I received a polite e-mail from a company’s Finance Director yesterday.
“I see First Actuarial are offering a project management service for small and medium sized companies staging auto-enrolment in 2014; I’ve got four questions for you
1. Why should I be thinking about this now?
2. What are the key milestones between now and my staging (April 2014)
3. How much will you charge me?
4. Would I not be better off doing this myself?”
Four good questions that help concentrate the mind and are worth sharing on here.
I’ll not give you the full sales pitch. But for those reading this who are involved in HR/Payroll purchasing here are some pointers.
Firstly, this is not a developed market. Solutions will change and you’ll need to be flexible in your decision making.
Secondly, you need to read and inwardly digest the Regulator’s papers, they’re free and the information generally well-written. They’re always well intentioned. Start by reading http://www.thepensionsregulator.gov.uk/employers/main-steps.aspx#s6824 and if you’re brave try http://www.dwp.gov.uk/docs/wpr-rev-implementation-reg.pdf
The Pension Regulator will help with your pension. But the Regulator is not a management consultant. The new demands of auto-enrolment involve an integrated solution that minimises disruption to the payroll and HR functions while delivering a “Qualifying” pension plan that is valued by staff.
If you break that sentence down, you can see three key needs – operational efficiency – investment management – maximizing the employee value proposition (EVP).
That takes you beyond the scope of the Regulator’s guidance and into unknown waters.
So why start planning today?
- Anyone with between 500 and 50 employees is the “squeezed middle”. There are 10,000 employers a month staging in the second quarter of 2014 and this company will be one. GET IN THE QUEUE
- There is a lot more to do than to buy a pension; this is all about business planning and you need to plan not just around the needs of payroll but of your HR teams and most of all your staff.
- Payroll and HR services are clunky and hard to change. If your payroll or HR systems are not fit for purpose, it is worth reviewing them now. The lead time to procure and select a payroll is generally considered 12 months – this client has only got 15.
- This company may already have pension scheme(s) in place. The process of selection is relatively easy, how you manage change is harder , reputational issues can emerge, need managing and that needs planning.
What are the key milestones?
Milestone one; select your team. We recommend you set up an auto-enrolment task force and give them a year to deliver, they need to review progress weekly and you should have a senior group – maybe the Board, reviewing progress monthly (quarterly to begin with)
Milestone two; establish whether your payroll software/managed solution/ bureau is fit for the purpose. You will need to do some benchmarking here, “what do others think and where can I get a view of the alternatives?”
Milestone three; what contribution structure shall we use. This is not just a matter of what suits the FD, nor what have we done in the past, the contributions need to meet Regulatory requirements but also need to be manageable by payroll and intelligible to staff!
There’s a lot of technical stuff here including decisions on whether to auto or contractually enrol, what to do about those with big pension pots, how to integrate salary sacrifice, whether and how to use postponement. This is probably the hardest stuff for companies to get their head round and the area where advice is most needed.
Milestone four; Can we manage the communications issues , the opt-out process and assess employees using what I’ve got or (assuming I don’t want to change) do I need to bring in third party software (middleware) to help me in this or can this work be integrated into what’s there.
Milestone five; What provider shall we use? Is what we’ve got fit for purpose, is there a pension plan out there could do the job better is it worth the disruption to change, can I do better with what I’ve got?
Milestone six; Buying in staff.This is something that needs to be flagged from day one. Publicising that the working group is on the case and throwing the process open to informal consultation with interested staff is no bad idea. The formal process of explaining what is going to happen , needs to happen before staging, preferable three months before.
Milestone seven; Go live! There is too much at stake to get this wrong. Careless or willful breaching of regulations will get big fines. Don’t expect too much sympathy from the Pension Regulator or HMRC. This is VAT-type stuff and you will be foolish in the extreme if you haven’t rehearsed your staging at least one payroll run before.
How much will First Actuarial charge?
Our approach is established. we work on time/cost and publish our rates. We can give you an estimate of the likely costs but we cannot underwrite that process as neither you or us know just the extent of your issues nor how much work will resolve them.
Can I do this for myself?
You would expect me to say “no” and at this point I am saying “no”. There are too many moving parts and too much uncertainty for me to say, there’s a big box out there with some instructions that will allow you to assemble “Ikea Style” an auto-enrolment staging.
The closest analogy I can think of is of conveyancing. You can self-convey but would your really want to? Would there be any real saving in not bringing in an expert and would the risk of getting it wrong outweigh the savings made.
But I think there is a way of dramatically cutting consultancy costs by taking a lot of the grunt on using new technology. I fully expect to see this market served by at least one an probably a number of specialist search facilities that will include “trip-advisor” or “Amazon” ratings, compatibility charts and even DIY project planning software.
We’re right behind the development of this technology as we do not want to charge our clients for work they can do themselves , nor do we have the capacity to take a substantial chunk of the 10,000 stagers a month. We are looking to automate the advisory process and if you are thinking you’d like to DIY, we’ll encourage you to do so. within the parameters of risk and capacity.
You’d expect an actuarial firm to be thinking ahead, we do strategy well. You would also expect us to be cautious. We don’t know all the answers and we don’t even know all the questions. That’s why we are not telling our clients and prospective clients there is a black box. We reserve the right to change details of what we are recommending to take into account changes in the market – providers and regulations.
If you’d like to discuss the issues with me or one of my colleagues , you can get hold of me on email@example.com or on LinkedIn. Right now, we have time, but in six months , we may not!
- How will employers chose their pension plans? (henrytapper.com)
- Payroll follows member! (henrytapper.com)
- What do we mean by good? (henrytapper.com)
- Tsunami – make haste to higher ground! (henrytapper.com)
- We won’t reinvigorate workplace savings like this (henrytapper.com)
- L&G’s AE membership self-serving with hand helds! (henrytapper.com)
- Offshore payroll companies – a (pensions) scandal in the making? (henrytapper.com)
- Club Pension! (henrytapper.com)
- The latest iPhone app: ditching your pension (telegraph.co.uk)
- It worked for Wendy- how Morrisons staged auto-enrolment (henrytapper.com)