Patrick Heath-Lay: find a scheme that is right for your business and its employees.
Get ready for reform
Published: 22 August, 2011
Next autumn,workplace pensions will change and every employer’s duties will change with them. Patrick Heath-Lay of B&CE explains how his company is helping the industry simplify the transition. Lisa Arcangeli reports.
Workplace pensions are set to change. From 1 October 2012 and the Government’s new compulsory employer duties require that employees be automatically enrolled into a qualifying pension arrangement or to have access to flexible and easy-to-understand schemes.
Employers need to allow themselves enough time to have a provider in place which can offer a scheme that is right for their business and their employees.
To put the financial implications into context, employers’ contributions in the construction industry could reach as much as £1.17bn by 2018, based on an average weekly wage of £532 for a construction worker.*
Over a period known as ‘staging’, which commences in 2012 and is based on the size of the workforce, by September 2016 all employers will be legally required to:
- Enrol their employees automatically into a qualifying workplace pension scheme.
- Pay a minimum contribution of 1% of band earnings into this scheme from their staging date, rising to 3% from September 2017.
- Keep records relating to pension arrangements, the enrolment of members, salary and contribution histories and members’ opt out and opt in notices.
- Periodically re-enrol employees who choose to opt out.
That is where B&CE comes in. The not-for-profit organisation is one of the UK’s largest providers of financial benefits to construction industry employers and individuals.
Set up “by the industry for the industry” nearly 70 years ago, the company first launched its EasyBuild stakeholder pension in 2001.
Developed exclusively for the construction industry, it has now become one of the largest schemes in the UK, with over 4700 companies, 500 000 members and £670m of funds under management.
EasyBuild, says director of finance and customer development Patrick Heath-Lay, will be more than able to compete with the Government’s National Employment Savings Trust (NEST) scheme on charges.
And, to mark its 10th birthday in April, B&CE announced a 0% annual management charge (AMC) for the scheme for new and existing customers, during the employer’s first year of auto-enrolment.
After that, it envisages the AMC will be no more than 0.5% for those actively employed in construction.
B&CE works with a vast swathe of the industry –from one and two-man operations up to the largest multi-national company in the construction sector, Mr Heath-Lay says.
“Because we operate such a large scheme, the appeal for a smaller employer lies in EasyBuild’s ability to provide low charges which as a smaller operator they might not have the buying power necessary to achieve.” In addition, administrative costs are low, he explains.
“For companies that may not have a human resources department to help them comply with these complex rules, we will undertake as much compliance work for them as we can.
“We want to take away as much of the administrative hassles that the regulator will allow us to do. We can also supply records that we believe the smaller employer, in particular, will find valuable,” he says.
Mr Heath-Lay points out that many of these regulations have not yet been finalised. “There is still clarification to come from the Pensions Regulator in July/August of this year,” he says.
“Once this has been established, we will know just how much of this regulatory burden we will able take away from the employers.
“We have specialists at our Crawley, West Sussex headquarters, who deal with these rules and regulations. We also work closely with many of the construction industry’s leading bodies.”
A number of organisations appoint members to B&CE’s board. These are equally split between employer and employee representation, he points out.
“We have three unions that appoint directors to the board –Unite, GMB and UCATT. For employers, the board is represented by UKCG, CECA, the Scottish Building Association, NFB, NSCC and FMB,” he comments.
There are no shareholders, no dividends to pay. “We run the company as an organisation that gives its profits back to the industry.
“We have a charitable trust arm to the business that passes profits back for hardship issues and general welfare of the industry.
“Everything we do has to be done for the benefit of our members,” he concludes.
*Source: Office of National Statistics and B&CE Benefit Scheme
What you need to know to make the change
October 2012 is the official start of the reforms, but companies can follow the compulsory employer duties set up by the Government as early as July 2012.
The financial and administrative impact that these pension reforms will have on the industry means employers and their employees will need guidance throughout this complex process.
“Although the reforms might seem some way off, we urge all employers in the industry to start preparing them- selves and their employees for this unprecedented change in the way everyone needs to save for retirement,” says Patrick Heath-Lay, B&CE’s director of finance and customer development.
From 1 October 2012, the standard rate of contributions will start at 1% for the employer and 1% for the employee, based on qualifying earnings.
“This will rise to 5% between 2012- 2016. Large employers will be the first to enter the scheme, with the smallest employers expected to join between March 2014 and February 2016.
“These rates stay constant up to 2016. Once all employers have automatically enrolled their staff, from October 2016, contributions will rise to a total of 5% and then to 8% from October 2017,” he explains.
“Employers need to allow them- selves enough time to have a provider in place, such as B&CE, that can offer a scheme that is right for their business. B&CE bases its charges on cost, not profit. It does not pay commission.
“That means our customers are able to benefit from low charges. Without shareholders to serve, any surpluses gained are returned to the construction industry. This results in the continued delivery of better products and services for our members,” he says.
A microsite, dedicated to explaining the pension reforms, how they affect those working in construction and allied trades and the solutions available is www.easybuildpension.co.uk.
The article first appeared in the June issue of Builders' Merchants News.