Personal Pension  

Auto-enrolment is the tip of the iceberg

This article is part of
Retirement - June 2014

As you will by now be more than aware, auto-enrolment has joined death and taxes as one of the nailed on certainties for all British workers. However, despite the inevitability of it hitting all UK businesses, many advisers are yet to get involved in this exponentially growing market.

All change can be unsettling, and a brand new product area in the market is no exception. However, the staging dates for many large firms have already passed and therefore advisers who are involved in AE are now able to shed light with some accuracy on how it works in practical terms and the advantages and challenges they may have experienced. If you are one of the advisers who are yet to get involved, do not worry that you have missed the boat; there are over 38,000 small and medium-sized companies with staging dates still due in 2014.


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So, why does this present such a huge opportunity? Well, in short, meeting the new requirements for workplace pensions is going to be extremely onerous for almost all employers. With 33 new regulations to adhere to, there is much to be done, and putting in place a pension scheme is only a very small part of the equation.

Some employers will assume this is something that they can do themselves, something that their HR function will simply pick up – but little do they know what is in store. To highlight the complexities, consider an average HR manager and the following issues:

- Is he a pension’s expert? Does he understand the legislation? If there is an existing scheme, can he deal with providers?

- Does he have a spare 103 days (this is the estimated time needed to run AE in-house)?

- Does he know where to begin with staging dates, project phases or interpreting the rules?

- Does he know who is eligible? Can he manage the changes (potentially each and every time payroll is run), does he know who to enrol, how to deal with opt-ins and opt-outs?

- Does he know how to communicate with employees about what is happening?

- Does he understand contribution tiering, retirement options, salary sacrifice, postponement and so on?

So, with all this in mind, it is pretty clear where an adviser can add real value, but this is only the start.

While AE presents a huge opportunity for advisers to engage with corporate clients, I believe that this is merely the tip of the iceberg – the ‘ticket to the game’ if you will. For once you have solved this very real headache (that is, AE), you have opened the door to two new potential avenues.

First, there is the business as a whole. Arranging an AE scheme will give you access to business owners and directors, and therefore the opportunity to help them with an overall analysis of the company’s needs for deeper financial solutions. While this might raise a number of the points you would expect – such as key person insurance – more complex aspects are also likely to come to the fore when you start to fully analyse areas such as flexible worker benefit schemes.