The received idea in Government circles is that employers don’t give a toss about the pensions they set up for their clients.
In a recent thread on the Pension Play Pen Linked In Group (if you aren’t a member , please join), the idea is rehearsed …
The vast majority of owners of SME’s are working hard and long hours to maintain successful businesses – making and selling widgets or whatever.
The hassle, time commitment and associated costs (in their/ their staffs time, systems and contributions) is about as welcome as a dose of Gout!
Is it not quite reasonable for them to expect, as this is a legal requirement and schemes must meet QWPS, that the Government has ensured within the legislation that such schemes meet all requirements including a suitable investment fund?
Indeed, if it is not possible for us to judge now (and it is not) which fund or investment process will produce the best returns in 20-30 years, what hope does the MD of Widget Co Ltd have?
In my experience, these people are in the main driven successful business people………who have little idea of savings and how investments work. Should we be expecting them to spend many hours trying to learn about something that they can’t afford the time to do?
Yes, they can take advice and oversight, but at a cost; a lot would ask why should they as this is regulation driven with set standards for the scheme.
This view is held by some in Government who see auto-enrolment as part of the red-tape that Government should be getting rid of.
I take a different view,
I see people’s savings into workplace pensions as every bit as real and vivid as savings into bank accounts or ISAs. £100 in a qualifying workplace pension is a tax-free investment which attracts low charges and is added to every month by payroll without an employee having to do anything but sit back and watch the savings grow. What’s more, the money is locked up and cannot be spent till 55, so it really is a pension – not a savings account. You get money paid from the Government into your account for locking it away, even if you don’t pay tax*
For ordinary people, especially for the low-paid, auto-enrolment is such a blessing. But we are painting it as a tax that is prohibiting the manufacture of widgets. Is the production of widgets all there is. Are the people who make those widgets not entitled to a top up to their basic state pension (with the option to opt-out)?
Later in the thread , my friend Steve Brice arrives, to tell this story…
Only yesterday I was speaking with a client who had chosen L&G as their provider and approached their payroll provider to discuss assessment. They were immediately told that they should change to NEST because that was easier for Payroll and that there was little point in talking to me as advisers get in the way of Payroll!!
I offered the client the opportunity of a three way call to discuss how we might all work together which he welcomed…payroll refused and gave the client the number of a software provider who would charge him to build a template for L&G for Payroll to use…at the employers cost!!
That employer engaged in the whole choice journey and chose L&G because his employees already have personal plans and may need to transfer to L&G if cheaper/better. They are also paying reasonable contributions into their existing plans already so once you add an employer contribution to this there is a real chance that contributions will breach £400pm….soooo tell me where NEST fits with this criteria??
And they can point, in defence of such stonewalling to the Pension Regulator’s website. Which tells employers that the criteria by which a pension should be chosen are
whether the scheme can be used for automatic enrolment and will accept all your eligible staff
whether the scheme is compatible with your payroll software – ask your payroll software provider for help with this
whether the scheme will write to your staff on your behalf to tell them about automatic enrolment
whether the scheme will assess your staff for automatic enrolment – if not, ask your payroll software provider if they can do this
the costs and charges for you and your staff
So where are the views of those whose wages are going to be docked and who will live with this decision, taken into account?
Is anybody asking staff what matters to them, and is anyone trying to match the needs of staff to what’s on offer from providers? To pick up on Steve Brice, is any thought being given to what has gone before?
The answer is “NO”.
So what does the worker get from these bullets?
The benefit of AE compliance? – no benefit
Payroll compatability? – no benefit
A letter from the provider? – no benefit
Workforce assessment? – no benefit
Costs and charges? – a benefit- but only if there’s some proper governance in the scheme – costs leak out of poorly run schemes like water from a leaky pipe.
Not only have we moved to an imaginary world where employers are too busy making widgets to talk with staff about what they want, but we are assuming that anything that “gets in the way of payroll” is “pointless”.
This is the madness of process over people, a kind of technological paranoia that sees the individual preferences of purchasers as secondary to the running of a well-oiled machine.
If employers don’t give a toss about their staff’s welfare , they jolly well should. That is what the Trade Union movement was set up for and why we have legislation that protects staff in the workplace and beyond.
I have never met employers who tell staff they don’t give a toss about them. At least not to the staff’s face. Why would you hate your staff so much?
The disconnect is around pensions, many employers don’t get pensions and don’t see why they should be running auto-enrolment but the same was said about the welfare state, the basic rules of health and safety – even the most basic workers rights.
Someone needs to stop and think. We are about to enrol 5m more people into workplace pensions; not into “auto-enrolment” – into “workplace pensions”. Unlike the last 7 million who had employers paying attention to the pension , this lot have no such protection.
Instead they have people potentially laying down the law on how their pay is invested for 40 years who are following guidelines from the Regulator that pay no attention to the needs and desires of staff.
Instead they are being told that the needs of payroll trump everything.
This does nobody any favours!
This tyranny of payroll , does nobody any favours, least of all payroll! If payroll can’t offer a choice of solutions then change payroll!
That doesn’t mean change your software – with all the disruption that brings, but it means that payroll must adopt the kind of plug-ins that make it possible to add choice. Even the most unsophisticated payroll software can provide choice through plug ins to software that makes choice available. Pensionsync, aeExchange and ITM are just three of these plug-ins.
And employers can access advice on what pension is right for their staff, and it can cost less than £100 to do so (as the Peoples Pension pointed out this week). If employers want to get hold of the software, they only have to google pension playpen or financial satnav. Or ask their payroll or accountant whether they have a link to these systems.
In a couple of week’s time, I will be speaking at the conference of the Chartered Institute of Payroll Professionals. It will be an important speech for me, and I hope for many of the 1.8 million employers still to choose a workplace pension.
I am going to make it clear to the payroll professionals in the room that it is not just the future of auto-enrolment that rests in their hands, but the confidence of the 7m people, not yet “in”, in the pensions into which they invest.
They can act as payroll tyrants- but this carries big risks- or they can step up to the plate and become pension managers- which carries great glory.