Personal Pension  

Grasping the nettle

And for the adviser community – which is competing for business after the retail distribution review – there is no doubt a huge opportunity presents itself through auto-enrolment and the pension reforms, which are gathering pace as swathes of smaller employers start to hit their staging dates.

The number of employers undergoing auto-enrolment will rise significantly in the coming months, and, according to figures from Nest, 98 per cent of employers aware of the reforms have sought advice.

To discuss these issues, Financial Adviser teamed up with Nest to launch Nest Live Spring 2013, a seminar attended by those interested in auto-enrolment.

Speaking at the seminar, Tim Jones, chief executive of Nest, said: “There are 6000 employers starting auto-enrolment in April 2014, 12,000 in May, a gap then 12,000 in July. Just breathe in those numbers. Just think about the capacity of the industry and how it is going to respond to those numbers. It is going to be difficult. The pensions industry has never brought in that volume of employers over that compressed timetable.”

Employers face significant challenges, and, according to Nest, have a high expectation of support from their advisers. Figures from Nest show 94 per cent of employers are expecting support on understanding the legalities. When it comes to the auto-enrolment process, Mr Jones said employers’ chief concerns include: workforce assessment every pay period to identify who is eligible for auto-enrolment; managing payroll processes; communicating the changes; coping with a high-turnover workforce; and dealing with low-paid workers, who could easily flit between either side of the qualification criteria.

Mr Jones said: “This challenge is not about choosing the pension scheme – yes that’s important, but the issue here is that auto-enrolment duties require workforce assessment every pay period – that’s a non-trivial activity.”

Are advisers equipped to deal with the scope of this challenge and fully reap the rewards? This was central to the debate between industry experts at the seminar chaired by Financial Adviser editor Hal Austin.

Roy Porter, assistant director of distribution for Nest, certainly thinks rewards may come, but only if advisers “grasp the nettle” and ensure their business model is fit for purpose.

He said: “I personally think that demand will outstrip supply and when we get to early next year there will be a huge pull on advisers’ time. It is whether or not you have the capability, the business model, and the inclination to engage with employers. I definitely see it as a huge opportunity for advisers.”

However, some employers who are already struggling to manage the cost burden of auto-enrolment will be reluctant to stump up the cash required for the advice they need. This could be even more of an issue if the government decides to abolish consultancy charging on auto-enrolment schemes, which allows the cost of advice to be spread between the employer and employee.

Challenges

Speaking at a panel discussion, Martin Freeman, director of JLT Benefit Solutions, said: “Some of the challenges we have had while all those opportunities have also been there have been about the different skillsets needed, the different forms of remuneration and charges, and the willingness of employers to pay for some of this stuff and understand quite what a big a problem they have got.”