It appears that even The Pensions Regulator may have woken up to the fact that auto-enrolment is not as easy as it has been telling everyone.
It was suggested last week that there are serious concerns that vast numbers of employers with 200 to 249 employees may not be adequately prepared to start staging next April.
This is, of course, wonderful news for the adviser community. But firms looking to capitalise on this opportunity need to make sure they have identified the right technology to facilitate auto-enrolment and move quickly to contact employers.
It should be noted that insurers are increasingly taking the position that employers who have not prepared in time should stand in line and pay the fine. The truth is, as anyone who is actively involved in auto-enrolment is well aware, there is a significant shortfall in capacity to process auto-enrolment relative to demand.
At the beginning of the year, Tower Watson predicted auto-enrolment capacity in the UK would run out in May and that by December, there would be a seven times shortfall of supply capable to match demand. That is before we even get into smaller enterprises, never mind the micro businesses that stage after the next election.
With the first fine for non-compliance issued recently, perhaps it is important to start communicating with employers on the size of fines they face. For example, a firm employing under 250 employees would face a fine of just £5,000 a day for non-compliance – which is only half the rate that can be levied on larger firms.
The level of fines The Pensions Regulator can impose is enough to cause most company directors sleepless nights. An increasing number of providers are indicating they are unwilling to take on employers who have less than six months left until their staging date, so firms due to start the process in April do need to act very quickly now.
The combined effect of the RDR and the fiasco around consultancy charging creates a very different scenario to that which many advisers are used to. Historically, the approach of many advisers was effectively to remove problems from clients and make things operate with a minimum of disruption. Frequently advisers almost did too good a job to the degree that clients were not aware of the full extent of all that was being done for them.
Given the complexity of the auto-enrolment regime the reality is vast numbers of employers are going to need major help meeting their obligations. The key to this must be for advisers to identify which auto-enrolment software solutions are best placed to help clients’ various needs.
In so doing I believe it is really important for advisers to fully articulate the total complexities of the auto-enrolment process and all the employer will need to address on their own if they don’t take professional advice.
In a world where advisers are going to be negotiating fees with employers it is going to be really important to spell out in the greatest possible detail all the tasks that a company is faced with undertaking if they do not employ external assistance. It might be worth inviting employers to work out how much internal resource they will need to address each stage of the process.
Simply outlining to any employer thinking of managing their own auto-enrolment that they will need to identify their staging date; consider if there are benefits to taking advantage of postponement enrolment; review any existing scheme to identify if it is compliant or identify a new scheme; then scope scheme design and requirements will probably have many rapidly reconsidering. The above, in practice, represents just a fraction of the tasks that need to be carried out.
Other activities such as carrying out the workforce assessment, member categorisiation, defining contribution levels, conducting the auto-enrolment process itself as well as opt-outs, opt-ins and re-enrolment – not to mention leavers and joiners, managing member communications, record keeping, compliance and reporting duties – will clearly require considerable time and effort.
The above list is by no means exhaustive but at the same time should help focus the minds of anyone who might believe pension minister Steve Webb’s assurances that no one needs any help with auto-enrolment.
The right technology can vastly streamline many of these activities but trying to address them on paper formats will result in an almost endless pile of paper. One thing that has surprised me in recent months is how few adviser firms seem to have settled on their technology partners for auto-enrolment.
To help advisers with this process F&TRC’s auto-enrolment and group personal pension/master trust comparisons tools are now available to advisers in Beta format from www.advisersoftware.com.
These tools consider a wide range of auto-enrolment software solutions from life offices and master trusts, as well as individual software suppliers. These tools are designed to help advisers match individual employer needs to the most suitable auto-enrolment and pensions solutions.
Auto-enrolment genuinely represents an enormous opportunity for advisers to grow their businesses based around a long-term revenue stream. Choosing the right technology around which to build these services will be crucial and any firms that have not already selected their technology partners should do so as a matter of urgency if they want to maximise the benefits to their firms and their clients.
Ian McKenna is director of the Finance & Technology Research Centre