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Guest Blog: Pensions Auto Enrolment

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The deadline is looming …. Are your prepared?

 Rod Milne from pension specialist HFS Milbourne provides a snapshot of setting up an Auto-Enrolment scheme and suggests that going it alone without the benefit of expert advice is not for the faint hearted

The staging date of auto enrolment for firms with PAYE schemes supporting between 30-249 employers will fall between April 2014 and October 2015. As the Pensions Regulator routinely writes out to employers 12 months before their designated implementation date, it is likely that many firms will have already received detailed information about their obligations under the new regulations.

The administrative and regulatory burden of this new legislation should not be underestimated and generally the advice is to act sooner rather than later in terms of getting to grips with all that the new rules encompass.

There are a number of significant challenges and risks to all employers, irrespective of whether there is an in house HR resource to manage the implementation of a new process, including the transition from any existing scheme structure.

The sort of things which need to take priority at the planning stage include:

How best do we structure our scheme to comply with the regulations? The starting point is a review of any existing pension arrangements to see what changes, if any, are required to comply with Auto-Enrolment. Potential fines can be hefty, ranging from £400 to £10,000 per day so non-compliance is not an option, especially as any remedial action that may be necessary may result in back-payment of both employer and employee contributions with interest.

What is the best scheme design and recommendation? The initial assessment should include a thorough audit and assessment of the workforce and provides an opportunity for ‘data cleansing’ to remove out of date and inaccurate information. Once a shopping list of requirements is created, it should be possible to identify which scheme from the numerous options available on the market best meets the needs of the workforce as well as the provider that can offer the most attractive terms.

How do we align the structure to any reward objectives? It is possible to incentivise staff as part of a benefits package through more attractive pension provision and this can be built into any new scheme, a priority being to ensure that staff appreciate the full value of the contribution made by the employer. Higher pension contributions can help attract and retain quality staff so are worth considering for key personnel.

How do we forecast and manage the financial implications? There is of course the costs associated with all the administration required to set up and manage the ongoing scheme and at the very least, this can include additional manpower, training, new software and technology which all has to be factored in. There are also the contributions which have to be made by the employer on the employee’s behalf which are linked to salary and run at 1-3%. With advice it may be in an employer’s interests to look at a “salary exchange” arrangement whereby the employer saves on National Insurance costs, these savings can in some cases actually pay for the 3% employer contributions!

How do we effectively communicate and implement the changes to maximise employee engagement? It is vital that staff are involved every step of the way in order to achieve ‘buy in’. On-going communication in the form of both group presentations and individual ‘one to one’ pension surgeries is important. Information packs will need to be provided and updated on a regular basis to keep staff informed of scheme progress. Some clients running larger schemes even operate online portals and e-communication programmes to keep employees updated on pension news and these are options that can be considered.

Review and support: Once the scheme is in place, it will be important to establish a structured process for ongoing assessment and review. Employees, especially those approaching retirement age, will want to discuss their individual pension plans and may even require retirement counselling. As well as opportunities for face to face discussions, a system for dealing with queries by telephone and mail should also be made available so that urgent issues can be resolved quickly. Regardless of the compliance burden, most employers will want to achieve the greatest possible return on their employees’ pension investments and will therefore appreciate an annual performance review along with an update on any relevant changes to the Regulations. Don’t forget that an employer is not allowed to give advice to an employee on pension scheme membership , this must be done by a regulated adviser.

Perhaps your firm will be one of the very few that will be bold enough to implement the changes without any external advice. It is the finer technical details that will cause employers the biggest problems and it is prudent for any company with no experience of running workplace pension schemes to call in pension specialists for assistance.

HFS Milbourne has made it easier for companies to embrace Auto-Enrolment by offering a free bespoke guide “Seven Steps to Auto Enrolment”, which will take employers through all the steps leading up to Auto Enrolment.

HFS Milbourne has also created a menu of services designed around the key stages of implementing an Auto-Enrolment scheme – from data gathering and scheme assessment at the beginning of the process to ongoing review and assessment once the programme is in place. Clients can choose to “buy in” as much expertise as they require – HFS Milbourne can manage the whole process or just specific elements of it, whichever best suits the client’s needs. This provides the flexibility that small businesses need particularly those that will be implementing a pension scheme for the very first time.

For further information, email