New research indicates that the anticipated transfer of responsibilities from financial advisers to accountants and payroll as auto enrolment intermediaries is happening far slower than anticipated. But things could be about to change - drastically.
Of the intermediaries surveyed by Pension PlayPen, only 3% self-identified as accountants. According to the research, 51% were financial advisers, indicating the crux of AE intermediary responsibilities is still falling on IFAs.
These figures are in stark contrast with NEST’s insight 2015 survey. In NEST’s survey, 49% of employers with 2016 staging dates said they expected to get their AE advice from accountants and payroll. Only 14% said IFAs. But from Tapper’s own research, that hasn’t happened at all.
“There are three messages here,” said Tapper, founder of Pension PlayPen. “We underestimated accountants' risk aversion in wanting to act as intermediaries, IFAs have hung around in the market for longer than expected and, simply put, clients have been procrastinating.”
Tapper emphasised the last point in particular: “Auto enrolment hasn’t hit accountants yet. It’s only hitting them now, but by golly, things will change very quickly”. All of those tardy micro and small employers - who should’ve started working on AE last year already - will now rush to comply, Tapper told AccountingWEB.
Colin Morton, an IFA at Richardsons Group, is also expecting a bottleneck as IFAs eventually leave the market, right as the AE tsunami nears. As the staging employers become smaller, said Morton, they’ll struggle to pay their pension contributions and an IFA.
“IFAs can’t take fees directly from individuals’ plans anymore. We can charge the employer set up fees, but we can’t take anything from the individual employees. So the responsibility has shifted to the employers. So it’s up to them to either accept our fees, or go it alone,” said Morton.
“It’ll be a case of the market will decide when that point is, because the work will dry up. I’d imagine as the companies start getting smaller, with smaller budgets, it’ll happen naturally.”
These small employers will turn to their accountant for advice as they’ll struggle to afford IFA fees, according to Tapper. Legally there is nothing prohibiting an accountant from giving auto enrolment advice. “As long as it’s done on a business-to-business basis and the end customer is the employer and not the individual employees, it does not need to be regulated,” explained Tapper.
Accountants who operate payroll services will need to get over their AE phobia as the staging surge nears, argued Tapper. “If you operate payroll, it’s very hard for you not to operate AE. It’s hard to see a subset of accountants that want to do payroll - but don’t want to do AE. They can’t hold on to their payroll department and not do AE.”
AccountingWEB launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.