Workplace pensions reform: preparing for automatic enrolment
The Pensions Regulator expects many businesses to seek advice from their accountant on reforms to workplace pensions. Here it shares eight steps you can take now to help clients prepare.
There is now less than a year until the first large employers will have to start automatically enrolling staff into a pension scheme. Preparations continue apace and among employers workplace pension reform is moving from a theoretical issue to a tangible requirement.
The changes to workplace pensions will require all employers to put certain workers into a pension scheme and make contributions on their behalf. Any workers that don’t want to save for their retirement in that pension scheme will need to make an active choice to opt out. Those workers who don’t meet the criteria to be automatically enrolled may be able to opt in or join another pension scheme. Employers will need to ensure that they can manage requests like these.
Our survey has shown that a large proportion of smaller employers will approach their accountant for information and guidance on automatic enrolment. This is particularly the case in businesses where their accountant provides payroll services.
To that end, we have outlined eight tasks that accountants may be asked by their clients to assist with, to help the employer fulfil their legal duties.
First and foremost, it’s important for employers and their advisers to understand when automatic enrolment will affect them; this is known as their staging date. The requirements are staged over time, with the largest employers starting from October 2012 but the very smallest employers not becoming subject to these changes until May 2015 at the earliest.
It’s essential not to underestimate the preparation time needed to implement the changes necessary to fulfil the new duties. In the case of most employers, amendments in areas like payroll, human resources and IT will need to be considered in good time prior to their staging date.
The Pensions Regulator’s website has information on the ‘staging’ of automatic enrolment, so employers can check now when the new requirements will affect them. The Government has recently confirmed the staging time bands for all employers, and will shortly confirm the actual staging dates within these time bands for all employers.
The existing landscape
Amongst accountants, awareness of automatic enrolment has become more widespread, and we have seen a significant increase in the number of accountants who have confirmed that they understand that employers need to enrol workers into a pension scheme under the new law – as well as contribute to the scheme.
However, while 92% of the accountants we surveyed have clients with fewer than 50 employees – who will be staged from 2015 – most believe their clients have staging dates in 2012 (30%), 2013 (21%) or 2014 (16%).
Elsewhere in our research, we found that two-thirds of employers expect to use an external adviser for guidance and, of the employers who are prepared to pay an adviser, over half of these expect to use an accountant.
The eight tasks
Although more and more accountants are providing advice in this area, 30% of those we asked are still undecided about engaging with employers on automatic enrolment.
It’s clear that many employers will be approaching their accountant in the first instance, and there are eight tasks that could be completed to ensure that employers are adequately supported in their preparations:
1. find your client’s ‘staging date’ by using their PAYE reference
2. check your client has business software suitable for automatic enrolment
3. check which workers meet the criteria for automatic enrolment
4. check whether existing pension schemes can be used for automatic enrolment
5. provide pension schemes with details of workers to be automatically enrolled
6. provide information to all workers about their pension scheme inclusion and confirm details of contributions and pay deductions
7. ensure your client registers with The Pensions Regulator and keeps statutory records
8. ensure your client makes pension contributions to the pension scheme on behalf of their workers and monitor the ongoing eligibility of workers.
More details about each of these eight tasks will be published shortly, along with guidance on how to complete them. However, further information on what employers need to do, and when, can be found on The Pensions Regulator’s website now.
The Pensions Regulator
The Regulator has a statutory objective to maximise compliance with the new employer pension duties. This is a big educational challenge. We’re gearing up to make sure that every single employer in the country understands that they will need to do something about workplace pensions reform.
Our aim is to establish a pro-compliance culture by supporting employers and making it as straightforward as possible to comply, but also making it clear that wilful or persistent non-compliance will result in regulatory action being taken. Such action could include the issue of compliance notices, fines, and escalating penalties, but we will only take enforcement action where it is appropriate to do so.
Details of our compliance and enforcement approach will be published later in 2012, and this will set out how we intend to deal with non-compliance and, where appropriate, take enforcement action.
Support and guidance
95% of the accountants we asked said that employers will wait until the last minute to make preparations for automatic enrolment. It’s clear that everyone’s interests will be best served if employers are made aware of their forthcoming duties in good time for their staging date. In order to make this happen, we will be using a variety of means to communicate with employers.
These communications will include talking directly to very large employers, individually writing to all employers and working with industry bodies and representative groups of the smallest employers. Building on our existing good contacts with the organisations that will support employers – such as accountants, payroll service providers and financial advisers – will be crucial to making sure that complying with the new law is as easy as possible for employers.
Some of the educational products that the Regulator has made available for advisers and employers include:
- detailed guidance covering all aspects of workplace pensions reform legislation;
- technical guidance to help payroll software developers implement changes to their products, better enabling them to support employers;
- online interactive tools specifically for smaller employers;
- a checklist for trustees setting out some of the issues that should be taken into account when existing pension schemes are considered for automatic enrolment;
- letters reminding all employers – as they approach their staging date – of their forthcoming duties and how to get further information and guidance.
Workplace pension reforms will bring about a significant change for many employers and workers. We believe that with appropriate planning and support, it will be possible for employers, with support from key advisers such as accountants, to play their part in delivering successful workplace pensions reform.
Toby Christie – policy manager, employer compliance regime, The Pensions Regulator