From an employer’s perspective, the government’s delay to the pension charges cap decision is not helpful.
It is important that this complex issue is given the proper consideration, but continued uncertainty creates challenges for employers and continues to knock confidence in pension saving among employees.
For larger employers, the delay has less impact. We have about 5,700 employees and our scheme’s charges are already competitive. We negotiated these down by a further 0.5% last year. We have also successfully navigated our way through auto-enrolment, having staged in June 2013. Our size helped us address both these issues.
If we were a smaller employer that had not gone through auto-enrolment staging, this delay would cause concern.
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Employers approaching their staging date need to take the contents of the pension charges consultation into consideration when establishing a new scheme or amending an existing one. Not doing so could lead to the scheme design having to be revisited in the near future.
The additional challenge is that the power to negotiate better terms now may be limited, due to lack of scale and leverage. The delay could makes negotiations with providers harder and more time-consuming, at a time when many employers are already grappling with complex auto-enrolment legislation.
Value for money
Employers want the best return from their investment into pension saving and part of that comes from employees believing they are in a scheme that offers value for money. Many employees will not gain that confidence until this situation is resolved. At the moment they are confused about what ’good’ should look like.
In the interim, trustees and employers are left to manage the message around their current scheme charges.
However, despite the uncertainty and challenges this delay may pose, the most important thing is that we get defined contribution scheme charging right. Greater transparency would be a start.
Pete Strudwick is pensions and performance partner at LV=