The start date for employers with 50,000 or more employees is October 2012. If you have fewer employees your start - or staging- date will be later.
Whenever your staging date is, it may well fall to you as the HR sspecialist to review your company's pension arrangements and provide advice on how to meet the new pension obligations.
The Government has established NEST, a new pension scheme to particularly target smaller employers and lower earners under auto-enrolment. However there are other options out there and our own research with employers suggests that many smaller companies will want to make an active choice between a number of different pension schemes.
Only one in seven smaller employers have said they will simply default into NEST. The top three factors viewed by employers as important in selecting a scheme were, in order:
- being simple to administer;
- the costs and charges for members; and
- the quality of the default fund.
Raising transparency around costs and charges, so it is easier for employers to compare 'apples with apples' when selecting a scheme, is a key issue the NAPF's industry working group has been tackling. A new Code of Conduct, designed to drive up consistency in the information providers and advisors give to employers, is expected in the autumn.
Ensuring that their older workers have adequate pension provision will be increasingly important, particularly as the State Pension Age rises and the default retirement age has now been abolished. For example, our work showed that the variation between a low and high charging scheme could mean a difference of three years working and saving. And the choice between the highest and lowest annuity rates on the market could make a difference of two years working and saving.
Costs and charges are just one of the factors that can affect member outcomes. As our work with the Pensions Policy Institute (PPI) earlier this year showed, a range of factors, including whether or not a worker opts out at younger ages; the level of employee and employer contributions; the level of charges; the annuity selected and; the age of retirement can more than double a workers private pension income in retirement.
Making sure that the member is getting the most out of their pension at every stage of the life cycle, and can plan for retirement effectively, delivers important benefits both for members and employers. A key factor in driving these outcomes, including member engagement through active communications, is good governance around the pension scheme, whether through running a trust-based arrangement where the trustees are there to protect the members benefits, or through ensuring that in a contract-based arrangement the employer has put management committee or review structures in place.
NAPF polling earlier this year confirmed that around two thirds of employees are likely to remain saving into their pension scheme after they've been auto-enrolled - with 'affordability' and 'trust in the pensions industry' being the two most mentioned reasons for opting-out.
Against this backdrop it's crucial that employers, industry and the Government pull together to ensure that workers understand the long-term benefits of saving into a pension and have confidence that they are getting a good deal from their scheme. With employers often cited as the most trusted by workers, and with the employer contribution often being the main attraction, finding a way of presenting the pension offer to workers and getting them to understand how much money they stand to miss out on if they opt-out will be key to getting their engagement.
Some employers will be looking to put more flexible benefit packages in place that allow workers to choose from a range of different benefits and rewards including pensions.
And employers putting in place more generous packages than the minimum 8% contributions under auto-enrolment, may qualify for independent recognition through the NAPF's Pensions Quality Mark (www.pensionqualitymark.org.uk/). The PQM delivers a powerful message to existing and potential employees.
All these issues will be on the agenda at the NAPF's Annual Conference and Exhibition 2012 in Liverpool (17-19 October). The new Pensions and Employee Benefits programme sessions, with HR Magazine as our media partner, is ideal for HR professionals and will look at topics such as the business benefits of providing a good workplace pension; making the best use of member data to drive down employer costs;, innovative strategies for communication; choosing a pension for auto-enrolment and; flexible benefit packages. We look forward to seeing many of you there. Visit www.napf.co.uk for more information about the event.
Joanne Segars (pictured) chief executive, NAPF
