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Providers set auto-enrol limits to cherrypick business

Providers are imposing minimum employee pension contributions limits and levying direct employer charges as firms try to cherrypick automatic enrolment business.

Aegon has set a minimum average contribution limit of £100 a month per member for existing schemes and £150 a month for new schemes, potentially squeezing out employers with staff at the lower end of the pay scale.

A spokeswoman for Aegon says: “Some costs of running a scheme, whatever the size, are fixed. The minimum contribution levels are set to cover the costs of setting up and providing ongoing high levels of service to scheme members.”

Aviva says it applies a minimum average monthly contribution and a minimum number of members when considering schemes. However, the provider declined to specify exact figures.

Aviva will also consider levying an additional employer fee to cover a shortfall, a move it first indicated in May. 

In addition, the insurer says it will always offer to enrol new employees if their employer already has an Aviva scheme.

Friends Life also says it will enrol any new employee into an existing auto-enrolment scheme.

However, Friends Life will not serve some small schemes and considers minimum average contributions an “important factor” in pricing a scheme. It says it will also consider a fixed employer fee to cover shortfalls in some cases.

Royal London has an £83 minimum average monthly contribution limit for new schemes. The firm says it is considering levying an employer fee where minimum contributions fall below that and will not accept schemes with fewer than five members.

Standard Life’s minimum requirements are five members per scheme and a minimum average monthly contribution of £25 per month initially and £100 per month from 2018.The insurer may decline terms for existing schemes if the nature of the scheme changes significantly, for example, by adding a large number of new employees.

Legal & General has introduced a flat £1,000 set-up charge for schemes with fewer than 500 members. The firm says the charge is paid by the employer and so does not affect the price paid by members. Prudential and Scottish Widows had not responded at the time of writing.

Now: Pensions and B&CE, which runs The People’s Pension, say they do not impose minimum requirements and will accept any schemes.

Under auto-enrolment legislation, Nest is required to accept any scheme. 

Syndaxi Chartered Financial Planners managing director Robert Reid says: “With a number of providers there is too much human intervention and not enough straight-through processing, which means once premiums go down, those providers struggle.”

How providers are cherrypicking auto-enrolment business?


  • £100 average monthly contribution for new members of existing schemes
  • £150 average monthly contribution for new schemes


  • Undisclosed minimum average contribution and scheme size

Friends Life:

  • Will not offer terms to some small schemes

Standard Life:

  • Minimum average contribution of £25 per month, rising to £100 per month from 2018

Legal and General:

  • Has introduced a flat £1,000 set-up charge for schemes with fewer than 500 members

Royal London

  • Set an £83 per month minimum average contribution for new schemes



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. I (strongly) suspect the insured providers will be looking to ensure that they only take on profitable schemes at the present time, before entering the market more agressively in 2018 once premiums hit their maximum.

    It’s going to be interesting as to how this land grab pans out given the difference in approch between the ‘Life and Pensions’ firms and the ‘master trust’ type providers….. it still feels like the former are clinging onto a model which is being surpassed by technology and the need for immediate processes.

    Furthermore, I suspect there will be more legislative ‘curve balls’ yet to be tossed ….

  2. I really don’t see what the problem is. If you can’t find an insurer to do the work then use NEST/Peoples pension and charge the client accordingly. If the client is unwilling to pay then walk away. Ask any client in business what he/she would do if they were not going to get paid for doing business with one of their customers and see what the answer is. At the end of it all, for the vast majority of people, Nest pension will be as adequate as any.

  3. PS – a very good friend of mine set up a scheme for an employer who staged as of July 1st 2014 (378 person scheme) and when he was making initial enquiries of providers, one of them quoted their minimum premium was £400,000pa. For SME’s thats some minimum annual premium!! Anyone reading this come across the same thing with the provider in question. I don’t want to name them specifically but their old two-word name used to end in Provident

  4. Firms trying to ensure that their business is profitable? Why on earth would they do that? Perhaps, though, it’s to ensure that they fulfil their duty to their shareholders by maximising their return on investment. It’s time we stopped knocking the businesses in the life and pensions world for acting like …businesses actually.

    The life and pensions industry do not have a duty to the public. That was the whole point of NEST. Articles like this just increase the general mistrust of the sector unfairly. Then we act all surprised that public confidence in the industry is low.

    I know of no business team in any business sector who will not try to pick the most profitable segment of the market.

  5. Philip Castle 7th July 2014 at 1:01 pm

    If we cherry pick in reverse with our clients and split the membership placing some staff with NEST/People’s Pension/Now then place the cream of the crop on an advised basis elsewhere, it’s unlikely to go to a traditional insurer isn’t it?

  6. Surprise surprise businesses want the most profitable clients.

    It always amazes me that the government and regulator make ill thought out decisions then complain that the companies required to supply the solution will only do so at a profit.

    I agree with the theory behind AE but the regulator and government shouldn’t be surprised that business will try to provide AE solutions at a profit.

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