As an employer seeking help with workplace pensions and automatic enrolment, you may only be offered a small selection of pension schemes. Or maybe no choice at all. It depends on who you seek help from. So, should you care?
Well, we think you should. Here are three reasons why:
1. Because your workplace pension is not just for staging
In the same way as puppies are for life not just for Christmas, your workplace pension could be a feature of your engagement with your staff for decades. If your choice of scheme is well received, you could get some brownie points from your staff. If it isn’t, you could get grief instead. And who needs grief?
2. Because providers really are different
There are many providers available today, even for small employers. They all work in the same way at the highest level; they are attractive saving schemes. But dig deeper and you’ll find that they’re all different across a wide range of features including ownership, objectives, charges, investment, service standards, choice and governance. And more besides.
Take NEST for example. NEST is currently, I think, the largest provider of auto enrolment pensions by number of employers. Many people assume that because it’s backed by the government it must be like all the others but better.
Whilst the following points are not necessarily negatives and do NOT mean that NEST isn’t a great scheme (or that it is), they do show that it is certainly not the same as all the others.
From 9 providers that we currently highlight for consideration, NEST is;
So, scheme providers are not all the same. Consequently, some will be more attractive to you and your staff than others. Surely it must be best to have a look around before you decide?
3. Because it’s the law?
The law requires you to enrol workers into a scheme that meets minimum standards. It’s down to you to decide on a scheme provider. There are no specific rules about how you make that choice though and as we’ve just seen, there’s more to it than meets the eye.
So, what happens if you get it wrong? (and what is “wrong” anyway?). Say the pension provider goes bust or the investment manager loses all the funds? Or they just perform badly?
Some people say “nothing”; that there is no come back on the employer. The trouble is that the law isn’t really that clear. There’s certainly no law that I’m aware of that says “It doesn’t matter how you choose a scheme because no one can sue you for making the wrong choice”. If only there were. But the law doesn’t work that way. I guess we’ll only know if and when the first challenge makes it to court.
I’m not a lawyer and I can’t give you legal advice, but if it were me I would want to be able to show, if challenged, that I had at least followed a selection process. That I took identifiable steps to understand what’s available in the market and what good looks like; that I took reasonable steps to check that my chosen provider is well run and that the features and benefits are of good quality and value.
A great many business advisers offer a very restricted choice of providers, perhaps because it makes it easier or cheaper for them to provide their services. But to me, reasons like “they are the three biggest providers” or “we find them easiest to deal with” don’t stand up to scrutiny. There has to be more to more to it. Your members expect.
So how do you choose a scheme?
Unless you have some knowledge of the pensions market, you’ll probably want to get some help. You don’t have to hire an expensive Financial Adviser. You just need someone with sufficient experience and expertise in workplace pensions to be able to research the market, explain how it all works and help you to manage and document a process. It isn’t rocket science and if they have a clear process it needn’t take that long.
It’s for you to decide. In our view, comparing schemes and documenting your decisions are crucial first steps. And hey; if you happen to be stopped by one of your staff in the car park one day and asked; “why did you choose our pension provider boss?”, you’ll be able to give them an answer!
Needless to say, we can help. Give us a call on 01892 871242 if you want to know more.