Auto-enrolment pension providers are sticking to their existing plans following Legal & General’s employer charge cut.
Last week, L&G revealed plans to scrap its £1,000 employer charge for firms with fewer than 500 employees.
But other providers that impose minimum requirements before accepting auto-enrolment business say they have no plans to follow suit.
Last summer, Money Marketing uncovered how pension companies had set limits to cherrypick the most lucrative employers. Some had explicit requirements, while others set individual terms.
Aviva says it will accept any employer but will “offer an additional charge where that allows us to offer the employer a price, rather than turn them away”.
A spokesman says: “It’s important that SMEs and their advisers have access to choice when selecting an auto-enrolment scheme and the additional services they need.
“Different providers offer different levels of choice and support and it is important that advisers compare not only the price but the services provided for that price. Some providers who operate rigid charging structures are also forced to refuse employers who do not meet their commercial thresholds.”
Aegon also confirms it is retaining its requirements. The provider has set a £100 average monthly contribution limit for new members of existing schemes and £150 average monthly contribution for new schemes.
Likewise, Royal London’s £83 per month minimum average contribution for new schemes prerequisite is still active.
Royal London head of corporate affairs Gareth Evans says: “Effectively we’ve got a charge for smaller schemes – we’re monitoring the market but there are no plans to change the charge at the moment.”
A Friends Life spokeswoman confirms the provider continues to charge “on a scheme by scheme basis”.
He says advisers are being frustrated by providers’ setting terms on a scheme-by-scheme basis.
He says: “You could spend the best part of a week ringing round trying to find out what providers’ terms are. It’s an opportunity for advisers, it’s the complexity that keeps us in our jobs, but it’s not helpful for clients.”
Pension PlayPen founder Henry Tapper says dropping the charge puts L&G “back at the top of the table” of auto-enrolment providers.
L&G says all new schemes will be registered and launched through a new online portal, removing much of the administration costs the £1,000 would have covered.
It says SMEs will be able to set up their scheme within 30 minutes and have it fully live within a day.
Tapper says: “What they’ve done is streamlined their on-boarding route and that will radically bring down the cost to them and employers.
“The £1,000 charge was probably a deliberate barrier to say we’re not going to increase the cost of the member charge, but in the short-term we’re not going to accept much new business.
“They were deluged with work in 2012 and I think they deliberately took themselves out of the market.”
Government-backed mastertrust Nest is required to accept any employer, while The People’s Pension and Now: Pensions will also take all business. However, in November Money Marketing revealed the People’s Pension was considering an employer charge to cover costs at the less profitable end of the market.
Which providers are cherrypicking auto-enrolment business?
Aegon: £100 minimum average monthly contribution for existing schemes; £150 for new schemes
Aviva: Levies an additional employer charge on a case-by-case basis
Friends Life: Levies an additional employer charge on a case-by-case basis
Royal London: Minimum average monthly contribution of £83 for new schemes
Nest: No employer charge
Now: Pensions: No employer charge
The People’s Pension: No employer charge