A micro employer has set up a non-contributory auto-enrolment plan three years ahead of its staging date, as the Pensions Regulator steps up support for smaller businesses seeking a provider.
Ahead of its launch last year, the newly established charity Portsmouth Sail Training Trust’s board of trustees committed to a ‘best practice’ approach to pension provision, to help it attract talent within a competitive sector.
We know he could walk out of our place and get another job for £30k but there won’t be the pension attached
Hereward Drummond, Portsmouth Sail Training Trust
Hereward Drummond, trustee at PSTT and a trustee of a bank pension scheme, said the board structured its employment contracts around the auto-enrolment qualifying thresholds and wanted to be ready well ahead of its 2017 staging date.
He said: “We asked ourselves, why not do it now to get the right person to join us for the right reasons?”
On Thursday the regulator announced it was stepping up its guidance for smaller businesses preparing for auto-enrolment.
Along with other online tools, it has published a list of mastertrusts that are open to employers of all sizes and have been independently reviewed to demonstrate they meet certain quality standards.
The regulator’s research found that one in five employers will not seek advice when choosing a scheme, while one in 10 do not know how to select a scheme or think it will be difficult.
PSTT’s current only employee is a 42-year-old male with no previous workplace pension savings. Over the next 10 years the charity plans to expand to between 15 and 20 full-time workers.
Exceeding the minimum
Nearly one in three (30 per cent) small employers say they plan to contribute, or will consider contributing, more than the legislative minimum when they enrol their employees into a workplace pension, according to new research from provider Now Pensions.
Of those who intend to be more generous, 17 per cent say they plan to pay more than the minimum from the outset with a further 13 per cent stating that they will pay the minimum initially, with a view to increasing contributions over time.
This is an improvement on 2014, when just 8 per cent of SMEs surveyed said they intended to pay more than the minimum.
It currently pays a contribution of 5 per cent of qualifying earnings for a £30,000 salary.
Drummond said the charity’s pension provision makes it stand out as a first-class employer within the sector, which is built on short-term contracts.
“We know he could walk out of our place and get another job for £30k but there won’t be the pension attached,” Drummond said.
Outside help
Drummond said the help of a local insurance broker was instrumental to getting the auto-enrolment-compliant scheme up and running.
“She held our hand to a degree as we closed [on a provider]. We got all insurance and pensions help for a nominal fee of £500. It’s an important message – you don’t have to do it by yourself,” he said.
Drummond said external support is crucial for employers planning and implementing provision, particularly at the micro level.
“The lingo, jargon – for a painter and decorator it would be absolutely impossible,” he said.
This is the reason I’m delighted we did it now – I worried about leaving it to 2017 when millions of people will be ringing
Hereward Drummond, Portsmouth Sail Training Trust
The charity assessed offerings from Aviva, Standard Life and The People’s Pension, but eventually settled on government-backed provider Nest.
Nest provided literature about the pension for PSTT’s first employee and Drummond attended a face-to-face meeting to supply further explanation and answer any queries.
The employee also phoned Nest and had questions answered by an adviser.
“This is the reason I’m delighted we did it now – I worried about leaving it to 2017 when millions of people will be ringing,” he said.
Enrolment upsurge
By 2016 an average of 45,000 employers will be staging every month, according to research on SMEs and auto-enrolment by Nest this year.
While 85 per cent of micro-employers told Nest they are aware of auto-enrolment, just 18 per cent of small and micro-employers felt they completely understood what it means for their business.
Adam Bexson, auto-enrolment specialist at consultancy Barnett Waddingham, said the cost of an external adviser to support auto-enrolment staging and compliance would disproportionately impact smaller empoyers.
“If you get a bill and you break down the cost per member... it’s more expensive per head,” said Bexson. He said employers need to be aware of the need for continual work to maintain compliance.
“It’s not a one-off project,” he said. “These employers need to cope with it on an ongoing basis.”
The regulator’s executive director of auto-enrolment, Charles Counsell, said the most significant challenges for auto-enrolment still lie ahead, but the message is to plan early.
“We have now written to all small and micro employers across the country alerting them to their duties,” he said.
