As everyone should now know, employers are going to have to provide a pension plan and some money to fund their staff’s retirement. The rules and guidance are complex but the idea is simple – “you’re in”.
But “in” to what. The difference in outcomes between and a good retirement savings plan can be up to a third.
Employers have the job of picking good plans and ignoring bad ones. They can employ advisers to help them with the decision or they can throw their hands in with NEST, NOW, the People’s Pension or any of the insurers keen to find new participating employers for their mastertrusts and GPPs.
But the likely outcomes for staff retiring in many years time is likely to be only one thing on an employer’s mind. The big risks facing employers in the short term are all about complying with regulations ; making sure the money goes to the right place at the right time.
The complexity of auto-enrolment is daunting and it’s likely to exercise the minds of HR specialists, payroll people, pension specialists as well as those Board members charged with successfully running the organisation.
In a series of complex trade-offs, companies need to decide on contribution structures that enable their payrolls to run things smoothly, providers who can get the statutory communications out in a timely way. For many it is already proving too much of an operational headache to adopt the minimum contribution scales. Better to pay “over the odds” than risk payroll meltdown.
The conclusion commentators like me are coming to is that employers are not so much worried by the cashflow implications of auto-enrolment but on the business disruption it may bring.
The winners in this game are the providers who can provide a comprehensive solution that takes the problem away.
Today I spoke with the pension manager of a large retail organisation staging in April. Her organisation had purchased a solution that depended on the services of an IFA who are promising a packaged solution with a leading UK insurer. Will this work? I have no idea, she had no idea and until they are up and running, I doubt the IFA or insurer know either.
But to view the IFA’s website, you could have no doubt that their solution is the only sensible way forward.
My view is that employers will chose pension solutions that they think will work. They will continue to shun NEST because NEST does not provide a comprehensive solution, they will embrace organisations that are confident enough to provide a total answer to a difficult question.
Whether organisations such as the one I spoke to today, have any idea that it will work is anybody’s guess. My guess is that there is a lot of “irrational exuberence”out there, not all of it justified.
- Why I support Labour’s attack on pension charges (henrytapper.com)
- Half of SME owners have no pension plan (xlntelecom.co.uk)
- Scale and scalability- why L & G is the cuckoo in the Nest. (henrytapper.com)
- Getting CEO’s and Chairmen “comfortably” relaxed about pensions. (henrytapper.com)
- Auto-enrolment;- the story so far (henrytapper.com)
- Why can’t we select a pension like we buy a car? (henrytapper.com)
- A return to old-fashioned pensions (henrytapper.com)
- Australian “Super” – not an answer – a new question. (henrytapper.com)
- Viewpoints: Private pension plan would raid taxpayers to fill public pension gap (sacbee.com)
- Money makeover: Almost 30 and no pension (confused.com)