“You wouldn’t expect your employees to pay to use one of your fire extinguishers so why should they pay the costs of auto-enrolment”. This from a pension minister who has created a new lexicon for pensions involving self-powered pots, baked beans and traded annuities.
But this analogy has legs (unlike the fanciful pots).
A year ago I wrote about (and was threatened with legal action) for writing about one of our largest retail chains which justified the payment of commissions out of its employee’s pension pots to fund for auto-enrolment costs. These costs were disguised by the use of active member discounts, but they pretty well doubled the stated member charge. You can read the blog here, Give a straight red to active member discounts
Yesterday Steve Webb told an audience of over 600 payroll and HR professionals at the Ceridian Client Conference #CCC14 that. As a result of the quality standards he was currently putting in places, companies that passed the burden of auto-enrolment onto staff, would have to revisit the policy and reverse it.
Steve’s plans may have been put back a year (he says he backed down out of pressure from employers not insurers), but the plans are still there. That employers have got another 12 months to put things right does not mean that they should keep things wrong and I would urge the offending department store and the insurance company paying the commission, not to wait. Give a straight red to bad practice and practice what you tweet.
Buy now at pre-crunch prices?
The position of insurance companies is hardening. Yesterday I spoke with Scottish Widows who will be charging customers dealing directly with their on-boarding teams a minimum of £1,500 to implement a new Scottish Widows pension. Not necessarily bad value and a fee that is open and explicit. Legal and General charge £1000 to use a similar service and it is likely that explicit fees to employers to get workplace pensions embedded into a company will become commonplace. If you employ the services of a third party HR project manager, IFA or other auto-enrolment expert you could be paying more or less but make sure you don’t end up paying twice (Scottish Widows give you the choice but say they won’t charge you if you use a regulated IFA).
It is possible to avoid these fees by using some providers not currently charging; in view of the trend, it may be sensible to on board your pension sooner rather than later- I don’t see prices going down- indeed as the capacity crunch crunches, I can only see auto-enrolment implementation costs rising. There are currently no implementation costs from the leading mastertrusts- NEST, NOW and People’s Pension.
It’s official – we’re unreal!
Unbeknownst to me, I am unreal and so are my mates! This from WWW.ebb who kicked off at #ccc14 telling his audience how nice it was to speak to real people and not the usual pension people who came and sneered at him. Well Steve, I was there and so were some other pension insurgents and you were really laying it on with a trowel. I will continue to really laugh at your pot follows member policy until you get real about the transition costs between funds of your current plans! But that doesn’t mean that I don’t think you are doing a good job in other places (witness your work on internal transaction costs within funds.
You’d better shop around
As if reading a script prepared by the Founder and Editor of the Pension PlayPen, Mr Webb (note reverence here) suggested that anyone wanting to buy a workplace pension still had plenty of choices and would be well advised to shop around. He stopped short of pointing out that this is what employers can do for free at www.pensionplaypen.com but this was towards the end of his speech and he may of been getting tired
Our Pension Minister seems to be back on form, he has just about got out of the hole he dug with his full frontal assault on charges and is now back biffing. He was at his best yesterday singing his paraise for simplifying auto-enrolment; he got sage nods from many in the audience that included the CIPP and the Payroll World delegation who we took down to DWP Towers late in 2012 to sort out alignment issues. Yesterday we got the roll-call of easements restated and the promise of more – “my door is open to change”. Be careful what you wish for Steve, there’s a fresh-faced Scottish historian waiting in the hall.