurance to advise. Payroll advisers can’t answer pension scheme questions; pension scheme advisers can’t answer payroll questions. Some advisers offered no solution. Others offered a simplified one-scheme solution, which could prove costly for the employer or their workers, and may backfire for all parties when the Pensions Regulator audits each company. Few offer a comprehensive solution for all clients, large and small.