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The GREAT Auto Enrolment opportunity?An advisers’ guide to helping clients through the pension reforms

March 2014

For information purposes only. Some of the service suggestions within the document may only be provided by individuals or organisations who are regulated by the Financial Conduct Authority.

The 2012 Pension reforms, better known as Auto Enrolment, was an opportunity that some approached with caution when the legislation was first introduced. Now, some 18 months on, Auto Enrolment has seen itself become a hot topic, as many advisers are beginning to recognise and benefit from the significant commercial opportunities that lie ahead.

The size of this opportunity will be determined by your appetite to formulate an advantageous client proposition.

It’s at times like this when careful planning can pay dividends.

Auto Enrolment is like playing a game of snakes ladders

October14,800–14,900

Staging dates continue and peak at 134,200 for companies in 2016January

700–800

March3,200–3,300

April3,700–3,800

June13,100–13,100

August600–700

October700–800

November600–700

July12,600–12,700

April6,100–6,200

May12,2000–12,300

Setting the scene: The inevitable ‘capacity crunch’ on the horizonMany involved with Auto Enrolment can feel a degree of satisfaction that it’s a case of so far, so good.

Opt-out rates are lower than anticipated and public perception has been largely positive. But now things are about to change as we welcome the SMEs into the arena – in fact some 12,000+ companies during the middle of 2014. And many of them are heading towards their advisers for support and expertise.

This guide highlights six main areas that advisers could consider when establishing a client service proposition.

MythIt will be wrong to assume that payroll providers will ensure that employer data complies with regulations.

It is the duty of the employer and their adviser.

Number of companies due to Auto Enrol in 2014 Number of companies due to Auto Enrol in 2015

1. Scheme review and selectionScheme review tends to be the starting point for advisers. Employers are keen to establish from the outset whether their existing workplace pension arrangement qualifies under the terms of Auto Enrolment.

If their scheme does not qualify then the employer may seek the necessary guidance to either adapt or seek an alternative provider arrangement. Indeed, employers may also use Auto Enrolment to motivate a larger employee benefits remuneration evaluation exercise – an area that would represent a significant opportunity for advisers.

Added value at a glance:

Existing scheme for compliance review

Alternative scheme and/or provider selection

Broader employee benefits package review

2. Employee and data assessmentData assessment is a core requirement of the Auto Enrolment process, as it will ensure you enrol the right employees at the right time, paying the correct contributions.

The perception is that NEST (the government’s workplace pension solution) and other major providers will handle the data assessment as part of the package they offer. Some don’t, many charge and not all providers can complete assessments fully.

Advisers are recommended to have their own inhouse data assessment and cleansing system which they can use, at will, and of course command a fee for. A web-based tool is preferable meaning no installation or ongoing systems maintenance. Greater control also reduces the risk of non-compliance and any potential penalties.

Added value at a glance:

Employee eligibility assessment

Data cleansing and formatting for payroll

Please refer to the 1998 Data Protection Act for more information.

3. Contribution levelsTypically employers will look to their advisers when it comes to calculating appropriate contribution levels.

Advisers working through Auto Enrolment with existing clients will be able to use their insight to judge scheme affordability, whereas advisers working with new clients will gain exposure to an employer’s wider financial standing – opening up an opportunity to offer additional services.

In particular employers may be keen to get an understanding of how Auto Enrolment has impacted their business particularly in relation to remuneration costs.

Advisers will also be well placed to demonstrate why planning ahead will be more prudent and represent less impact of business as usual.

Added value at a glance:

Contribution levels guidance (general)

Contribution levels guidance (individual)

4. Communicating with employeesSurprisingly many employers look to their advisers for what they view as ‘financial education’.

Handled incorrectly, and employees will be left feeling robbed of their pay cheque. However, presented openly and well in advance, employers could experience a more positive reaction from employees, through improved retention and a greater appreciation of benefits.

A good quality Auto Enrolment system will issue employee communications automatically. Better still, by selecting your own inhouse system, advisers are able to control the timing and presentation of the communications. Some providers will offer communications as part of their overall solution, but this tends to be less favourable as advisers will loose control of the process whilst maintaining overall accountability if issues occur.

Added value at a glance:

Statutory communications (joining letters, opt-out forms etc.)

Employee education (additional communications)

10% 5%1%

5. Regulatory complianceThe Pensions Regulator will enforce non-compliance by issuing statutory notices and fixed or escalating penalties.

You can help your clients avoid this by understanding the compliance requirements, one of which is for the employer and the pension scheme to keep certain records.

http://www.thepensionsregulator.gov.uk/docs/pensions-reform-compliance-and-enforcement-quick-guide.pdf

Above is a link to the Pensions Regulator’s enforcement strategy and regulatory approach. Responsibility for complying with the duties ultimately lies with the employer. However, as an adviser, there are third party compliance obligations which you must be aware of when carrying out these activities on behalf of your clients.

Added value at a glance:

Guidance on record keeping and other compliance measures

6. Scheme reporting, analysis and re-enrolmentAn adviser’s role needn’t finish once the Auto Enrolment cycle has completed.

Indeed, in many ways a company’s staging unlocks the potential to provide reporting and ongoing financial advice as part of an employer’s annual review.

Most employers will be very interested to get a picture of how successful Auto Enrolment has been for them, giving advisers the option to provide analytics. And before you know it, once three years pass, it will be time to conduct re-enrolment!

Added value at a glance:

Annual scheme review

Re-enrolment (every three years)

How can help your Auto Enrolment service proposition So these are the six main areas that we think could help you add value and ultimately determine your clients’ Auto Enrolment success. You could choose to charge this package – or elements of the package – on a fixed fee basis, removing the need to bespoke your proposition each time, whilst giving your client complete cost transparency.

eAsE, one of the leading Auto Enrolment solutions, can help you provide this complete experience through use of our data management and communications tool.

To arrange your free demonstration please contact Mark Scane on 020 7648 9990 or email info@enrolwithease.com.

6. Scheme reporting

3. Contribution levels

5. Regulatory compliance

2. Data assessment

4. Employee comms

1. Scheme review

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