Advisers have an important role to play when speaking to company bosses about whether their staff have adequate pension cover.
According to Royal London director of policy Steve Webb, advisers should be engaging with company clients to ensure they know how to help their staff get the most out of their workplace pension. This could include helping them understand options other than the default fund and that minimum contributions are unlikely to generate a comfortable retirement.
Mr Webb said: “It’s one thing saying that employers need to keep their automatic enrolment scheme under regular review, but they obviously need to know what they are looking for, which is where advisers come in.
“Many larger employers do already take pensions seriously and go well beyond their statutory minimum duties. But all employers should be reviewing their automatic enrolment arrangements on a regular basis to ensure that it remains fit for purpose.”
Mr Webb's comments follow the release of a new report from Royal London and law firm Eversheds Sutherland; warning Britain’s employers about minimal compliance with automatic enrolment.
The policy paper Automatic Enrolment and the Law – How Far do Employers’ Duties Extend? summarises current minimum duties on employers. But the paper warns there are reasons why employers in general, and larger employers in particular, might wish to do more than the legal minimum.
It points to legal cases in America where employers have paid damages over levels of pension provision.
There is a risk that future regulators and ministers could decide today’s employers should have gone beyond the basic legal minimum requirements, especially if some workers end up getting poor outcomes.
Courts might decide, as they have done in other pensions-related legislation, that employers have an "implied duty" to look after their workers and that a minimalist approach could "fall foul" of this test, the pension provider warned.
Kim Barrett, managing director at Barretts Financial Solutions, agreed the current minimum contributions are not enough. However, he said it is often difficult to get company bosses to see the benefit of doing more than the minimum, due to other financial commitments.
Mr Barrett added: “There are two types of employers; those who want to offer good benefits and understand about helping their employees to save for retirement. The other group of employers just want to provide statutory minimum. It is a slow process to explain the importance of saving.”
Juan Marin, employee benefits adviser at Prismatic Wealth, agreed it is difficult to talk to employers about automatic enrolment. But he said he found that having closer relationships with company bosses has made it easier.
His firm holds pension clinics to explain the benefits directly with employees as well as employers.
Mr Marin said: “Companies will be thinking 'how are we better than the next competition?'. With the employee benefits you can make sure your company stands out from the others.”
Ima Jackson-Obot is features writer at Financial Adviser
