Different advisers take different approaches to assisting with setting up an auto-enrolment scheme, and it can be time consuming from an administrative perspective and having a standard approach.
Other than corporate specialist IFA firms, Morten Nilsson, chief executive of Now:Pensions, says very few wish to become involved with assessment and ongoing workforce auto-enrolment communication as it is not something they have done historically or are comfortable with.
He says: “It is not financial advice. Most advisers see their responsibility to the employer client as facilitating the selection of their auto enrolment pension scheme in a timely manner – not much more.”
Mr Nilsson added that the positive would be making the employer relationship much tighter and securing an ongoing income stream.
“The cons are that most IFAs would have to invest in technology to perform the auto-enrolment functions, learn new schemes and/or ensure other administration staff are running these functions for clients.
“Most advisers offer high value advice interactions – auto-enrolment is becoming more and more high volume, small value processes.”
Pensions are unknown territory to the small and micro employers facing automatic enrolment. According to Nest, currently eight out of 10 do not have a scheme in place. Understandably many will turn to an intermediary for support.
Nest research shows 74 per cent of small and micro employers want support with auto-enrolment so it looks like they are going to be keeping the IFA and intermediary community very busy.
Gavin Perera-Betts, executive director of product and marketing at Nest, says Nest has produced a hub that enables advisers and other professionals to help employers with set up, ongoing management and compliance.
This could mean an adviser offering different propositions for different clients covering all or just part of what an employer needs to be compliant.
Using the hub advisers can set-up directly with Nest as a delegate organisation, manage Nest for all their clients through one account and create bespoke access levels for different users within the intermediary organisation.
According to Mr Perera-Betts, Nest has already got about 3,500 intermediaries signed up as connectors.
Ongoing advice with auto-enrolment
The pensions landscape is ever changing, and auto-enrolment is only one element of scheme management.
Furthermore, auto-enrolment will impact on most areas of the employers business and should be viewed as an ongoing responsibility.
It is important for an adviser to recognise the need to ensure pension arrangement and products continue to be fit for purpose over time, according to Angela Seymour-Jackson, managing director of workplace at Aegon UK.
Ms Seymour-Jackson says advisers should ensure the pension scheme is providing employees with the best possible outcomes.
She says: “Advisers have a responsibility not only to make sure their clients make the right choices, but that employers recognise that they could face enforcement action should they fail to be compliant with the new laws.
“At Aegon we work with advisers and employers on an ongoing basis, and strongly believe that automatic enrolment is not a one-and-done event and that advisers have a key role to play on an ongoing basis.”
Auto-enrolment isn’t a “one-and-done” process, agrees Gavin Perera-Betts, executive director of product and marketing at Nest.
He says auto-enrolment is an ongoing commitment so employers may wish to have an adviser manage the whole process for them.
“It is for the adviser in consultation with their employer client to determine what a good review period should be.”
Advisers should be carrying out regular due diligence on the pension provider and the default fund, says Morten Nilsson, chief executive of Now:Pensions. Most will look to do this annually, he notes.
At the same time the adviser will probably want to collate management information from the pension provider and the employer payroll/auto enrolment system to analyse the cost of running the scheme for the employer, Mr Nilsson says.
He adds management information should be used to ensure and check:
• employer auto enrolment responsibilities;
• data quality and implementation; and
• file submission and contribution processing.
Mr Nilsson says the reality of the situation is that it will be difficult for advisers to collate all this information and pension providers will have to work hard to provide it for them.
Another reason why advisers may want to contemplate ongoing work relating to automatic enrolment is to build up savings pots and potentially create the high net worth clients of the future.
In September the latest figures from the Office for National Statistics revealed active membership of private sector occupational pension schemes leapt from 2.8m in 2013 to 4.9m in 2014, which was the highest number since 2000.
Together with active public sector scheme members for 2014 of 5.4m, and total active scheme membership was 10.2m – the highest number since 1995’s 10.3m.
However, the survey shows average total contribution rate for private sector defined contribution schemes was 4.7 per cent in 2014, down from 9.1 per cent in 2013.
So, while auto-enrolment is increasing the number of people saving work clearly needs to be done to bolster the amounts going into pots.
