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Are you a payroll provider? How are you dealing with the issue of auto enrolment?

by Bill Monty | May 17, 2017
  • As a payroll provider, it can be tricky trying to ensure that your clients’ employees receive the optimal pensions outcomes from auto enrolment. It’s not your job to know the ins and outs of complex pension funds and how they affect the retirement plans of those employees enrolled in those schemes. That’s why more and more payroll providers are turning to specialist financial advisers to help them choose an appropriate pension fund for their clients’ auto enrolment programmes.
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    What auto enrolment means for UK businesses right now

    Since 1 October 2012, all UK employers have been required by legislation to provide a qualifying workplace pension scheme for their employees. Each individual business has been given a date (known as their staging date) by the pensions regulator as to when this will apply to their business. Since 1 April 2017, all employers who incorporated prior to 1 April 2012 need to have an auto enrolment programme in place.

    This means that from May 2017, all employers who incorporated between April 2012 and September 2017 are required to get their auto enrolment programmes up and running between 1 May 2017 and 1 February 2018. Many new start-ups and small SME’s are likely to be affected by this over the next twelve months.

    Sable International has been helping many UK companies (and payroll providers) through the process of auto enrolment and have noticed that small businesses tend to be the ones who are affected the most by the process.

    While focusing on growing their businesses, small business owners simply do not have the time available to cope with the additional admin that comes with auto enrolment. Most rely on their payroll provider for guidance, and many payroll providers are, understandably, not always sure how to go about finding the right investment plans for their clients.

    How we can help you and your clients

    Technically, auto enrolment falls outside most payroll providers’ remit. However, because it does impact payroll, due to the additional pension contributions required, many business owners turn to their payroll providers for help. These providers then advise their clients to either get in touch directly with pension scheme providers, or urge them to seek the help of an independent financial adviser.

    The former is often chosen by business owners, as most businesses are constantly seeking ways to reduce costs. Whilst there is nothing wrong with approaching a pension provider directly, it can have its drawbacks.

    The likelihood of most of these small businesses starting their pension scheme from scratch means that Master Trust/low cost pension providers often seem the most attractive. This is due to the free/low cost set up fee for the employer and free/low cost ongoing employer administration fee.

    But there are often significant shortcomings with pension schemes like these.

    Don’t sell your clients short. Urge them to be outcomes focused

    We have found that many businesses have been attracted to the free pension providers with many forgetting the cost to the employee. Each of these pension providers has an employee annual management charge (AMC) and these can range between 0.30%-0.75% per annum of the employee’s assets under management.

    Costs, over time, can have a significant impact on the performance of an employee’s portfolio. We believe it is important to have the performance of the scheme front of mind when deciding on an appropriate pension scheme for their business. This is where a skilled financial adviser shows their true value.

    There should be nothing automatic about auto enrolment

    While going with a low cost provider may save the business some financial cost, it neglects the need for a service and advice element that a comprehensive auto enrolment solution requires. Unfortunately, many business owners just want to get the issue of auto enrolment off their desks and they simply do not have the time to decide on the most suitable option for their business and employees whilst also making sure that this is done compliantly.

    Having an automated solution does not cover it all. We have found employers want to have their hands held through this complex process. They are unlikely to get the support they are looking for within an automated approach.


    We are interested in speaking to all small payroll companies who are concerned with the above and how this can impact their clients. Give me a call on +44 20 7759 5534 or send me an email and we’ll get you and our clients sorted.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

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