For many small employers, providing a workplace pension, because of Automatic Enrolment, will be brand new territory. With a wide range of providers to choose from, where do you begin? How do you narrow it down and make your selection?
It’s a similar process to hiring a new worker or signing up a new supplier. You look for signs of quality, assess whether they’re suitable for your company and a ‘good fit’ for your team.
So if you are looking to choose a pension provider for your new auto-enrolment pension scheme, here are five things to bear in mind when making your decision;
1. Does the scheme have recognised industry accreditations?
Independent indicators of quality are one of the best ways to identify a high quality scheme. It’s like getting the nod from a trusted friend that a supplier will do a good job for you.
In the world of pensions, your ‘trusted friend’ comes in the form of The Pensions and Lifetime Savings Association (PLSA). This national association aims to help pension professionals run better pension schemes.
The PLSA conduct an independent assessment of pension schemes, and award a PQM READY status if it meets their high standards. These standards include having good governance, low charges and clear member communications.
You can find a list of approved providers on the PensionQualityMark.org.uk website.
If you’re looking to use a master trust, a type of pension provider that is open to multiple employers and run by a Trustee, check whether it has a master trust assurance framework report (MAF).
If an organisation receives a clean bill of health in the MAF type 1 and 2 reports, you can be more confident that the scheme is well run. The Pensions Regulator publishes a list of accredited master trusts.
2. What does the sector think?
You may not be an expert in pensions, but the judges of leading sector awards are. There are a range of awards that recognise high quality schemes. These include awards for the best pension scheme overall and those that focus on particular element of a scheme, like the way it has been designed. Some notable awards include those provided by Financial News or the Pension and Investment Providers awards.
There are also awards for the quality and design of a scheme’s approach to their investments, including the European Innovation Awards and the IPE awards. If a scheme has a track record for award success it can be a good sign their peers within the sector think they provide a high quality service.
3. Is it a responsible investor?
Many schemes have started thinking more broadly about how the companies and markets they invest in are run, how they generate profits and how they treat people and the planet.
It’s widely acknowledged that well-run organisations with sound environmental and social practices have a better chance of sustaining long-term success and profitability. This is especially important when you consider that pensions are for long-term saving.
It’s worth checking if the provider has a responsible investment report. You might also be interested in the work of ShareAction.org. They’re a charity that campaigns for responsible investment and assesses pension schemes based on their approach to investment.
4. Does it use clear communications?
For many workers being automatically enrolled, this will be their first experience of pension saving. They’re likely to have questions such as: how does it work? What happens to my money? Is my money safe? And, what will I get back at the end?
Making sure the provider uses clear communications is a no-brainer. Pensions jargon is not only off-putting it acts as a barrier to understanding. It’s likely to cause confused workers to direct all their questions your way or worse put them off pension saving all together.
Tools such as The NEST phrasebook, which offers clear communication alternatives to pensions jargon, can also help your workers get to grips with pensions.
5. Is it easy for me and my workers to use?
Auto enrolment is an ongoing process, it’s not a case of ‘set and forget’. Finding a scheme that’s easy for you and your workers to use could save you a lot of time and stress. This is especially the case if you’re intending to set up and administer auto enrolment yourself.
Check whether the website is straightforward to use, and whether it has resources such as an online help centre and live chat service. These tools have definitely proven popular with our members and employers. It means they can quickly and easily find answers to their questions and help is always on hand if they need it.
Some providers also offer web services. This means you may be able to set up and administer auto enrolment via your familiar payroll software which reduces both administration time and the risk of human error. Check with your payroll provider to see if they’re set up with the scheme of your choice.
If you work for yourself, find out more in our complete guide to pensions for the self-employed.
This article has been written exclusively for ByteStart by Paul Budgen, Director of Business Development of NEST. If you need further help with auto enrolment, or you just want to find out more about NEST’s scheme, there’s lots of information on the NEST website.