Workplace Pension Scheme Strategy

It all comes down to two key aspects – strategy and flexibility – but not all scheme trustees are fulfilling their legal duties to review their default fund’s strategy and performance, and correctly govern default funds.

Watchdogs are currently probing 500 schemes of between two and 999 members as part of a pilot inspection programme. The programme has been designed to ensure that their default funds are up to scratch with trustees fulfilling their compliance and administration duties as well as the principles of good governance.

Trustees must be able to show that investments are being made in the best interests of the workers and demonstrate appropriate engagement with The Pensions Regulator (TPR).

Legislation also states that a scheme’s default fund strategy and performance must be reviewed every three years, or when there is a significant change in investment policy or the makeup of its membership.

Meeting Employee Expectations

With a report from TPR indicating that 99 per cent of workers uses their employer’s default fund for their retirement savings, it’s imperative that trustee obligations and employee expectations are met. Research from Corporate Adviser Intelligence shows that fund performance varies greatly from one scheme to another.

If a scheme fails to meet employee requirements, individuals may choose to opt out and take their own retirement planning route. This makes it imperative for employers to review their scheme regularly to ensure it is fit for purpose.

While many employees tend to forget about their pension fund and leave it to build up unattended during the accumulation period, employers must nonetheless ensure that they are fully informed about the best market deals and most effective options for the highest returns.

Many workplace pension schemes also offer a number of different options within the scheme, which is ideal for those workplaces with a diverse workforce.

Choice, Control and Value

In order to create the best possible scenario for pensions to meet employees’ income needs, trustees and employers should establish the most effective conditions in which the investment can grow over time.

This should include a balance of choice, control and value to allow it to reach its full potential. High returns, good risk management, tax efficient solutions, good platform functionality and low platform costs are also good features of a resilient scheme.

We also talked earlier about flexibility. This is especially important if you run a workplace pension scheme for employees of many different ages with a vast range of salaries.

In order to keep their pension income working well at different stages of the retirement journey, employers can look at schemes offering a range of different withdrawal options, such as flexi access drawdown, small pots, beneficiary drawdown and capped drawdown.

They may also wish to seek out those schemes with the option to minimise or avoid withdrawal charges. Employees appreciate both the benefit itself and the option to be an individual and feel valued as such, as opposed to being just another member of the team.

Phased Retirement

The issue of flexibility and the different types of withdrawal option available sit comfortably beside a growing tendency among UK workers of taking a phased retirement. High costs of living and an ageing population means that we all need to make our money work harder; these changing retirement patterns reflect that people have identified – and are responding to – this need.

The benefits of a slower transition are evident, as analysis from Aegon published in FT Adviser shows that the household income of recently retired pensioners is 20 per cent higher than that of older pensioners.

Work and Pensions data from March 2019 shows that the net average weekly income (after income tax, national insurance and council tax) of recently retired pensioners is £392, compared with £326 for pensioners who retired some time ago.

But the decline in defined benefit pension schemes means that savers must avoid getting complacent about their anticipated retirement income, and employers must stay on top of the different financial challenges their team members might face.

Balancing Risk and Reward

Among today’s challenging and unpredictable economic conditions, many of us will not be able to choose when exactly we want to retire. This means we need to save into our pensions using a strategy with a healthy balance of risk and reward to ensure that we are ready for all types of outcome.

This is where pensions branch out into a key component of a wider savings plan and investment portfolio that is bespoke to every individual. Either way, the workplace pension scheme must ensure to add solid value within a wider investment picture.

Ensuring that your workplace pension scheme meets your employees’ ongoing income needs also means making sure they have access to the right advice. This could be both one-on-one advice from an independent adviser as well as the possibility of introducing financial wellbeing workshops to your workplace.

Financial wellbeing provides employees with the confidence and knowledge they need to make effective financial decisions at every stage of their working life. It is also designed to help people save in a more effective way and thus carve out more solid and realistic retirement objectives towards which their pension fund ambitions can be tailored.

For more information on our Financial Wellbeing workshops or advice on the workplace pension scheme, contact the advisers at Vintage Corporate today.

The post Does Your Workplace Pension Scheme Meet Your Employees’ Income Needs? first appeared on Vintage Corporate Limited.

We would like to draw your attention to the point that states all companies must “have processes in place to satisfy the re-enrolment requirements every three years.”

Under auto-enrolment regulations, every three years you’ll need to put staff back into your workplace pension scheme if they have left it, and if they meet the criteria to be put into such a scheme. 

Choosing your Re-enrolment Date

Also known as cyclical re-enrolment or three-year re-enrolment, this requirement to re-enrol covers staff who opted out of your scheme more than 12 months before your re-enrolment date or staff who are still in the scheme but pay below the minimum contributions level.

With the re-enrolment date fast approaching for many companies, now is the time to ensure you have everything in place. First, we advise choosing your re-enrolment date, which will fall within a six-month window with three months on either side of the 3rd anniversary of your auto-enrolment staging date or duties start date.

This flexible window of time is designed to help employers fit around their business practices and schedule their re-enrolment date at a time when they have sufficient resources. This date cannot be postponed for any reason so it is up to you to plan ahead.

Many companies choose to align the re-enrolment date with their payroll for a streamlined process where the start date matches the start of a payperiod.

Identifying Eligible Employees

Once you have chosen your date, you must work out which of your staff the re-enrolment applies to and whether they meet the necessary criteria to be re-enrolled. Eligible employees are those aged between 22 and under State Pension age with earnings of more than £10,000 (2018/19 tax year).

If any employee has handed in their notice to end employment, been given notice of dismissal or already has protection from the lifetime allowance you are not legally required to re-enrol them.

All eligible staff must be re-enrolled from the chosen re-enrolment date and employers must start contributing to their pension scheme from that date.

Communication is key when it comes to auto-enrolment and employers must communicate with eligible staff in writing within six weeks of their chosen re-enrolment date. This means explaining to individuals exactly how re-enrolment applies to them.

Declaring your Compliance

Employers do not need to inform TPR of their re-enrolment date until they submit their re-declaration of compliance. Even if you do not identify any eligible staff to re-enrol, this paperwork must be submitted within five calendar months of the third anniversary of your duties start date or staging date. This will show that you have met your re-enrolment duties.

It is also every employer’s duty to ensure that TPR have the most up-to-date contact details to ensure timely delivery of all correspondence. You can use the dedicated contact form for this purpose, and TPR advise providing both an employer contact that should be the business owner/most senior person as well as an additional contact that will receive “task specific” emails.

Ongoing Duties 

It is absolutely essential to stay on top of your workplace pension scheme requirements and be aware of your ongoing duties. This includes keeping strict records that are readily available for submission to TPR if required.

These records need to prove that you have been meeting your legal duties and should include the names and addresses of all employees you have enrolled into the workplace pension scheme as well as comprehensive records that show every time money was paid in.

Requests to Join or Leave the Scheme

Opt outs are part and parcel of auto-enrolment and itis up to employers to monitor any employee requests to leave or join the workplace pension scheme.

Requests to join must be honoured within one month (subject to employee eligibility). If a member of staff is re-enrolled but expresses a desire to opt out, they can do so within one month and they must receive a refund of their contributions.

This process goes hand in hand with consistent monitoring of staff to assess eligibility for the scheme and to make sure that you have enrolled all eligible employees. Stay on track with the ages and earnings of all staff, and be aware of those in alternative circumstances such as those returning from parental leave and new starters.

TPR has recently adopted a much stricter approach towards workplace pension scheme compliance and swift action will be taken against any employer who fails to meet their re-enrolment duties and demonstrate full compliance in every aspect.

Contributions Increases

From 6 April 2019, there will be another round of contributions increases where the minimum amount employers must pay into their staff’s pension will go up. You must pay a minimum of 3% of a portion of your staff’s earnings into their pension, and the total combined payments made by you and your staff must be no less than 8%.

Re-enrolment takes place every three years but all employers must be aware that it can also happen and also happens on an immediate basis in certain circumstances.

For advice and support with staying on top of your auto-enrolment and re-enrolment duties, contact our expert advisers at Vintage Corporate today on 020 8371 5232 or email info@vintagecorporate.co.uk

The post Managing Your Three-Year Re-Enrolment Duties first appeared on Vintage Corporate Limited.

This is especially apparent when it comes to the issue of pensions. Research from Prudential shows that under-35s do have a responsible attitude to retirement saving and that two-thirds have signed up for workplace pension schemes but more than half want more support and information about pensions.

A survey from the PLSA with results published in FT Adviser examines this issue more deeply to reveal that eight out of 10 people aren’t sure they are saving the right amount for retirement.

51 per cent wrongly think the auto-enrolment minimum pension contribution level is the government’s ‘recommended amount’ of money that they should be setting aside for retirement.

Understanding Saver Perspectives

In order to address these concerns, employers need to understand saver perspectives and tailor their communications appropriately. In her keynote presentation at the PLSA (Pension and Lifetime Savings) Annual Conference, economist and author Noreena Hertz suggests communicating with Generation K using the “care, curate, customise and communicate model.”

Her advice comes from the view that this a generation which is arguably far more distrustful than previous ones due to being raised in a culture of fear and “existential threat” where terrorism and brutality is not uncommon.

Expanding on this point, employers need to understand that Generation K (those aged 15-24) will expect an even higher level of personalisation than previous generations of employees due to a profound distrust for larger corporations and the need to have that personal touch in a seemingly unstable world.

This is a generation that is very well aware of the need to save with 72 per cent admitting to feeling concerned about debt. Auto enrolment and the workplace pension can authentically meet their concerns with a logical and rewarding retirement savings structure.

The younger generations are generally proactive when it comes to financial planning. This can be seen with the high levels of auto-enrolment take-up, but employers need to continue to communicate in transparent and tailored language if they wish to engage the next generation of workers.

The Evolution of Employee Benefits

Employee benefits as a whole have developed significantly over the years in line with evolving employee wishes to include options such as children’s critical illness cover, financial education and voluntary benefits.

In an increasingly competitive business landscape, a strong employee benefits package is becoming less optional and more essential to keep your team satisfied, engaged and incentivised and to support the recruit and retain process.

When it comes to Generation K, employers must meet this need and desire for long-term saving appropriately by explaining the concept of auto-enrolment clearly and answering any queries. They must clear up confusion and ensure that their employees are fully aware of the benefits and possibilities within the workplace pension.

Employers must position pensions saving and auto-enrolment in such a way that it will assuage the concerns of Generation K as opposed to exacerbating them. This should at a minimum encourage employees not to opt out and ideally encourage each employee to take an active interest and role in their own retirement planning.

Online Financial Technology

Hertz also argues that schemes and providers (and, indeed, employers) will need to help Generation K relate to their older “future selves”. We must also consider the online angle as this is a generation so heavily shaped by technology with many hours spent online every day.

While online banking is now the go-to banking option for many with a cross-generational appeal, it would no doubt benefit auto enrolment and the pensions sector if they create ways that this generation can manage all finances including their pension using online technology.

In a world that appears so unstable, the idea of planning a long way in the future may be met with scepticism or financial concerns. However, employers must overcome this hurdle and create a culture of trust if they want to future-proof their business and move with the times.

A Fully Comprehensive Auto Enrolment Scheme

We do understand that it’s not always so easy to know where to begin with communicating the benefits of auto enrolment to your employees. It must be conveyed in a way that will capture interest and ensure that employers are supporting their employees in making the best financial decisions and saving enough for retirement.

While many employers can barely find enough time in the day to consider building a strategy, it is essential in order to fulfil the six key principles of a good workplace pension scheme in the eyes of the Pensions Regulator.

That’s why our team at Vintage Corporate offer employers support with every aspect of auto-enrolment. We will ensure that you are aware of your ongoing regulatory duties as an employer and that all aspects of your compliance are regularly monitored and reviewed.

We will also ensure that your current workplace pension scheme is still fit for purpose and meets the needs of your employees in the most effective way, and support you with engaging and communicating about auto-enrolment with staff. Contact our specialist team today for more details.

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