When auto-enrolment began in 2012 it brought with it the inevitable flurry of providers – all competing in a bid to service the 5.4 million SMEs in the UK. We were one of them. Each of us offer differing levels of service at different fees.
Choice is generally considered a good thing but having an understanding of what you want can make your decision that much easier. That sounds obvious when we’re talking about food or clothing perhaps but when it comes to auto-enrolment, for many SMEs, it’s not so clear cut.
Whilst most auto enrolment solutions are generally good value, it’s understandable that small businesses with tight cash flow might just choose the cheapest option with most renown. After all, auto enrolment is a new venture for most and some might feel it’s simply something to tick off the ‘to do’ list. BUT, I would urge businesses to do a little bit of research up front to save headaches and time down the line. In essence, whilst following the herd might offer a certain level of comfort, it’s important to know what level of service you’ll receive and how much of the heavy lifting you’ll end up undertaking by doing so. Free still comes with a choice.
First off, It’s worth considering how much work you, the employer, will have to do. There are some good service providers who offer free set and ongoing administration to the employer (indeed, we are one of those) but several others can often scrimp on ongoing service levels and you can often find yourself paying with the most precious of commodities, time. Do you want to be constantly administering your employees’ pensions or passing on general, non-personal updates to ensure your scheme remains compliant with the regulator?
Secondly, 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 detailed and clear information on this and provide an ongoing communication service is important in making your employees feel secure.
Thirdly, does your service provide call centre support which connects you to a human being? Good providers, whether paid or free, 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, where it’s invested and why.
Which brings me to my fourth point – does your service offer a range of investments beyond passive funds or funds simply investing in an index? And if not, why is it charging employees a fee to manage their money with little-to-no active management involved? Offering employees a choice of active and passive funds seems far more logical, practical and accommodating while at the same time being fully transparent about the costs associated with investing in different types of funds.
Sorting out a company pension scheme can feel like another huge task so finding a trusted provider that takes the heavy burden of setting up the scheme in its entirety from them, is important. Additionally, many small companies will likely have limited experience in providing a pension 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. Pension schemes may offer extra services such as working out who is eligible to join the scheme, processing requests to join or helping with ongoing duties.
There are a handful of providers, some free, some not, who are currently offering this quality service level but so I would advise businesses to do some research and find out which companies will set up and manage your auto enrolment capability providing the full complement of set up and ongoing services.
SMEs should see auto enrolment as not just another item on their to do list, moreso an important part of employee engagement, which, if they it get right, will in the long term free up their time to concentrate on managing their businesses effectively.
Garry Crackle is director at Opt Pensions