As I find myself embroiled (is that the right word?) in more Auto Enrolment work we’re finding more and more quirks in the system.

I’m really enjoying helping these medium sized business owners ensure their businesses are ready for the ‘auto enrolment avalanche’ and really having the opportunity to dig deep into their businesses to find solutions which work.

I’m also enjoying, with the permission of the businesses we work with but without mentioning any of these businesses specifically, sharing  the things we learn on this blog.  I’m doing this for two reasons….

If you’re a financial planner (and I know a few of you regularly read this blog…) involved in the auto enrolment market it allows you to pick up on some of the niche issues which arise which might affect your clients, or prospective clients, businesses.

or

If you’re a business owner reading about the complexity of auto enrolment  and how a seemingly simply process of compliance can very quickly turn into something far more complicated hopefully reading this will encourage you to take action as soon as you can.

So today I want to tell you a story.  It’s modern day England but in an alternate universe of Giant Robots, and huge walls protecting cities.  As you might be able to tell I’ve been reading a lot of science fiction recently…

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It’s a story of a giant unstoppable robot (auto enrolment) attacking a city which has taken years to build (a pension scheme) but is luckily protected by a giant wall (Enhanced Protection).

Luckily this robot can be easily stopped.  All it takes is the completion of a simple process and the systems in place to stop the robot.  However the robot will come back every three years and the processes and systems put in place will be tested time and time and time again.

If the systems and processes breaks down and the robot continues it will break down the wall and potentially damage the city causing significant damage.

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Whilst I’ve had the opportunity to use a degree of creative license in my method of explanation…the issue in question is real.

A few years ago individuals who had built up large pension pots had the opportunity to protect their pot (this protection was called enhanced protection) from a tax charge.  Under one condition.  The individuals in question couldn’t contribute any more money in a money purchase pension arrangement (you can find the detail and links to more depth on the HMRC website here) and their contributions to other sorts of pension arrangements were limited.

Previously that’s never been a problem.  If individuals know they can’t pay any more money into your pension….they won’t!

However with the introduction of auto enrolment it’s not a simple as that.  If an individual is automatically enrolled in a scheme and doesn’t ‘opt out’ within set timescales they are deemed to have made a contribution and therefore will lose their enhanced protection.  More information can be found on this here.

Therefore it’s important to ensure that the robot (auto enrolment) doesn’t hit the wall (enhanced protection) before it needs to be diverted away.

Admittedly ‘this collision’ will only impact a small number of individuals.

However we’ve already seen an example of the potential impact of this during the work we’ve been doing with a couple of our clients and therefore whether you’re preparing your business for auto enrolment or helping other businesses prepare for auto enrolment it’s something to be mindful of…

The more we help companies comply we understand that auto enrolment is far less about pensions and far more about systems…

Systems to ensure that employer meets reporting obligations to the regulator.

Systems to ensure that a company’s workforce understand auto enrolment and it’s impact.

and

Systems to ensure that it provides an individual with the right not to join if it’s going to have a detrimental impact to the pension they have already built up.

Please make sure that your (or your clients) businesses have the right systems in place to ensure they can meet these obligations.