Insurers’ views on auto enrolment exposure and PII
We invited ACCA’s recommended broker Lockton to ask insurers for their views on how exposure to auto enrolment could affect your professional indemnity insurance cover.
Q: How do insurers view accountants who operate payroll for auto enrolment contributions? A: Insurers view this as a low risk activity as the accountant does not normally provide any advice.
Q: How do insurers view general advice on the auto enrolment legislation? A: Insurers would expect an accountancy firm to direct clients to the government websites explaining the client’s duty under the legislation. We would expect this work to be clearly noted in the scope of services or included in their retainer letter with their client. The scope of services should clearly state the activities being provided and whether or not (regulated) financial services/investment advice or specific tax advice is being provided in relation to auto enrolment legislation. Again, it should be clear whether the advice is to the employer or the director as an employee. ACCA has issued a template for engagement letters to be used when providing auto enrolment services.
Q: How do insurers view assessing eligibility within the workforce? A: There are very clear rules on who is eligible so we would expect this to be part of the general advice an accountant would give under their normal activities.
Q: How do insurers view accountants who provide advice to their clients on available pension options? A: If the accountant is signposting to the government’s NEST site only then this is considered as low risk. However, where an accountant advises their client on any scheme outside of the NEST arrangement, insurers are generally treating this as investment advice and this represents a higher risk.
Q: Does the accountant need to be regulated by the FCA for auto enrolment advice? A: Only when advising an individual and not the employer.
Q: How do insurers view accountants assisting in the setting up of the pension? A: If the accountant is assisting an IFA in the setting up of the pension by supplying employee payroll data this will be acceptable and considered as low risk. However, if the accountant is advising on the type of pension (other than NEST), this is moving into the type of advice generally provided by an appropriately qualified accountant or IFA and will be treated as higher risk investment advice.
Q: How do insurers view accountants who submit information to the pension providers? A: We would expect the appropriately qualified accountant or IFA to do this. However, if the accountant is supplying employee payroll data only this will be acceptable and in this scenario will be categorised as payroll.
Insurers are currently in the process of updating their proposal forms which will identify the services provided in respect of auto enrolment. If an insured is declaring income relating to pension scheme selection (other than NEST), then this is likely to impact premiums.
Footnote: This article represents the views of a number of insurers who Lockton have surveyed and is not to be regarded as advice (whether legal or otherwise) given by Lockton Companies LLP or the writer and cannot be relied upon by any reader of this article. By reading the article you agree that Lockton has no liability to you or any other party in relation to the same. If you have any concerns or queries about the subject matter of this article then please seek your own independent legal advice on the same.
ACCA says: The insurance companies approach is very disappointing as clearly the regulators both agree that the activity is unregulated. ACCA is discussing the position taken by insurance providers with the Pension Regulator and its impact on auto enrolment, SMEs and accountants.