Auto-enrolment is a worry to accountants. Estimates are pretty consistent that around two thirds of all employers staging auto enrolment will look to accountants for compliance with auto-enrolment regulations and help with choosing and setting up a workplace pension.
Unfortunately for most accountants, the best view they have of a workplace pension is from the TV.
Tidings of great joy?
But help is on its way. Their institute has decided that now is the time to give accountants a little guidance and has published a series of documents to help practitioners.
I have been reviewing those documents (I can access) helping accountants provide help to clients on choosing a pension. I was attracted by social media..
So far so good.
A search on the ICAEW website lead me to a number of exclusive areas from which I was excluded – this for example.
The public information is simply a series of links to the Pension Regulator’s website.
There is one exception.
What the ICAEW makes freely available by way of unique content is a guide to choosing a pension . You can read it here. It claims to contain “new guidance” though – in the main it contains links to the Pension Regulator’s website (which is nothing new).
Where the ICAEW’s guidance is new – it is confusing. Readers are told that
TPR have confirmed to ICAEW that they do not expect payroll practitioners who either offer a single scheme solution or differential charging structures (for example, to reflect payroll compatibility) to perform due diligence on the governance of any such single scheme, or schemes for which preferential rates are charged.
So that’s alright then.
But a couple of paragraphs later, when talking of an accountant’s relationship with his or her Professional Indemnity insurer, things aren’t so clear.
ICAEW approached two of the major insurers who provide PI insurance to our firms. They are of the view that they would be interested to know at renewal if firms are advising employers on choice of pension scheme. Additional questions may be asked to try and gauge what knowledge and experience the firms have which puts them in a position to give advice on such a topic and also how they ensure they do not ‘creep’ into regulated advice territory.
Also understanding the accountants role will help determine the impact on premium. Where only factual information is given, insurers are not at this time seeking extra information about this and therefore it would seem any impact on premium would be slight. Where advice is given, as mentioned in the previous question, firms should have the requisite knowledge, experience and expertise to deal with matters and provided they are able to demonstrate this then the impact on premium would be reduced.
The Lord giveth and the Lord taketh away!
We’ve asked the Regulator what the position is on providing a default and tPR has been clear, where payroll decides on a default, it will have to make it clear that “other options are available and that they may be better”. This is not made clear in the ICAEW factsheet.
The legal position comes down to whether providing a single scheme solution constitutes advice (or is simply providing factual information). In my view, providing a default single scheme solution is advice – it is telling clients what to do (which is why the Pension Regulator wants the additional).
Suggesting to practitioners that they do not need to perform due diligence on a default arrangement is a very dangerous thing to do. I have not seen this on the Pensions Regulator’s website.
I am sure that PII insurers will ask firms who offer defaults
“to show their experience and expertise to deal with these matters”
Why would the ICAEW, co-authors of the Master Trust Assurance Framework, suggest to members that they can get away without doing due diligence on the Governance of Pensions they are defaulting their clients into?
If I was reading this factsheet , I would be none the wiser and much more confused.
Assuming I do not consider myself as having the experience and expertise to deal with these matters, I am looking at a small increase in my PI if I give information , a large increase if I give advice and presumably a ramp in premiums if I provide a default without showing I was qualified to channel my clients down that route.
Accountants who channelled clients down the path to NOW and People’s Pensions on the basis that these pensions are “free” are now reversing them out of the cul de sac to which the path lead. Who knows if they won’t be doing the same for the next default they choose if it does the same in 6 months time?
Quite apart from the Regulatory and Insurance consequences, there are issues here about credibility and reputational risks. Employers go to accountants for their skill and knowledge.
The Institute of Chartered Accountants of England and Wales, has very publicly announced a decent profit in the past year.
Having spent much of the summer pestering the ICAEW to provide guidance to their members about auto-enrolment, I spent most of the autumn gnashing my teeth with frustration that I could not provide members with such help. I had been stopped in my tracks by the ICAEW’s commercial department and their demands for cash up front to promote my tools.
But lo! A windfall rebate of fee fines- or should that be “fine fees” – (what fees are anything but fine) means that the ICAEW can reduce the increase of member fees to their lowest level for many years (not with standing inflation being at a record low).
Perhaps now is the time for the Institue to back down on the pay to play policy it is adopting towards the pension selection tools , putting them into “play” without the “play”.
What accountants really really want!
Every single week this autumn , I conducted training for accountants and their payroll bureau managers. I worked with 2020, ICPA, through QTAC, Payman and through a number of directly organised events. The message that came back loud and clear was that accountants were and are scared silly about offering advice, even if that advice seems to be unregulated. They know about regulatory creep, they have seen what happens to IFAs who get it wrong and they are terrified about impairing the value of their practice and of the impact on PI premiums.
What the ICAEW are offering members reading this factsheet is more confusion and no solution.
The ICAEW should be taking the lead, instead they are arguing legal niceties on the head of a pin. The advice from the ICAEW is too little too late and it does nothing to help.
I call upon the ICAEW to promote informed choice and provide access to sites such as http://www.pensionplaypen.com where accountants and employers can get the information needed to properly choose a pension for their staff.
For those who want to read the fact sheet and guides available from the Friends of Auto-Enrolment (and absolutely free), they can find them here