Advisers ‘penalised’ as providers refuse AE business

Small businesses are being prevented from auto-enrolling ahead of their staging dates due to pension providers refusing the business, according to one adviser.

Elliot Silk, head of employee benefits at English Mutual, told Money Management that providers are blocking business from employers ahead of their staging dates.

“They are saying okay, this is a July 2014 staging scheme, we are not going to respond to you at the moment because we are focusing on our immediately staging companies,” he said.

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“That is penalising employee benefit consultants and advisers that are organised, which isn’t really fair.”

Providers refusing to work with employers ahead of their obligatory date is unfair on the employer and employees, Mr Silk said, and will also have an impact on the workflow of the adviser firm.

“What is going to happen is, if the schemes are all blocked up, a few months down the line it is squeezing our project plan.”

Although Mr Silk did not want to name providers, he said that both older-style pension providers that used to pay commission and newer entrants to the auto-enrolment market were being problematic.

Kate Smith, regulatory and strategy manager at Aegon, said its acceptance of a scheme depends on the circumstances but, if it met its criteria, there was no reason it would not process an application straight away.

“I don’t see why we wouldn’t unless we had a particular capacity crunch at that time,” she said.

A spokesperson for L&G said that it is currently looking at 50-500 employee companies, which are staging next year, which would have to take priority over smaller companies as their dates are sooner. However, he added, L&G would suggest starting the process at least nine months in advance of the staging date.

“We would say apply as early as possible and we can schedule in for work at the appropriate time,” he said.

Tim Jones, chief executive at Nest, said that although the government-backed scheme does not technically have to accept anybody until their staging date, he would welcome any employer that wanted to join early.

Even when a pension provider might accept a scheme, Mr Silk added, the tender process is extremely slow and providers often do not respond.

“When we are tendering for business, we are not getting responses from all the providers,” he said.

“What you would have seen a couple of years ago, if you had a decent scheme, the providers would have been fighting with each other to give us terms and competition with regard to charges and added benefits.

“But now you are looking at reasonable quality schemes – in excess of 100 employees, average earnings £35,000 plus, reasonable contributions at 3 per cent matching – and we are seeing companies that aren’t even acknowledging or responding.”

When a scheme is set up, he added, an implementation manager is often not appointed, or only appointed at six weeks prior to the staging date, which is too late to properly test all of the systems.