Do you have 1 June marked in your diary? You probably should have because it is when auto-enrolment really kicks in. Although big firms began enrolling staff in October 2012, 1 June is when employers with fewer than 50 workers start staging.
By 2016 the rules will also apply to all personal service workers – nannies and carers, for example – creating totally new challenges. However, this may be the most opportune area for advisers to add value.
So far auto-enrolment has been fairly benign. The rate of opt-outs has been an acceptable 12% and The Pensions Regulator has fined only a couple of hundred of the tens of thousands of employers that have staged.
However, a small business that lacks HR resources will have to work out who their employees are under the legislation, work out their staging date and then find a pension scheme. They will also have to tackle the tangled web of eligibility criteria.
Steve Bee, chief executive of JargonFree Benefits, says: ‘Everyone thinks small firms will have smaller problems with auto-enrolment, I think the exact reverse is the case. Ask anyone who has gone through auto-enrolment and they will tell you it was hard work and resource intensive. Small firms do not have the resources.’
However, better opportunities may open up for advisers to help individual clients with auto-enrolment, in smaller but meaningful ways; in particular where a family employs a nanny for their children or a carer for a family member.
Last week child care agency Parental Choice warned of a black market of cash-in-hand nannies emerging as a result of parents trying to avoid paying into a pension for their employees.
However, advisers ought to be able to help people set up the required payroll functions, dealing with tax, national insurance contributions and now pensions. Providers in the nanny arena include PAYE for Nannies and Nannytax. There will be various employment options the client should consider.
Anyone with a critical illness, who may need to employ several people, will have to enrol them. Understanding how to fund a carer’s pension also dovetails with any long-term care or intergenerational planning being undertaken.