What is the future for corporate advice?


    For advisers, either in the market or wanting to get into it, AE represents a genuine opportunity to engage with corporate clients noting that the number going through the process has increased from an estimate in 2012 of 1.277m employers needing to comply to the Pensions Regulator saying in 2015 that the number has risen to 1.8m companies.

    Of these, 7 out of 10 say they will ask a business adviser for help and so the opportunity to start the conversation is there as employers seek compliance. More challenging is how to make money out of the opportunity as our research showed that most micro employers will not pay fees to get AE done. ‘Massive opportunity, revenue challenge’ is how I would summarise AE.

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    In no way am I writing off pensions or their importance. But with the overall lack of consultation on pensions freedoms in 2014, I am concerned that, with pensions simplification we may end up with a world of technical legacy, such as a declining market, with a new world of no advice/no technical or taxation planning need.

    Imagine a world where the government will match up to say £5,000 or £10,000 in TEE (Taxed Exempt Exempt world) or limit both contributions and the percentage of the fund that can be taken tax free until a certain date.The simplicity is incredibly attractive when aligned with the consequent tax and national insurance contributions saving.

    Even the removal of higher rate tax relief now looks unlikely with a lower, single level looking to be the biggest change. This reduction begins to limit the appeal of pensions for high net worth individuals/decision makers in companies (who still have capacity in their £1m lifetime allowance which in itself may disappear) to prioritise pensions over other benefits.

    I think you get the picture - nothing is sacrosanct. While the public sector DB battle is yet to be had, the corporate world could be used as a lever to harmonise pensions. Imagine the kudos the Government would gain from implementing a mechanism to fund a matching amount for those below the lower earnings level for AE pensions (for example, 10p/50p or £1:£1 up to an agreed limit of say £5-10,000) and you can see how the social conscience can be eased.

    Imagine the low matching levels, limiting the higher paid ‘fat cat pension’ stories as in a world of no tax relief, the argument would be that such people will always be aware and therefore responsible for funding their own pensions. A significant £billion saving and an egalitarian win.

    Taking it a different way, perhaps it is about time pensions were modernised and made simple as then more people would understand them and view them as savings rather than as pensions. We all like to have savings but perhaps for most a pension is a luxury. With AE pensions ‘saving’ will become routine, if not a luxury, as long as it is easy to do. With high opt in rates and potentially high opt out rates in SME and micro employers, it is likely that compulsion is on its way either way.