Auto-enrolment: Why’s it important?
April 2018 marked another big change for auto-enrolment, as the minimum contribution levels rose from a total of 2%, to 5%, with the employer having to pay at least 2%. For small to medium sized businesses, this presented a significant cost increase in many areas. Although the merits of staff saving for retirement are undeniable, the burden on employers has often been overlooked. Additionally, with wide-ranging speculation around the potential of rising opt-out rates among employees, the effect of this on the industry as a whole has yet to be seen.
Eligibility and the self-employed
An individual considered by HMRC as self-employed for tax purposes, may still be classed as a ‘worker’, if they work under a personal contract of services. This means that according to auto-enrolment rules, arguably they should be auto-enrolled, though the Pensions Regulator is yet to address this question.
Indeed, recent high-profile tribunal cases involving Uber and CitySprint have illustrated this, where drivers argued they were classed as ‘workers’ under the aforementioned Acts and should therefore be entitled to AE provision.
While it is still unclear how exactly auto-enrolment will be rolled out to the self-employed market, there is no doubt that such a large percentage of the UK marketplace will not be left out for long.
Key things to consider
With auto-enrolment becoming an ever-increasing part of UK business life, it is essential that all employers take stock of the arrangement they are currently in and check that this is best suited for them. Here are five key considerations when reviewing your existing workplace pensions arrangements:
How much of the heavy lifting do I have to do?
First and foremost, how much work do you have to do currently? Smaller businesses are generally busy with some working at capacity. Quite often the management will be focusing on sales, marketing, HR and other administrative tasks within their businesses. Sorting out a company pension scheme can feel like another huge task. They need a trusted provider that takes the heavy burden of setting up the scheme in its entirety from them and will help walk them through the process (and provide guidance for their employees) from start to finish (see communication provision below). Pension schemes may offer extra services such as working out who needs to be put into a pension scheme, processing requests to join the scheme or helping with ongoing duties.
Communication & ongoing service
It is vitally important that employers feel their employees have good access to their schemes and that they understand what they are investing in and how their contributions are doing. Choosing a provider that will not only provide a detailed information on this and provide an ongoing communication service is important in making your employees feel secure, as well as ensuring your compliance. Equally, look for providers offering a dedicated consultant who will deal with you every time and knows your story – you’d be surprised how many providers don’t. Good providers recognise that many members of the scheme might not have a great understanding of the workings of a pension so will also provide user-friendly information on how their pension works.
Value for money?
Whilst we’d always advise opting for quality over price, you don’t necessarily have to pay through the nose to get this quality service level. Nevertheless, price is an important consideration for smaller companies and competition among auto-enrolment providers is stiff. What many businesses don’t realise is that setting up an auto-enrolment scheme with all the ‘bells and whistles’ isn’t always expensive. However, take note of where a provider is going over and above to assist you with your duties, as this may be more than worth the fee.
Where’s the money invested?
Auto-enrolment providers should offer a default option but employees should be given a choice too. In our experience, too much choice is stifling and too little is hindering. Indeed, the large number of available saving options is one of the main factors contributing to a crisis of confidence when it comes to investment habits – with over a third of consumers saying they thought there was too much choice when it comes to saving for retirement. It’s also important to dig down into the investment options. Options should include the ability to invest across stocks and shares, not simply passive investments. Ask providers who manages their underlying investment portfolios and get them to show you their credentials and past performance.
Consolidating other schemes?
Some employees might have accumulated several different pension pots from various other jobs and they may wish to bring these under one roof for ease. However, transferring private pension pots into a workplace scheme will depend on the individual scheme, some allow transfers and some don’t. It’s worth asking potential AE providers whether this is a service they provide and can, again, do the ‘heavy lifting’ on behalf of the employer and employee. Keeping on top of pensions should not be daunting. Neither should it be complex or costly to merge various pots together should an employee wish to do so.
Like it or not, auto-enrolment is a mandatory provision for all employers in the UK. It is therefore worth taking the time to make sure that your pension scheme is working best for you. If you’re not sure always ask. As Benjamin Franklin might have said, there are three certainties in life: death, taxes and auto-enrolment. Your workplace pension is important, the time to take interest is now.
Opt Pensions is a trading style of Opt Corporation Limited and is part of the Harwood Capital Management Ltd. Group of Companies. We were established specifically to meet the demands of auto-enrolment and to assist small to medium-sized companies with their new workplace pension responsibilities. We do this by having a dedicated team of Business Development Managers ready to assist employers and their advisers with their auto-enrolment responsibilities as well as providing a number of unique services which go over and above the usual expectations of an auto-enrolment scheme.
From start to finish, Opt Pensions will manage your needs and provide a highly compliant, well-functioning workplace pension scheme that you can rely on to fit all of your auto-enrolment requirements. At Opt Pensions we will provide you with not only compliance, but compatibility, and the reassurance of knowing your workplace pension is in safe hands.
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