More than a million small businesses are going to have to set up pensions for employees for the first time under auto-enrolment or workplace pensions. This is going to present myriad challenges for small business owners, especially at a time when many are facing increasing employment costs. But there are steps you can take to make your clients’ lives easier, and to support them through this process.
The most important thing is to encourage your small business clients to plan ahead. You can also act as their auto-enrolment guide to help them understand their duties – and how to comply with these duties.
Rollout of auto-enrolment
Since the introduction of the scheme back in 2012, more than 5.4 million workers have been automatically enrolled into a workplace pension; the aim being to enable individuals to save towards the lifestyle they aspire to in retirement. To date, the focus has mainly been on larger and medium-sized businesses, as automatic enrolment is being staged over a period of six years.
However, small and micro-businesses are now starting to reach their auto-enrolment staging dates. This means that if your client’s business has fewer than 50 staff, your client will need to start auto-enrolling workers to meet the deadlines set by the government.
Talk clients through their options
If your client already has a pension scheme, their provider will be working with them to make auto-enrolment as smooth a process as possible. If your client has never offered a pension scheme, however, they will face a bigger challenge – but that’s where you can help them.
One of the most popular options for many micro businesses is the National Employment Savings Trust (NEST), the workplace pension set up by the government. By signing up to NEST, your small business clients can meet their statutory obligations without having to pay any fees.
Aside from NEST, other major providers of auto-enrolment include services such as NOW: Pensions and The People’s Pension. However, you should advise clients that with such firms, they will have to pay employer fees of hundreds of pounds a year for administering a workplace pension scheme.
This could get costly, and especially if your client is a micro-employer with just a handful of employees.
Impact of auto-enrolment
Figures from the Department of Work & Pensions (DWP) show that across all employers that had staged up to August 2015, the total median cost of implementing auto-enrolment was £500. Further findings show that employers tended to say the most work came from communicating the reforms to workers, as well as ongoing administration of the pension scheme.
When helping clients to set up a pension scheme, it may be helpful to explain that auto-enrolment is a payroll tax that they face. You should also point out that at present, total minimum contributions are two per cent of workers’ earnings, of which at least one per cent must come from the employer – although these are set to increase.
Plans to delay increases to minimum contributions
In the Autumn Statement, the Chancellor revealed plans to delay the next two scheduled increases in auto-enrolment minimum contributions rates by six months. The aim is to simplify the administration of the scheme for the smallest employers by aligning these changes with the start of the tax year.
This means the increase from two per cent of qualifying earnings to five per cent from October 2017 will now be delayed until April 2018, and the increase to eight per cent from October 2018 will be delayed until April 2019.
Talk clients through the changes to workplace pensions
While some of your clients may view this as a great cost saving, others will want to get on with the job. Either way, it’s important to check your clients understand these changes.
In your role as their adviser, you could suggest to your clients that they may need to refresh their literature and systems; you should also advise them to hold discussions with their staff to ensure they are kept up-to-date with the changes.
Help clients understand their responsibilities
As an accountant, you are well placed to help clients understand their legal responsibility to their staff when it comes to auto-enrolment and workplace pensions regulations. You can also help them to feel more positive about engaging with workplace pensions. Your clients will benefit from the professional guidance and advice you can give them to help them to get auto-enrolment right.
For more information that can help your clients understand the requirements of auto-enrolment and workplace pensions, download our comprehensive auto-enrolment guide here.