We are currently reviewing our business plan for http://www.pensionplaypen.com. The DWP have this week published their projections for the use of NEST among the 1.2m employers still to stage auto-enrolment and it seemed a good time to review NEST’s assumptions in the light of our own.
This first table tells me just what I need to tell the Conservative 40/40 group where to go with their proposals to deny employers with less than ten employees auto-enrolment. My good friend whose daughter is complaining about the enormity of having to run a workplace pension for her five staff can console herself that she will have it no more or less tough than 800,000 other employers and their 2m staff. This may be the most challenging task for all concerned but it is essential not just that micros take their duties seriously but that we take micros seriously. We cannot allow a grey pensions economy among small employers and small employers must regard themselves as “in”.
But what’s odd is the Government’s assumption of the numbers of the very smallest employers it considers will use NEST.
70% of employers with less than five employers
65% of those with between five and ten employers
On these projections NEST will be on boarding between 5 and 600,000 employers between 2016-17.
I don’t get this, for two reasons;
Firstly, there is an anybody but NEST mentality among most small employers I deal with and speak to. This is irrational , wrong and sadly irrefutable. If there was a way not to use NEST, people will find it
Secondly there appears to be more of an appetite among the insurers to compete against NEST for this group of employers.
There is a third reason but I hope that this will prove an irrelevance, that NEST is currently unable to provide the support services to employers that would allow them to onboard NEST using the technology that is currently available in the market.
Right now this is not an issue, organisations that use NEST today have developed their own interfaces between NEST and HR and payroll to ensure they fulfil their employer duties. Just about every conversation I have with NEST’s rivals, suggests they see NEST’s Achilles’ heel not as its incapacity to accept transfers or high contributions, but in the restrictions imposed on it to compete as an online onboarder and AE compliance provider.
I suspect that the market is very happy to keep quiet about this.
NEST is now dependent on employers being able to use their payroll software to fill in the gaps or to pay IFAs or accountants up to £6 per head per month for a third party compliance service.
I suspect that most small employers, faced with a premium to use NEST, would be reluctant to do so, provided that there were cheaper alternatives. And I think there will be.
So I am beginning to think that the DWP’s projections for NEST in 2016-17 may well be a little ambitious. Employers wanting to go straight to NEST may find (unless they are payroll lucky) that this is a non-starter.
Perhaps the restriction on providing supporting software to enable online on boarding and aE compliance is the one that is most needed of all.