Mrs HR Dee
Dear Mrs Dee,
Thanks for your enquiry.
I can see you are sold on the idea of offering a workplace pension for your staff. You know you have to anyway, but I can see you want to do it properly.
And you want to know whether I can help.
I’d be delighted. In fact you’ve come to just the right person.
If you’re setting up a workplace pension, it pays to make sure it’s the best your workers can get. I will guide you to the right one for your organisation and introduce you to your future workplace pension provider.
I won’t charge you whether you follow my guidance or not, I’m low-maintenance!
There are currently around 20 workplace pension schemes available to employers staging auto-enrolment. They are either group personal pensions where the contract’s with each individual worker and company pensions where the contract is with you the employer. I’ll help you understand the pros and cons of each. Both can be good but it’s helpful to get a bit of background before kicking off.
While I know you are keen on setting up a scheme anyway, it’s important you know what you have to do by law so I will help you understand what your obligations to your workers under the new regulations.
To keep things simple,there are two obligations that really matter. Firstly you are obliged to make a contribution into your workforce’s pension pots and secondly you are obliged to work out each month, what to pay and to whom.
The amount you pay depends on you though there are minimum amounts. I’ll help you calculate your minimum obligations and you can then work out the level of any discretionary spend you want to makes as part of your overall reward strategy. It’s really important you do this assessment for yourself. Without it, you cannot plan your contribution structure, and doing it will tell you how competent you will be staging and managing auto enrolment. If you find the assessment a breeze -great – the world’s your lobster (as Arthur Daley put it). But if you find assessment a nightmare you may need to upgrade your payroll or HR system, or concentrate on providers with really excellent auto-enrolment support or start a search for some independent software (known as middleware).
But the most important thing is that you get the contribution levels right; too high and you risk investment in your business, too low and you and your staff finding the auto-enrolment process doesn’t make a difference to retirement outcomes.
I really want you to think about your contribution levels, your workers need more than the minimum contributions and, if you get it right, investing in their pension pots can be rewarding both for them and for your organisation. You’ll find out more about the advantages in terms of tax and national insurance as we go along.
I’m sure you picked up on the “if”in that last paragraph. Like all purchasing decisions, there is a risk you could make the wrong choice and be saddled with a workplace pension that didn’t meet your workforce’s or your organisations needs. I don’t want that to happen.
We’ve worked out there are six key characteristics that give you the performance indicators by which you can judge your workplace pension. I will help you weight each against the others so that you purchase a workplace scheme that matches your organisations particular needs.
This is not as easy as it sounds and will take some hard work on your behalf.
Firstly, I’m going to have to find those workplace pension providers who want to offer you a scheme.
Some will not work with you because they only offer schemes to certain industries (for instance – charities, social housing,plumbing).
Some exclude employers on demographics, contribution levels, location or for IT reasons.
I will ask you to give me details about your organisation including that assessment of your workforce you used to work out your contribution structure. I’ll also ask for your permission to send this to all the relevent providers without mentioning your or your organisation by name.
Once I’ve found you the providers who will deal with you, I will get you to quote you a price for the service they offer. It may surprise you to know that many providers offer a range of prices depending on how attractive they see you as a potential customer. It’s normally quite easy to compare these – but not always. Some pension schemes like NOW and NEST have complicated pricing structures that need to be simplified to make a proper comparison.
But getting you this list of workplace pensions for you to choose from is only the first part of my job. I will also rate the offers made to you against the six performance indicators I mentioned earlier; they are
1. Cost and charges- how much your staff will be paying for the service on offer
2. Investments – what your staff will get as the “default investment option” and any further choices for the more curious
3. At retirement – what support the pension scheme will offer your worker when he or she decides to draw their pension
4. Employee communications- how your workers can get information on what is happening both at outset and going forward
5. Durability- how certain you can be that the organisation that manages the scheme will treat workplace pensions as core business in years to come
6. Auto-enrolment support – how effective the scheme’s support services to meeting your particular needs to carry out your duties.
My ratings will be based upon research carried out by First Actuarial, a professional firm who are independent, unbiased and skilled in assessing providers on this basis. You’ll be able to research the providers independently through factsheets I’ll provide you with. I’ll also give you a lot of guidance on what the six characteristics and how important they could be for you.
By the time you are ready to take a decision, I will have coached you so that you properly understand what your are buying, can weight each characteristic according to your needs, can understand the ratings and (if you feel brave enough) challenge and over-ride those ratings. But you don’t have to choose for yourself, First Actuarial will give you default ratings based on their “normal” employer. If you just wish to accept default weightings and ratings- that’s fine by me.
Once you’ve agreed the basis on which you take your decision, it is simply a matter of pressing a button to see which of the providers scores highest.
You are then free to make your decision on which workplace pension to use. Once you have made your selection, I will send your details to the provider who will begin the process of implementing the pension with you.
There is no obligation on you to make a decision and you are free to walk away at any time without any obligation. Even if you press the button and implement with your chosen provider, you need pay me nothing.
I will have recorded every piece of information you have provided, every decision you have taken and when you have taken the decision , I will provide you with a digital document which will be your audit trail.
If, when you have finished, you want to have validation of what you have done, I will also offer you with a certificate from First Actuarial, that can be purchased for £500 (plus VAT).
So who am I?
I am Clarence, an on-line pension geek who guides you through this complicated business. You can find me here and I’ll be starting work around the end of September. Because I’m online, I don’t need your money and the cost of building all this technology and keeping the systems in place is born by www.pensionplaypen.com and the advertising revenues they receive.
So why don’t you come and register with me?
Had any better offers lately?