I took the conscious decision a few years ago to pull out of setting up or taking over group schemes as the market had lost the plot with too many firms claiming they were doing everything for nothing but taking substantial commissions and churning schemes.
I am not going to use any polite phrases like re-designing or re-engineering; they were churning pure and simple.
As a result, and due to the fact that few employers are willing to pay for transfer advice for their employees, a lot of the employees of these very schemes are now sitting with small pots from a variety of providers yet at present they would be ignored by the small pots project. These previous pots will remain unconsolidated unless these employees change jobs and even then only the most recent scheme would be moved
Steve Webb needs to be looking at including all previous schemes as part of the initiative, so it is not just people who are moving jobs but anyone employed with several small pots who are given the ability to consolidate without advice.
It seems quite unfair that those who are not moving jobs are denied this option of consolidation. I say this because many providers are still unwilling to accept transfers without advice. This currently prevents those small transfers going ahead and makes monitoring their pensions pots more difficult. I will therefore promote this particular change to the small pots initiative, it is a small change, but it would have a major impact.
There may be some IFAs out there who will say I am forgetting that it is possible for employers to offer financial advice on transfers without it being a benefit in kind – as if this was the only deterrent. Cost is the real deterrent and although the benefit in kind can be avoided there is a limit to what the employer can pay.
Currently this limit is £150, that has been the limit since the day it was introduced, indeed when I met the DWP before Christmas to talk about consultancy charging, I raised this very point with them and suggested that if this was now rebased with inflation it would probably be sitting at about £250 per member.
Despite this fact, I have recently heard of IFAs including in their presentation anything up to between £300 or £400 in respect of employee advice, without mentioning the tax free limit. Although the situation is quite clear, to secure the £150 exemption you often have to quote the relevant section to the local inspector of taxes to secure this concession.
Being hot on detail is vital. Recently I have also heard many advisers stating they will guide, or worse still advise, employers on HR or payroll software. Given that many IFAs still do not use their back office to full strength just when did they nip off and become IT experts? More to the point, does their PII cover this area of advice?
If we are going move into markets that we have not transacted in for a while, or ever transacted in, then we must make sure we are fully competent. Moving into the corporate market requires the same amount of preparation as moving into personal financial planning and that should not be ignored by anyone who is involved as they say if you don’t plan you plan to fail.
Many will rush into the corporate market on the sound of the auto enrolment stampede but take care lest you get trampled through a lack of preparation.
Robert Reid is managing director of Syndaxi Chartered Financial Planning