Findel uses auto-enrolment to chisel down costs

There have been concerns that the cost of implementing the reform will be hardest felt among small and medium-sized employers, and those approaching their staging dates are striving to find ways to dampen the financial impact.

We’ve got a large number of people to auto-enrol, so it would just help on the cost front

Findel had around 400 of its 2,000 permanent employees in its original group personal pension with Legal & General. The company was able to get the annual management charge down to 0.4 per cent from 0.45 per cent by moving existing members and auto-enrollees to L&G’s Worksave GPP.

“We’ve got a large number of people to auto-enrol, so it would just help on the cost front,” said Findel’s group HR director Maxine Morgan.

The original scheme had a take-up of just 20 per cent. “We never really promoted it, for cost reasons,” said Morgan. This scheme saw Findel contribute 5 per cent if the member contributed more than 3.5 per cent and 6 per cent if the member contributed 5 per cent or above.

For auto-enrolment the company has set the rate at the initial statutory minimum of 1 per cent for worker and employer, but staff are entitled to “upgrade” to the higher rate after three months’ service.

However, financing the higher-rate part of the scheme remains an issue, said Morgan. “We’ve still got a concern about the cost associated with lots of people choosing to opt in to the upgraded scheme,” she said, “so we’ve not gone mad on [communicating] that, but we have done more than the bare minimum.”

Findel has used letters and posters to communicate the changes to staff, in addition to the standard letter sent out by the provider. However, it felt the amount of communications support offered by both its pension and payroll providers was suboptimal.

“L&G didn’t necessarily support the whole of the comms process. The payroll provider was unable to provide templates as well, so a lot of that burden has fallen on Findel to communicate warm-up notices and postponement notices,” said Helen Gamson, a compliance manager at consultancy PwC, which worked with Findel on the auto-enrolment project.

Helen Buchanan, managing director of marketing and distribution in the corporate division at L&G, said it was “very rare” that an employer requests member communications support in addition to what it already offers.

“In such circumstances we are happy to respond to special requests,” she said.

Debbie Falvey, senior consultant on Aon Hewitt’s defined contribution team, said speaking to service providers early was key for employers preparing for auto-enrolment.

She said employers should also consider moving from weekly to monthly payroll, cleansing data and finding a provider that offers support at a low cost.

“If the current scheme will be qualifying [for auto-enrolment], driving up membership pre-staging [is important] so there are fewer people to actually enrol at that point,” Falvey added.

How Findel managed the project

Findel began discussions on auto-enrolment in the summer of 2012, around 18 months ahead of its four companies’ various staging dates.

A steering group was established, comprising the HR director, the finance director and the company secretary. A project team was then set up to oversee the “mechanical” aspects of implementation, Morgan said.

The company decided early on it wanted one scheme in which all staff were entitled to the same contribution rate. This desire for continuity was also part of the reason Findel decided to retain L&G as its provider, after considering Nest, she said.

Despite making savings on the AMC, the company ran into problems with its payroll provider, which was unable to get systems in place in time.

PwC’s Gamson said the team wanted all system development to have been tested by the staging date of the first entity but “that didn’t happen”.

“We did try to engage with them as early as possible,” she said. “They didn’t do the initial development to the exact specifications so further alterations had to be made.”

Morgan added that a “common theme” throughout the process was that providers’ services have become a lot more restricted in terms of what they offer and the resultant administrative burden has added cost and complexity to the employer.