Opinion  

Webb has missed the point on need for advice

Emma Ann Hughes

Emma Ann Hughes

The owner of my chip shop can calculate the cost of two cod, three sausages and two large chips with amazing speed, but can he single handedly set up a pension scheme for his staff?

That is the test facing Costas the chippy come 2015. I am sure he will be reassured to know that pensions minister Steve Webb MP thinks he is up to the challenge and Nest is all he needs.

Well, I hate to break it to you Steve but Nest is a pension scheme - and a low charging one at that. While the scheme design may be a suitable option for most companies employing the sort of low-paid staff the auto-enrolment reforms are designed to get saving, choosing which scheme to use is just the tip of fish batter for poor Costas.

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Jamie Clark, business development manager of Scottish Life, told FTAdviser Nest’s low charges mean its hands are tied in the amount of support it can offer employers.

Unlike providers or financial advisers, it can not go and sit with Costas, who is clearly without a HR and finance department, and help him figure out how to set up and manage his employer pension contributions and guide him through the myriad complexities.

Mr Clark feels it is this lack of support that means Nest is already failing to attract the amount of cash many thought it would from the larger employers, who have got HR and finance departments, that have either already had their staging date to contract in their staff now.

Costas is the owner of a small business who spends most of his waking hours behind the counter wrapping chips or frying fish. What hope does he have?

The ban on consultancy charging, which was announced in May and supported by many that had bemoaned fees being taken from members’ pots (Ros Altmann branded such charges a “scandal”), means firms could have to pay up to £12,000 for advice, according to RSM Tenon.

Mr Webb vigorously defended the ban and the likely lack of advice that would eventuate, saying nobody has to pay for advice as the government-backed default option, Nest, is so darn good.

At a roundtable event in June he responded to a question on the effects of the ban by saying the government has “legislated for quality” with a “quality” default option and that there are also other quality providers that are well-established in the market.

He went on: “If they want to pay for advice and wish to pay for advice and do something better and different then that’s fine, but nobody has to pay for advice and we need to make sure that people who do this in an unadvised way get good outcomes.”

I think Mr Webb needs to “get real” as young people used to say in the 1990s.

Small and micro employers, who will be ‘staged in’ and required to offer their staff a pension from 2015, will find the task of implementing a scheme, getting to grips with the the minutiae of the rules and promoting the option to their employees daunting.