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Providers ‘misleading’ advisers on auto-enrolment capacity

Pension providers have been accused of “misleading” advisers by turning away automatic enrolment business they had previously agreed to accept.

Tens of thousands of employers will reach their auto-enrolment staging date this year, leading to concerns of a “capacity crunch” as providers struggle to meet demand.

In July last year, Money Marketing revealed providers were turning away auto-enrolment business from companies who were within six months of their staging date.

Speaking at a seminar at the National Employment Savings Trust’s head office in London last week, Nurture Financial Planning managing director Simon Linstead said provider cherry-picking means choice will be limited for small and medium sized businesses.

He said: “Naively I thought there would be more options in the market than Nest.

“The biggest scheme we have is 250 lives with high salary levels – normally you would think that is a cracking scheme for a provider to take on. Every single provider turned it away within 24 hours. It is clear providers are cherry-picking business.

“The message we got from providers a year ago was very misleading. They said they were going to cater for certain schemes and then when the time came they changed their stance. That makes life very difficult for us as advisers and our clients.”

PSG Financial Solutions IFA Petra Griffiths said she was aware of other advisers who had faced problems securing terms from auto-enrolment providers.

Ridgeway Chartered Financial Planners IFA David Mills said: “I share the concern about the restrictive nature of choice in the market. Shoehorning everyone into one provider because there is a lack of choice in the private sector does not feel fair to the end client.”

Nest managing director of customer and proposition John Taylor said: “The feedback we have heard today resonates with what we have seen in the market.”


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

  1. For many years providers have operated scheme acceptance on achieving an economice hurdle rate and they’d be crazy not to. This is no different. Number of Employees into a scheme is unlikely to be a key driver – ie a 250 man scheme with a £50 average contribution is unlikey to be attractive to many providers wheras a 25 man scheme with a £250 average contribution is attractive as average premium is likely to be a key driver. So rather than call it cherry picking another way of saying it might be that providers are running business and have business rules in place. A good quality scheme will have lots of choice, a scheme with low averge contributions should still have at least 3 providers who will take their business so no shoe horning to one provider.. It’s no different from the person wanting to buy a new car – if the amount you have to spend is £8k your choice is limited if you have £80k to spend you’ve lots of choice.

  2. goodness gracious 23rd January 2014 at 10:30 am

    Often it is the way advisory firms present the potential business to the providers. If you don’t put a decent payroll, members information and p60 as well as basic pay into their own system, the providers can choke. NEST requires a lot more work from the payroll department, good additional software from their payroll system, and someone to manage approved letters and staff communication. The thing I can’t get my head around with NEST is just how much do their foreign owned investment managers charge? Is this part of the 0.3% charge or is it on top?

  3. So CBI conference today – SWids expect to stage 10,200 employers through Auto-Enrolment. Picking a lot of cherries.

  4. 10,200 down …1,289,800 to go!

  5. Providers are running a business with a view to profit. That has to be right, if we want providers to be around to pay out pensions.
    Nobody ( less NEST) is obliged to take any business, so why complain if a provider declines due to poor quality of scheme. Some employers will have simply ignored their Staging Dates and expect other people to help remove them from the soft stuff.

    Then again, when I questioned one major pension provider about their admin capabilities for AE alarm bells rang when I was told a) the data had to be shaped prior to submission, and b) the “straight through processing” facilities they offer took two weeks or more to effect…

    I don’t like being bluffed.

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