As we move into the second half of 2015 and in to 2016 we will start to see the auto-enrolment (AE) machine affect businesses with 50 staff or less. And it's going to hit big, with literally hundreds of thousands of small businesses facing costs and decisions in 2015.
A major challenge for employers will be to decide whether or not they need external assistance in meeting their new obligations. The rules and decisions can be numerous and complicated: understanding to whom in their organisation the rules apply, contractual changes, payroll and payment mechanisms, record-keeping and auditing, communications and, perhaps the most obvious one, and often overlooked, choosing a pension scheme.
The Pensions Regulator is stepping-up the pace now with flash visits to employers, often resulting in compliance notices and, increasingly, fines. So be prepared for scaremonger tactics too as part of the sales pitch from service providers.
The task of becoming compliant, initially at least is about two things: managing costs and managing risks. Enlisting the support of a professional, who has experience of the processes, decisions and challenges you will face can undoubtedly save you time, worry and cost.
For payroll providers, pension providers, accountancy practices, IFAs and benefits consultancies, this presents a huge commercial opportunity. To make sure you are receiving value for money you need to understand some of the dynamics of the market to ensure you know what you're letting yourselves in for.
Let's look at the options. Payroll firms came to AE late but they got there in the end. If you want mechanical answers to assessment, payments and auditing, and sometimes communications, payroll companies can provide cost-effective solutions. But they will only go so far and they're not specialised in pensions. Pension providers are the manufacturers: they offer the savings vehicle itself and often supply a heap of 'information only' support. They will not offer you guidance or advice.
If you want context, reference points, advice, guidance, recommendations and support services that can protect you from risk and potentially save you money, you must turn to corporate pensions consultants.
But even here there are additional considerations. Many advisers are now also establishing themselves as providers, offering schemes of their own in an attempt to offer a one-stop solution for clients. Nothing intrinsically wrong with this approach in itself, but if you are looking to pick your way through the 80 or more AE-qualifying pension schemes out there, true objectivity may be hard to come by. This leads to the question of whether you bundle advice and product service into one arrangement, possibly at the expense of the members (i.e. they pay for the cost of the advice that you receive as an employer through scheme charges) or you separate them out in the interests of flexibility and transparency. And there's a lot to be said for flexibility.
So do you need external help choosing the right scheme? I'd say yes.
Do you need help running it thereafter? Probably, if you want to do it right!
JLT Employee Benefits have a designated team who deal solely with Auto Enrolment for firms with under 50 staff. If you would like to discuss your options please contact the Employee Benefits team on 0207 5284000.