Auto Enrolment Scheme Selection - A Case Study

Lodge-u-like

Current Status and Aims

Lodge-u-like is a major hotel chain employing over 10,000 staff in the UK.
Pension provision has changed over the years, and with some acquisitions too, there are currently a total of 9 separate schemes. Two are Defined Benefit schemes outside the scope of this case study, as there are no intentions to re-open either scheme to future membership or accrual (and wind-up issues are for another case study!).

The remainder are a mixture of Contracted in Occupational Money Purchase (CIMP) schemes, Stakeholder and Group Personal Pensions. These are very much in scope as auto enrolment could be an opportunity for some welcome rationalisation.

Lodge-u-like has always prided itself on making good quality pension provision available to their employees. However, and despite repeated communication exercises, take up of the current open schemes remains stubbornly low, averaging out at 43% of male and 37% of female employees.

There is continuing Board support for a high quality workplace pension and they do not want auto enrolment to be introduced with just the bare minimum requirements, as this will not reflect well, leading in turn to poor perception of the employee benefits provided more generally. Naturally, the Board also want to ensure that they comply with their auto enrolment responsibilities as efficiently as possible.

Action

The Pensions Manager formed a dedicated working group to assess the options with a view to a Board proposal. A Creative Benefits Employee Benefit Consultant worked directly with the group, attending all meetings and providing technical input, as well as practical assistance.

A timetable was set and all data for the existing schemes provided to Creative Benefits in order for Strategic input to be based on the current reality.

Analysis of the data revealed a number of significant differences in the existing scheme’s benefit levels and take-up rates.

Outcome

With the expert help and practical assistance provided by Creative Benefits, Lodge-u-like was able to assess the range of existing pension plans (and their benefit levels) with ease.

The strategy review meetings ran to time and despite some differences of opinion from internal attendees, a clear strategy was concluded. This was presented in tandem by the Pensions Manager and their Creative Benefits Consultant to the Board.

In summary:

CIMP – Closed to remove cumbersome trustee responsibilities and to harmonise employee benefits.
Stakeholder – no longer needed by law and often perceived as a poor relation, this scheme will also be discontinued.

NEST - considered but rejected due to lack of employer recognition and problems catering to all employees within one scheme.

Personal Pension – One is updated and enhanced to ensure it is ready for auto enrolment. Selected for all current non-joiners and future employees due to; the simplicity of operation, ease of use for both employee and employer and the flexible features, such as seamless transition into Self Invested Personal Pensions and Drawdown. Members of the closing PPs transfer to the enhanced Plan.

DB scheme – no change, but with Creative Benefits’ help, members are offered target driven contributions if they choose to switch to the Personal Pension.

Conclusion

Lodge-u-like implement their auto enrolment duties with an enhanced Personal pension Plan that caters to all eligible employees, saving considerable management time and aiding employee perception.

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This is intended as a representative example but is not a real life situation.