I’m always a bit reticent telling stories based solely on “word of mouth”

The issue with “Word of Mouth” reports is that facts get confused, certain points get over and underestimated and pertinent points get ignored.

However sometimes (and especially when the ‘word of mouth’ story comes direct from a very specific source) these stories are worth telling.

This story starts with a HR manager working with a medium sized employer.

The HR manager in question, obviously responsible and diligent, understood the importance of complying with their duties (which includes automatically enrolling employees into a scheme when the time same) and started to prepare in plenty of time.

They had an existing group pension scheme in place available for all of their 180 employees and as a first port of call decided to approach their current pension provider, a recognisable brand name pension provider.

The pension provider assured them that they could help them with automatic enrolment and even provide a shiny new piece of software designed to help them process data, meet their obligations and communicate with their employees.

They were prepared to provide this service as part of the work they were doing with the pension and for no additional cost.

However 2 weeks ago the diligent, well prepared HR manager received a call (followed by a letter) from his pension provider.

The “Free” service provided designed to ensure that he complies now wasn’t going to be free.

It was going to cost around £30,000 per year every year.

Usually, this wouldn’t have been an issue for the HR manager. He could have said no. He could have taken the time to shop around for an alternative solution to the compliance issue (either through his payroll or independent middleware).

However due to the fact that his employer had a staging date of May and the call came at the start of March it’s effectively meant that this particular HR manager wasn’t given much of an opportunity to make alternative arrangements.

If I’d heard this story from a third party I’d have been less inclined to believe it.

However I spoke to the HR manager directly who told me of this “Real World” automatic enrolment experience and his frustration (and anger) on the behaviour of the particular organisation in question.

It’s important to say that I’m not suggesting that all pension providers are engaging in this behaviour.

I’m sure that many are fulfilling their promises of providing software and auto enrolment compliance support as promised and with no “nasty surprises”.

However pension providers need to be commercial. Any “free” service actually needs to be paid for.

Traditionally this is usually paid for, and traditionally not in a particularly clear way, through annual charges placed on pensions.

However as the market changes and overall contribution levels decrease it seems that some providers have looked at automatic enrolment and decided that charging through certain schemes aren’t the way to go and charging an employer direct is the only profitable route.

Whilst this makes approach makes sense (this means that the employer pays for duties they need to comply with as opposed to forcing employees to pay through charges on their scheme) I believe that giving an employer 6 weeks to 2 months (after making promises months before) pretty shoddy behaviour.

So, where does this leave employers…. 

I believe the message is clear.

Prepare early.

Understand that the “Pension Shell”, “Compliance Software” and “Payroll” are three different parts of the same puzzle and all of these don’t need to be managed by the same organisation for an employer to comply with their duties.

and

Get impartial, independent advice from experts who really know and understand this market inside out.

If all employers did these things we might all hear less stories like the one I’ve told today!