Employers need to act now to ensure they are ready for compulsory workplace pensions, warn leading chartered accountants and business advisers Price Bailey
Price Bailey has worked with a number of companies that have now gone live with auto-enrolment and estimates the whole process takes around nine months from start to finish.
“There’s a mistaken belief that all you have to do is press a button, but the devil is in the detail,” says Karen Wyndham-Webb, chartered financial planner and director of employee benefits at Price Bailey. “It’s a four-party project; you need to bring together the employer, the adviser, the pensions provider and the payroll provider, and that can be quite hard.”
Employers need to start by identifying when their staging date is and how many of their existing workforce will be eligible for auto-enrolment, including examining whether those on fixed-term contracts will be entitled to join. Ms Wyndham-Webb recommends employers then ask themselves a number of questions about their current set-up, to establish whether their existing scheme will be compliant.
“A lot of employers are assuming their existing pension provider will automatically make their scheme a qualifying one, but a lot of the pension companies are exiting from the market,” she says. “Even if they can, some are levying quite hefty charges. It might be a good opportunity to look at what else is out there in the marketplace.”
Alongside this, employers need to identify whether they can afford to have their entire workforce in a workplace scheme at existing levels or whether they may need to scale back provisions, which could involve altering terms and conditions. They must also establish how the process will work in practice.
“Who is going to do your mandatory communications? Is that going to be the pensions provider or are you going to do it yourself?” asks Ms Wyndham-Webb. “Who is going to run the assessment each time you run a payroll? Is that going to be a payroll company or the pension provider? That will affect the processes and systems that you need to put in place.”
In its role as an adviser, Price Bailey can offer guidance for employers on the best way to proceed and project manage
Another issue is whether to offer employees the ability to contribute to pensions via salary sacrifice, which can deliver savings to both employer and employees. “This is an ideal opportunity to consider introducing this now because it’s a win-win, but you need time to do it and, if you haven’t got your systems and processes in place, that will cause a problem,” she adds.
In its role as an adviser, Price Bailey can offer guidance for employers on the best way to proceed and project manage the process using its three steps of design, implementation, and run and comply, or any combination of these.
“We talk the decision-makers through the design phase and we’ll then liaise with the employer, the payroll company and pension provider to make sure certain things are done at certain times,” says Ms Wyndham-Webb. “Once we’re all up and running after implementation, we will then hand-hold the employer through the ongoing compliance and phasing journey.”
Pension providers are being selective about the schemes they want and, if an employer has left it late, with less than three months (and in the case of some providers six months) to staging, the pension providers may decline to offer terms.
The overall message is to act in plenty of time. “Something always comes up that you don’t expect,” warns Ms Wyndham-Webb. “The ones that go wrong are where employers have come to the task too late.”
Karen Wyndham-Webb, chartered financial planner, director employee benefits and technical pensions
The Quorum, Barnwell Road, Cambridge CB5 8RE
Telephone: 01223 507614 Fax: 01223 696101 Mobile: 07793 936655