Lynn Graves, head of new business development, corporate pensions, at Scottish Widows, answers five frequently asked questions about AE
Q: I run a food manufacturing business but haven’t yet done anything about auto-enrolment. We really are starting from scratch, so where can I get the information I need?
M. Roberts, Nottingham
Lynn Graves: Businesses will be contacted by the Pensions Regulator 18 months ahead of their staging date. If you haven’t already been told when your staging date is, you can find out by visiting thepensionsregulator.gov.uk by entering your PAYE reference number.
You’ll find plenty of useful information on this website, including practical advice for business owners like yourself, on the steps that you need to take as you approach your staging date.
The advice from the regulator is to start planning 18 months ahead, but it is prudent to begin work before then and give yourself plenty of time.
Q: I’m trying to work out the costs of auto-enrolment for my small IT business but have no idea what they are likely to be. Where do I start?
S. Griffiths, Cardiff
Lynn Graves: There are some obvious costs, namely your employer contributions – and some less obvious ones that need to be considered. This could include the technology needed to implement auto-enrolment, and depending on which technology solution you use, you might have to pay more to your payroll provider or pension provider, although some, including Scottish Widows, do not charge anything extra for this.
Advice on auto-enrolment from a professional adviser, and additional admin support if it is needed, will also incur extra costs, although the latter tends to be more of an issue for large and medium-sized firms than for small businesses.
There are online tools available to help you calculate these costs, but one thing you need to be realistic about is the cost of your contributions and what your likely opt-out rates will be. Early indications suggest rates of around 10 per cent, which are lower than originally anticipated. If you assume too high an opt-out rate, the actual cost of contributions may come as a nasty shock.
Q: I don’t have an adviser relationship, but with a contact centre workforce which includes a number of part-time and temporary employees, would such an arrangement benefit me, as an employer? Who should I speak to?
J. Davenport, Birmingham
Lynn Graves: The adviser relationship is something that a growing number of employers are considering. If you have never been engaged in a workplace pension scheme, it is likely that you have not thought about such a relationship before.
A key point to make is that as a result of pensions reform, the role of the adviser is changing, and services are increasingly focused towards employers rather than employees, as it was previously.
Advisers are building up a strong set of skills around auto-enrolment, which makes them a valuable asset to companies as they get to grips with implementation. You can find a useful list of independent professional advisers by visiting unbiased.co.uk.
Q: I am the managing director of a retail business with 85 employees, and a company pension scheme is already in place for the senior managers. Am I right in thinking that I can continue to use this scheme for auto-enrolment?
S. McGovern, Surrey
Lynn Graves: Many business owners assume their existing pension scheme will work for auto-enrolment, but that may not be the case, and you should speak to your pension provider or adviser to find out. It must be a qualifying workplace scheme as defined by the pensions regulator, but even if yours does qualify, you shouldn’t assume that it could be extended to the entire workforce.
Often you find that pension schemes offered only to senior staff are costed according to the profile of the employees who qualify. If you employ part-time or transient staff, who will have a different profile, your provider may not be able to offer the scheme to every member of staff at the same rate.
However, there are other options, so you should speak to your existing provider to see if they can provide alternative terms for the rest of your workforce, or work with your adviser to explore alternatives such as a separate scheme for the auto-enrolling population.
Q: I remember the introduction of stakeholder pension schemes over a decade ago, which never really seemed to take off. I just wonder, will auto-enrolment be any better?
F. Walker, London
Lynn Graves: Some cynicism as a result of what happened with stakeholder schemes is natural but the general experience this time round is different. Auto-enrolment is backed by primary legislation that holds employers to account. This is backed by the regulator, which has already issued notices to employers for non-compliance. The challenge is how we can best support employers and their workers through the process.
What can Scottish Widows offer?
Award-winning Scottish Widows is a specialist in corporate pensions, managing more than 44,000 schemes of all sizes, across all sectors. It was named Pension Provider of the Year at the Workplace Savings and Benefits Awards 2013 and Group Pensions Provider of the Year at the Financial Adviser Life & Pensions Awards 2013.
Our auto-enrolment solution, AssistMe, helps make compliance with automatic enrolment as smooth as possible. It can accept data from HR and payroll systems with straight-through connectivity to our administration systems. It also gives reporting and MI capability to provide the necessary audit trail to the pensions regulator.
Scottish Widows has devised a comprehensive set of tools to help advisers and employers to plan the most appropriate route to fulfilling automatic enrolment duties and to test different scenarios. These include an automatic enrolment planner and an employee impact tool that will help companies understand how pensions reform affects different groups of employees.
Our dedicated communications team can provide employers with the help and support they need to promote their scheme in the most effective way. This includes traditional methods of communication, as well as multimedia and other promotional resources such as posters, email campaigns, and a user-friendly microsite which points employees to key information on their company pension, with access to our online tools and member services.