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Advisers: Providers cherrypicking auto-enrolment business

The most profitable auto-enrolment business is being cherrypicked by pension providers, according to the vast majority of advisers.

Some 93 per cent of 244 advisers say providers will not take on employers that cannot meet employee contributions targets, according to a survey commissioned by auto-enrolment scheme Now: Pensions.

In July, Money Marketing revealed how providers had introduced strict rules around what new pensions business they would take on – including minimum contribution levels, minimum numbers of members and extra employer charges if those conditions are not met. 

Now: Pensions and The People’s Pension say they will accept all employees, while Government-backed scheme Nest is required to.

Nearly half of advisers also reported service delays as a result of growing pensions demand, with 56 per cent saying providers’ infrastructure is not as efficient as it should be. 

Less than one in ten advisers were able to say providers have successfully managed demand for auto-enrolment services this year.

Now: Pensions chief executive Morten Nilsson says: “As we go into 2015, the problem of ‘cherry picking’ will worsen as fewer providers actively participate in auto-enrolment.

“But, we remain committed to accepting all employers regardless of size on equal terms.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. How is that any different from advisers not taking on clients from who they cannot make a profit?

  2. They’re not cherry picking at all. They merely don’t want nickel and dime schemes that’ll be guaranteed money losers. They’ll have enough difficulty making any money even on large schemes.

    So, for virtually all small employers, their only option will be NEST, whether they want it or not.

    So much for government meddling and denying employers freedom of choice. If the government wants compulsion, it should have stipulated merely that employers must set up a scherme but that it may be one of their own choosing, with freedom to switch to another if their original choice turns out not to be satisfactory.

    And if that bozo Webb really wanted to do something contructive to encourage people to reconsider contributiong to a pension plan, he’d have reinstated Contributions Protection Insurance along with the facility to secure life cover through a PP (perhaps subject to a minimum level of ongoing contributions towards retirement benefits).

    AE is a mass of problems before it’s barely off the ground, and all because civil servants can’t see a simple, workable and practical solution to anything, even if it came up behind them and bit them on the backside. A pox on the lot of them.

  3. With a max charge of 0.75%pa what does anyone expect? There are not charities, they are commercial businesses and have shareholders to be accountable to. I don’t blame them one iota. The big AE players make the advisers job really, really easy for placing the business of these employers. I wonder what advisers they surveyed, what their adviser charge is and how this would compare to the fee charged if they have to place it with Nest? There is so much more work involved with NEST or Now from our point of view. How many are doing AE business with Employer clients that the adviser will not make a profit from either or short or long term? The cream will be looked after by the “private” sector and the dross will go to NEST and Now. Stop whinging about cheery picking and either start charging proper fees to place it with NEST or get out of the AE space.

  4. Christopher Petrie 10th September 2014 at 6:30 pm

    Auto-enrolment has already provided pension provision for millions of generally lower paid working people. In the next 3 years millions more similar folk will enjoy the same.

    I find it intensely irritating how so many comfortable – and often bourgeois – IFAs and others seek to denigrate a scheme that demonstrably is helping the lower ends of our society.

    It might not be perfect. There isn’t a perfect solution that suits everyone. But best is better than nothing and better shouldn’t be stopped because it’s not perfect.

    My suggestion is critics should dig ditches for a year on minimum wage and no pension…and see how they feel about AE then.

  5. The critics of AE aren’t idealogically opposed to the concept. What they object to is the government overriding all commercial considerations and imposing its own charging structure which renders unviable virtually all small schemes.

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