Why the triennial re-enrolment point is the right time to review your pension scheme
Bramwell Towse, Director of Corporate Solutions at Wren Sterling’s Grantham office, describes what he has seen in the market as employers consider the suitability of their scheme at the triennial re-enrolment point.
The triennial re-enrolment of auto enrolment schemes is naturally leading to employers questioning the scheme that was put in place first time around. For the largest companies that staged in 2012, they’re coming around to their second triennial re-enrolment where new questions may have arisen in the last three years.
As a corporate consultant, I saw employers rush to meet their deadlines throughout auto enrolment and many did not get the optimal outcome as a result. They are now taking this opportunity to review the market.
Many larger employers also had more than one entity with differing staging dates and providers so we are seeing these being consolidated into one scheme for good reasons.
Employee engagement, governance support and access to digital services are all increasingly sought-after by employers, while there is also demand from employers and employees for broader workplace savings. So, employers are asking whether the original scheme they have in place is appropriate if it does not score well in all these areas.
Price is another key factor behind the increased activity we are seeing. Prices have come down since schemes were put in place three years ago, but they can’t go down forever, but for the moment there are cheaper deals to be had, and that is causing movement.
It was always expected that as pension contributions increased up to 2018, group pension schemes may move between providers as higher contributions offered lower charge alternatives.
This move of auto enrolment schemes between pension providers has evolved more quickly than many expected, driven by demand from employers with a bad experience in auto enrolment preparation / ongoing administration, unhappy employees or employers looking for a choice where time to their Staging Date had offered restricted options.
Clearly as larger employers started the auto enrolment process earlier larger schemes have primarily been the ones moving provider, but demand is now increasing as employers reach the third anniversary of their Staging Date.
Questions for finance directors
A few questions a finance director may wish to consider:
Does our pension scheme have an annual management charge lower than the 0.75% government maximum charge – are we happy with this or do we require the lowest cost for our employees?
Are our staff handling administration happy with the scheme arrangements and could these be more efficient?
Have any problems occurred with the pension provider or auto enrolment systems and were these handled satisfactorily?
How easy is it for members to obtain information online?
Does the pension scheme allow adviser charges to be paid so advice can be provided to a scheme member funded from their pension funds?
Auto Enrolment is a big part of employer responsibilities with ongoing work and commitment to a significant spend for employee benefits in many cases.
At the triennial re-enrolment point, employers should consider if their overall strategy is the right one and if so, whether the company pension scheme fits that strategy.