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Friday, 3 October 2014

Friday Guest Blog: Beyond the new frontier - Automatic enrolment and support for businesses

By Rob Hawthorne - Chartered Financial Planner at Rowanmoor Consultancy Limited

On 25 August  2012, the Voyager 1 spacecraft became the first man-made object to leave the boundaries of the solar system and enter interstellar space.  The probe has now been operating for almost 37 years and continues to explore the interstellar medium, transmitting valuable data back to Earth.

The probe, along with its sister Voyager 2, represented the very pinnacle of planetary science and with Voyager 1 having only just entered the vast arena of interstellar space, the journey is very literally just beginning.

Back on earth, or to be more specific, the UK, the programme for employers to start automatically enrolling employees into workplace pension schemes is now in full swing, a journey that started in 2012.

At the time of writing, over 4,000,000 workers have been automatically enrolled representing some 21,000 employers, many of whom had no existing pension provision and no experience or technical know-how administering a complex financial product for their employees.  Where Voyager represented one of the biggest challenges for mission planners, calculating gravitational slingshots around the outer planets, one of the biggest challenges facing employers is the implementation and ongoing demands of one of the biggest changes to UK pension legislation in over a generation.

Over the next four years, small to medium-sized employers in the UK will start their journey and will be required to comply with the automatic enrolment regime.  Many companies have only a sketchy knowledge at best, of their new legal duties, and those that believe a “one size fits all” payroll system will meet their needs in full, are very much heading towards disaster.  Experience so far has shown that to achieve full compliance employers really do need to get the bull by the horns and in true mission control style, plan ahead, task by task, step by step.  Failure is not an option.

In outer space, the margin for error is slim.   Back on Earth, those employers that find themselves in breach of their new regulatory responsibilities could face disciplinary action or even prosecution.  To safeguard employee interests, an enforcement regime has been established.  Employers will be required to register with The Pensions Regulator to declare compliance.  Furthermore, employers will be required to comply with new statutory employment rights and contributions will be monitored to ensure that all are meeting the new financial obligations.

When Voyager was envisaged, decisions were taken to determine objectives, experiments and destinations well in advance of the launch dates.  In preparation for automatic enrolment it is essential that employers consider what type of pension will suit their needs.  Employers will need to update their payroll and HR systems (assuming of course they have them) to meet the new administrative burden, familiarise themselves with their new duties and they will need to consider the financial impact of the compulsory contributions on the company accounts.

Regular duties include self certifying compliance, providing scheme information to employees, automatically enrolling employees, making contributions on their behalf and keeping accurate scheme records, to list but a few.   The impact of these reforms will be nothing short of significant on the day to day operations of your typical small to medium-sized employer.

Advice on how to plan ahead is fundamental if businesses are to survive the journey. The final destination might not be known, but those who would challenge the credibility of independent financial advice and planning in the context of automatic enrolment have not fully understood the wider challenges faced by employers.  Although automatic enrolment started in 2012, the journey for UK workplace pension provision is only just beginning.

Our corporate clients are provided with a clear automatic enrolment strategy. If you would like to find out more about how the new legislation will affect your business please contact our Consultancy Support Team on 08445 440 747 or email consultancy@rowanmoor.co.uk.  We look forward to hearing from you.

Rob Hawthorne is a Chartered Financial Planner at Rowanmoor Consultancy Limited, Independent Financial Advisers, Bolton.

www.rowanmoorconsultancy.co.uk


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