After salary, pension is the employment condition on which most money is spent. All the more reason to get this right for your employees. But what if you want to switch pension schemes or administrators? How do you arrange this and who do you need for it?
Switching is not something that you do every day. And when it comes to pensions, not every year either. In most cases, employers conclude a pension contract for a period of five years, although some companies do so every three years. Hanneke Geluk is senior pension consultant at BeFrank and knows better than anyone what to expect when you opt for a different pension scheme or pension administrator. She has the answers to five pressing questions on the subject.
What are reasons for switching to another pension administrator?
“You may not be satisfied with your current provider. This concerns, for example, the contact or the costs. Another reason is that employers experience too much hassle. Changes are not properly processed or the portal leaves much to be desired. At a certain point you’re nearing the end of the pension contract, at which time it’s not a bad idea to ask yourself whether another provider might do a better job.”
“In addition, the pension market is becoming increasingly competitive. As a result, there are also employers who wonder whether they might be able to get a better deal elsewhere. Pension is a very important employment condition and, in my opinion, the price should not be the decisive factor, though it can play a role in someone’s decision to switch.”
“Incidentally, renewal is never automatic. An independent pension advisor always looks over your shoulder to see if the pension scheme still matches the objectives and financial situation of your company.”
As an employer, when should you start thinking about renewing or switching?
“Let me tell you how we do this at BeFrank. At the beginning of the year, we look at which contracts are expiring. We first approach the pension advisor and then the HR director or CFO of the company. What are their wishes and what changes to the scheme are required? A concrete request for a proposal follows via the pension advisor, and ideally this will be ready before the summer. After the holiday period, negotiations will follow, and in the autumn a new pension contract will be on the table for both parties to sign.”
If you decide to renew, would that be quick and easy?
“Does the current pension scheme still fit our company and our employees? Of course, this is a question that employers must ask themselves in the first place. If the answer is yes, you can proceed with what is called an unchanged renewal. However, we will examine the conditions again. Which rate, for example, best suits the company depends, among other things, on the industry and the number of employees. We then make a proposal that is re-evaluated by the employer, who is assisted by an independent pension advisor, as I mentioned before.”
“If you are a small employer, you don’t actually have to arrange that much. The advisor will assist you and do most of the work. If the company is larger, the Works Council also has a say in the choices that are made. And if there are trade unions involved, you will have to coordinate the process with them as well.”
I want to change my pension scheme or switch to another provider. Does that involve a lot of planning and organisation?
“You decide to switch from an average salary scheme to a defined contribution scheme*. There are plenty of reasons for this. As an employer, you determine the level of the contribution. Moreover, employees sometimes have the choice of what to do with the available contributions.”
“Start in time, about a year in advance. After all, pensions are an important employment condition. Like salary, you cannot just change the conditions without taking the people affected into account. As an employer, you have a duty to provide information in this regard.”
“Switching schemes or providers is not something that you do every day. It is the task of the pension advisor to guide companies through this process. This way, you can be sure that everything will be taken care of and it won’t be a full-time job for you, the employer. And if you, as an employer, decide to switch to BeFrank, it will be our mission to relieve you of as many of your worries as possible. We will make this process as easy as possible every way that we can. The ease of a good pension scheme therefore applies not only to employees, but certainly also to the employer.”
What do employers sometimes run into when switching?
“We regularly see that the recordkeeping at an old pension administrator could have been better. If this is the case, it causes a lot of extra hassle when switching. So make sure you check those records properly. Are the details, entitlements, contributions and investments correct? Changes that appear not to have been properly processed may have consequences for the employee, among others. Someone does not get what he or she is entitled to, for example. As a good employer, you want to avoid that kind of situation.”
“At BeFrank, the renewal rate is more than 95 per cent, which is exceptionally high. As far as I am concerned, this is the best proof that employers are very happy with our services. We do a lot to activate participants. And it works. We often agree that a minimum of 70 per cent of employees will log in to the portal. That percentage is almost always achieved. And the employer is happy about that too.”
*Average salary scheme The contribution and the level of the pension income are determined by the salary, the period of employment, and the annual accrual rate.
Defined contribution scheme The contribution serves as the basis for the pension capital. How much pension is ultimately accrued is not predefined.
This article appeared on MTsprout.nl on 3 June 2021.