Which pensions employers are using to comply with auto-enrolment

The types of pension schemes chosen by larger employers for auto-enrolment are in stark contrast to those expected to be chosen by medium and smaller employers.

The Employee Benefits/Capita Pensions research 2013, published on 29 July, found that 63% of respondents that still need to auto-enrol staff will use a group personal pension (GPP) plan as their primary scheme for auto-enrolment, while 33% of those that had auto-enrolled their workforce are using a GPP.

L’Oreal, which postponed auto-enrolment from 1 August to 1 November 2013, will auto-enrol eligible employees into its existing trust-based defined contribution (DC) scheme, while Legal and General, which reached its staging date on 1 April, is using its existing stakeholder DC scheme.

Meanwhile, The University of St Andrews, which auto-enrolled its 460 eligible employees on 1 July, opted for a master trust pension, provided by Now: Pensions.

According to the Employee Benefits/Capita Pensions research, some 18% of employers that have auto-enrolled chose to use a master trust, while only 6% of those still to auto-enrol plan to use one.

It also found that those still to auto-enrol are less likely to use a trust-based DC plan, with only 9% intending to do so.

Trust-based schemes are more common among larger employers. Jamie Jenkins, head of workplace strategy at Standard Life, said: “You need the skill to set up a trustee board and a smaller employer typically wouldn’t have that, let alone an HR department or a pensions department.”

The Pensions Regulator (TPR) launched a guide in August to help employers with limited pensions experience to select a good-quality scheme for auto-enrolment.

According to TPR, choosing and running an appropriate scheme is key to the success of auto-enrolment. Its guide aims to ensure employers feel confident of selecting a scheme that suits their workforce and business requirements.

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“Meeting your duties and having a qualifying scheme can be done through a number of different product types,” said Jenkins.

“If you just want to have trustee oversight, you might go for a master trust. If you want something more flexible because there are members in the scheme who might want to make their own decisions, then you might choose a contract-based pension.” 

Auto-enrolment schemes snapshot