Hewden: simplicity crucial to managing auto-enrolment

According to official figures 32,000 employers will have to auto-enrol in the current financial year. Many of the employers yet to stage will have less resources, making it more difficult to attract the best providers and advisers.

Hewden’s HR systems project manager at the time Helen Close singled out benefits design and administration as key aspects for schemes to consider when auto-enrolling employees, during a workshop at the Ceridian Customer Conference 2014 last week.

The employer staged last October. “We planned 11 months in advance so we felt we weren’t rushing into it,” said Close. “Our biggest tip would be to keep your design as simple as possible.”

Prior to auto-enrolling, the employer had two defined contribution schemes, one with B&CE for its around 200 weekly paid staff and another with Legal & General for the remaining 800.

The employer ultimately decided to move all its employees to Legal & General. This produced challenges for communication with members who had to switch from the existing provider, but this, Close said, was helped by the scheme outlining the move in a positive light.

Hewden's AE project

Early last year Hewden expressed concern about the impact a high take-up of auto-enrolment would have on the balance sheet, prompting the employer to offer only the minimum contributions for auto-enrolment.

The scheme has raised its participation to 91 per cent compared with 8 per cent prior to the reform. “I had a very clear objective when I set out to get participation rates up. We thought we were going to struggle,” said Close.

“Our challenge was convincing people who had to move that it was the right choice but once we explained and people looked at it we didn’t have any kick-back,” said Close.

She gave the example of using a simple benefits structure which did not differentiate between entitled, eligible and non-eligible members.

“Anyone who wants to join the scheme gets a contribution from the company because we wanted it to be an all-inclusive scheme,” she said.

Evaluating advice

The scheme employed consultancy KPMG to ensure the design and communications met compliance standards, but Close said there was enough freely available information to do without external advice.

“We didn’t get value for money but we got peace of mind,” said Close. “There’s enough information out there that you don’t need someone to hand-hold you.”

As well as the preparedness of smaller employers, the sheer volume of employers staging may also lead to strains on the industry. Some argue that the so-called capacity crunch will lead to changes in the technology solutions offered to employers.

“We’ll see small, unproven technological solutions coming to market,” said Melissa Goddard, director of pension solutions at payroll provider Ceridian.

Goddard also warned of a “second wave” of employers re-entering the market having already auto-enrolled but seeking a better deal from providers.

This may lead to an off-the-shelf approach to auto-enrolment technology.

“Providers are having to look at what they can offer that is affordable; being more prescriptive is where 2014 is headed,” said Goddard. “The days of bespoke solutions are behind us.”