Employers face looming pensions squeeze
EMPLOYERS risk being left with very limited options when they go searching for the perfect pension to help them comply with new legal duties – writes Phillip Cox, director at David Williams IFA.
Companies have to offer and pay into a pension for all qualifying staff under the auto-enrolment provisions that are gradually being introduced over the next few years.
Employers with between 350 and 499 staff are bound by the rules from January 2014, followed in February by those firms with 250-349 on payroll. By April, any organisation employing more than 160 staff should have introduced pensions for their workers.
David Williams IFA Chartered Financial Planners has been working with businesses across Northamptonshire to tackle this looming pension challenge. But as the process moves from the largest employers to smaller and medium-sized businesses, traditional pension providers are becoming more selective about which firms they want to deal with.
- They are setting thresholds for a minimum number of ‘so-called’ eligible staff in a new pension, turning away companies with a high proportion of lower paid workers
- They may demand minimum average premiums that are far higher than an employer can afford to pay
- Companies with high rates of staff turnover, or with a significant proportion of the workforce on zero hours contracts, may also be rejected by pension firms
- Where companies already offer a pension to some workers, they may find their existing pension provider wants to change terms
Pension providers are also expecting employers to shoulder an increasing share of the administration supporting auto-enrolment. This may mean employers need to overhaul their payroll systems.
A second issue is a looming squeeze on capacity. More than 30,000 companies reach their start date for auto-enrolment between April and July 2014. Pension providers are going to be pressed for time to assist all these employers. Those firms who are talking to advisers and providers at least six months ahead of their start date are far more likely to have a smooth journey, and will ensure that qualified help is booked in the diary.
The right advice can help you steer a safe path through the auto-enrolment jungle, and David Williams IFA is experienced in finding the best ways to match a firms with a willing pension provider. We are familiar with new providers coming to the market who are offering more accommodating terms, for example.
Employers who start planning early and who have taken steps to update their payroll should also find more pension companies willing to help.
David Williams IFA starts by helping employers with an auto-enrolment audit, allowing firms to assess their options.