Pensions have been at the forefront of the news agenda throughout January and it is no wonder, as 2014 is the year when pensions truly go mainstream across the UK.
The Government’s automatic enrolment reforms are due to apply to tens of thousands of companies over the next 12 months, many of which have little or no previous experience of setting up pension schemes for their staff.
While the success of the first year of auto-enrolment was due in large part to the effort, time and resources the largest firms in the country dedicated to rolling out pensions across their workforce, the second year will see smaller employers needing a far greater level of support from financial advisers, the payroll industry and the pensions industry alike.
Yesterday Nest published its annual Nest insight report, which takes the temperature on the auto-enrolment landscape. The findings are conclusive.
The business opportunity for smaller advisory firms has opened up exponentially this year. Nine in ten employers with more than 50 workers plan to seek advice on the choice of their scheme. And clearly the help employers are looking for doesn’t just reside in provider selection, with 74 per cent having sought or intending to seek additional support. Many will want assistance to help comply with the regulations and manage their scheme on an ongoing basis.
This support will be much needed. The findings of Nest’s report suggest that while most employers staging this year are aware of the reforms, they are still hazy on the detail.
In comparison to first-year employers, a large proportion of which took over 16 months to get ready, only a quarter of firms staging between February and July this year say they have both confirmed the provider they’ll use and believe they’ve done everything else they need to do to be ready to comply. This leaves a large gap in the market, with many companies apparently under-prepared for what is to come.
Advisers are ready for this. The research shows 82 per cent of advisers with a significant proportion of clients staging in 2014 have identified ways to help their clients adjust to the reforms. Even among advisers whose typical clients won’t stage until 2015 or later, over half have recognised new opportunities for their business.
And much of this work will be ongoing. Many of the advisers we spoke to in our research are considering offering support all the way through the compliance process and beyond. This includes not only ensuring their clients are complying with the reforms, but administering their schemes day-to-day.
The extent of support needed is far more involved than many may have first anticipated, but it will be invaluable for employers who want to delegate the administration of their workplace pension scheme to a trusted adviser, so their focus can remain on running their business.
After a successful first year, all eyes will be on what happens next for auto-enrolment. Advisers are picking up the baton to help pension providers and colleagues in the intermediary market ensure the next 12 months are equally successful.
John Taylor is managing director of customer and proposition at Nest