How Paper Pro

pensions

Paper Products

  • Business type: Stationery supplier 
  • Average age of employees: 38
  • Number of employees: 1,250
  • Staging date: 1 September 2013

In a nutshell

  • Paper Products has grown rapidly over the last 10 years, mostly by acquiring other companies. As a result it has four different PAYE numbers amongst its workforce, the largest of which has 700 employees.
  • Paper Products includes a series of retail outlets, where staff turnover is high – typically staff stay less than two years, and there is a spike in recruitment between October and the end of January to compensate for the Christmas rush.
  • Store staff represent around 50% of the company’s total workforce.
  • It has an existing GPP open to all staff, but take-up is low (30%). There are two legacy DB schemes from company takeovers, but both are closed to future accrual.

Paper Products will need to check its staging date carefully, as different PAYE schemes will have different dates,” says Philip Smith, head of defined contribution and wealth at Buck Consultants. A company with multiple PAYE numbers can decide to align its staging dates, so that the entire company auto-enrols when the largest PAYE section must comply. “If Paper Products wanted to align its staging dates, then the Pensions Regulator would need to be advised at least one month before the revised date,” says Smith.

Although Paper Products has an existing GPP there are still two aspects of the scheme that it will need to discuss with its provider. First, it will need to check that the GPP meets the Pensions Regulator’s requirements as a qualifying scheme.

Secondly, it will need to make sure there are no nasty surprises in terms of annual management charges. The scheme will see a huge influx of members with auto-enrolment, many of whom will be low-paid short-term workers. That may mean the scheme provider wants to charge more for administration.

Just because Paper Products has a scheme, doesn’t mean the company shouldn’t look at other options. “Consider another delivery vehicle, such as a master trust, for specific employee categories, particularly retail staff,” Smith advises. 

Paper Products may also need to think through business processes, such as its recruitment policy over the Christmas period. Taking advantage of postponement could be usefu.l “In some circumstances, employers may choose to employ a ‘waiting period’,” says The Pensions Regulator’s spokesman. “This is the postponement of the assessment of the worker and therefore a postponement of whichever employer duty may apply, depending on the category of worker.”

Communications will be important, given the low take-up of its existing pension scheme. “The company will need to work with advisers to devise a communications strategy that ensures non-engaged employees ‘open the envelope’,” says Smith.

Further reading for Paper Products

The Pensions Regulator’s guidance 3a ‘Postponement’

http://www.thepensionsregulator.gov.uk/docs/pensions-reform-postponement.pdf

The DWP’s guide to communications: http://www.dwp.gov.uk/docs/auto-enrol-language-guide.pdf

PC FIXIT

Business type: IT support

Average age of employee: 37

Number of employees: 520

Staging date: 1 November 2013

  • PC Fixit has an existing defined contribution (DC) scheme that has been open to new joiners since 2009. The take-up rate has been 45%.
  • There is no default fund at present and members have a range of 10 funds from which to choose.
  • The company has decided to close its deï¬ned beneï¬t (DB) scheme and will transfer all members into the defined contribution (DC) scheme in six months’ time. This will boost the number of members in the scheme to 300.
  • The DC scheme will also be used for auto-enrolment at a later date, which should boost membership to around 500.
  • The company is committed to providing a good quality pension and will be matching employee contributions up to 7% (so, if an employee puts in 7%, the total pension will be 14%). 
  • Both the DB and the DC scheme are run by a single trustee board.

While many of the aspects of PC Fixit’s existing DC scheme might match the requirements for auto-enrolment, there is one obvious omission.“The plan needs to have a default investment option”, says Philip Smith, head of defined contribution and wealth, Buck Consultants. “Changes in the demographics of the scheme, in terms of a big influx of new members, needs to be considered when that investment policy is being set.” As PC Fixit has a trust-based scheme, it will be down to the trustee board to set the default fund strategy.

The culture of the trustee board might be a challenge for PC Fixit. Smith says: “DC can tend to be ignored as DB often crowds trustees’ agendas. It can work, however, providing the trustee board is sufficiently disciplined.” The trustee board must also be made aware that it could be asked to amend the scheme structure to comply with auto-enrolment.

PC Fixit will have to consider how it handles contribution rates for current non-joiners – will the employer be able to offer the same terms for all staff?

To date, PC Fixit’s scheme won’t have needed any form of workforce assessment for eligibility, as joining has been optional. It will need to introduce an automated system to assess all employees for eligibility when auto-enrolment starts and then on an ongoing basis for new joiners and currently non-eligible staff. “The company will need to understand the impact on take-up, pension costs and administration resources as scheme membership grows,” counsels Jonathan Reynolds of RSM Tenon (pictured).  Reynolds also suggests that PC Fixit should consider rebroking the scheme: “It may be possible to improve the scheme terms - it is well funded”.

Further research for PC Fixit:

Trustees’ checklist for auto-enrolment: www.tpr.gov.uk/trustees