The document discusses opportunities for financial advisers related to the UK's pension reforms known as Auto Enrolment. It outlines six main areas advisers could focus on when establishing client propositions to help employers comply with Auto Enrolment requirements: 1) reviewing existing pension schemes and selecting alternatives if needed, 2) assessing employee data, 3) advising on contribution levels, 4) communicating with employees, 5) ensuring regulatory compliance, and 6) reporting on scheme performance and preparing for re-enrollment every three years. Providing services across these six areas would help advisers add value for clients and make the most of the commercial opportunities presented by Auto Enrolment.
1. The GREAT
Auto Enrolment
opportunity?
An advisers’ guide to helping
clients through the pension reforms
March 2014
For information purposes only. Some of the service suggestions
within the document may only be provided by individuals or
organisations who are regulated by the Financial Conduct Authority.
2. The 2012 Pension reforms, better known as Auto
Enrolment, was an opportunity that some approached
with caution when the legislation was first introduced.
Now, some 18 months on, Auto Enrolment has
seen itself become a hot topic, as many advisers
are beginning to recognise and benefit from the
significant commercial opportunities that lie ahead.
The size of this opportunity will be determined
by your appetite to formulate an advantageous
client proposition.
It’s at times like this when careful planning
can pay dividends.
Auto Enrolment
is like playing
a game of
snakes
ladders
3. October
14,800–14,900
Staging dates continue
and peak at 134,200 for
companies in 2016January
700–800
March
3,200–3,300
April
3,700–3,800
June
13,100–13,100
August
600–700
October
700–800
November
600–700
July
12,600–12,700
April
6,100–6,200
May
12,2000–12,300
Setting the scene:
The inevitable ‘capacity crunch’ on the horizon
Many involved with Auto Enrolment can feel a degree of satisfaction that it’s a case of so far, so good.
Opt-out rates are lower than anticipated and public perception has been largely positive. But now things are
about to change as we welcome the SMEs into the arena – in fact some 12,000+ companies during the middle
of 2014. And many of them are heading towards their advisers for support and expertise.
This guide highlights six main areas that advisers could consider when establishing a client service proposition.
Myth
It will be wrong to assume that payroll providers will
ensure that employer data complies with regulations.
It is the duty of the employer and their adviser.
Number of companies due to Auto Enrol in 2014 Number of companies due to Auto Enrol in 2015
4. 1. Scheme review
and selection
Scheme review tends to be the starting point for advisers.
Employers are keen to establish from the outset whether their
existing workplace pension arrangement qualifies under the
terms of Auto Enrolment.
If their scheme does not qualify then the employer may seek the
necessary guidance to either adapt or seek an alternative provider
arrangement. Indeed, employers may also use Auto Enrolment
to motivate a larger employee benefits remuneration evaluation
exercise – an area that would represent a significant opportunity
for advisers.
Added value at a glance:
Existing scheme for compliance review
Alternative scheme and/or provider selection
Broader employee benefits package review
2. Employee and
data assessment
Data assessment is a core requirement of the Auto Enrolment
process, as it will ensure you enrol the right employees at the
right time, paying the correct contributions.
The perception is that NEST (the government’s workplace pension
solution) and other major providers will handle the data assessment
as part of the package they offer. Some don’t, many charge and
not all providers can complete assessments fully.
Advisers are recommended to have their own inhouse data
assessment and cleansing system which they can use, at will, and of
course command a fee for. A web-based tool is preferable meaning
no installation or ongoing systems maintenance. Greater control also
reduces the risk of non-compliance and any potential penalties.
Added value at a glance:
Employee eligibility assessment
Data cleansing and formatting for payroll
Please refer to the 1998 Data Protection Act for more information.
5. 3. Contribution levels
Typically employers will look to their advisers when it comes
to calculating appropriate contribution levels.
Advisers working through Auto Enrolment with existing clients
will be able to use their insight to judge scheme affordability,
whereas advisers working with new clients will gain exposure to an
employer’s wider financial standing – opening up an opportunity
to offer additional services.
In particular employers may be keen to get an understanding of
how Auto Enrolment has impacted their business particularly in
relation to remuneration costs.
Advisers will also be well placed to demonstrate why planning
ahead will be more prudent and represent less impact of
business as usual.
Added value at a glance:
Contribution levels guidance (general)
Contribution levels guidance (individual)
4. Communicating
with employees
Surprisingly many employers look to their advisers for what they
view as ‘financial education’.
Handled incorrectly, and employees will be left feeling robbed of
their pay cheque. However, presented openly and well in advance,
employers could experience a more positive reaction from employees,
through improved retention and a greater appreciation of benefits.
A good quality Auto Enrolment system will issue employee
communications automatically. Better still, by selecting your
own inhouse system, advisers are able to control the timing and
presentation of the communications. Some providers will offer
communications as part of their overall solution, but this tends
to be less favourable as advisers will loose control of the process
whilst maintaining overall accountability if issues occur.
Added value at a glance:
Statutory communications (joining letters, opt-out forms etc.)
Employee education (additional communications)
10% 5%1%
6. 5. Regulatory
compliance
The Pensions Regulator will enforce non-compliance by
issuing statutory notices and fixed or escalating penalties.
You can help your clients avoid this by understanding the compliance
requirements, one of which is for the employer and the pension
scheme to keep certain records.
http://www.thepensionsregulator.gov.uk/docs/pensions-reform-
compliance-and-enforcement-quick-guide.pdf
Above is a link to the Pensions Regulator’s enforcement strategy
and regulatory approach. Responsibility for complying with the
duties ultimately lies with the employer. However, as an adviser,
there are third party compliance obligations which you must be
aware of when carrying out these activities on behalf of your clients.
Added value at a glance:
Guidance on record keeping and other compliance measures
6. Scheme reporting,
analysis and re-enrolment
An adviser’s role needn’t finish once the Auto Enrolment cycle
has completed.
Indeed, in many ways a company’s staging unlocks the potential to
provide reporting and ongoing financial advice as part of an employer’s
annual review.
Most employers will be very interested to get a picture of how
successful Auto Enrolment has been for them, giving advisers the
option to provide analytics. And before you know it, once three years
pass, it will be time to conduct re-enrolment!
Added value at a glance:
Annual scheme review
Re-enrolment (every three years)
7. How can help
your Auto Enrolment
service proposition
So these are the six main areas that we think could help
you add value and ultimately determine your clients’
Auto Enrolment success.
You could choose to charge this package – or elements
of the package – on a fixed fee basis, removing the need
to bespoke your proposition each time, whilst giving your
client complete cost transparency.
eAsE, one of the leading Auto Enrolment solutions,
can help you provide this complete experience through
use of our data management and communications tool.
To arrange your free demonstration please
contact Mark Scane on 020 7648 9990
or email info@enrolwithease.com.
6. Scheme
reporting
3. Contribution
levels
5. Regulatory
compliance
2. Data
assessment
4. Employee
comms
1. Scheme
review
Full colour (CMYK)