When Creative Benefits made the decision to launch Creative Auto Enrolment earlier this year, it was with the intention of providing an end-to-end solution for the estimated 1.3m firms around the country who are set to go through the auto-enrolment process before 2017.
For Managing Director David White this meant identifying the specific challenges employers face when navigating the staging process and coming up with a solution to overcome them.
He says: “Clearly, shaking up pensions is incredibly important for the future of the country, but it is interesting that the government has chosen to make employers the catalyst for this change and the ones that have to comply with the legislation surrounding it. Indeed, that legislation mandates 33 new pensions tasks for employers, even those that have existing pension schemes. They obviously need support with this and consequently need a complete service available to them.”
Mr White groups the 33 tasks into five disciplines, the first of which is assessment of eligibility, communication to staff and heading up the opt-out process. The second part is payroll management, acknowledging that the payroll system is going to have to be able to talk to whichever assessment system the firm is going to use. The third discipline is choosing a pension provider and a default pension investment strategy.
Mr White adds: “This third requirement is particularly bizarre as, for all of us who work in the pensions industry, if we want to give advice to an individual or company we have to show we have passed the requisite exams and are registered with the regulator. Here the legislation mandates that the owners of, say, a widget-making company, who are experts in making widgets but do not know about pension funds have suddenly to choose a pension fund for their employees’ pensions contributions.”
The fourth discipline concerns cost and cost management, while the fifth is dealing with employees’ questions through every stage of the process, particularly with the issue of opting out.
“It is very important to take a lot of care around who answers those questions,” Mr White says. “With the question of opting out, you will get fined heavily, if you are seen to have coerced – either deliberately or inadvertently – your employees to opt out.This is deadly serious.”
The solutions Creative Auto Enrolment have created also work along the lines of the five disciplines that have been identified. The initial stage is covered by its software system, which deals with all of the assessing, communicating and opt-out procedure automatically. Furthermore, it keeps doing it, fitting in with the requirement to assess employees every payroll period.
“In terms of the second discipline, all the senior directors here have many years of group pensions experience,” Mr White says.“They would all say that getting your set up right with the payroll system and how you are going to make it work is crucially important. If you don’t get that right at the outset, it is a problem forever. Our solution is to have an experienced team of implementation consultants to guide employers through the whole process, either on the telephone or in person. Later on, they also become your employer helpline.”
“Third, we have an arrangement with Scottish Widows where our clients will be accepted by them for their pension scheme and they will be given a discount,” Mr White continues. “That tends to be a great relief to employers, particularly as it is such a well-respected household name.”
“Meanwhile, the cost management element is aided by the inclusion of automatic salary exchange included in the Creative Auto Enrolment software. This means employees can exchange some of their salary for pension contribution, saving on national insurance contributions, but this can now be carried out automatically so the employee can make savings from the outset. Finally, the proposition is rounded off with an employee helpline, saving the employer time and resources needed to answer the myriad questions that naturally arise during the auto-enrolment process, and also meaning that the employer is protected from inadvertently getting involved in the opt-out discussion.”
Adviser Proposition
“Another important strategic decision we made when setting up Creative Auto Enrolment was to explore the support we could provide, not only to employers, but also to advisers.” Mr White adds. “We fear what is being called the ‘capacity crunch’, with 38,000 firms having staging dates next year, with 36,000 of those in the first six months. This is way beyond anything like normal market capacity and we think it is going to be very difficult for employers to find slots with people who can help them.”
“This represents a huge threat to advisers’ relationships with their clients. IFAs and wealth managers either need to take control of this situation or potentially lose control of those clients as one of two things are likely to happen. Either, because it is mandatory, the client will find another solution but by definition they will have been helped by someone else, or they do not do anything and end up under investigation with the regulator and fined.”
To avoid either of these scenarios, Creative Auto Enrolment suggests advisers refer clients to them, promising to provide help and support but restricting what it does for the client to pure auto-enrolment. In addition, in recognition of the fact that the referral process takes time, it has included an introducer fee for the intermediary within the fees it charges to the client.
“It is also worth pointing out that,in addition to our introducer fee, IFAs have scope to develop significant revenue streams, for example:
•Educational workshops and presentations,
•One-to-one advice for individual employees in the company who may want guidance with their pension choices, including on opting out or in and their investment funds,
•Helping employees with existing pension arrangements, possibly transferring them into the new scheme.
“For both employers and advisers we think the end-to-end solution we have created is a no-brainer. There is only downside to not getting involved and only upside in getting involved.”
