The title refers to Augustine’s prayer “lord make me chaste, but not yet”.
It came to mind as I read concern from “industry spokespeople” over the DWP’s announcement to simplify the Auto-Enrolment regulations in time for the staging of the small and medium-sized companies in 2014.
A cottage industry has sprung up among corporate benefits advisers keen to hold employer’s hands through the “regulatory minefield” (and associated clichés) of AE administration.
The Government’s simplification program had better not clear too many of the mines or a lot of these advisers are going to have nothing to do.
My firm , First Actuarial , have been hard at work lobbying for regulatory reform. In September last year , we helped organise a delegation of payroll and pension experts to meet Steve Webb and the DWP to sort out some payroll wrinkles. We’ll be reminding them of the conversation ,our concerns and the solutions we offered. (The details are at the bottom of this article).
The concern of actuarial consultants and lawyers is expressed as regret for large companies who have spent a fortune coding payroll software to sort their complex problems and might find some of this sunk cost unneccessary. Towers Watson and Taylor Wessing have gone so far as to suggest that such firms might have to rework their processes to comply with a simplified regime.
I find these concerns extraordinary. Any business that is built around exploiting weaknesses in legislation is running a risk that that legislation will be fixed. It is not a sustainable business model.
Similarly, advisers moaning about undoing the work that has been done to comply with bad regulation ignore that it is they who have been paid for doing this work (and they who will charge again to redo the work). In practice, if there are a few over-elaborate processes which are maintained post-simplification- so be it. The payroll coding was designed to make these processes automated and it looks extremely unlikely that the likes of Marks & Spencer will have to pay again to “dumb down” their systems.
But there is a much bigger point to make here.
This constant harping on about compliance to regulations (simplified or otherwise) is offensive to those whose primary focus is on getting AE to deliver large amounts of cash and pension to those who need it most, the 11m + who do not save today.
There are greater obstacles to achieving this than the concerns we took to the DWP, problems with assessment, the jiggery-pokery to keep the pensions rich from losing protection and problems with pay period alignment.
The heavy lifting to get the DC schemes we use “fit for purpose”, the work to restore trust and get people saving voluntarily into workplace schemes is of greater moment.
While we continue to press government to make pensions simpler, First Actuarial’s primary concern is to make sure that the 1.2m small and micro employers who will staging over the next five years, do so effectively.
Auto-enrolment is not a business problem, it is a way of getting people who work in businesses to see light at the end of the tunnel, a way to the sunny uplands of retirement. If we adopt that mindset then the short-sighted concerns of the “pension industry” vanish behind us.
Here are the practical steps we suggested to the DWP in September 2012
|Payroll Periods and AE Pay Reference Periods are misaligned||AE Pay Reference Periods should be aligned to tax and NI periods|
|Employers find it hard to meet the deadlines for commencement of AE communication duties||Align the start of communications duties with the pay-date in the final reference period in which an employee become eligible|
|Pro-ration obligations are out of step with tax, NICs and pension contribution practice||Abolish pro-ration and have employees pay the full contribution at the point of payment|
|Opt-out and continuous employment obligations are inconsistent with employment law||If employees opt-out or cease active membership, their next assessment date should be three years later|
|Missed payment and back pay obligations are complex and out of step with tax and NICs||Regulators should consider AE and contribution payment, in alignment with Tax and NICs and allow comms duties to commence from this point|
- What would you pay to get your firm a proper pension? (henrytapper.com)
- People get ready! (henrytapper.com)
- Who’ll pay the price for an auto-enrolment train crash? (henrytapper.com)