For the past year, we have been thinking about where to position Pension Playpen to help small businesses with their workplace pension. We’ve worked out that small businesses taking on pensions for the first time will need help in four areas.
- A way to see and display how the workplace pension is doing
- A way to compare value offered by workplace pensions
- A means to remedy problems when they arise
- Day to day support and occasional intervention from independent experts
To use a farming analogy, it is one thing to sew a field with corn, it is another to harvest it. Auto-enrolment has sown the field but that field could quickly become full of weeds and eventually barren unless it is given care with maintenance.
See and display
Employers need to get timely, relevant information on their workplace pension at least once a quarter. As well as a little narrative, employers tell us they want to know how the default fund has performed both over the quarter how the quarter impacts longer term performance numbers. When I speak about adjusting these numbers for the amount of investment risk managers take, most employers get it. Employers want these numbers delivered so simply that they can share them with all their staff “see and display”.
Compare and contrast
Employers are telling us they want to feel proud of the workplace pension they have chosen and take ownership of that decision. It may not be a pension scheme they set up, but employers still feel that the scheme in which they participate is their company, workplace or “works” scheme.
In taking ownership of the choice of workplace pensions, employers are telling us they want to see their choice vindicated over time by the delivery of superior value, lower costs and better value for money both for them as employers and them as members.
Repair or replace
One employer told us that she’d been surprised to hear her workplace pension described as a vehicle. She said that if she bought a car, she’d expect it to be serviced once a year , repaired from time to time and either upgraded or replaced regularly.
While in practice, the incidence of renovation or replacement of pensions may be rare, that employers can see a way to do this, is seen as a positive. Just as with cars, utilities, bank accounts, payroll and accounting software, “switch-ability” is an important positive for employers.
Independent and effective
Employers we are speaking to are moving away from an advisory to a support model. Rather than control the decisions that employees make with regards contributions and investments, they want to have access to information and facilitate their staff through independent helplines.
The point of human interaction is to give confidence to both employers and staff on pension decisions, not to advise on a definitive course of action. Advice may become necessary but we found there was a primary need for effective information and sign-posting; advice was a secondary need.
Delivery of independent support
In our conversations with small employers, we have seen a consistent frustration over the past three years with the availability of independent support.
While good workplace pension providers have offered workplace support, employers find it hard to work out what is fact and what is marketing. We shouldn’t forget the OFT’s conclusion from their report in 2014.
There will soon be over one million more employers with workplace pensions than there were only three years ago. But the knowledge of workplace pensions has progressed little further than an understanding that employers have a duty to set one up. Frankly the engagement is at the kindergarten level provided to them as Workie.
With contributions increasing from 2 to 5% in April 2018 and from 5-8% 12 months later, demand from workers to know more about Workie will increase. Some of those workers will be the owners and senior managers themselves, they will be driven both by self-interest and by a wish to keep their colleagues happy.
The delivery of the support that employers need is not currently in any business plan I have read. It is not in the terms of reference of the current auto-enrolment review nor is it a service that I see business advisers, IFAs or EBCs gearing up for. In short, I see a market failure looming.
There is one solution that – when put to small businesses – makes immediate sense. Currently the support they get for pensions is provided through the auto-enrolment or pension modules from their payroll and accountancy software providers. Organisations such as Sage, Iris, Moneysoft, Star, QTAC, Bond, BrightPay, Payroo (Able) and MyPaye have stepped up to the plate and helped people to auto-enrolment compliance. They are the trusted support.
It is high-time that credit was given to these organisations and consideration given to providing them with the tools to deliver the four services provided above.
In considering the shortfalls in support to small employers, organisations like www.pensionplaypen.com can deliver those tools, effectively, independently and at a mass-market price that will appeal to other stakeholders.