Auto-enrolment for bosses who don’t do pensions

What’s the current situation?

There are ten times as many employers in the UK who don’t offer staff a pension, as employers who do.

But, by the end of 2017, all employers will be paying into pensions for their staff – by law. So you’re going to have to join the employers that already do.

You may think this is a hardship and we sympathise: there is some red tape to deal with and the contributions will come out of your profits. But, if you are smart, auto-enrolment can be turned to your advantage. It could become the best way to pay your staff you’ve ever had!

The two big wins for employers

Reward your staff by using a work­place pension really efficiently. Offer them a way of saving for their retirement that beats anything they can set up for themselves.

The two big bear-traps

There’s some fearsome admin involved in setting up auto-enrolment and you’ve got to get payroll, HR and your pension pro­vider talking to each other.

The pension scheme you choose for your staff has got to be right for them. Get the pension decision wrong and your provider could become an albatross around your neck.

Ten top tips for getting started

1. Get going soonest! Most people recommend you give this a year’s lead-in. You may not have a year, but don’t think that this is a process that gets any easier. The sooner you start, the less the pain.
2. Get a team together; we suggest the team includes someone from payroll, and someone who works (preferably runs) your personnel or HR team. Finally you’ll need someone in finance who knows how not to waste money!
3. Find out when it all kicks off! The key date is your staging date and it’s not under your control. You need to know your PAYE reference number; insert it here to find out when you need to “stage”.
4. Get yourself a plan; you can get a template.
5. Decide what outside help you’re going to employ. If your payroll person is confident, then don’t look outside: in-house expertise is cheaper and less risky. If your use an outsourced payroll provider, such as a managed bureau or your accountant, they are your next best bet. Only go to a specialist middleware supplier when you’ve exhausted your usual resources.
6. Check out www.pensionplaypen.com We’re an online resource paid for by advertising from providers. There’s a lot of information on the site which should help you familiarise yourself with the pension side of things. The alternative is to try and select a provider yourself, or commission a report from a qualified adviser.
7. Choose your provider early. Many pension providers are quoting 6-month lead-in periods; if you are staging soon, you need to get your skates on as every week that goes by reduces your choice of pension providers.
8. Make sure the choice you make is properly documented. You are accountable for your decision, and the choice of provider is the most critical decision you will make.
9. Talk to your staff about what you’re doing. Make sure they know what’s coming their way. All the signs are that people are liking being in a workplace pension, but the companies who have staged so far are used to talking to staff about pensions. This isn’t business as usual for you, so get going!
10. Whatever you do, do it with a smile. You have to do this, it’s a job worth doing – so do it well!

Top tips for keeping costs down

1. Stay clear of intermediaries unless you really need them – there is more snake-oil surrounding auto-enrolment than in Dr Hook’s medicine show.
2. Do your financial modelling. There are a lot of options and the cheapest may not be the best. You need to set up a proper spreadsheet to work out which contribution rate is best for your organisation. There is a free calculator on www.pensionplaypen.com which lets you do this without you having to create your own spreadsheets.
3. Think about phasing in your contributions: it’s allowed and it is a big cashflow advantage.
4. Get your payroll and HR processes right early on; last minute means having to go to third parties which will probably be expensive and risky: do you really want staff data passing through middleware?
5. Consider salary sacrifice; it’s a proven way of saving you and your staff national insurance, it’s cheap to set up and there’s relatively little downside.
6. Look at the CAP service on www.pensionplaypen.com. It costs nothing to use and you only have to pay £500 +VAT for its valuable actuarial report, validating the pension you have selected from those CAP offers you.
7. Make sure your staff are aware of what you are doing for them. Keep them in the loop: you have much to gain from keeping them onside.

Tips for getting the pension decision right

1. Make sure you know what your staff want. If they have preferences for a particular provider, listen to them,
2. If you have an existing workplace pension, don’t assume it will pass muster. The rules on standards for workplace pensions are changing and what was accept­able in 2013 may not pass muster going forward. Check out https://www.pensionplaypen.com/rate-your-pension for details.
3. Don’t assume you have no choice. There are a wide variety of pension providers who want your business. Even if you feel you are not the biggest employer with the deepest pockets, there are likely to be a number of providers after your long-term custom.
4. Search the market with https://www.pensionplaypen.com/choose-new­pension/start. We’re not just saying this because it’s our site, we’re saying it because currently it is the only place where you can search the whole market at no cost to you.
5. Don’t take our word for it! To make life easier for employers, www.pensionplaypen.com uses default positions established by its advisers, First Actuarial. These are based on sound principles and because First Actuarial doesn’t take commission nor fees, the positions it adopts are taken out of con­viction. But, as they are the first to point out, they do not speak for you, only the average employer.
6. Cheapest isn’t always best. We use a tool we have called a balanced score­card, to help you decide. The cost of your pension is usually only 20% of the decision, the rest is to do with “value” – what you get by way of service.
7. Make sure you record every step of your decision. Without an audit trail, you are vulnerable not just to critcism from today's employees, but also from your future employees. If you can’t record your decision-making process yourself, you can use the download report from www.pensionplaypen.com or commission an adviser to help you.