I attended an auto enrolment presentation by Star Payroll on Monday. One of the speakers was Henry Tapper from Pension PlayPen whose analysis shows that the transfer of responsibilities from financial advisers to accountants and payroll bureaux intermediaries is happening far slower than expected.
But things could be about to change, drastically.
Of the intermediaries surveyed, Pension PlayPen reckons only 3% were accountants but 51% were financial advisers. This compares with NEST’s survey which showed that 49% of employers with 2016 staging dates said they expected to obtain their AE advice from accountants and payroll bureaux and only 14% from IFAs.
Arguably the reasons are a mixture of slow action by employers, worries about risk and lack of knowledge. Yet there is an avalanche of businesses scheduled to stage between now and May 2017. So there’s going to be a massive struggle to cope with the numbers – that’s inescapable. This is likely to lead to errors, increased costs, stress and possibly even fines.
Yet it’s not difficult if you know how – like most things in life. But working out how is probably difficult.
What is set to make the situation a lot worse is that IFAs are retreating from the marketplace as there is less and less to be earned as payroll sizes shrink. A nasty shock is going to be the increased costs, especially as a percentage of current fees. For a small business fees could double, in addition to the actual pension deductions.
Of course the whole burden of extra costs falls on employers, not employees.
What seems only recently to have become clear is that intermediaries are in fact allowed to advise employers (but not employees) in a non regulated environment. Whether or not many actually do so remains to be seen as naturally there will be a reluctance to recommend a choice of pension provider as that would seem to be a commercial risk. Still that leaves scope for just plain advice.
The one big lesson so far is that it’s madness to use middleware – software between the payroll and the pension provider. It might have been a good idea at the time but it adds enormously to cost, time and hassle. AE must be an integral part of payroll, otherwise…
The good news is that by the middle of 2017 the dust will be settling. In the meantime our advice is to choose a payroll bureau that is fully up to speed and is positively keen to do it.