By now most accountants should definitely have heard of auto-enrolment (AE). Introduced in 2012, it is a government scheme which requires businesses to enrol all qualifying employees into a pension scheme and make contributions to it.
It is now getting to a point where most large UK businesses have already enrolled their employees into schemes and close to 1.8m smaller businesses, as per TPR figures, are expected to reach their staging date over the next 3 years – the date their auto-enrolment comes into effect. Small businesses actually make up 95% of all businesses in the UK which means this will not be a quick and easy process.
There appears to be a consensus about the ideal method for tackling this mammoth task. According to industry experts, the key to a smooth transition will be based on collaborative efforts between accountants and financial advisers. There also needs to be a strong emphasis on the IT systems, primarily in the payroll area.
“The payroll bureaux are run by accountants, the accountants are now seeing auto-enrolment as a revenue generator - there is money in managing the employer’s risk. We see packaged solutions emerging involving accountants, with book-keepers, payroll bureaux and advisers all working with providers,” says Henry Tapper, director at Pensions consultancy First Actuarial.
As outsourcing partners to a large number of accounitng firms, we believe that as AE moves into the phase of staging smaller employers, accountants will start to play a real part in its successful implementation. It’s highly unlikely that your smaller clients have an existing pension arrangement or retain an IFA to help them. And if they do turn to a financial advisor to find out what solutions there are in terms of scheme review, selection, analysis and re-enrolment, these might not appear to be the best for them from a cost and business perspective.
This is where your clients will turn to their main professional contact i.e. you, to get them over the AE line and beyond. But as you can’t provide advice on private pensions, NEST and other alternatives to employers - unless you are regulated by the FCA - you will have to collaborate with an adviser for a comprehensive service offering. Having done some research, we think accountants will need to closely work with advisers mainly to avoid the risk of putting forward a solution without having the requisite levels of knowledge, experience and resources.
To find out exactly what impact it can have on the client’s business, as an accountant you can provide a forecast of the cost, right from staging date through to the next change in the contribution levels. At an administrator level, you look after processing the payroll, submitting data to the pension provider and maintaining dialogue with the Pensions Regulator through regular data updates.
In summary, collaboration in some capacity with an adviser is a must. But it also a great way to gain understanding of your client’s wider financial standing and open up an opportunity to offer additional services.
Do you think wider collaboration between accountants and advisers is needed for auto-enrolment to work? Let us know your thoughts and comments on Twitter.
My name is Vishal Kurani, the author of the QXAS blog and I appreciate you stopping by! I help accountants gain Accounts Outsourcing knowledge through my easy to follow blogs and guides. Download my free guide "The Accountants Guide to Making Payroll Profitable" to learn how to make payroll profitable for your accountancy practice.