Personal Pension  

Easing the crunch

But not all IFAs are happy about the new arrangements.

The route many advisers are taking is to set up a strategic partnership with a provider, where intermediary clients are guaranteed a place on a scheme as long as they comply with the pre-arranged criteria. However, sceptics have suggested this may cause clients to be shoehorned into funds irrespective of value.

One of the most reported partnerships so far is that between the national IFA firm LEBC and Standard Life. According to the initial statement on this deal, an agreement was reached that “allowed LEBC to offer its SME clients Standard Life’s Group Flexible Retirement plan as a package”, including access to online resources, member communications and the Scottish-based provider’s full fund range.

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Keith Allnutt, head of LEBC’s Bristol branch, confirmed that Standard Life had guaranteed to accept any of LEBC’s business, provided that at least five people sign up from each employer and pay in at least £100 a month by 2018. He said his firm had negotiated with several providers to avoid getting caught out by a capacity crunch and stuck with Nest as an alternative, which he claimed was not a viable option for clients who “took comfort” in established brand names.

When negotiating, Mr Allnutt said many providers “didn’t want anything to do with it”, but that Standard Life saw the benefits. He explained that this meant clients would be guaranteed a scheme with a big name and not have “to share with thousands of other employers”, as was the case with Nest.

He said: “We have been ahead of the game. We have guaranteed pension schemes for our clients by negotiating with a life office to be on a small panel of IFAs with the guarantee of a scheme, which is a great message for us as lots are backing out and wanting six months’ notice.

“That does not mean all our business goes to Standard Life, but we have a backstop for companies that leave it too late. This is a commitment from Standard Life to us and with a very competitive price arrangement.”

Mark Cardy, director at East Sussex-based financial advice firm Skerritts, also claimed to have been approached by providers looking for partnerships, but opted not to accept, because it would have contradicted his company’s independent tag. With the capacity crunch looming, he said these types of deals were “inevitable” and offered plenty of benefits, even if they undermined the nature of whole-of-market advice. Most advisers, he added, tended to avoid Nest, due to its negative perception, and dealt with small panels anyway, because providers were exiting the market.

Mr Cardy, once worked as head of sales for Aegon UK, understood why providers wanted to make deals, given that they are “profit-making organisations” struggling to make money from smaller firm auto enrolment schemes. This, he added, left advisers with a dilemma, as it was clear that a capacity crunch could happen, yet no one knew how Nest would react if forced to accept massive volumes.