Author: andy

Workplace pensions, the choice is yours… but do you want it?

Did you know that over 99% of savers who have been auto enrolled into a scheme that offers a range of funds don’t make any active choices and just stick with their employers’ default fund?

Why?

Is it because it’s easier or that we neither understand nor have the time to investigate the options and what they mean? Maybe we just don’t care and like so many of us, ask the question “will it really make a difference anyway”.

Sometimes we just want someone else to make the decision for us and take the hassle out of it and auto enrolment seems to fit into that category.

Usually your fiscal friends will tell you to investigate, shop around, look for the best deal, assess your choices but when it comes to your workplace pension, the few members who do switch their investment funds will often chase the market and the buy high/sell low behaviour can seem like the best way to get more bang for your pension fund.

When it comes to risk choices for your fund, those savers who do self-select are normally guided by the risk classifications of the funds available. There are many tools to help you understand your risk, assess you attitude and determine what kind of saver you are, However, regardless of the tools at our disposal, we all continue to struggle to determine their own attitude to risk.

It is well documented that 80% of self-select members change their investment selection less than once every five years, and more than half of them never make a change to their initial investment selection and its more than likely that your fund can remain untouched for 40 years.

With fund sizes for auto enrolled savers still very small, it looks set to stay the same, savers sticking with their companies default fun and at the end of the day there is little value in changing, so save some time and go and put your feet up, maybe not, best save that for your retirement.

Posted on

AE, can you help me? IFAS and Accountants luck out

A recent report by the Department for Work and Pensions (DWP) discovered that many employers are taking the minimum steps to comply with auto-enrolment rules and are turning to IFAs and accountants to outsource their pension duties.

This latest report found that employers who were new to the market were seeking just enough information to become compliant and that the process was almost always prompted by a letter from The Pensions Regulator (TPR).

The report also found that workers were not getting the information or even option sometimes, to save more for their retirement and instead taking the minimum contribution alone.

There has been a notable increase in employers who are now turning to IFAs and accountancy firms to help manage their AE obligations. Some employers have even turned to family members or colleagues who have experience with automatic enrolment.

Employers are now prepared to pay a management fee to an intermediary to ensure workers are not only getting the stipulated amount but also to deal with requests from savvy employees who wish to top up their pension plan or find a new provider.

The report also highlighted a lack of desire from employers to educate themselves on the AE rules and of those who conducted the process themselves, undertook limited research, usually focused on a visit to the potential provider’s website, and “skim-reading” the topic online. Very few employers spent any time researching the compliance requirements.

Many new employers are selecting the first pension offered, often opting for the National Employment Savings Trust (Nest), unless prompted to do otherwise by an intermediary or other outside source.

We here at OptEnrol can confirm the finding of this report as we are seeing people turning to us for help to ensure their AE obligations are being met and to help ease their already busy work load.

And let’s face it, everyone needs a little help sometimes.

Posted on

Better Service demanded for Automatic Enrolment

It’s been 6 years since the introduction of automatic enrolment and in April there will be a second rise in the minimum contribution employers will be required to provide. As a result, companies and advisers are reconsidering their providers and as time has passed and experience grown, the cracks are beginning to show, and other avenues are being sought.

Aviva experienced an 80% rise in calls in 2018 requesting more or better auto enrolment support, the majority of which were from advisers.

Malcolm Goodwin, head of workplace savings and retirement at Aviva, said: 

“SMEs and their advisers are now starting to understand that when it comes to their auto-enrolment provider, they do have the freedom to switch they are starting to look at what is being delivered by the scheme they originally signed up to.”

In the beginning there was a sense of panic and the application of AE was fraught with confusion and uncertainty, only natural when we experience change but with understanding comes the ability to ask questions and seek better solutions.

Here at OptEnrol we are seeing a rise in enquiries as some advisers are no longer convinced that client requirements are being met. Rather than just rely on them to do this themselves, they realise that they could be offering more support and service providers such as OptEnrol could be the answer to the problem.

Great for us! We offer all of this as well as the peace of mind when using our complete auto enrolment service, where advisers can see their clients’ activity all in one place.

Those involved with providing AE assistance and companies who need to ensure they have everything in place now have the option and confidence to shop around and as they say, “knowledge is power”.

Read the full article here

Posted on

Workplace pensions – is it about to get ugly?

With contributions set to increase significantly in April 2019, might we be about to see an employee stampede for the exit? One that would undo much of the good work to date in getting us all saving for our retirement?

The increase is likely to be a bridge too far for many employees as they see their levy rise to 5% having started at just 1%. While the smaller deduction was largely accepted by most of the workforce and so hailed as a success story, a twentieth will compete with the household’s other needs – from groceries to mortgages.

The employers’ challenge:

Whilst commentators are only guessing at the scale of the opting out after 5 April, what is it likely to mean to you as an employer (or adviser)? As well as meeting the 50% hike in employer contributions in most cases to 3%, you’ll have to deal with the extra admin of processing lots more requests to opt out. Notifications should not really come directly to the employer, and for many schemes such as NEST and The People’s Pension they are lodged directly with the pension provider. As employer you then have to identify these and make timely amendments in your payroll and AE assessment records. There’s the added complication of deciding what to do about employees who want to continue contributing but can’t afford the increased amount.

What does it mean to OptEnrol users?

OptEnrol will be able to cope with the increased activity.

Firstly it dynamically uses the PRP dates to select the rates for each tax year and produce correct contribution calculations. For many pension providers it automatically gathers the opt out request dates to flag the employee records, amend contributions and issue relevant employee communications. Employers can choose as a default to have their own contributions continue or cease.

We’re here to help

If you’re an employer or adviser and would like to discuss these upcoming changes you can get in touch with our OptEnrol experts here, by email at info@optenrol.co.uk or by calling 0131 467 4467.

Posted on

Meet Richard Bolton, Managing Director

Well, that’s Christmas and Hogmanay out of the way. We watched the Edinburgh fireworks from the office balcony (it’s why we moved near the Castle, well amongst other things, there is a pub underneath the office).

It was a relaxing break after a busy year spent with three twenty-something offspring able to join our customary seasonal feasting and drinking. But now it’s back to business and after a great 2018 of exponential growth with most of our OptEnrol clients, this year promises to start with a bang, just like the fireworks.

We here at OptEnrol really have become the auto enrolment specialists which has been reflected in our growth, assessing over 63,000 employees each month. Naturally, we’re on the lookout for lots more as the service accepts all sizes and complexities of workforce. Advisers using other assessment services have recently been attracted to OptEnrol’s low charges, pay-only-as-you-use basis as well as the great customer service from our dedicated and fantastic support team who are there to help whenever you need them.

2019 really shifts up a gear in April when contribution rates rise for the second (but likely not final) time so check that the rates set up in OptEnrol for you are what you are expecting, whether at the new legal minimum or higher. The software will automatically use those new rates for assessments ending after 5 April, so keep your eyes peeled.

Despite the publicity, the new deductions may come as a surprise to some employees, so you should give them advance warning. You could also mention the good news about the extra amounts you will be paying on their behalf – they’re going up to 3%.

For some employees the new deductions will be unaffordable and if so you’ll have to be clear on your policy for employer contributions. You are entitled to maintain your contributions, stop them altogether or increase them to ensure the workplace pension status is maintained. Whatever you decide, OptEnrol can cope and automate most of it.

Finally, be prepared for a bit more admin if lots of employees opt out but help is at hand as it can all be done through OptEnrol, that’s what we are here for.

2019 will be a testing year in workplace pensions but they’re here to stay, as is OptEnrol and we are eager and open for business!

Posted on

OE Fools And Horses

We’re now on the plateau with workplace pensions. After its introduction in 2012 all businesses then existing and all the ones created up to October 2017 have by now begun their obligations. Since then newly established businesses have immediate obligations, though they can still use postponement for up to 3 months.

But is that it then, nothing more to be done? It’s likely a lot of businesses will have “chosen” the handiest or least cost pension scheme because of uncertainty and just wanting to do anything to get compliant.

The rolling 3 yearly re-assessment date may be a trigger for everyone to re-assess what they’ve done and evaluate a range of options. Net investment performance comparisons are beginning to emerge with Compare My Workplace Pension Supermarket not far off, if not already lurking.

Time to reassess one’s processes and administration too – is your payroll brand or payroll bureau error-free or leaving you at risk of action from mistreated employees? And is it just a pure headache every week or month with bits of processes that don’t fit and don’t interact?

Time to be positive too. Providing your employees with pension benefits should be painless (not too expensive) and easy to administer. Take time to look into salary sacrifice, it’s literally free money, and whilst not very much based on 3%, it can be significant at 5% and who knows where the plateau for that will be in a few years’ time.

Posted on

The Z Factor

As we get older we look back at our youth with fondness, however spare a thought for Generation Z, those born after 1996, they have a lot on their plate.

Saving is difficult at the best of times and nowadays practically impossible for the millennials. For Generation Z, it’s just going to get worse! Let’s look at why…

There are more graduates than ever before and competition for graduate positions is tough. The Financial Times reported that between 2012 and 2016, there was a 40% increase in the number of applications for graduate positions. In the financial industry especially, competition is so fierce that JPMorgan hired only 2% of all graduates who applied!

Once you have fought off the competition and got yourself that dream job, or at least a job, there is the small matter of rent A quarter all graduates in the UK will end up in London within 6 months of completing their degree, where the average price to rent is £1508 per month.  And this figure is not going to get smaller anytime soon, as Savills stated rent prices are expected to increase by 19% over the next five years.

With the average starting salary for a graduate ranging from £19,000-£22,000, saving for a deposit and becoming a home-owner before the age of 35 is near impossible. On top of that, there are student loans and tuition fees to pay back to push this prospect even further away.

This has resulted in a 25% increase since 1996 of those aged 20-34 living at home with their parents, in order to try to save money.

With rising rent prices and fierce competition to secure a graduate position at least auto enrolment ensures that their retirement is taken care of!

So for the rest of us let’s try and help them as much as we can. Mums, dust off their old bedroom, teachers make sure you give them all the tools they need to face the world and employers don’t be greedy. They are the future after all…

Posted on

breaking bAEd

Ok, so “defying authority” has many definitions and we are of course not suggesting that people are dusting down their chemistry sets. But did you know, according to Aviva, 1 in 7 firms are breaking the AE rules?

I bet that’s higher that most of you would thought was going on, and the only ones who are paying the price are the businesses themselves.

We all know business are failing to automatically enroll their staff in a workplace pension scheme ahead of their staging deadline and as these staging dates are missed, more are more firms are starting to play catch up.

In fact, 40% of those who have already enrolled did so at the “last minute”. Such a lack of preparation is stressful and to be honest totally unnecessary.

No one is quite sure why companies are leaving it so late, there has been plenty of PR (remember Workie?) and most people are aware of the implications, which could be pretty serious, but maybe psychologically it’s just “another piece of red tape”.

AE solutions, just like our own fully managed AE Service, OneStop, could take care of all AE requirements and save firms the worry as their staging dates loom or indeed pass them by.

It’s like the old Chinese proverb of the man who put-off writing his will for years. One day, after an eye opening conversation with a friend, he felt he should finally do something about it. On the way to the lawyers, whilst texting, he was hit at speed by a pigeon who had lost its bearings.

Sure, it’s not very cheery, but come on, what’s stopping you? Just get on with it.

Posted on

You Do The Maths

According to The Pensions Regulator, more than three hundred and forty thousand employers have successfully enrolled seven million people into a workplace pension.

So, according to these figures, if we base the total UK workforce on the number given in December 2016 of 32 million, we can safely say there are 25 million still to enroll. That’s a lot of AE activity for employees and advisers alike.

25 million – That’s the population of Australia…

25 million – Also the number of emails sent every 8 seconds worldwide

25 million – That’s 1,000 staging employees for every 1 adviser in the UK
(we realise it doesn’t work this way – but it certainly helps for perspective)

 

We keep highlighting the fact that 2017 will see a massive surge of people hitting their staging dates and thus having toautomatically enroll their employees.

While we know that a lot of employers are seeing this as yet another barrier to business, the long term picture will show the benefits of this initiative. Automatic enrolment is helping reverse the trend for people who don’t save enough for retirement.

As a result, our aging population will have a healthier bank balance which in turn could lead to better physical health. Our aging population are living longer and it is just going to keep increasing, which is great, however it does mean that the money we save will now will need to last us for longer.

Although a slightly contentious issue for smaller businesses, the long term benefits of auto enrolment will be worth it in the end.

Posted on

SME’s Take Centre Stage

An estimated 800,000 small businesses are set to reach their auto enrolment staging date in 2017. That’s more than double last year which sat at approximately 336,000. SME’s will now have the added burden to ensure they meet their AE obligations.

Many small business owners are under enough pressure as it is to make sure they are keeping their heads above water without the added admin requirements that auto enrolment brings with it. However, if they fail to meet their AE obligations they will face large penalties and in extreme cases could land themselves in jail. In a recent survey by market researcher YouGov for workplace pensions provider Smart Pension, more than half of small and micro businesses felt auto enrolment would be a burden.

Will Wynne, co-founder and managing director of Smart Pension, stated 2017 is going to be a challenging year for hard-working small companies and that 2017 would be a massive step change. He highlighted that almost a million small firms offer employees an opportunity to save for their retirement for the first time. Which means just over 1.46 million small firms in total will need to set up pension schemes.

Mike Cherry, chairman of the Federation of Small Businesses, said “Our country’s prosperity in 2017 will be founded on the success of the smaller business movement.” He went on to say “any small business owner will tell you that the sheer cost of doing business has steadily risen over the last year, with a range of policy choices hardening at the same time, creating a cumulative effect.”

2017 is going to be a busy year for us all involved with AE, none more so than the SME, so give them a round of applause as they start their AE journey.

“Break a leg!”

Posted on