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Jan 2022

19

Automatic enrolment for accountants: Lessons learned from the UK

It is a decade this year since auto enrolment was rolled out in the UK. Created to address a growing pensions crisis caused by a lack of retirement savings, an increasing life expectancy, and an overall older population, it was brought into law with the Pensions Act 2008.

The policy is widely considered to have been successful as it has certainly reversed the decline in workplace pension saving. The introduction of auto enrolment led to a tenfold increase in total membership of defined contribution occupational schemes, up from 2.1 million in 2011 to 21 million in 2019.

 

What is auto enrolment?

In the UK, auto, or automatic enrolment requires employers to automatically enrol eligible workers into a workplace pension scheme. Both the employer and the employee must pay minimum contributions into the pension pot. All other employees have the right to join or opt-in to the workplace pension scheme, depending on their age and earnings.

It began with a phased rollout, first by employer size, starting with large employers in 2012, followed by mid-sized employers in 2014, and then small employers between 2016 and 2018. The minimum contributions rates were also phased in, beginning at a 1% employer contribution and a 1% worker contribution before steadily increasing to its full amount in April 2019, that of 3% from employers, 4% from employees, and 1% tax relief.

Find out what to expect with auto enrolment in Ireland here.

 

The opportunities of auto enrolment

Auto enrolment will mean different things for different people. While it may offer employees reassurance for their future, it may also cause a considerable challenge for employers to fund this extra expense. However, if its rollout in Ireland is similar to the UK, it will also create considerable opportunities. By introducing auto enrolment, the UK government effectively created a new market for pension providers, asset managers, and other financial institutions, while also creating a new and considerable service that accountants and bookkeepers could offer to their clients.

UK accountants, bureaus, and bookkeepers offering auto enrolment typically package their AE services as one that offers expert knowledge on the topic, ensures compliance, and will see payroll processed without a hitch. Common features of this service include:

  • Assessing clients’ employee eligibility
  • Assist on pension scheme selection and assistance with set-up on the scheme
  • Auto enrol clients’ employees into their chosen pension scheme
  • Issuing employee communications on behalf of their clients
  • Provide on-going administration of auto enrolment
  • Manage employees opting out or postponing auto enrolment
  • Re-enrolment of employees
  • Submitting Declarations of Compliance to The Pensions Regulator
  • Ensure their clients legal obligations are met

Avoiding the pitfalls of auto enrolment

While auto enrolment may represent a potential new service you can offer to your clients, you should be cautious as to how you present this service. At the beginning of the auto enrolment roll-out in the UK, accountants and bookkeepers were uncertain of how to offer these services and how much to charge for them. Many were caught out by undervaluing the service. It’s important to get the pricing right from the start, to avoid having to increase costs on your clients.

How do I choose the correct pricing strategy for auto enrolment?

A number of pricing strategies are now in use, including a tiered pricing strategy, a monthly retainer fee, and a price list strategy.

  • A tiered strategy allows you to provide AE services at different price points for different levels of service. For example, with each higher tier you can add on services such as postponement, declaration of compliance, and payroll & pension reporting.
  • A monthly retainer fee sees bureaus increase their monthly charge for processing payroll to include the additional AE duties. The monthly payment will spread the cost of auto enrolment over a period of time, and it is typically offered as part of a contract.
  • Alternatively, you can choose a price list strategy where you present a menu of the services with each item priced. With this strategy, there is also an option to offer bundle deals, for example if the client buys more than five tasks or services.

Each of these different pricing strategies outline clear deliverables for the client. They offer clarity, choice and control for the client, while being a profitable service for you.

 

How do I choose the best payroll software for auto enrolment?

The rollout of auto enrolment may be stressful, for both you and your clients. The payroll software you use will not only decide what auto enrolment services you can offer but also the time you spend carrying out these services, and thus, the extra workload you must take on.

In a letter sent in July to Tánaiste Leo Varadkar, Chartered Accountants Ireland wrote that payroll service providers have requested a lead in time of at least 18 months in order to adopt auto enrolment. However, with 9 years' experience providing full auto enrolment functionality to our UK customers, Thesaurus Software have the resources and knowledge necessary to quickly begin updating the payroll software with these features.

Thesaurus Payroll Manager will offer full auto enrolment functionality at no additional cost. All Thesaurus Payroll Manager packages will include auto enrolment plus free phone and email support to help you through your auto enrolment journey.

 

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Posted byÁine CourtneyinAuto Enrolment