Is your workplace pension working hard and are you paying enough in?18 May 2021
Saving into a pension is perhaps not the most exciting of topics; however, it's usually very necessary. Somewhat enforced pension saving might be more interesting, possibly from an annoyance position for some, although the UK's roll-out of the automatic enrolment pension system has been seen as a success, with over 10 million people now saving for their retirement (10 million people in February 2019 according to The Pensions Regulator).
Sometimes known as workplace pensions
Automatic enrolment, sometimes known as workplace pensions, has come a long way since it was first introduced in 2012. The largest employers started first, followed by medium sized and smaller employers. Now, all employers, including those employing staff for the first time, should be offering a qualifying workplace pension scheme to their employees.
Are you really contributing enough?
We believe that one big risk is that many will believe that with the pension box ticked, they are putting away enough for their old age, and that is probably not the case.We recommend that you take a moment to really look at your next pension statement when it arrives to see what the pot you have might offer at retirement.
Now there are pension plan values, how are they really doing?
In our experience, most employers are pretty clued up about the pension auto-enrolment rules and we have established and continue to run a significant number of workplace schemes for a range of companies. We have found that detailed dialogue and thorough research at the outset has been key to being able to establish a suitable workplace pension plan that provides good outcomes for scheme members at a reasonable cost to the employer, and which will remain in place into the longer term.
However, it is clear that some companies were in rather a rush to comply with the auto-enrolment requirements when they reached their 'staging date' some years ago, and a pension scheme has been put in place which solved the short-term need to comply with legislation. However, in some cases, the scheme used may not provide the benefits that an employer would prefer to offer to their employees, such as a wider range of investment funds aside from any 'default' fund, or lower plan charges. This is particularly true if the staff profile has changed since auto-enrolment duties began, and as individual pension fund values grow over time as contributions have been invested over the years. Again, have a read of the annual statement to check what's really happening.
Employer costs & administration
In addition, the existing scheme may also be more expensive for the employer to run, and more complex in its administration, than some more modern additions to the auto-enrolment pension range.
Aside from any additional benefit that an employer may wish to offer staff members, we have found that as auto-enrolment pension schemes have developed, more providers offer schemes at limited or no cost to the employer, and with excellent administrative systems which provide features such as staff assessment tools, links to payroll software, statutory communications to employees and all the information required to complete the regular declarations to The Pensions Regulator. This type of automated admin can really streamline the ongoing administration of a workplace pension scheme, which any employer struggling to achieve this on their own will appreciate.
When did you last review?
As our clients will know, we do not advocate a move away from existing plans or schemes without very good reason; if it's not broken, don't fix it. However, there could be significant benefits to be gained for both employer and employees by revisiting historic automatic enrolment planning.
Chapters Financial would be happy to review and assess your existing workplace pension scheme – please contact the team in Guildford for an initial discussion.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899