Managing Your Cash Flow
Common challenges small businesses experience with auto-enrolment
4 min read
08 December 2016
As we approach 2017 and enter the busiest period for auto-enrolment, it seems that smaller employers are, for the most part, smoothly adapting to providing workplace pensions – but there are some common challenges all firms will go up against.
Talking to smaller employers, despite this generally very positive picture, there are a few common challenges. To make sure these issues don’t delay your auto-enrolment process, I’ve put together three quick tips on situations I often get asked about.
1) Not knowing where to start
If you are one of the almost 1m smaller employers set to introduce auto-enrolment over the next 15 months, you might be thinking “where do I start?” To take the first step, it’s important to know your staging date. This is the date you’re required by law to enrol your workers into a workplace pension. The Pensions Regulator (TPR) tells you when your staging date is and if you need to check you can visit TPR’s website. The site also has a host of useful guides and information for employers, so if you’re at the start of the process, or just need extra information to ensure you hop over those common challenges, it’s definitely worth visiting.
2) Not knowing which pension provider to choose
Unfortunately there isn’t an equivalent to the Tripadvisor website for pensions, so picking your pension provider deinitely tops any list of common challenges for the auto-enrolment process – but there is the next best thing. The Pensions and Lifetime Saving Association (PLSA) provides an independent assessment of pension schemes. Its PQM READY status shows that a scheme meets high standards. These standards include having good governance, low charges and clear member communications. PLSA publish a list of pension schemes that have achieved PQM ready status.
If your auto-enrolment scheme provider is a master trust, you can check whether it has published a master trust assurance framework (MAF) report. A MAF report demonstrates that a master trust is meeting certain standards of administration and governance. There’s a list of accredited master trusts published by TPR. Governance is important as there’s a well-recognised relationship between good governance equating to a good pension and member outcomes.
In addition, you may want to compare the quality of the scheme’s default fund. Most workers generally stay in their scheme’s default fund so it’s important to check the fund offers a high quality investment approach. A good place to start is the guide to analysing auto enrolment default funds produced by Defaqto, that was commissioned by NEST.
3) Getting auto enrolment communications right is a one of the most common challenges to overcome
I know that in many smaller employers business communications is direct, personal and perhaps normally done over a cup of tea. That’s one of the best things about working in a small team. However, auto-enrolment has clear rules about how you should communicate with workers. It’s important to remember you have a responsibility to provide your workers with some form of written communication detailing their new pension. An informal chat, even if that’s how you normally talk, isn’t appropriate here. It’s actually to everyone’s benefit if the communication is straightforward, free of financial gobbledygook and takes place at an early stage of the process, so any snags can be ironed out.
So those are some of the issues that employers talk to me about, but this isn’t an attempt to create a comprehensive list. If you need further help with auto-enrolment, or you just want to find out more about NEST’s scheme, there’s lots of information on the site.
Paul Budgen is director of business development at NEST