Making the policy work for all

Auto enrolment has been a big success so far, with opt out rates low and satisfaction levels high. But with 1.8 million small and micro employers yet to stage, the hard part is still to come.

While it’s important to debate the complexities of providing pensions for those that employ workers in the home – for example nannies and carers – it’s important that this doesn’t overshadow the policy.

Important as they are, nannies and carers make up a very small proportion of the employers meeting their staging date (the date on which a company’s auto enrolment obligations come into effect) in the next two and a half years. Yet the media attention they have attracted has been disproportionately large. We need to ensure the debate focuses on the real issue – ensuring that providers and employers are together able to successfully navigate the soaring peaks in staging dates that are approaching.

This means focusing on bridging the gap between the expectation of what small and micro employers consider their experience of auto enrolment likely to be, and what could prove to be the reality.

Our ‘Meeting the needs of smaller employers’ consultation findings show all organisations want and expect some degree of support with auto enrolment. The problem is that the smaller the employer, and therefore the less potentially lucrative in pure fund-based remuneration terms, the more likely they are to want and need help with auto enrolment.

Micro companies (those with five or fewer employees) in particular lack confidence and want a provider to do everything for them, expecting high levels of support at set-up, through staging and on an ongoing basis. For example, our research has found that 62% of micro employers see the availability of a named individual within a provider to help with any issues that arise as essential, compared to 59% of smaller employers.

Our research also found small and micro employers want live chat facilities and enhanced online support. These are the sorts of services that are going to be essential to make it through the coming staging peaks without the system grinding to a halt, which is why we are introducing them.

But for small and micro employers simple economics dictates that these types of services can only be delivered if providers have sufficient resource to fund them.

NEST offers some ancillary services, but it has received a massive loan from the government – operating commercially it would need more than 40 times its current assets under management to meet its ongoing costs.

Other providers that have positioned themselves as targeting the mass auto enrolment market are now turning away employers that do not suit their underwriting profile, whether because average earnings are too low, the employee population is too small or turnover of staff is too high.

It is precisely because we want to continue to remain open to all employers that we have introduced a monthly service charge for employers, of £36 a month plus VAT for firms staging from 2016 onwards.

But we appreciate there is a big difference in the work done for an employer that uses a payroll bureau whose system has embraced auto enrolment and one that has not. This is why we have introduced a tiered approach to our charge structure that means those employers that come via a payroll bureau – who are far better prepared than those who come direct – pay just £20 a month, or £12.50 a month where there are only four employees or fewer.

Let’s move the debate to making sure auto enrolment stays on course. That means understanding we need well-resourced providers delivering low cost services that meet the needs and obligations of these small businesses. Auto enrolment has been a big success so far, but in terms of employer numbers, the job has barely begun.

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NOW: Pensions has a good technical infrastructure combined with a pension product suitable for our team. We couldn’t be happier with NOW: Pensions.
Martin Woods, SALT.agency