I was asked to call a business owner recently and explain the implications of auto enrolment to his business.  The opportunity to call this client came from an accountant we’d worked with previously and had recently read our white paper we had sent to him.

I called this business owner, spent some time understanding a little more about his business and provided him with an overview on how the rules will impact him, his employees and his business.

Now, I’m a firm believer that if I’m trying to explain something and the individual I’m explaining the concept to doesn’t understand what I’m trying to explain, it’s my responsibility to ensure that I need to communicate the concept in a more effective way.

During this call I obviously failed in my effort to communicate the impact of auto enrolment and definitely need to do better next time!  Let me explain what happened….

After I’d explained how auto enrolment will impact this individuals business.  The business owner said..

“Thanks for explaining that Chris.”  he started “The thing is….I’ve seen it all before.”

“I remember a couple of years ago when stakeholder pensions came in.  We just set up a shell, everybody decided not to join and we carried on as usual.”

“I know you told me that these rules are already law, the obligations as an employer are mine, and the penalties are high, ….but I don’t think the rules will actually impact me and my business.”

“I think that these rules will fall by the wayside and I can then get on with running my business.”

“I appreciate your opinion” I said “But let’s assume that auto enrolment does come into play, and due to your thinking ‘it’ll never happen’ you haven’t prepared sufficiently enough and therefore incur fines…..are you prepared to take that risk?”

“Yep…”

“Ok.  Thanks for your time.  If there’s anything else you need, let me know.”

“Thanks, Chris.  You’ve been really helpful…bye.”

Now on this occasion, I blame myself for not being able to communicate the importance of preparing for auto enrolment.  However it’s not a mistake I’m going to make in this blog entry…

Let’s be clear 

Auto Enrolment is happening.

If you think these rules are going to be ‘as effective as stakeholder pensions’ you don’t understand enough about the rules.

The law has been in place since 2008 and large employers have already had to comply.

If as an employer you still think it’s not going to impact your business….you’re wrong.  It will.

If you think that a concept that semi-compulsory workplace pensions can’t work.  Take a look at the australian model.

If you think that you can deal with it a few weeks before the date you need to comply…you don’t understand what you need to do.  I’d suggest you need to read , in full,  the guides on this page.

As an employer, to choose to ignore auto enrolment is like choosing to jump into shark infested waters with a cut leg.

You might not suffer.  But it’s far far more likely you will….

We recently published a white paper highlighting some of the issues facing businesses on the approach to auto enrolment.  For the majority of employers auto enrolment is still on the horizon.  However the rules have impacted some of the larger uk employers and in particular the main supermarkets in the UK.

Companies like Sainsbury, Tesco and ASDA have had huge resources to draw upon in order to prepare for these changes.  Large employers all have their own HR, Payroll and Employee benefits departments to help them implement changes.

Seperate departments for payroll HR and pensions is something that most medium sized employers have never had and, in our recent experience, there are many medium sized employers who are looking to outsource (in a similar way to how they outsource their HR or payroll) to ensure they comply with the new rules.

However there are lessons to be learned from the experiences of some of the larger employers….

Firstly let’s talk about preparation.  The large employers were talking about, and preparing for, auto enrolment long before the date they needed to comply.  The larger employers had a plan in place and worked to ensure that they complied with the plan.

Whilst there are some small and medium sized employers who are starting to prepare, for many, they don’t see preparation as a priority and therefore have put getting ready for auto enrolment at the bottom of the to-do list.  I think this is a mistake and in the white paper I explain why.

We had an interesting conversation recently with an employer who firmly believed that Auto enrolment will be repealed and removed.  I’m going to talk about this experience in my next blog entry but I think it’s worth pointing out ASDA’s experience…

ASDA reported that only 8% of individuals decided to opt out.  They were expecting a greater percentage of their workforce to decide not to join their scheme and therefore thought that an 8% opt out rate as ‘stunning’.

Initial predictions on the number of individuals who would ‘opt out’ was 20 – 30% however it’s been found that, for the larger employers who have already needed to comply, it’s between 5% – 10%.

Now, these percentages of individuals deciding not to join as scheme may change as both medium and small employers need to comply.  However if the trends continue it shows that more employees are actually seeing the introduction of auto enrolment as an advantage.

Employers have had the experience of a failed ‘pensions’ experiment and therefore you can (sort of) understand why they would assume that auto enrolment will go in the same direction.

However all the initial indications from the larger employers are actually (and perhaps) surprisingly showing that, if communicated correctly and administered appropriately, your employees actually may like the fact that their employer is looking after them with a pension scheme.

It also shows that, unlike the introduction of stakeholder rules (which, in my opinion, was a failed experiment designed to encourage individuals to save more for retirement), auto enrolment is truly here to say and SME employers need to start preparing sooner rather than later….and this is something I’ll be talking about in my next entry….

I recently wrote a White Paper (titled “The Pensions Avalanche”) designed to give SME businesses and the professionals who work with SME businesses an insight into some of the challenges they may face whilst preparing for auto enrolment.

If you run a business which employs, or work with businesses you do you’re probably aware of these rules.  However whilst writing the white paper one thing became patently clear.  The fact that the rules will impact every current UK employer in the next 4 years means that the number of businesses which are impacted each and every month starts small but grows incredibly quickly.  This means that the number of companies who are impacted by these rules will continue to grow.

Let me share with you some statistics…

Between October 2012 – March 2014 6,455
employers need to comply with the auto
enrolment rules. This means that between this
periods a monthly average of 359 employers who
need to comply.

Between April 2014 – April 2015 29,750 employers
need to comply with the auto enrolment rules –
This means that between this periods a monthly
average of 1,239 employers who need to comply.

Between June 2015 – April 2017 1,022,695
employers need to comply with the auto
enrolment rules. This means that between this
periods a monthly average of 51,134 employers
who need to comply.

The main impact of Auto Enrolment is in the later periods due to the fact that the majority of employers in the UK are SME employers (companies who employ less than 250).  In fact 99.8% of employers in the UK fit into this category.

This is one of the reasons that, whilst smaller companies have more time before they need to comply with auto enrolment, the rules also have the largest impact.  This is not only because these firms have less resource than larger employers but also due to the fact that the potential access to advice and support will be limited due to the scale of firms which need to comply.

One other thing to remember is that, for some larger firms, Auto Enrolment is already an issue.  These firms are much larger that your typical UK employer and include some of the UK’s larger employers.  This includes public sector employers like the NHS and the Ministry of Defence as well as ‘private sector’ employers including 3 of the big supermarkets, Tesco, Sainsbury and ASDA.

In my next Blog post I’m going to talk the information these large employers have shared about their experiences with auto enrolment and what SME employers (and the professionals who work with them) can learn from their experiences.

Let me ask you a question.  What was the last thing you lost?

If you’re anything like me you lose stuff on a pretty regular basis.  In my house, and on a pretty regular basis, I can be found rushing around trying to remember the last time I had my car keys, where I’d put my mobile!

Luckily due to the fact that we use our keys and mobiles every day they aren’t usually too far away and are usually found pretty quickly after being lost.

But, and please indulge me whilst I ask you another question, how easy would it be to find your keys if you hadn’t seen them all year?  or in the last 5 years? or the last 10?

Now it’s highly unlikely that this would happen. Most of us use our cars almost every day and therefore if your keys did go missing you’d continue to look for them until you find them.

However what about if you lost something, on most occasions  infinitely more valuable than your car keys but not an ‘object’ you use day to day.  An ‘object’ which, in some instances, can be worth thousands of pounds. Your pensions…

A recent survey found that nearly a quarter of adults have ‘lost’ a pension pot.

‘Lost’ in this context doesn’t mean the TV show set on an island which seemed to get stranger and more incomprehensible every series.

‘Lost’ in this context doesn’t mean the tv show set on an island which seemed to get stranger ’Lost’ in this context means ‘Lost track of’….i.e. when you haven’t got any paperwork on the scheme.

This isn’t particular surprising due to the fact that, on average, we now have 11 employers over our working lives.  With our busy lives, trying to keep track of numerous different schemes can be quite tough.

So either you, or one of the next 3 people you meet are likely to have lost a pension at some stage.  In a quartet of people there’s a good chance that the individual who has ‘lost’ a pension in their lifetime is you!

A lot of these pensions have may have a relatively small value however let’s not forget that this is still your money and you have a right to claim it!  Also you might find that the pension you thought was worth pennies is actually worth significantly more.  Therefore surely there’s some value in taking the time to trace these schemes.

The issue previously was that these schemes, especially without the required paperwork, was difficult to trace and track.  However since 2007 there has been a free service, run by government, which may be able to help you potentially find any scheme you might have ‘lost’ throughout your working life.

Therefore, if you are one of the four who have misplaced a scheme, your pensions can go from ‘lost’ to ‘found’ quickly, easily and without too much work on your part by using this service.

You can find the online portal to the Pension Tracing Service here.

Over the weekend I took some time to visit the London Coffee Festival (in the Truman brewery in Shoreditch).  I managed to try a bunch of interesting coffees, play with a few coffee related gadgets and also introduce my friend to the wonders of Chai tea.

Now whillst the coffees we tried and the teas we tasted had a number of similarities (they, on the whole, were hot and wet!)  there are enough differences in taste and consistency to ensure that you would never describe a tea as a coffee, or visa versa.

Now it’s unlikely that most of us would get confused with the diferrence between coffee and tea….but is the difference between advice and information when it comes to our money so clear?  especially when it comes to the official source of financial information, the money advice service

I like the ‘Money Advice Service’.  They provide some great information, tools and resources.  However there is one thing they don’t provide…and that’s advice.

You could argue that advice is in the eye of the beholder and actually theres some validity in that argument.  The dictionary definition of ‘advice’ is:-

Guidance or recommendations concerning prudent future action, typically given by someone regarded as knowledgeable or authoritative.

Now, I’d suggest the team behind the money advice service are knowledgable and authorative.  The information on the site is clear, well written and accurate and suggests that it has been written by individuals with high levels of expertise.

However I’d also suggest that whilst the information (and interactive tools) on the site are increibly useful they are not ‘advice’.

Personally I believe that to offer ‘advice’ you need to ensure that the advice is tailored to an individuals circumstances.

This is where the Money ‘Advice’ Service falls short.  Whilst there are various calculators and useful tools to use no tool on the site has the expertise to truly understand your needs and make appropriate recommendations based on this.  This is why I believe that the term ‘advice’ is misguided.

The Money Advice Service is currently under a lot of pressure.  The treasury will review the service over the next couple of years with some suggesting that the service won’t exist in it’s current state in 2 years time.

Personally, I think that if we lose access to a free source of good quality public information this will be a shame.  However with the budget for the money advice service for 2013/2014 being of £78.3 million I’d suggest that there’s probably a far better way of providing access to this information far more efficiently and cost effectively.

There are a good number businesses, charities and individuals providing good quality information on a range of subjects and for a fraction of the annual cost of the money advice service.

It may be the case that you feel, when managing your financial affairs, that all you need is information.  If this is the case then the Money Advice Service might be perfect.  However if you’re looking for bespoke advice based on your individual circumstances I believe that it’s worth looking at speaking to a qualified individual who can help you with this.

The difference between information and advice is like the difference between tea and coffee.  Similar…..but completely different.

As auto enrolment approaches for many employers we are finding that, when working with certain employers, some interesting aspects of the rules which are coming up which are worth mentioning.

I’m conscious that these quirks may not apply to your business.  However they do serve to illustrate that early preparation and understanding whether there are any ‘quirks’ which may mean the process towards making sure you comply with the auto enrolment rules might take slightly longer than you expect.

However if you are one of the businesses which this aspect impacts, you are a planner who are helping businesses prepare for auto enrolment (I know that we have a few regular readers who are other advisers) I felt it was important to share how this change might either impact you or your clients.

It’s important to mention that I have changed the name of the company in this story.

So….let me share with you a story:-

A company, let’s call them Trojan education, who due to employing 20 people assumed they didn’t need to worry about the auto enrolment rules for some time.

Based on their PAYE reference number their ‘staging date’ (the date they need to ensure they comply with the new rules) was the 1st January 2017.

However they manage their payroll through a company which manages all payroll data through one collective PAYE reference number.

Trojan education has seperate contracts of employment with their employees…however due to the fact that the firm who manages their payroll does this collectively under one PAYE reference number the date Trojan now need to comply has skipped forward.

The organisation which manages the payroll for Trojan manage over 4000 employees through their payroll under one PAYE reference number and have called Trojan to tell them that, although they only have 20 employees, they have been included as part of their payroll.

Therefore need to take action to comply with auto enrolment rules within the next 2 months as the company dealing with the payroll had all of the employers they work with under one PAYE referrence number.

Obviously Trojan were slightly panicked.  They were a million miles from being ready for the change as the systems they need are not currently in place.

The good news is the pensions regulator have put some rules in place to accomodate the fact that there are smaller employers who form part of larger payrolls and may, potentially unfairly, have to comply early.

In Trojan’s circumstances this allows them to push their auto enrolment date from next month to January 2016 which allows Trojan some time to prepare but actually means that (considering their original staging date was January 2017) they have one year less than they had previously thought.

Whilst this story may not apply to your business or the clients you work with it does illustrate one thing.  There are ‘quirks’ to the auto enrolment rules which might have an impact to either your business or your clients.

Understanding how auto enrolment will impact your business both early and in depth will ensure that the impact on the day to day commercial activities within your business will be minimised.

In this Blog, any on my education site Common Sense Money I try to share ideas, inform and talk about financial issues which are relevant to you, your family and your life.  I’ve received both fantastic and constructive feedback on my work in this area however I realised last night whilst thinking about how I can improve what I do I realised there is something I don’t talk about enough on any of my ‘online homes’….and that’s the importance of taking positive action.

Let me be clear….I’m a firm believer in sharing good ideas.  I’m a firm believer in taking time to understand both what you want to achieve in your life and what you need to achieve financially to make these life goals happen.  I’m a firm believer in learning.

However all of these things are pointless unless you do one thing….take positive action.

Positive action changes everything.  Taking a good idea and running with it, understanding what you want to achieve in your life and taking steps to make it happen and not only learn, but implement what you learn in your businesses, your careers and your lives is the key difference between just understanding more and making sustainable positive change.

Intellectually we all know this.

So, what’s stops us take positive action both generally, and in particular, when it comes to taking control of our money?

There could be a wide range of reasons however I believe one of the key factors is that, sometimes, we know we need to take action to improve our situation financially, make the most of our hard earned savings or put the right provisions in place for our businesses

However with the wide range of (sometimes conflicting) information available it’s easy to take action but potentially tougher to know whether the action you take is going to help you achieve what’s truly important to you.

If you decide to work with a financial planner I believe that part of their role is to help you ‘cut through’ the wide range of information so that you’re able to take action but only after, and this is important, they have taken the time to understand what’s truly important to you.

However whilst some people decide to work with a financial planner it’s not impossible to take positive financial action by ensuring you are well informed enough  to ‘do it yourself’.  Effectively, and like engaging with any professional, you’ve got to decide whether you’ve got the time, knowledge and confidence in this knowledge to take the ‘DIY’ approach

Regardless of whether you decide to work with a financial planner or alternatively manage your financial portfolio yourself the key factor here is positive action is always going to be far better than something more dangerous, ignoring the fact that you need to take action to achieve your goals.

However many people, although they may be concerned about the achievement of their financial goals may be concerned about taking action which is detrimental to them achieving their hopes, dreams and aspirations (regardless of whether they decide to work with a financial planner or take a DIY approach) and I’ll be talking about how to ensure that the action you take is truly positive and not detrimental in some of my upcoming blog entries.

We’re talking to a number of medium sized firms at the moment who are preparing their businesses for the impact of auto enrolment and have found a sector specific quirk which impacts temporary recruitment firms.

I’m aware that your business may not be a temporary recruitment firm but in the interests of ensuring that I’m sharing useful information which may impact your business or a businesses you work with it’s something worth sharing.

So, let me tell you a story….

Steve, the managing director of a recruitment firm, knows about auto enrolment.  However he’s not particularly concerned about taking action immediately.  The reason for this is that  although he has 120 – 150 temporary workers working for his clients at any one time, he only had 35 workers on permanent contracts actually working for the agency.

Steve has assumed that he needs to meet the auto enrolment rules for his team in the office.  His business has contracts of employment with both his team and the temporary staff who work in other peoples businesses on the agencies behalf.  He has one payroll which effectively covers both the team in the office and the temporary recruits.

What Steve didn’t realise is that he needs to ensure that he complies with the new rules not only for his team but also for his temporary workers.  This means making regular contribution if the temporary worker complies, communicating regularly with his temporary staff about the scheme and meet the wide range of rules contained within auto enrolment regulation.

The cost of both making pension contributions and the time it takes to ‘deal with the paperwork’ to ensure Steve’s firm complies with the new rules need to be planned and prepared for.  This planning and preparation will take time regardless of whether Steve decides to meet the new rules internally or work with a professional partner.

However ‘time to prepare’, with Steve’s business in particular, is something that due to his incorrect understanding of who would be included he now has less of….

Steve had assumed that he had until October 2015 (the date employers who employ 30 – 35 need to comply with the new rules) however based on the fact he will be seen as employing 185 (including his temporary staff this is the number his firm ‘employed’ in April 2012) he will need to ensure that he is fully prepared for the new rules by the 1st April 2014.

In our experience we’re finding that many employers are underestimating the time it takes to ensure that their businesses are ready for auto enrolment.  Also many firms have just gone through potential changes to their systems recently in order to comply with the HMRC’s Real Time Information rules.  Due to this auto enrolment has been reduced in priority on the ‘to do’ list.

However with the pensions regulator saying that firms should start to prepare at least 18 months before the date they need to comply with the auto enrolment rules and some larger employers saying they wished they would have taken more time to prepare I’d suggest the small and medium sized employers should start to prepare sooner rather than later.

For Steve’s firm, he’d initially assumed that he had 2 years to prepare….however due to the fact that he officially employs not only the staff in the office but also the temporary staff he now has a year to put a plan in place and make the required changes to his systems and processes to ensure that he complies.

So, if you run a business or work with businesses who employ, and especially if you’re involved in the temporary recruitment business, it’s important that you start to plan or prepare now to ensure that your business is completely ready for ‘auto enrolment’.

Downsizing from a larger to a smaller property is undertaken for a number reasons from selling to provide children with a deposit so they can purchase their first home, moving closer to children, or you want (or need) a reduction the day to day work of maintaining your home.

A good plan is the key to a successful downsize but, whilst I can’t promise it will be absolutely stress free, following my 7 ‘downsizing tips’ will certainly stand you in good stead.

*  Begin the sorting through process of personal items, housewares, clothing, furniture, the loft, garage and even the shed well in advance. Depending on whether you have been a frugal spender or a secret hoarder this process could take days, weeks or even months.

* Try to be objective about what to take with you to your new home. Remember not everything you currently own will fit into your new smaller space.

*  Recruit some helpers, if your friends or family are anything like me, there’s nothing like the offer of Sunday lunch in exchange for few hours of free labour! If help is not readily available seek the help of a professional home organiser or de-clutter. The Association of Professional De-clutters and Organisers lists professionals across the country that specialise in assisting people downsize and move home.

*  As you are going through your items sort them into four clear categories:-

- Items definitely not going to the new property and instead are heading to the charity shop or some other worthy cause.

- Items you are not sure about and you feel you need to think about and either decide to keep or remove later.

- Items you think someone else would love to have as a gift.

- Items to throw away.

*  Purchase storage boxes with wheels or handles that can be moved with ease without too much bending or lifting.

*  If you have lived in your property for more than 10 years invest in updating décor and refreshing key rooms such as the living and dining room, kitchen, bathroom and master bedroom. These rooms tend to ‘sell’ a property and investing a relatively small amount can save months of the property languishing on the market and may help you achieve closer to the price you desire.

*  Carefully select a removal company. Whilst a man with a van will save you money, consider obtaining the services of a company that does the packing for you, supplies you with boxes for free and are fully insured.

As the new tax year starts recent research has found that current cash ISA rates are at a record low.  According to Moneyfacts (published back in February) the average interest rate is 1.74%.

There could be many reasons for this, however one of the potential reasons cited as the fact that banks and building societies have more access to money via the FLS (Funding for Lending Scheme) which was launched (by the Bank of England and the Treasury) and is designed to boost lending to households and companies.  Banks and Building societies have less need to attract savers money and therefore have less incentive to offer more attractive savings rates.

The fact that interest rates are at an all time low and well below inflation (the increase in the cost of living ) illustrates one thing.  It’s a tough time for savers.  However, if you are a saver you can ask yourself three key questions to ensure that your savings are working as  hard for you as possible.

1.  Are my savings in the right place?

We’ve already established that interest rates are pretty low at the moment.  However some accounts are better than others.  There is some value in ensuring that your savings are in the right home.  This means checking your current interest rate and whether you are holding this money tax efficiently and comparing this with what’s available either with your current provider or through other banks or building societies.

Just because interest rates are relatively low it doesn’t mean that you should ‘settle’ for the lowest of the low!  It’s absolutely worth spending some time doing some research to provide yourself the the best of what’s available.

2.  Are my savings held as tax efficiently as possible?

Tax has an impact on your savings returns.  The interest you receive on your savings, if you are a taxpayer, is deducted at source when your interest is paid.  It’s therefore worth using your ISA allowance to ensure that you are making the most of your tax efficient allowances.

It’s also worth noting that if you are a non taxpayer you can complete a form with your bank or building society (ask for a R85) to ensure that you won’t pay tax if you don’t need to.  By doing this it saves you time potentially claiming this tax back.

3.  Should I save, or save and invest?

Saving and Investing are different….and let me explain what I mean.

Your savings are the money you keep in the bank.  It’s usually relatively instantly accessible and provides you with money you need in the event of an emergency, or for your short term plans.

Investing is the money which are designed for you to achieve your longer term goals (from paying for your children’s education, your retirement or your dream holiday in 10 – 15 years time!).  This is usually money which you don’t need instantly but need for the longer term.

Whether you should save or both save and invest depends on a range of factors including your attitude to risk, your financial goals and the amount of remaining time you have in order to achieve your financial goals.  However it’s important to take some time to both understand the difference between saving and investing and ensuring that your money is in the right place.  For the majority of us a combination of both saving and investing is the most appropriate balance.

However it’s important to ask yourself what’s right for you.  Just Saving….or both save and invest.

By asking these questions it will provide you with more of an insight into how to ensure you can manage your make your money work for you and potentially close the gap between where your money sits today and what you want your money to do for you…