The Auto Enrolment rules mean that eligible employees should be automatically enrolled into your pension scheme without any barriers to entry AND without having to make any decision whatsoever!  The employee’s only decision is whether to opt-out or continue with pension membership.  This places the responsibility squarely on the shoulders of the employers on many different levels.

Choices

As an employer you have various options open to you such as; using the National Employment Savings Trust (NEST), converting your existing scheme to meet the required quality standards, putting in place a new scheme offered by a pension provider, or using a combination of all three.

You can choose the scheme and structure you think is the most appropriate to meet the needs of your workforce.  This could either be NEST, one or more alternative good quality pension schemes or a combination.

What if you already have a pension scheme?

You may already have a pension scheme in place which meets the requirements to be an acceptable alternative to NEST, or which can be amended in order to meet the requirements (e.g. by increasing contributions or amending membership eligibility criteria).  Do not assume that you can automatically make these changes, you should always approach your existing pension provider in the first instance.

What happens if you get it wrong?

As you have many choices and decisions to make as a business, getting it wrong could be very costly now and potentially in the long term, in terms of regulatory penalties, administration time needed, and ongoing costs.  Seeking professional independent financial advice will help you co-ordinate and implement a robust project plan that fits with your business.

Is NEST the best?

What might seem like a low cost set-up option may on first glance appear suitable but will have hidden on-going costs to administer. For example, some employers may incorporate NEST on the belief that it is a low cost solution for them as there are no set-up costs.  In reality, NEST is only obliged to accept your pension contributions, they do not provide help with any of the assessment or administration of Auto Enrolment, which makes up 90% of the enrolment process. This means you could be left purchasing expensive software, or having to outsource the ongoing administration leading to a greater overall cost, and for many years to come.

Each business and their respective workforce are unique, so the most suitable course of action differs.  We recommend you consult an independent financial adviser to advise you on suitable solutions based on factors such as cost, workforce mentality such as value placed on employee benefits, time left to staging date.

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About the Author

Paul heads up Sedulo Wealth Management and, in a nutshell, his role is to ensure you and your dependents are adequately provided for now and throughout your lifetime. His 16+ years of financial planning experience mean he is more than capable of developing workable, long-term financial plans for both personal clients and businesses.