Experiences of 2 SME’s with auto enrolment
For the majority of companies, auto enrolment is now in place, but there is a wave of newer SME employers – those that set up in business from 2012 onwards – that will be approaching their staging dates this year, right through until February 2018.
We spoke to two chartered accountancy firms to find out how they have been managing auto enrolment on behalf of their SME clients and what advice they’d give to those about to embrace auto enrolment for the first time.
- Senga Morrison, is Payroll Administrator, at Cowan & Partners Ltd, based in Edinburgh;
- Chris is a Glasgow-based chartered accountant who represents a range of SME clients.
Here’s what they had to say:
- What have been the key challenges around auto enrolment for SMEs?
Chris: “The main hurdle is time. You’ve got to do a lot of research to really find out what the procedures are behind auto enrolment, and once you understand those, you’ve then got to search through a wide range of possible providers, so it can be quite bewildering.
“The other hurdle is administration. Most of my clients have decided not to arrange auto enrolment themselves but have preferred to turn to me as their accountant and trusted adviser to set up the schemes for them.”
Senga: “The hardest thing for us has been getting the client to make a decision and inform us of that decision. As accountants we can’t tell our clients which auto enrolment provider to go with as we’re not authorised to give financial advice. Cowan & Partners has selected NOW: Pensions as our preferred auto enrolment provider to work with but it still remains the clients’ decision as to whether they go with NOW: Pensions or another provider.”
- How have you helped SMEs tackle auto enrolment?
Chris: “I’ve got a list of all my clients with a note of their staging dates, so a couple of months prior to their staging date I’ll contact them to explain that the deadline is approaching and this is something they need to deal with ASAP. I usually provide an overview of what their duties are under auto enrolment, what the contribution costs are likely to be and that there are various schemes to choose from.
“I have set up a lot of schemes with NOW: Pensions for my clients, so I can talk from experience about how easy and straightforward the process is, particularly the turnaround time. Usually through NOW: Pensions I can get a scheme set up and approved for a client within a few days.
Senga: “We’ve communicated with our clients that they now have to comply with these new auto enrolment rules. We explain that it is mandatory as the government has decided this is how pensions are going to work from now on. And we do everything we can to support the client but the best thing about working with NOW: Pensions is that they do all the admin and paperwork for us.
“With over 200 clients we wouldn’t have the capacity to do the paperwork for all of our clients and most of our clients don’t want the hassle of doing the paperwork either so are happy to pay the small fee that NOW: Pensions charges for managing the admin.”
- Have there been any recurring problems that SMEs have reported once the staging process is underway?
Chris: “No. Once they’re up and running and they understand how the information gets uploaded and disseminated, it’s usually pretty straight forward. I think the headache for SMEs is just in getting started.
“A couple of my more forward-thinking clients have wondered whether auto enrolment could create the next PPI storm in the future if employees are unhappy with the pension scheme that their employer enrolled them into… but that remains to be seen. However, it did highlight the importance of the decision for an employer to make in selecting the best pension scheme provider for the business.”
Senga: “The only confusing issue for our clients has been that the direct debit set-up has to be implemented twice.” NOW: Pensions comment – Two direct debits are required, one for any charges payable by the employer to NOW: Pensions, and a separate direct debit for payment of pension contributions to the NOW: Pensions Trust.
- How do you think SMEs have coped in the main with auto enrolment?
Chris: “Very few have dealt with it themselves; they’ve put a lot of reliance on their accountant or IFA to actually administer and set it up for them.”
Senga: “Based on our experience I’d say it’s probably been fairly straightforward. My colleague and I were expecting it to be really difficult to implement but it hasn’t been at all.”
- What advice would you give to SMEs yet to go through the staging process?
Chris: “Don’t bury your head in the sand. There are potential penalties for non-compliance so deal with it now. And be in communication with your employees to explain that auto enrolment is happening and what their options are. Some of my clients’ employees have realised what a great opportunity auto enrolment is to start saving for retirement and have decided to put in additional voluntary contributions above the minimum requirement.”
Senga: “Find the right pension scheme for your business. Shop around, don’t just go for the first one, see what’s out there. A good pension provider will guide you through the process and help as much as they can.”
- What is the difference for an SME implementing auto enrolment compared to a larger company?
Chris: “I’ve got one or two larger clients and there isn’t really a difference. It’s mainly administratively; it can be more onerous for a larger firm as they tend to have more staff so managing opt outs can be more of a burden for example.
“Also staff retention is more stable in a smaller firm so a larger company will tend to have employees coming and going more frequently than an SME. This could lead to a situation where a larger firm might have several employees that have paid pension contributions for just a few months before leaving the company so there will be admin associated with what happens to those small amounts of contributions. Will they get gobbled up by admin charges or will they remain available to those employees, potentially to transfer over to another auto enrolment scheme? This is a practical issue that hasn’t been answered yet.”
- How has NOW: Pensions helped you and your clients implement auto enrolment?
Chris: “I only have positive things to say about NOW: Pensions. They have been very helpful. My initial introduction to NOW: Pensions was through an IFA who I’d asked for suggestions of pension providers to suggest to my clients. He’d done a lot of research and concluded that NOW: Pensions was a good bet.
“Gill from NOW: Pensions came to my office and gave me an hour-long seminar about NOW: Pensions’ scheme and the general procedures around auto enrolment which was really useful and got me off to a good start.
“NOW: Pensions have helped with all my administrative concerns. It’s been a very smooth process.”
Senga: “They’ve been extremely good and their online portal for auto enrolment, the NOW: Pensions Gateway is a dream come true. Very easy to use and quick to transfer clients’ information across.”
Read our Top tips on finding the perfect SME auto enrolment provider or contact us directly. NOW: Pensions prides itself on offering a simple way to provide a workplace pension with easy online sign-up.
Contact us via NOW: Pensions Client Support – 0330 10 03 336.