As we approach the half way point in year four of Automatic Enrolment, many things have changed in terms of the options available to an employer who is looking to fulfil their obligations under the legislation.
Back in 2012, the largest employers who needed to comply had in-house pension teams, financial advisers, finance departments and payroll teams. These key players came together to plan the journey, as well as agreeing the budget for the same.
In some cases that budget was substantial and although many solutions were bespoke to the employer generally this went well and lessons were learnt.
We are now entering a phase whereby many of the employers who are staging have no such team of in-house experts at hand. Often Finance, HR and Payroll sit at the same desk and indeed are the same person.
Currently more than 50% of employers staging right now are doing it themselves.”
This poses a question for employers staging right now, “How will I select my auto enrolment pension provider and what are the key components in that decision making process?”
We are being told by The Pensions Regulator (TPR) and their latest research, that currently more than 50% of employers staging right now are “doing it themselves” and are defaulting to what is being called “the government scheme, NEST”.
NEST is not the government scheme but was designed at outset with a Public Service Obligation to accept all employers who wished to use it to comply with the legislation.
Its brief was not to be a provider of choice for all employers who need to comply with the legislation. This means that NEST is merely a pension provider like any other and should be compared with others to see whether it will best suit the profile of an employer’s workforce.
Each master trust has their own quirks and one may be better suited to you than another.”
More than one pension provider will currently accept all employers and many will not charge the employer for the privilege, you just need to know where to find them. Each have their own quirks and one may be better suited to you than another.
TPR do give some guidance on their website however the link will provide a general overview of the types of scheme that are available in the market from which employers must choose one that best suits their workforce.
Many things need to be considered outside of the perceived “FREE” pension provider option. Not all providers cover all of the tasks that an employer will need to perform. A simple “FREE” default does not always come with the ability to assess your staff, decide on a definition of pensionable salary, send the statutory communications and complete your declaration to TPR at the end of it all to confirm your compliance and avoid the most common reason for a fine so far!
Not all providers cover all of the tasks that an employer will need to perform.”
In this example free is not always free as someone needs to either spend time on the additional associated tasks, back to your in-house expert, or these tasks need to be outsourced to a third party at a cost. Here is an idea of the tasks involved.
If you can complete all of these tasks within your own business then you need pay no one to comply with the legislation.
If however your own efforts cannot cover these off it may be worth considering who can, as although this may cost money initially it may be a much more efficient process, provide fewer disgruntled employees and may mean less chance of costly fines from TPR in the longer term.
The best place to start when thinking about how to choose your pension provider and scheme is The Pensions Regulator’s website. Make sure you know your duties – their online duties checker will ask you a few questions based on your individual employer circumstances and tell you the tasks you need to complete and by when. Most employers are able to check their duties in around 5 minutes (you will need your PAYE number to hand). Visit our website to find out more.