part two: A FINE PENSION MESS and how to avoid it

Adam Bernstein continues his look at how businesses can stay on the right side of the auto-enrolment pension rules

By Adam Bernstein | Published:  14 June, 2018

Pensions auto-enrolment, the government’s drive to have everyone saving towards their retirement is just over five years old and recently, this last February, completed its rollout. However, while it might be the end of the rollout as far as the government is concerned, for businesses, the process is never-ending as the obligations continue… forever.
    
Ignoring the rules and failing to meet the obligations can lead to very painful penalties being imposed by The Pensions Regulator.

Don’t fall foul of any changes to the rules
The government has done a pretty good job of improving the rules as they go along, even though they may seem rather onerous at first. Nathan Long, a Senior Pension analyst at Hargreaves Lansdown, explains more about how firms can be caught out by the law.
    
Nathan says that there “is a ruthless determination to ensure auto-enrolment remains successful and the government recently made recommendations as to future changes to the legislation.”
    
The two key changes for employers are that staff will need to be automatically enrolled from age 18 as opposed to 22; and contributions will accrue from the first pound of earnings, whereas currently the first £5,876 can be excluded.
    
Nathan says the changes are great for pension savers, but will impact on some sectors more heavily, especially those that employ large numbers of younger people: “These recommendations will not only mean people retiring with more income, it means they will have greater control over leaving work. In fact, someone with average earnings could increase their pension pot at retirement by over £60,000.
    
“Increasing the reach of auto-enrolment is great for the long-term retirement prospects of the nation but adds yet further costs for businesses. The government is clearly mindful of this alongside the ongoing Brexit uncertainty and so opted for a long implementation period, with the changes not due to be rolled out until the mid-2020s.
    
“Even so,” reckons Nathan, “it is widely recognised that 8% contributions are not enough for a comfortable retirement, with a growing consensus that contributions of 12% are more appropriate – the government has also recommended reviewing the minimum contribution levels from April 2019. Small businesses in particular should be alive to the very real risk of increased costs coming down the tracks.”
    Empirical evidence is showing larger employers driving higher levels of understanding and engagement amongst their staff by embracing workplace financial education programmes. Nathan thinks that smaller businesses may struggle to offer these services: “A possible solution to improved engagement could lie in allowing staff to be able to select where their auto-enrolment pension contributions are paid if they already have their own pension plan.” There would still be a company appointed provider for anyone that doesn’t choose, however anyone who has truly got to grips with their pension planning could continue to contribute to their preferred plan. The responsibility would then be on pension providers to engage their customers in order to retain their business.

Nathan thinks this solution need not add more administration for employers: “In the same way that you require an employee’s bank account details, so you can pay their salary, simple details of pension provider and policy number could allow correct payment of pension contributions. The technology to enable this already exists, it simply must be adopted for this revised purpose.”

To finish
The key message for employers of any size is that auto-enrolment is an on-going exercise and crucially requires on-going compliance with any rule changes. First up will be the contribution hikes in 2018 and 2019, but employers need to keep their wits about them. Whilst it may seem The Pension Regulator is out to get small businesses, actually the opposite is true and its website is a great source of information for businesses of all shapes and sizes: www.thepensionsregulator.gov.uk

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    Fergie’s opened its doors, and unveiled its big, bright and very orange sign for the first time in late February. Based in a converted warehouse on a business park on the outskirts of Thatcham in Berkshire, Fergie’s has been set up as a German marques specialist, catering for drivers of the VAG group output, as well as cars from BMW and Mercedes-Benz.
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    Differentiation
    Starting out is hard, particularly if you are aiming to start at the top, but Shaun was upbeat about the businesses potential: “We’ve had a great start. Each member of the team is very focused on their individual roles and we’re hitting our targets that were set out in the business plan. It’s very early days but we’re all putting in the hours and committed to making this a success.”

    They are getting the customers they want too: "The marketing team are busy behind the scenes. From day one we’ve had a defined focus on who our clients are and we’ve built a marketing plan based around that. We’re very keen to get off on the right foot and build a strong reputation based around outstanding customer service. It’s the part of the business the customer sees and touches. It’ll be our point of differentiation.”

    A new chapter
    Readers may remember that when he won Top Technician in 2018, Shaun was head technician at Millers Garage in Newbury. What a difference a year, and a big trophy, can make: "I have been on a journey over the last three or four years, and have met some great people in the industry. Like they say, It’s good to talk, and my new network gave me a different perspective.
    “I’ve fancied going it alone for a while and it seemed like the perfect opportunity. I started planning at the end of last year, and got the keys for here on 1 January."

    Winning Top Technician was a factor: "I realised that I had to do it this year. If I left it for three or four years, I couldn't advertise that I was setting up, and that I was the winner of Top Technician. It would be old news. I was speaking to a lot of people in the industry about it, and I just decided it was time to go. I set about doing the business plan, looked at what I wanted to do, arranged additional finance on top of the money we had, then set about finding the right equipment to meet our budget.  I started planning in November and into December, got the keys on 1 January, and that was it. From that point we were here full time. This was a warehouse that had been used by a parts supplier. It was just a bare shell. We turned it into this within three months, and opened on 25 February, and we have been open a month now.”

    Shaun was thoughtful for a moment, and then said with a laugh: "When you look back, you think 'how did this even happen?' I still don't know how it happened!"
        
    That was then, and this is now. Let's look at what Shaun has set up: "We have four two-post service ramps, a dedicated wheel alignment ramp, and a Class 7 MOT ramp. We are setting up as an MOT station at the moment too. In the meantime, are working with a local garage that is carrying out the MOTs for us. In return, we are doing their diagnostic work. It’s a system that works well for both of us currently.

    “On the tooling side, as we are a German marques specialist, all the diagnostic tools are for the VW -Audi Group, Mercedes and BMW. We have to have that as a specialist. We have some generic scan tools as well as a backup but, factory tooling is a must.”
    Shaun and the team are thinking long-term. One of the things he wants to create for Fergie’s is a positive working environment. With this in mind, upstairs, we found the bones of a staff lounge: "We’re focused on building a great team and staff retention is a big part of that. Having a great place to work as well as the right culture in the company is really important. You need somewhere they can relax, and eat in comfort.”

    Next door, Shaun has set aside a room for training. Training is really important to Shaun and having the right environment to do that is essential. “When we do training in the evening, they will come up here. Treating the staff right is the biggest thing for me. I want to get great techs here, so they need to be treated well.”

    The staff are not the only ones getting good treatment. Shaun also became a father for the first time last year, and they have found room for a little creche for son Quinn also. We told you it was a modern place didn't we?

    Customers
    Apart from the technical stuff, you always need to remember that a garage business needs customers. When they arrive, Shaun has presentation covered thanks to a comfortable, warm-wood-and-armchairs reception that could be an upmarket high-street cafe: "I initially wanted it to be all white and fresh and clinical, but I had my mind changed and this is so much better. Everyone who comes in says how nice it is, and wants to chill out, read a paper, have a hot drink, they love it. Because we are a little bit out of the way, we wanted to create somewhere people can wait."

    To have them waiting, you need to have them in the first place. With this in mind, Shaun sought out advice: "I did a lot of business training with John Batten at Auto iQ and he has helped me massively. I didn't think advertising was important before I started the business. As far as I was concerned it was all word of mouth. Starting a new business, that is not going to happen though. We are literally at the bottom of a road with no passing trade. I’m too busy in the workshop to give marketing the focus it needs which is why we bought in someone to do this from the start. That and our front of house team are every bit as important as the technical ability we have in the workshop.”

    It's a hard slog starting from scratch, but with a young family, a big vision and a great team, Shaun is on his way: “I am doing long hours at the moment- I am here until 11pm every night. I just want to set everything up, systems, equipment, etc. All of that effort will be worth it in the long run, getting it all right from the beginning. Doing this, I have learnt almost everything in one go, from a business point of view, which is really cool. Luckily my mum is an accountant with a massive company, so she has helped with it as well. With mum's, my wife’s, and my friends support as well as a great team, it was the ideal time, and the ideal recipe. Now we’ve all just got to put in the hours and do the work.”
    We know he will succeed.  


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