Industry view: Staying on top of pensions paperwork
By Jonathan Craig, workplace pensions and auto enrolment specialist and head of corporate services at Acumen Financial Planning
In recent months, the majority of auto enrolment headlines have focused on smaller employers who are preparing to meet their staging dates – but what about those employers who have already staged and their considerations for this year?
For some employers, they will now be realising that preparing and getting to their staging date was the easy part. With further legislative changes to workplace pensions pending, the challenge to remain on top of the workload and keeping informed has never been greater.
This month, the government is introducing a 0.75% charge cap on auto enrolment default funds and in April 2016, there will be a ban on auto enrolment legacy consultancy charging and commissions payable to pension scheme advisers.
The unintended consequence of the charge cap will result in heightened pressure on pension providers’ ability to administer schemes at a profit, which in turn will herald the introduction of monthly employer fees; an outgoing which employers may not have anticipated.
Furthermore, the removal of commissions from April 2016 will bring with it added outgoings for employers. Historically, professional advice in respect of researching and commencing group pension schemes was remunerated by pension providers paying commissions to advisers. However, with this revenue stream drying up, this will imminently trigger conversations from advisers to employers, seeking to introduce fees to replace commissions for their services.
It’s worth noting that these additional responsibilities as an employer are standard across all sectors and there are serious implications if these are not adhered to. As the impact from the decline of the oil price starts to bite, some employers will inevitably be seeking to “manage” operational costs and workplace pension schemes will be a prime area for review.
With such a wide variety of fee structures and services available, it’s critical to source the most competitive fee and most relevant services suited to both the employer and employees requirements. Paying fees for “bundles services” that incorporate services that neither the employer nor employees perceive any value in, is one area where employers should be wary. A collaborative approach to agreeing services provided is the optimum way to maximise value.
Aside from issues of cost, employers will also be reviewing the level of internal resource allocated to manage payment submissions and assessments of workers. In retrospect, many are discovering that the measures they adopted in time for their staging date were manual, unrefined and time consuming.
As the auto enrolment market matures, we’re seeing developments from pension providers and their scheme design. Most pension providers now have a better grasp on auto enrolment and have refined their offerings. As a result, those schemes which are still failing to live up to initial promises and employers’ expectations should be reviewed as there will be alternative, less resource intensive solutions available.
As new pension providers enter the workplace pension and auto enrolment market, offering greater efficiencies and streamlined processes, the burden of managing the process internally should be a practice of the past.
WHAT IS AUTO ENROLMENT?
The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it. This is called automatic enrolment.
What are staging dates?
Employers have been given various staging dates. These are dates on which they must start enrolling employees into workplace pension schemes. Staging started in 2012 with the larger employers first. It will continue until 2018 by which time companies of all sizes must comply.
In 2015 companies with fewer than 58 employees are due to stage, with the majority of companies with 30 employees or less staging in 2016 and early 2017.
For further information, visit www.thepensionsregulator.gov.uk