The trouble with the Government’s new workplace pension regime is that the real winners are the pension scheme providers, which have been gifted thousands of potential new pension investors. Sadly, the losers are the small and medium-sized business owners who want to do right by their employees.
We have clients whose staging dates are not for a while but they want to get a qualifying scheme set up now so that their employee pay and benefits strategies are aligned with the rules and new employees can go straight on to the scheme.
What they are finding is that many provider companies will not talk to them.
The problem comes in a number of guises. Sometimes the provider feels that the client’s scheme is too small or too expensive to run (so probably has employees in the lower income brackets) and simply declines to offer terms. On other occasions, the provider has a policy of not quoting for cases where there are fewer than a fixed number of employees.
Here is a real example from when we recently asked for quotations for a charity client’s employees. Aegon declined completely and Aviva said it would not quote for anyone with fewer than 20 employees. But perhaps the oddest response was the one from Standard Life.
It appears Standard Life has a policy of not providing quotations until the 12-month period before the employer’s staging date. So it is penalising forward-thinking employers.
This is particularly bizarre because clearly all provider teams will be stretched when the number of employers close to their staging date hits its peak in the months to come. You would think Standard Life would welcome the opportunity to spread the workload a little.
Providers should sit up and take notice. The preparation for auto-enrolment is very onerous for employers – particularly those which do not have HR departments and specialists.
Employers need time to put their schemes in place and to assess what changes, if any, they are making to their employees’ terms and conditions. Most employers will want to ensure that their employees are not disadvantaged by a change of scheme, if that is what is needed, and they will need to get advice not only from financial advisers but often from employment lawyers too.
Auto-enrolment is really a project management exercise and sensible, informed employers will want to start early. If they cannot get providers to quote for a scheme, they will end up failing to meet the deadlines or settling for a less advantageous scheme, leaving them vulnerable to penalties and employee claims.
Auto-enrolment was supposed to resolve the nation’s serious pension planning shortfall. Many employers would prefer to offer an attractive group scheme as part of their employment package – and for potential employees, the quality of the workplace pension scheme may well be a deal-breaker.
It will be sad if all of this comes to nothing because of a lack of enthusiasm from pension scheme providers.
Carl Lamb is managing director of Almary Green