The most seismic change in the provision of benefits in retirement is happening right now, but unbelievably, the majority of employers and employees directly affected by it don’t seem to know anything about it. The largest employers are already complying with the new Auto-Enrolment legislation, but every employer will be obliged to comply over the coming couple of years.
There is already a series of “staging dates” for the legislation, with each employer allocated a date when they must comply with the new rules based roughly on their number of employees. In addition, there will be a gradual phasing in of increased employer contributions over time, placing a mounting financial burden on employers.
In addition to this extra burden, thanks to the latest government tweak to the rules regarding advice charges, employers will require to fund all advice costs associated with the establishment of the new compulsory pension schemes.
The concept of Auto-Enrolment is pretty straightforward.
The Government want individuals to take more responsibility for their income in retirement, reducing the ever increasing reliance on the State in this area. However, due to fact that most people either don’t want or can’t be relied upon to voluntarily save for retirement, they will now be compelled to do so by the introduction of compulsory employee and employer contributions to a completely new workplace pension system.
Unfortunately, while the concept is simple, the implementation is not.
All of the responsibility is on the employer - the staging dates for employers, determining who is eligible for the scheme, the calculation of the premiums payable, when employers have to enrol employees into the schemes and the timings are all subject to strict rules. When these rules are coupled with a punitive array of fines and punishments for non-compliance, it helps to create an extremely dangerous and confusing time for anyone with any size of limited company, partnership or commercial enterprise who employ any number of staff.
In addition, NO existing “group” pension arrangement in place now, either personal or occupational based, will be able to deal with the extended administrative requirements generated by Auto-Enrolment. This will lead to a massive spike in the demand for new pension arrangements that are designed to deal with it, which it is expected will be hard for pension providers to meet.
In an attempt to try and manage this situation industry bodies are recommending that the “safe” lead time that should be set aside to establish a scheme could be at least one year.
This is a very challenging time for employers, but the good news is that James & George Collie Financial Management will be able help.
We can help clients identify when their staging date is, what they will need to do to comply with Auto-Enrolment, deal with the administrative cobweb that surrounds the new legislation and, perhaps more importantly, help formulate a plan for dealing with the additional costs involved with the new arrangements.
By working together we can ensure that Auto-Enrolment does not become the scary monster it could be, but is a properly managed and controlled force for real social change that doesn’t drain valuable time and cash resources.
For further information and advice please contact either Scott Middleton or John Waddell of James & George Collie Financial Management.