OpinionOct 2 2015

I auto-enrolled and all I got was a lousy Fiat 500

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I auto-enrolled and all I got was a lousy Fiat 500
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As auto-enrolment providers broke out the champagne to celebrate the third anniversary of the requirement to opt staff into a pension, I couldn’t help feeling the high fives were a tad premature.

The reality of auto-enrolment at the moment is that it’s creating pots, that when most savers reach the age of 55 and can access their cash, they will be lucky if they have enough to buy a Fiat 500, let alone that fabled Lamborghini.

While the policy has done a great job at getting people to set a little aside for the first time, the truth of the matter is that without more financial advice, these pots – and the cars they could purchase for you – will stay little.

Once again, as with those at retirement, the demand for advice is clearly there.

This week’s anniversary heralds a step change, with around 64,000 employers having met their duties in the last three years, but a further 1.8m being required to set-up a scheme between now and 2018.

An average of 58 employers enrolling each day over the last three years will now rocket to an average of 2,000 a day for the next stage of auto-enrolment, growing by around 3,500 per cent according to Nest.

These unprecedented numbers of employers setting up a scheme are unlikely to have experience of offering a pension. The same research found only 26 per cent of small and micro employers currently offer anything.

The average worker who started a workplace pension two years ago would now have around £670 in their fund

Around three quarters told Nest that they expect to turn to an intermediary, meaning that advisers have a crucial role to play in the next stage of the roll-out. But at the same time these small companies need your attention, large corporate clients will also need help again.

Clare Abrahams, head of auto-enrolment at Aon Employee Benefits, has pointed out that larger firms are facing the first ‘cyclical automatic re-enrolment’, meaning those first to go need to repeat their duties and ensure eligible staff are re-enrolled if they aren’t active members.

These larger employers need to assess how happy they are with the measures and providers they first put in place to deliver auto-enrolment – so once again there is a clear need for advice.

While the process this time should be less onerous than it was initially, many will need help to make certain that all the employee audiences are covered, that providers can support them with any new compliance requirements and that the Declaration of Compliance is completed by the statutory deadline.

What of the employees themselves? The average worker who started a workplace pension two years ago would now have around £670 in their fund.

The government needs to do more to incentivise advisers and reassure them about their liabilities so that they will offer assistance to employers and their employees.

Savers should be encouraged to increase their contributions in order to maximise any tax reliefs and employee matching, ensuring they secure an adequate income in retirement.

If the government and regulators don’t get this right and engage this industry more with the accumulation end of the pension market, we should all get ready for Daily Mail headlines about people who thought they were saving for a supercar, but instead have to squeeze into a supermini.

emma.hughes@ft.com