There are a bunch of ‘gaps’ which need to be overcome when it comes to helping employers do what they need to from an automatic enrolment perspective.
First, there is the knowledge gap.
The gap between what employers (and some professionals) should know and what they actually know about auto-enrolment and especially how it works practically for the respective businesses (and the clients of the respective businesses) involved.
There is the capacity gap. The fact that certain pension providers are being more selective than ever in the schemes they offer although it could be argued, pretty fairly in my opinion that the master trust providers like Now:Pensions and The People’s Pension will come along to fill the gap with Nest, a credible option (and due to its statutory obligations a potential ‘backstop’ provider too).
And there is the complacency gap.
Although this, in our experience, seems to be slowly reducing as staging dates come and go we are still seeing examples of employers who are leaving it too late and struggling to comply in time.
On a number of occasions, and as we are still in the final throes of a consultancy style market for automatic enrolment advice, this means solutions for employers who have left it too late can get pretty expensive.
However the gap that I am currently interested in is slightly different.
The more that I look at the SME market the more I see the following trends.
Payroll providers are now active in the market as providers of auto-enrolment software and whilst the quality and scope of the various pieces of kit differs I believe that the big players, Sage probably being the largest, are likely to do a decent job in helping many employers meet some if not all of their obligations.
For firms which have not got access to payroll software there are a bunch of different independent and pretty robust middleware options, one of which we’ve used for our larger consultancy clients that works really well.
Then you have got the pension providers who are aiming to provide the ‘shell’ (and in some occasions the software).
However the gap I’m interested in is the one in the middle. The one which sits between what the software does and the pension does. It’s the “IFA” gap.
You see, if an accountant can go to their payroll provider for their middleware and engage with a master trust directly for their pension needs (we know this is happening in the market now) where does the IFA or financial planner sit?
It is an interesting question and I believe that for IFAs to deliver a robust and compelling proposition to their professional connections and client in the SME market the answer lies in working out where both the regulatory and ‘added value’ gaps are between the software solutions and the pension providers.
I have identified a bunch of gaps where we can add genuine value, some required by the regulation and some employers might just want to have in their kit bag.
The challenge for all of us is to fill those gaps and deliver a proposition which is truly compelling for both professionals and employers. It’s a puzzle, but one I’m working hard to solve.
How about you?
Chris Daems is director of Principal Financial Solutions