Shepherds Bush Housing Group is to make its defined contribution scheme the "centrepiece" of its staff benefits provision by mirroring the contributions standards set out by the Pension Quality Mark.
The industry has rallied to improve overall scheme governance since the outset of auto-enrolment, while the Department for Work and Pensions has pursued its intention to cap charges, with a white paper planned for early next year.
PQM standards
To meet the standards, a scheme must:
offer a total contribution of 10 per cent, with at least 6 per cent from the employer
for PQM Plus, offer a contribution of 15 per cent, with at least 10 per cent from the employer
meet communications and governance structure standards
SBHG currently has both a defined benefit and DC plan with the Social Housing Pension Scheme, but poor take-up and staff exits from the DB plan have led the employer to overhaul its pension provision before staging for auto-enrolment in May next year.
Of its 297 workers, only 96 are currently in one of its schemes – 63 in the DB and 33 in the DC. The latter currently has a matching contribution structure of 3 per cent for both employer and employee.
“I would like us to move away from the existing 3:3 contribution structure for our DC scheme to a more generous structure,” said Phil Day, director of business support at SBHG. “We haven’t yet made a final decision about what that will look like; I’ll be going to our board with some proposals in early December.”
The organisation is targeting the National Association of Pensions Funds’ PQM employer minimum contribution of 6 per cent (see box). The quality of the default fund, charges and administrative ease will also be strong deciding factors, Day added.
“[It] will include a competitive charging structure, transparency of fees and costs, a good default fund and a range of alternative investment choices for those that want it,” he said.
A communications drive will go hand in hand with the overhaul as the organisation is keen to make staff aware of the value the new structure offers them.
“We intend to expend a lot of time, effort and resources on making sure that staff know what a pension is, why it is important and why it is such a great investment for their own future,” said Day.
“We want our pension scheme to be the centrepiece of our benefits package, with staff staying in the scheme after auto-enrolment so they have the opportunity to secure a decent pension pot for whenever they decide to retire.”
Mirroring the PQM
The NAPF’s 2013 annual survey showed two-thirds of employers agreed that the PQM allows them to “stand out from the crowd”.
Richard Wilson, policy lead, DC pensions and investment at the NAPF, added: “Having PQM is a straightforward way to demonstrate to employees that the pension scheme is better than the minimum required by legislation and that the employer really cares about how employees finance their retirement.”
The main driver for not-for-profit employers striving to better statutory requirements for auto-enrolment is “paternalism”, but at the same time they are constrained by limited resources, said Phil Duly, associate at consultancy Barnett Waddingham, which is working with SBHG on the review.
Duly said: “The limited resources for benefit spend will in some cases restrict employers’ choice of pension arrangements to the budget-price, budget-feature mastertrust schemes.”
But he added: “We know of some employers looking outside of their existing pension scheme for an auto-enrolment solution, and we would encourage all employers to consider the continued suitability of existing schemes.”
However, despite good intentions many employers could struggle to attain their aspired contribution levels due to costs.
In March, Pensions Week reported that plant hire company Hewden decided against rolling out a 4-6 per cent matching scheme to all staff, as a survey revealed more than 80 per cent would be likely to stay enrolled and the company concluded the cost would be too great.
