Xafinity supports employers to review total pension costs against what they can afford and, ultimately, need to pay to recruit and retain employees. Scheme design and ways of reducing costs and risks are always assessed.
When modelling costs we consider:
- Increasing membership and contributions incurred by auto-enrolment;
- Increased administration costs of monitoring and effecting auto-enrolment;
- Minimising the cost of deferred member management due to increasing membership turnover;
- Impact that any changes to the funding assumptions of an employer’s DB scheme (if relevant) may have on the employer’s annual ‘pension spend’ (e.g. Recovery Plan).
Xafinity analyses and models these factors so employers can accurately plan for their future. In this way, employers can fully understand the likely impact that auto-enrolment and other scheme design changes will have on the cost of their pension arrangements.
Our clients find that having access to such information enables them to budget their pensions’ expense over the coming years and to take steps to mitigate unnecessary costs and risks where possible.
In the model above, XYZ Ltd operates both a DC scheme for new employees and a legacy DB scheme. Following the results of the DB valuation, a 15 year Recovery Plan is agreed with the DB Trustees to finance the deficit that has arisen.
However, in 2013, the employer’s Staging Date comes into force, requiring all employees to be auto-enrolled into the Qualifying Scheme. This has the affect of not just increasing the value of employer contributions that need to be paid, but also to understand the increased administration costs of the auto-enrolment process.
We were able to assist XYZ Ltd confidently plan for these events.