Q. I am the Finance Director of a medium-sized employer. I have been tasked with ensuring my company’s compliance with the auto enrolment regime when we reach our staging date in early 2014. I was concerned to see a recent newspaper headline that talked about an expected “capacity crunch” amongst pension providers next year, when small to medium-sized employers begin to enrol automatically their employees. Is there anything that I can do to avoid any capacity crunch and ensure my company’s compliance?
A. I can appreciate your concerns regarding the anticipated “capacity crunch” amongst pension providers as a greater number of employers are obliged to enrol their employees into a qualifying workplace pension scheme.
It has been reported widely that the Pensions Regulator (“TPR”) – the government body tasked with ensuring companies’ compliance with the auto enrolment regime – has been making enquiries of pension providers, regarding their ability to take on new pension schemes, as a consequence of the TPR’s own concerns regarding a potential lack of capacity amongst pension providers.
TPR has highlighted concerns also that the various payroll software providers are failing to offer suitable software programmes in time for employers to meet their responsibilities. Indeed one of the biggest barriers to compliance employers have experienced to date is ensuring that their payroll software has either been amended or integrates with their pension provider’s systems so as to enable an employer to deduct contributions, enrol and re-enrol staff and keep an accurate and contemporaneous record of an employer’s compliance with their obligations under the auto enrolment regime.
As with so many things in life, the key to ensuring your company’s compliance with its obligations under the auto enrolment regime lies in the planning. I recommend therefore that you consult a chartered financial planner, who specialises in workplace pensions, as soon as in practicable and in any event at least 9-12 months before your staging date (the date by which you must comply with your auto enrolment obligations).
Whilst this may seem excessively cautious, experience has demonstrated that this is the minimum time required to manage a project successfully (without increasing unnecessarily the stresses for those involved). This will afford the time necessary to review your existing pension arrangements (if applicable), consider the options available to you and to identify the most appropriate solution. It will also enable you to engage with staff and to ensure that they appreciate fully the auto enrolment regime, what will happen and any actions that are required of them.
The sooner you are able to identify an appropriate scheme, the less likely you are to fall victim to any “capacity crunch” (as providers are already refusing to install schemes for companies who do not allow the provider sufficient time to undertake their due diligence and to ensure that the systems are fit for their purpose.
Q. I am risk averse and I am struggling to achieve any sort of meaningful return on my savings, due to the prolonged low interest rates. A friend told me that I shall soon be able to engage in peer to peer lending (which they informed me attracts reasonable rates of return) through my ISA. Is this correct?
A. Sort of. The Treasury has confirmed that it is considering how peer to peer lending sites might be included within the tax-free savings regime. However, the Treasury’s considerations are very much in their infancy.
Peer to peer lending is set to come under the regulatory scrutiny of the Financial Conduct Authority with effect from April 2014 and early indications are that the Treasury is keen to include it in ISAs, considering that such a move would prove to be a boost for small firms affected by a perceived bank lending vacuum.
However, I do not expect peer to peer lending to be permitted within the ISA regime any time soon. The Treasury is likely to undertake further investigations and, in all likelihood a consultation with the industry and interested parties, before extending the permitted investments.
In any event, you ought to consider carefully whether peer to peer lending is a suitable investment for you to make. Whilst it has the potential to generate higher returns than a deposit account, it also carries with it greater risks. Indeed, one of the arguments against permitting peer to peer lending within the ISA regime is that it generally carries a much higher risk profile than many investors would ordinarily hold in their ISA.
If you are keen to explore your options and/or you wish to improve the returns you are achieving on your savings, I recommend that you seek assistance from a chartered financial planner who will assess your attitude to risk and identify those savings and investments products that are most suitable for you.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
