I attended my local Chamber of Commerce‘s Automatic Pension Enrolment lunchtime event last week. It was another emphatic message around the significance of grasping this particular issue sooner rather than later.
It was encouraging to hear so many interested parties in attendance fully intent on fulfilling their ‘employer regulatory duties’ just as soon as they had sought relevant counsel. Taking advice on the complexities of auto enrolment was therefore high on the agenda.
So it was of some concern to hear comments from Steve Webb the Pensions Minister at the recent launch of the Scottish Widows UK Pension Retirement Report 2013. In response to a question from a KPMG representative who asked the minister how small and micro employers were going to find funds to pay for advice at such a difficult time Mr Webb replied “Why do they need advice?”
I find it completely astounding that the minister in charge of UK pensions fails to understand why businesses may feel compelled to take advice before deciding on how best to invest for their employees future. As well as the obvious fact that anyone considering choosing a pension scheme should not simply choose the first one they are offered, there are a number of other key considerations.
For example, employers need to be clear on the pension scheme criteria that will culminate in a recognised Qualifying Workplace Pension Scheme. Or the necessary differentiation between ‘eligible’ and ‘non-eligible’ workers, not to mention identifying the individuals who fall into the category of ‘entitled worker’. Pensions techno jargon Steve Webb appears to believe all business owners are completely familiar with.
The purpose behind AE is to commit employers and employees to set levels of pension contributions. Initial and ongoing contribution cost calculations will be relative to agreed definitions of Qualifying Earnings and contribution Phasing. Here there are numerous options and employers will need to decide what combination suits them best from a cost perspective. At a time of economic uncertainty clearly crucial decisions made here by business owners need to be the right ones.
The list of additional considerations is not exhaustive and includes questions concerning pension schemes already in existence, investment fund choices, record keeping requirements and mandatory employee communications.
The Government’s ‘low cost’ fallback option NEST (National Employer Trust Scheme) which may be best for some groups of employees has also come in for some criticism concerning the restrictive nature of this route. Age UK, Which?, the Federation of Small Businesses (FSB) and the TUC are among those who have written to the pensions minister asking for a relaxation of the rules. Who will provide employers and their staff with the complex detail of what the restrictions mean for them?
SME firms will need professional assistance in meeting the challenges of AE to ensure they comply with employer duties regulations and they implement a design solution that best meets their requirements and the needs of their employees. It is therefore just not good enough that Government officials refuse to acknowledge that even with the best intentions a good plan will often result in unavoidable costs.
The Real Time Information (RTI) system for PAYE was introduced in April by HMRC to make it easier for the tax man to keep track of workers earnings and make sure they were paying the correct amounts of tax. It was supposed to be simple to install but there are already many of examples of it not working as it should causing chaos for some employers. Small business deserves better treatment and mandatory auto pension enrolment is a good news story. What we don’t need in the current climate is another time and energy consuming fiasco.