SMEs use Nest for AE advice

SMEs use Nest for AE advice

Small businesses may be “terrified” of appearing to provide financial advice to their employees as part of auto-enrolment so are choosing Nest, a committee of MPs has been told.

Appearing before the Work and Pensions Select Committee, small business groups expressed concerns about the liabilities their members could face if they find themselves accidentally giving advice through the AE process.

James Lowman, the chief executive of the Association of Convenience Stores, said: “Our experience is that most people in our sector are going with Nest.

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“I think it is about firstly the trust and the fact it is the government’s scheme and the path of least resistance.

“People are terrified about being seen to provide advice and, if they do provide advice, the rules around that and what they are able to do.

“It (choosing Nest) also helps say to the staff ‘we are not making money from this, there is no kick-back and no advantage. We are just making available the simplest government scheme,’and that is quite attractive for small businesses.”

When questioned by the committee’s chairman, Labour MP Frank Field, Mr Lowman said the research that is required when choosing an AE provider would be one reason for selecting Nest.

He said: “It takes away a choice in a way, and they are less of an agent in that choice in a way.

“They are not saying they have done extensive research on all sorts of schemes that are available and come up with this one. They recognise that to do that well is a large task, and it is one that comes with all sorts of responsibilities about choosing the right scheme.

“Unless you happen to have a lot of financial expertise, why would you do that?”

The cross-party committee is looking into AE to find out how the process has been going so far.

During the last hearing, Craig Mackinlay, the Conservative MP for South Thanet, said IFAs might “laugh” at smaller employers because they offer so few workers.

Mr Mackinley also expressed concern that some employers might accidentally “cross a line” into providing advice.

He reiterated this issue and said: “If a payroll service said ‘we’re going with Nest’, is there a liability there for almost suggesting some form of financial advice?

“But if a micro-employer went to an IFA they would say ‘a scheme of one, no thank you very much’, and turn their noses up.

“It is a very difficult situation, and liability is something I am worried about for the employer and advisers.”

Responding to that question, Mike Cherry, the policy director of the Federation of Small Businesses, also expressed concerns about liability.

Mr Cherry said: “In answer to that question, we are all worried about whether that is the right choice.

“We will have to wait and see. There is no guarantee around that, and that is a concern for most people.”