Pension reform great opportunity for IFAs, says Steve Bee
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Scottish Life head of pensions strategy Steve Bee says pension reforms expected in 2012 will bring great opportunities for advisers.
Speaking at an Ascentric conference in London yesterday, Bee said while every employer will have a pension scheme that their eligible employees must be auto-enrolled into, they are not allowed to give advice when giving information about the scheme.
He said: “Employers must not give advice at the point they are required to give information. The employers who do accidentally or wilfully give financial advice at the point of auto-enrolment then they are liable for all the losses that person makes, with no limit on it.
“Any employer who has got any sense at all will make sure that somebody who understands the difference between the giving of advice and the giving of information does that part of the duty for them.
“I think this is an excellent thing for our industry , in particular for IFAs because this is a great fee-charging opportunity for IFAs to go in and run something quite fiddly for employers on their behalf.”
Bee says when you combine all the elements of the pension reform, employers will be confused, adding: “Employers need financial advisers to come in and sort it out for them.”
He says: “The professionals, the accountancy firms, went into employers faced with VAT and established a price for dealing with that. Our industry is about to become a profession. The professionals in this industry need to establish a price for sorting that out for employers. There is a price for doing this, as there is for everything else businesses are required to do.”
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Readers' comments (5)
Julian Stevens | 17 Nov 2009 12:13 pm
I wonder if it will really turn out the way Steve so gaily predicts. A series of group addresses to a workforce is one thing and probably wouldn't need to incur a charge of more than a few hundred pounds, but consider a firm with 100 employees, many of whom may well want a private 1:1 consultation to discuss their personal financial circumstances. If half wish to avail themselves of that facility and each interview takes, say, 20 to 30 minutes, the bill for the employer might easily top £2,000. And that's on top of the cost of setting up and running the scheme itself, for which a firm of IFA's might well feel reasonably entitled to charge a few thousand pounds more.
Aside from all that, recent research indicates that a large percentage of people auto-enrolled into a Personal Accounts Scheme have indicated that they will manually un-enrol, such is the tide of ill feeling towards all things to do with pensions. Of this, the government seems to be conveniently oblivious.
I cannot help but feel the whole thrust of this latest initiative is chronically misguided and will be an even bigger white elephant than stakeholder pensions. "Great new opportunities for advisers" has become such an oft-repeated mantra from the life offices that nowadays it's really sounding rather tired and hackneyed. Well, I'm tired of it anyway.
Pensions need to be reformed and redesigned in such a way as to make them so attractive that people won't need to be auto-enrolled (for which read coerced).
Will my fund grow tax free? Ah, no, the government taxes dividend income.
Will I be forced to buy an annuity when I retire? Well, broadly speaking, yes you will and even if you don't the amount of income you'll be able to draw from your fund will be dictated by the Government Actuary's Department.
Will I be able to pass on to my children any unspent funds if I die soon after retiring? Errr, no, well not really, it's all a bit complicated that one.
Will I be able to insure my contributions against sickness or accident? Errr, no, that went in 2001.
Can I have life insurance as part of my pension plan? Errr, no, that went in 2001 as well.
Well, thanks for your time, Mr IFA, but frankly I think this new pension plan is a pile of rubbish and I shall be opting out at the first opportunity.
And who can blame them?
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Sean Kelly | 17 Nov 2009 12:32 pm
Far be it from me to disagree with the esteemed Mr Bee but didn't we hear all this with Stakeholder. Unless people, or their employer, is willing to pay a fee for advice there is no opportunity at all. As information is free on the internet people are not willing to pay for 'advice' as they can't see the difference between the two. Until we overcome this hurdle people will take no advice at all and then complain that pensions are rubbish when they reach retirement.
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Anonymous | 17 Nov 2009 1:01 pm
This is a damp squib.Stakeholder was a classic example of where the government tried to impose a pesnion plan on employers what to do without any idea as to why or how.They threatened to police it and fine companies who did not set a scheme up.To date have any been fined ,because many never set a stakeholder up?This will go the same way, with employers doing as little as possibe for the least possible cost..Steve Bee is not living in the real world (as usual) and is as misguided as the government in his attitude.Those employers who want a proper staff pension scheme will do it as now,the rest will do all they can to ensure employees opt out of this stupid scheme.Who will monitor the staff member who is there to provide information not advice.How will it be recorded in group or 1:1 meetings?It won't so how will anyone be able to claim against the employer when things go wrong?We all know the public forget very quickly and have selective memories!
Sorry Steve you are way off the mark on this.
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Mike Jones | 17 Nov 2009 4:07 pm
I'm with Steve Bee on this one even though I agree with the sentiments of the previous posters.
However, as part of an overall marketing strategy over the next two years it wouldn't cost an IFA that much in time or budget to reach out to potential new business with corporate clients.
Half a dozen pages on your website specifically for small employers combined with bi-monthly or monthly mailshots/newsletters with 'latest news' and links to your website.
On the basis that it apparently takes a potential customer around 7 times to see a company's name before he/she 'buys', the lead-in period to 2012 gives ample time for an IFA business to become a familiar name with potential corporate clients.
It might not suit all IFA marketing propositions but I'd be surprised if it didn't meet with some.
Just an opinion, that's all.
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Anonymous | 18 Nov 2009 6:35 am
In 1981 when I was 20 and young and daft, I joined a company where I had no choice but to join the final salary pension scheme and pay contributions each month. Had I been given the choice I would have opted out. As it happened it was the best thing (pensionswise) that could have happened to me.
My point is that sometimes choice can be a bad thing.
Most people below age 45, neither know nor care about pensions.
If we have now accepted that the State can no longer be relied upon to provide a decent pension in retirement, then the only answer in my opinion is compulsion into a private pension from day one of employment with no opt out. Simple.
What people never had they never miss.
Personal Accounts will fail because people will be given the chance to opt out.
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