The Printing Industry Pension Scheme expects to multiply its employer membership through auto-enrolment. Ian Smith explores how it is planning to use the reform to control costs for members
The scheme is planning to use the expected surge of employers from auto-enrolment to renegotiate its 0.85% flat fee for members.
Scheme profile: Printing Industry Pension Scheme
PIPS is a contract-based defined contribution (DC) scheme with more than 5,000 members from about 150 employers.
Though it does not have the governance of a trust-based arrangement, it has an oversight committee that monitors the providers of the scheme – Standard Life and Legal & General.
The committee, which meets quarterly, is made up of eight industry representatives – four from the employers' association, the British Printing Industries Federation, and four from trade union Unite.
Scheme secretary Barry Dixon said: "We act like a trustee board but we are not a trust scheme.
"The committee watches over the scheme to make sure it is low cost and well run, and to deal with any problems that might emerge."
Out of the 0.85% charge, the scheme pays independent financial adviser Meridian Financial Management to guide members.
Dixon said this made the arrangement better than other contract-based schemes, where there is less support.
He added: "We have got advisers on board and when people are coming up to retirement they can speak to [one]."
Secretary Barry Dixon said he was planning to raise the issue with PIPS' advisers with a view to using the added economies of scale after auto-enrolment to reduce the fees paid by its membership.
A reduction in fees will better enable members to get a higher pension in retirement.
The printing scheme has also been managing its auto-enrolment risk by making sure it meets the criteria of a "qualifying" scheme in the 2012 legislation.
This includes bringing all employer contributions to the minimum level – in the past, some of the schemes' 150 employers have not paid contributions into it.
Meanwhile, other schemes are facing tough discussions with providers to control their administrative costs as more lower earners are auto-enrolled.
For providers, these members present less value for the same administrative burden, which could increase charges for schemes.
Membership boost
PIPS has meet with the Department for Work and Pensions and the Pensions Regulator, and is using their auto-enrolment guidance as a template for its employer communications.
Dixon said: "We are giving them communication about the pension requirements that are coming in."
The scheme is making sure its member employers bring their contributions up to the minimum level, but is also looking further afield for prospective employer members.
Dixon added: "We are hoping there may be new companies that come on board. Most of the small companies probably don't have a pension scheme at all.
"Our membership could be a couple of thousand members."
He added: "Especially those smaller companies whose auto-enrolment responsibilities do not kick in until 2014 or 2015 and are still deciding what path to take, or not yet thinking at all.
"In the the printing industry there are about 10,000 companies, from the huge to the one-man print shop," he said. "We hope a lot of the print companies would come with us."
The key regulatory risk for these smaller companies will be compliance with the new legislation. As a multi-employer scheme, PIPS is one of a few trying to help with this burden.
With this enlarged membership, PIPS is planning to drive down its 0.85% membership charge.
"If we are achieving bigger volume, bigger volume means more money for them," he said, "we would look for pressure on that charge to come down."
The printing scheme is one of a few multi-employer schemes expecting a surge from auto-enrolment.
Alongside the state-sponsored provision the National Employment Savings Trust (Nest), other industry-based schemes such as the B&CE multi-employer construction scheme, are seeking to broaden their appeal.
Last week, the Federation of Small Businesses launched a contract-based scheme with Scottish Widows to help smaller employers manage the requirements of auto-enrolment.
Covering auto-enrolment cost
Other DC schemes face a challenge to stop their fees rising from 2012 when their schemes are flooded with members that are less profitable to their providers.
Neil Latham, a principal in DC consulting at Punter Southall, said historically the savers in DC schemes will be higher earners who offer providers with greater reward for lower fees.
For a lot of these schemes, auto-enrolled members will generally be contributing less to the overall pot. And many could opt out, leaving their schemes with nothing but administration costs.
Latham said: "Auto-enrolment actually makes it more expensive if a lot of people join."
For employers that decide not to add Nest alongside their current scheme, they face a challenge to convince providers to take the extra administrative cost without increasing fees.
Latham added: "Employers do not really want to run two schemes if they can avoid it. They are expecting the provider to take the hit."
