SME says auto-enrolment a 'doddle', advice unnecessary

The need for a consultant to help deliver auto-enrolment has been questioned by smaller employers. Plant hire company Hewden said earlier this month there was enough freely available information in order to stage without having to seek external advice (PE 03/03/14).

Some employers have also decided to offer workers a pre auto-enrolment offer of more generous contributions, ahead of implementing the minimum levels more widely for less engaged employees (PE 24/02/14).

Chemical manufacturer F2 Chemicals has 41 employees, 31 of whom are enrolled in a defined benefit scheme that closed to new members in 2009.

It joined mastertrust Nest as a pilot member in September 2011 when setting up a DC scheme for employees not in the DB plan, knowing it could use the scheme to auto-enrol employees after staging in October 2015.

The board decided to match employee contributions to the new scheme up to 5 per cent.

“Even though the company had closed its DC scheme, the board still wanted to contribute to the pensions of new employees,” said Bill Denison, managing director of F2 Chemicals.

The company has had three workers opt in to the scheme since it was made available in 2011.

“All the people in Nest have taken the 5 per cent option, but if they wanted to do 3 per cent we could easily set that up,” said Denison.

The employees that turned down the voluntary option will be auto-enrolled in October 2015. Denison said they will be auto-enrolled into the default with a 1 per cent contribution, on the assumption they will want to opt out.

“We’ll still offer 5 per cent but we don’t want to force people who have opted to go down that track to pay the full contribution,” he said.

Employers planning to use their existing schemes can face difficulty over providers accepting new members.

“They shouldn’t assume that just because they have a provider that [new members] will be able to join,” said Gurmukh Hayre, partner at consultancy KPMG.

“It’s becoming a more common problem, especially when contributions are low. [The provider] may refuse to take them or they may raise charges.”

Smaller employers can save money by not paying for advisers, as many of the problems employers face can be solved through free resources, said Denison.

“We enrolled without anyone helping us; it was a doddle,” he said.

“There’s a cost of doing a beauty parade [of advisers], even if it’s just employee time… You don’t need an elaborate process.”

Many smaller employers will be linked with mastertrusts such as Nest, making it easier for employees moving between these companies, Denison said.

However, consultants were sceptical that auto-enrolment would be simple for all SMEs staging, even those using mastertrusts.

“Where the SMEs will struggle is capacity,” said Phil Duly, DC pension consultant at Barnett Waddingham. “While they can set up with a mastertrust, it will no longer have the capacity to educate them on the options and tools available to them.”