There’re a few providers to choose from and you just don’t know which one is best for your workers. How can you get the information you need to make an informed choice? It’s their money and future after all. So here are five questions you should be asking yourself to help choose a high quality pension scheme.
(1) What does the Pension and Lifetime Savings Association (PLSA) think of your provider?
The PLSA provides an independent assessment of pension schemes. Its PQM READY status shows that a scheme meets its high standards. These standards include having good governance, low charges and clear member communications. If you choose one of these schemes as your workplace pension provider, then you only have to pass the contributions element of the PLSA assessment process to be awarded a Pension Quality Mark yourself. This means you can then demonstrate the benefits of your scheme to your workers. PLSA publish a list of pension schemes that have achieved PQM ready status.
(2) If you’re using a master trust, is your provider MAF accredited?
A master trust assurance framework (MAF) report demonstrates that a master trust is meeting certain standards of administration and governance. The ICAEW developed this framework in partnership with The Pensions Regulator (TPR). It was designed to help employers identify good quality schemes for auto enrolment and to build confidence in pension saving. Firms must undertake an initial (type 1) report and then subsequent annual (type 2) reports to ensure standards are maintained.
If an organisation receives a clean bill of health in the MAF type 1 and 2 reports, you can be more confident the scheme you are using is well run. When NEST published its 2016 “type 2” master trust assurance report it was welcomed by industry and employers as a sign of quality. There’s a list of accredited master trusts published by TPR.
(3) Is your provider a responsible investor?
Many schemes have started thinking more broadly about how the companies and markets they invest in are run, how they generate profits and how they treat people and the planet. With a growing focus on responsible investment, it will become more and more important for schemes to be guided by their own Economic, Social and Corporate Governance (ESG) objectives. Considering ESG risks and opportunities whilst being an active and responsible investor is another way of making the most of members’ investments. You might also be interested in the work of Shareaction. It’s a charity that campaigns for responsible investment and assesses pension schemes based on its approach to investment.
(4) What does the sector think of your scheme?
There’s a range of awards that recognise high quality schemes. These include awards for the best pension scheme overall and those that focus on a particular element of a scheme, like the way it has been designed. Some notable awards include those provided by Financial News or the Pension and Investment Providers awards. There are also awards for the quality and design of a scheme’s approach to their investments, including the European Innovation Awards and the IPE awards. If a scheme has a track record for award success it can be a good sign their peers within the sector think they provide a high quality service.
(5) What happens if your provider isn’t suitable for small employers or just says “no”?
Sometimes smaller employers discover that the provider they had in mind has designed their services and charges for larger employers. This can be an issue. Asides from cost, if you’re administering the pension yourself there’s also the amount of time it takes to complete routine tasks. Sometime providers just aren’t open to all types of employer.
Paul Budgen is director of business development at NEST.
As the number of businesses reaching the date when auto-enrolment duties start, known as the staging date, Real Business has produced a comprehensive checklist to ensure business leaders are not forgetting anything.
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