Pensions have been in the spotlight this week with the release of the findings of an Office of Fair Trading (OFT) report that called for a crackdown in the pensions market after it uncovered that some £40 billion of savers’ money is contained in current schemes which may be delivering poor value.
The report also highlighted that the sheer complexity of some defined contribution schemes make it difficult to decide on the best options that offer value for money – a problem which is only set to grow as smaller firms (who make up many of our members) are brought into auto-enrolment.
There is no escaping the fact that thousands of small businesses up and down the country will sooner rather than later have to take on the daunting task of launching their own pension schemes in the coming years. Whilst the OFT is recommending greater transparency to make it easier for employers to make a ‘money-supermarket’ style cost benefit comparison it also highlights the fact that it is never too early for business owners to start thinking about pensions.
This is something that the Forum is all too aware of and it is teaming up with specialist advisers Morfitt & Turnbull to help take the pain out of pensions. Below are a few simple tips to help you get ahead of the pack when it comes to auto-enrolment.
Get your facts straight
Before you start your preparations for auto enrolment it is essential that you acquaint yourself with exactly what is expected, when and to what extent. The Pensions Regulator website is a useful starting point where you can find detailed information on the scheme and employers obligations.
Out partner, Morfitt & Turnbull quite rightly points out: “For planning purposes all businesses should be aware of when their staging date applies and although there is a lot of information available in respect of pensions auto enrolment, it is not always easy to ensure a business follows the right path. Once the date is known then it is evaluation of the workforce to see who should be enrolled initially and in the future. The business can at least start to put together a plan so that the right scheme is in place and on time.”
Contributing to your employees pension scheme, for many SMEs, will be a cost that presents itself for the first time. There are also additional costs to take into account including the administration cost, which is more likely to be a time cost for an employee(s) to look after the scheme.
It is also worth noting that not all payroll systems may be fit for purpose and may need updating. Last but not least there is the cost of advice, one that may be best avoided, but as outlined below may prove invaluable.
The Pensions Regulator does provide extensive information and guidance. However it does focus on giving top line highly generic information and needs to be tailored to each business and they will not provide specific advice for firms.
Despite attempts to simplify the industry, as the OFT Report points out, pensions are still dauntingly complex and not the sort of thing that businesses should be entering into lightly.
It would be a wise move for those with no experience of running workplace pension schemes to seek the help of a financial adviser sooner rather than later as your staging date moves ever closer. By seeking professional advice a business can expect to have access to expertise and assistance on a whole host of issues, from reviewing any existing pension scheme to contribution options.