What is your organisation trying to get out of auto-enrolment?
The answer will be as diverse as our business strategies! If we had to generalise, we at First Actuarial would chuck all the answers into two buckets;
Bucket One is a risk bucket and contains answers like
- No fines from the Regulator
- Minimum disruption to payroll and HR
- Minimum disruption to productivity
- Minimal cost
Bucket two is a reward bucket and contains answers like
- Happy staff
- Better productivity
- Improved retention/reward
- Predictable “at retirement” strategy
Auto-enrolment success has to embrace both sets of answers and carry the votes of the HRD and CFO. When Diary Crest modelled their contributions, they assumed a 25% opt-out rate, they achieved an excellent 10% but while they got cheers from the DWP, was finance happy? And what did this mean to the price of milk?
Being prepared for auto-enrolment is just good business sense. How you prepare is down to you and your business. Hard and fast rules about starting at least a year from staging take no account of the dynamics of an employer. We have seen small businesses absorb auto-enrolment into their infrastructure as if it were BAU. We have seen large a large business sink over £1m into auto-enrolment preparedness and not recover a fraction of the ROI.
Our experience as a pension’s consultancy is to get the strategy in place early (typically six months before staging) and allow steps two to ten to follow naturally. The key is to get everyone on side early on and to empower people within your business rather than relying on external consultants. The more you can do yourself, (and the less you outsource) the easier workplace pensions will be going forward.
So here are the ten steps
The first step to auto-enrolment success is to know what success looks like. Without a clear strategy you will have no measure of achievement.
The second step is to get all parties bought into the strategy and the task of delivering on it. You know your business, you know who matters and you know there are no short-cuts.
The third step is to buy-in payroll. Start by assessing your workforce and model a contribution structure that is right for your business. . The buy-in of payroll is a pre-cursor to another discussion. You need to understand your payroll capabilities and build your strategy around what payroll can do.
The fourth step is to buy in the Regulator- a lot easier than it sounds. The Pensions Regulator has a great website http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx
The fifth step is to make sure your pension qualifies for auto-enrolment. If you have an existing pension plan you need to be talking with your provider to ensure it can be used for auto-enrolment.
The sixth step is to make sure you have the best pension for your staff. If you don’t have a plan, you can start from scratch, if you do, now is the time to review it against the opposition
The seventh step is to contract with a provider and make absolutely sure that you are on the same page; you need a joint implementation strategy.
The eighth stage is to tell your staff exactly what is going on. This means being clear not just about auto-enrolment but about the decision about the pension.
The ninth stage is to implement clinically. The rules surrounding the payment of contributions and the statutory communications to staff are tough but they are fair- follow them.
The tenth stage is to celebrate what you have done. Whether you like it or not, your organisation is committed to substantial payments into workplace pensions from staging on. The pension contribution is part of pay- make sure it’s valued.
Your workplace pension needs to comply but it also needs to be a part of your organisation’s reward strategy. Since the budget, there has been a sea-change in people’s attitude to their pension. In short they now “own” their pot and you can expect to see a lot more interest in the investment aspects of auto-enrolment than before.
There is currently considerable capacity in the market and employer’s staging today have considerable choice of workplace pensions. But as the Office of Fair Trading has pointed out, most employers are badly placed to making choices without advice and advice on pension choice is hard to find and far from cheap.
We recommend to you http://www.pensionplaypen.com, a free service to employers and advisers which gives access to all the leading pension providers and allows employers to compare and choose the workplace pension that is right for them.
This article first appeared in http://www.pensionplaypen.com