By April 2015, we can expect workplace pensions qualifying to be used with auto-enrolment to have headline charges under 0.75%. By the same time the following year, all schemes will need to be cleansed of commission and Active Member Discounts and more is expected relating to “hidden charges” by April 2017.
Pensions 2.0, 2.1 and 2.2 are in plan.
By happy coincidence, and I’d like to think this genuine joined up Government, April 2015 is also the date by which the Guidance Guarantee is to be implemented. Delivering 30 minutes of guidance to all workplace retirees is going to created considerable interest and not a little disruption, workplace pensions, or at least how to spend them, will be high on the “water-cooler agenda”.
Sensible employers who have taken decisions to purchase pensions for their staff where charges are, or could be in excess of 0.75% pa, will need to move to pensions 2.0 within 12 months. Fresh disclosure to staff of the new charges affords such employers an opportunity to promote a “good just got better” story. Managing out this message is important. We do not want to see workplace pensions damage employer relations. April 2015 is a good date to implement an upgrade, not just to your “at retirement” procedures but to your workplace pension scheme too.
There is no need to panic, but there is no need for complacency either.
Those organisations who have non-qualifying features in their workplace plans would be well-advised to get in touch with their advisers now and re-establish their terms of business to retain the relationship on a fee-paying basis. Where no agreement can be reached, it may be time to find a new adviser or engage with the insurer direct.
In extreme instances, where the plan cannot be moved onto a qualifying basis, employers may need to move to a new provider. For the most part, what is needed a bit of bodywork, not a new car!
Employers who are smart, will get their upgrade early. We can expect to see considerable strain on insurers in the run up to April 2015 and again the following year. The smart employer will want to be on the front foot, controlling the process, ensuring best terms for staff and managing messages at their pace and not at the pace of the insurer.
So here is a five point action plan for any employer who has a workplace pension being used for auto-enrolment
- Wise up, read the DWP’s Command Paper. If your scheme is clean, you should give yourself a pat on the back
- If not, speak with your advisers, this is not a time for recriminations but you are the client – and it’s your compliance head-ache
- If you can’t reach agreement, go to your provider, they need you to be compliant and should help
- If you get nowhere with your employer, then it’s time to shop around- assuming the shops are open (If you want a 24/7 convenience store try http://www.pensionplaypen.com)
- Make sure you have a project plan to migrate from pension 1.0 to 2.0.
Employers are critical to this process. There will be some reluctance among advisers to accelerate the termination of commissions and AMDs but employers need be in no doubt that the “further measures for savers” outlined by the DWP are going to happen and sooner rather than later.
This post was first published in http://www.pensionplaypen.com/top-thinking