With auto-enrolment well under way, for the first time every employer must offer a pension scheme to staff. As we venture through the next few years, many small to medium-sized organisations are considering workplace pension provision for the first time, raising some challenging questions about the type of scheme to use and what support they can expect.
Many employers won’t know where to start when choosing a pension scheme for their staff, and why should they? Many may not have dedicated HR departments or pension managers and, let’s face it, pensions are not a straightforward business. Employers want to get on with their day job, deliver what their business is there to do and not get bogged down in pension legislation in order to avoid fines and negative PR on the back of non-compliance.
Scottish Widows Workplace pensions report, published in September 2013, asked employers their thoughts on workplace saving and retirement planning. Out of the 328 respondents, only 12% currently offer employees access to a pension scheme. Auto-enrolment will see this figure rise dramatically over the next few years, but how will employers decide which is the right scheme for them and their employees?
Group personal pensions
Fundamentally at product level, there is often not a lot of differentiation between one provider’s group personal pension (GPP) and another, but there are specific features that make up the wider proposition and, in turn, affect the employer’s decision-making.
Our research revealed that the three most important features employers look for when choosing a scheme are investment performance, charges and the provider’s industry experience. Employers are looking for the best returns on investment for their employees and see these being maximised by competitive charges and fund growth.
Communication
Another factor to consider when choosing a scheme is communication. Employees need engaging communications to ensure they are aware of the implications of auto-enrolment for them, as well as appreciating the benefit their employer is making available to them. Employers should expect their pension provider to offer support in delivering good-quality communications to workers, at the launch of the scheme, in the run-up to auto-enrolment and on an ongoing basis for members.
As well as starting to plan and prepare for auto-enrolment as early as possible, employers should seek advice and expertise from qualified advisers. Our survey revealed that more than one-fifth of employers are open to paying for advice to ensure they have the best scheme for their staff, with the rest defaulting into their current scheme (19%), the National Employment Savings Trust (Nest) (20%) or yet to decide (34%).
Retail Distribution Review
The Retail Distribution Review (RDR) has changed the way in which advice is paid for, and many organisations yet to automatically enrol may not feel they are in a position to pay for fee-based advice. The cost of advice may seem daunting, but it could be money well spent compared with the potential fines from the regulator for non-compliance.
Choosing a pension scheme that suits the business and offers staff the best outcome at retirement is a serious business.
There is a lot of help and support that employers should take advantage of, by speaking to advisers and providers, as well as The Pensions Regulator, the Department of Work and Pensions and the Money Advice Service, among others.
Some providers have announced they are unable to accept schemes with less than six months to their staging date, so the main message here is for employers to consider their requirements and start early.
Lynn Graves is head of new business development, corporate pensions at Scottish Widows.
