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Recommending the right pension scheme

This article is part of
Guide to Auto-Enrolment

As more and more employers will be required to undertake auto-enrolment, Angela Seymour-Jackson, managing director of workplace at Aegon UK, notes advisers will be asked to help both new and existing clients to select a scheme.

However, selecting a qualifying workplace pension provider is a non-regulated activity.

Some employers might not realise that auto-enrolment affects them, or think they have several years to sort it out, therefore Ms Seymour-Jackson says there is a great emphasis on helping your clients understand the new legislation and how it applies to them.

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For some she says employers setting up could take up to 12 to 18 months, so it is essential to understand that this is not a quick process.

Ms Seymour-Jackson says advisers should ensure that schemes which they recommend meet certain legal and quality criteria, and focus on areas such as value for money, simplicity, effective governance, choice of investment options, transparency and the quality of the communications from the provider.

However selecting a scheme does not need to be difficult or time consuming, she adds.

She says: “Advisers are in a position where they can help employers make choices which meets both their needs and the need of their employees, whilst ensuring that any decisions that an employer makes now will have a significant positive impact on their employees’ future.”

To help employers and advisers the Pension Regulator has published a number of papers looking at the principles, features and benefits of a good pension scheme.

Should an employer wish to complete more detailed due diligence then they are able to engage an adviser to review the market for them.

Recommending the right qualifying scheme is important and according to Gavin Perera-Betts, executive director of product and marketing at Nest, the following criteria are useful for advisers to consider:

• how will a new scheme work alongside any existing arrangement;

• is the scheme suitable for those workers who haven’t saved in a pension scheme before;

• how does it invest their money and does it use clear language when communicating with employers and workers;

• how would any new scheme deal with large numbers of joiners and leavers;

• how easy is the new scheme to administer; and

• you should also ask about the scheme’s charges, how it will invest money on behalf of members and what happens when workers leave your client and the scheme – both in terms of administration and what happens to a member’s money.

Griselda Williams, head of business development at Trust Pensions, recommends the following as key considerations when recommending a scheme;

1) Is this a quality scheme? Who are the trustees? Who is the investment manager? Where are the assets held? Who is the scheme administrator? Does the scheme have master trust assurance, PQM Ready, or a Defaqto five-star rating as a stamp of quality? Is it providing information to scheme comparison sites such as Pensions Playpen?

2) How simple is the scheme to use? Is the sign up free, fast and secure? Does it incur employer charges? How easy is it to create the employee and contributions data reports to send to the pension scheme? Do they offer a dedicated account manager or just a call centre?