Opinion  

Adding value around the AE opportunity

Paul Avis

Paul Avis

The number crunchers at The Pensions Regulator have been busy recently.

In addition to their regular monthly and quarterly updates on automatic enrolment they have published an annual commentary and two strands of research, the latter examining the awareness and approach to AE of small and micro employers and their advisers.

The findings range from the staggering - with over 500,000 more employers than predicted that need to comply - to the niche - where 20 per cent of small employers who have seen an online advert about AE saw it on a tablet.

Which of these statistics can help you fine tune your proposition?

The big headline over the summer was there are now 1.8 million employers that will have some automatic enrolment duties. For 35 per cent of them this is just a compliance exercise as there are no eligible jobholders, although some may wish for support. Allowing for just over 50,000 employers that have successfully staged so far, this leaves around 1.1 million employers looking for compliant pension solutions.

Many of these employers will be looking for advice. Amongst the small employers (5 to 49 workers) surveyed, 65 per cent had already approached providers and 65 per cent of the remainder were planning to seek advice.

Micro employers (1 to 4 employees) might present a particular challenge. At present 30 per cent have taken advice and about 20 per cent more are expecting to do so. However, the timescales some of them will need to do this work will be short, with 14 per cent thinking that only 1 or 2 weeks will be required.

The data points to the areas of advice where value can be added. Over 60 per cent of the employers surveyed have looked at how many employees they would need to enrol in a pension scheme. The compliance bulletin highlights where this process may breakdown.

It is important to understand the contractual relationships for zero hours or seasonal workers; if employees are paid weekly, earnings must be checked each week against the weekly limit of £192.

There are also areas where SMEs have not yet started, with 67 per cent of those with a staging date in 2016 having not begun to investigate which pension scheme they are going to use, and 49 per cent of 2016 stagers yet to check whether their payroll software will work with auto-enrolment.

It is the disparate pieces that need to be brought together which make this a project management task on top of the compliance, payroll and employee benefits angles. Intermediaries need to offer a full solution or work with each other to make this work for employers.

Amongst IFAs, 90 per cent will help to choose a pensions scheme. Only 39 per cent would configure software themselves, with 42 per cent referring them elsewhere.

In contrast, 79 per cent of payroll providers will configure software, while 38 per cent would refer the selection of a pension scheme to someone else.