With countless SMEs facing looming deadlines for auto enrolment (AE) over the course of this year, many will undoubtedly be embarking on the pension provision journey for the first time and will no doubt be wondering where to turn. Choosing the right auto enrolment provider is important as a pension scheme should cater for the needs of employees and employers alike. Getting the right one will put employers’ minds at ease and employees will feel valued, secure and better in control of their retirement planning.
However, there are many auto enrolment providers offering varying levels of service at different costs and so selecting a scheme that is well-suited to their workforce and business requirements can be daunting.
How much of the heavy lifting will I have to do?
First and foremost, how much work will you have to do? 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. Additionally, many small companies will have little-to-no experience in providing a pensions scheme for their employees so look for providers that 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 and 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. Equally, look for providers offering a call centre which connects you to a human being – 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. For as little as £15 per month, some companies will set up and manage your auto-enrolment capability providing the full complement of set up and ongoing services.
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.
Garry Crackle is the Director of Opt Pensions.