The government’s auto-enrolment scheme is the biggest shake-up for pensions in decades. For many directors, implementing the system hasn’t been without its headaches. Here James Foulkes, director and co-founder of Kingpin – a London-based B2B tech marketing agency – shares his experience of the process
I co-founded Kingpin in 1997. Like most people who start a business, I went into it because I had an idea, not because I’m good at accountancy or law. However, over the last 18 years, I’ve learnt a whole host of stuff I didn’t expect. Such as with pensions.
When the government announced its auto-enrolment scheme for pensions in 2012, I immediately got why they were doing it. The UK has an aging workforce, with fewer younger people, who will need to get money from somewhere when they retire. It increases investment in British plcs, plus gets younger people thinking about the future.
At the time, Kingpin had a non-contributory stakeholder pension scheme. We have 18 staff, but only two signed up. It worked for us because we are a small business – we can’t compete with banks or larger firms who offer gym membership.
Auto-enrolment is different. It’s compulsory for employers to automatically enrol their eligible workers into a pension scheme.
We started implementing auto-enrolment in April. Our staging date isn’t until June 2016, so we’ve started early. One independent financial advisor (IFA) I spoke to said this was good, because if we need to pause during the process, it will be fine.
At first, I assumed auto-enrolment would be another piece of needless bureaucracy for small business. But to be honest, the government has handled it well. Once you register at pensionsregulator.gov.uk, they let you know your staging date. The website then gives you simple, easy-to-follow instructions on what to do next. All the information has been relatively easy to find.
So far, I’ve found that it’s 100 per cent important you seek advice. The financial services industry changes so often, it’s a full-time job to stay on top of it. I’m currently talking to two IFAs, plus we use a HR support company too.
As for Kingpin’s staff, we’re going to sit them down to give them an option of talking to either our IFA or their own adviser, and then give them the option of being in or staying out. Kingpin has a young workforce (our average age is around 30) but I don’t think we’ll have any problem getting staff involved.
Auto-enrolment does have its negatives. There’s the admin side for one – there are multiple forms to fill in, plus the FCA [Financial Conduct Authority] demanding they have everything in writing. Then there’s the cost, which I’m slightly worried about. The minimum contribution an employer must pay [into each employee’s pension] is 1 per cent of a worker’s gross earnings. This means we effectively have to give people pay rises and increase the percentage we pay them over time.
Our next step? We’re looking into a supplier to deliver this to our employees, and we’re thinking about the government’s Nest (nestpensions.org.uk) service, but other providers also offer auto-enrolment schemes. The whole experience has been a learning curve, but we’re getting there…
Advice from Scottish Widows
Lynn Graves at Scottish Widows said, “Kingpin’s approach to auto enrolment is a great example of how to stage relatively pain-free. Planning well in advance, taking your time to understand the requirements, seeking professional advice and importantly, taking the time to communicate and engage employees, are all crucial steps for auto enrolling successfully.
“Although Kingpin’s workforce is relatively young, it’s great that they’re offering additional support and encouraging them to plan for retirement now. Under auto-enrolment anyone over the age of 22 is eligible to be enrolled so Kingpin’s approach is absolutely right for their employees’ best interests.
“Thanks to auto enrolment these young people are set to accumulate a sizable fund. And with the newly introduced Pension Freedoms, they will have some big decisions to make when they reach retirement so learning about how it all works from an early age will certainly give them an advantage.”
For more information visit: scottishwidows.co.uk/pensionreform/employers thepensionsregulator.gov.uk