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Fay Goddard: Clear demand for auto-enrol advice

The Diamond Jubilee made me reflect on how life has changed since the Queen ascended the throne 60 years ago and I decided to seek out some facts and figures.

Since 1952, the number of pensioners has doubled, 44 times as many Britons are reaching age 100 and we are living, on average, nearly a decade longer.

There are 5.6 million more pensioners today than in 1952, rising from 6.8 million to 12.4 million. The percentage of pensioners in the population has increased from 14 per cent to 20 per cent and there are around 13,400 centenarians, compared with just 300 in 1952.

Less than five million pensioners claimed a state pension in 1952, compared with 11.5 million today, with a further million living overseas. The state pension was £1 12s a week (£1.60p) and you claimed your pension with your old age pension book at the Post Office. It does not take much to work out the enormous increase in cost to the Government (and taxpayers) of providing the state pension today. Few could argue the figures do not justify the need for auto-enrolment, while many believe the requirements do not go far enough and want full compulsion and/or higher contributions.

The CII has just published a report on research into SMEs’ readiness for auto-enrolment, which reveals that only a minority of small firms are prepared for the reforms.

A small number of these firms have already sought external assistance ahead of auto-enrolment and, of these, nearly half have been to see a financial adviser. The vast majority of these firms were satisfied with the advice they received.

Out of all the firms surveyed, financial advisers were the most popular potential source of assistance for advice on auto-enrolment, coming above accountants and pension providers.

Firms place specialist knowledge and trustworthiness at the top of the list of attributes they look for in advisers. There also seems to be a willingness to pay for advice for certain services, particularly one-off tailored advice on setting up a pension scheme and ongoing advice on the scheme.

There is a clear demand from SMEs for advice on their pension reform responsibilities but the big question will be whether there are enough advisers willing to provide it.

Travelling the country last month delivering our spring roadshows, I talked about the opportunities and received mixed views. I think fee-based advice to employers is a huge opportunity and well worth considering. If you doubt it, I suggest you look at the report and decide for yourself.

Fay Goddard is chief executive of the Personal Finance Society

A copy of the CII’s research report Auto-enrolment and small businesses, is available here



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I am sure there is demand but what price are they willing to pay.

    I’m sure if asked everyone would say they want a Ferrari but few are able to afford one.

    The main impact of NEST will be on SME’s are least equiped to pay for advice or guidance in the current economic climate.

  2. In principle, NEST is a sound idea, but its major shortcoming is that it’ll force people to participate in a thoroughly messed up retirement savings framework. The Conservative party knows this full well and PROMISED in its pre-election manifesto to put right all the damage inflicted by 25 years of destructive meddling on the part of successive governments. Yet now it’s in power, albeit in coalition, it’s not done a single thing to honour this promise. In fact, all it’s done is meddle still further, as a result of which people are now more averse to the very idea of saving via an approved pension plan than they were three years ago.

    Steve Webb may be “well informed” about the reasons why people don’t want to commit money to a long term retirement savings plan, but he’s obviously under strict instructions from behind the scenes not to make any unwelcome noises about the government’s refusal to address these issues.

    Why won’t the government allow the reintroduction of Contributions Insurance?

    Why won’t it allow the reintroduction of at least a modicum of life insurance via a pension plan (subject to a minimum level of ongoing contributions to retirement benefits)?

    Why won’t it lift the tax on dividend income received by pension funds?

    Why does it refuse to address the annuity (rates) trap at retirement? (Flexible DrawDown is an option available only to a tiny number of people.)

    Why won’t it lift the punitive tax on unspent retirement funds post-vesting?

    Why won’t it allow unspent retirement funds, on death, to pass down (tax free) into pension plans for ther next generation?

    Why not allow parents, within their lifetime, to assign to their children pension funds they may decide against using themselves?

    Why has it renamed the 25% Tax Free Cash option at retirement PCLS if not as a prelude to taxing it?

    And what will NEST do to encourage very small businesses to make provision for their staff or for the self employed to do so for themselves? Nothing at all.

    NEST could and should be a triumph of socio-economic engineering. Instead, (IMHO) it’s more likely to be an unwelcome financial and administrative burden on most employers forced to participate in it or to implement a qualifying alternative.

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