How should employers select auto-enrolment help?

Employers must take a range of considerations into account when choosing the providers and advisers they want to help implement their auto-enrolment strategies.

Auto-enrolment is likely to be a cash cow for pension providers and consultants that offer the right service propositions, but could prove catastrophic for employers that buy in the wrong support.

And support is key, given the complexities of auto-enrolment compliance. From registering with The Pensions Regulator (TPR) and identifying their staging date, to assessing their workforce and reviewing their pension scheme arrangements, employers of all sizes face an arduous task.

Plentiful support is available from pension and payroll providers and employee benefits consultants to help employers create and manage an auto-enrolment strategy, but how do they decide which providers to approach?

Martin Scott, partner in law firm Mayer Brown’s pensions group, says: “You can’t generalise [about employers’ use of providers]. In the pensions sphere, although it is becoming more competitive, people are prepared to shop around.

There is still a sizeable minority who are quite loyal to their existing adviser and wouldn’t really look further than them, but I’ve had one client that spoke to three or four others and didn’t use the adviser they normally use.”

However, beauty parades and using more than one adviser and/or provider tend to be a luxury of bigger employers, which have the time and relative funding to explore alternatives to meet their auto-enrolment strategy objectives. Scott says: “Bigger employers are more likely to consider alternatives, but that’s not necessarily just specific to stuff like auto-enrolment. They would do that or any particular issue or challenge they face in the business environment.

“Lower down, in terms of sophistication or concentration of employee workforce, [employers] are much more dependent on their existing advisers.”

Using existing consultants

Pump engineer SPP Pumps is a case in point. It used only its existing consultants and pension provider, Aegon, to help deliver its auto-enrolment strategy and meet its staging date on 1 January 2013 (see box below). Meanwhile, interdealer broker Icap used its payroll provider, Ceridian, with the help of its employee benefits provider, Capita Employee Benefits, as well as its pensions provider, Standard Life (see box below).

Employers must ensure that any new providers and consultants they appoint are compatible with their organisation and any existing providers they use, in terms of working relationships and technology. Each pension provider has its own approach to auto-enrolment, so software will vary, often considerably.

Mayer Brown’s Scott says employers should also ascertain providers’ workloads before taking them on. “They should make sure that [providers] are not overstretched because that is one of the worries,” he says. “Make sure they have the resources [to undertake the project].

“[Employers] could have a beautiful plan out there that won’t get past the execution phase because the provider responsible for executing it won’t be able to provide what [the employer] wants.”

Employers should assess their current systems, the changes they need for auto-enrolment and how far their current providers can accommodate these before they make a decision on the support they require to achieve their strategy.

Simon Hemmings, benefits manager, Europe and Asia at Icap, says: “Employers should look at as many providers as they can to see what is available because I was surprised to see how differently people approached this.”

Case study: SPP Pumps uses existing adviser

SPP Pumps decided to use its existing adviser firm, Barnett Waddingham, to work on its auto-enrolment strategy. Terry Newby, operations director at SPP, says: “We are a relatively small company and have no HR function, so as long as Barnett Waddingham appears to be doing the right thing by us, we are happy to stick with it.”

Before working with Barnett Waddingham on its auto-enrolment strategy, SPP was helped by its trade union, the Engineering Employers Federation, which ran seminars on the reforms. Newby also brought forward SPP’s staging date from February 2014 to January 2013.

A tripartite arrangement between SPP, Barnett Waddingham and the employer’s pensions provider, Aegon, was established, with both providers taking part in an employee communications campaign.

SPP’s contract-based defi ned contribution (DC) scheme has been restructured into a dual plan, with a legacy stakeholder section for existing members and a section for new joiners, offering lower contribution rates.

 

 

Case study: Icap required payroll provider’s support

Simon Hemmings, benefits manager, Europe and Asia at interdealer broker Icap, had three objectives for the providers of his auto-enrolment project to meet: to help Icap decide which employees were eligible for auto-enrolment; to help calculate contributions; and to help communicate with employees seamlessly, with as little manual intervention or human administration as possible.

Hemmings decided to stick with the organisation’s existing pensions provider, Standard Life, but required additional support from Icap’s payroll provider, Ceridian, because Standard Life was unable to calculate the employee contributions required for auto-enrolment.

But Hemmings says: “The system that Ceridian came up with made sense for us but, depending on your specific requirements and existing systems, that may not be the case for another employer.”

Icap is using Ceridian in addition to its employee benefits consultant, Capita Employee Benefits. Hemmings adds: “Our intermediaries help us make sure we make the right decisions and also ensure that the Ceridian system does everything that needs to happen from a legislative perspective. Ceridian provides the solution.”

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Ceridian’s system undertakes workforce assessment, pension contribution calculations for employees and employers, and sends out online pension communications for employees.

Icap runs a group personal pension (GPP) plan for 600 of its 1,600 employees. Its auto-enrolment staging date is September 2013.