Adviser opportunities as employers face second 3-year AE review
This year’s review by large and mid-sized employers of their auto enrolment propositions, presents an advice opportunity for adviser firms, says Jason Green, head of Workplace Research at Finance and Technology Research Centre
Over 500,000 employers with more than eight million members are now enrolled in an automatic enrolment pension scheme.
This is huge opportunity but adviser firms need to be able to service these clients in an effective and cost efficient way.
Auto enrolment rules state that members must be re-enrolled every three years. This triennial process is a great opportunity to review the current pension provider and assess whether it is still the right choice for the employer and its members, or if there are better options.
The largest of employers would have first carried this out at the end of 2015 and will be facing this obligation for the second time in 2018 along with thousands of other medium and smaller sized employers.
Auto enrolment services have evolved substantially over the last few years. Employers and savers have become more aware and increasingly engaged. With the pending contribution increases taking place over the next 16 months it is vital that savers understand the value of their pension and its benefits.
Multiple factors should be considered when choosing or indeed potentially switching pension provider. It is not all about price. Product features and operational capability, along with an adviser’s/paraplanner’s own knowledge and practical experience all play a key role.
While many employers receive a good service from their pension provider, others will be far less happy. Some pension providers have significantly enhanced their processes in recent years so there is lots of scope to help employers find better options.
All the providers in the market can provide a ‘pension’ and assist employers in meeting their AE duties, but how do you choose the right one for your clients? What are the key elements which should be valued and considered most?
The 0.75% charge cap will remain in force for the foreseeable future, but some providers are still at the higher end of this scale and refusing to price more competitively. As a secondary market scheme there should already be sizable assets accrued. This will be attractive to many providers and could mean that they will lower costs or waive any set up or on-going fees.
Do you choose a trust or contact-based scheme? They have equally valid roles in the market, with many employers choosing to have schemes with both e.g. a low-cost provider for the majority of workers and a more sophisticated scheme for senior and executive staff.
Achieving good member outcomes and value for money are two buzz phrases which are continually used, but difficult to benchmark. The aforementioned factors, and many others should be taken into consideration at the provider selection stage if you are considering a change.
Selecting the right workplace pension scheme for an employer is a decision which should not be taken lightly as it can impact an employee’s financial well-being. This is a great advice opportunity to help employees.
Note: F&TRC has launched a ‘Workplace Robo Paraplanning’ tool to help the process of selecting the right pension for an employer, aimed, it says, at significantly reducing workloads and maximising opportunities to grow adviser business streams.