Who'll be left holding the Auto-Enrolment hot potato?
Auto-enrolment is a hot potato, we know it will taste good eventually but for now it's capable of getting our hands burnt and no-one's too sure they want to have hold of it.
Which is why I was pleased to read this article. It's written by an IFA called Bridget who I've never met but have heard good things about on-line.
In the article Bridget, an IFA , asks a rhetorical question.
"Do you as a qualified accountant suddenly want to become a pensions adviser? Of course you don’t, so you need to find somebody specialising in Workplace Pensions that you can trust and offers a good service".
The trouble with rhetorical questions is that they risk putting people's backs up - I expect that a few of you reading this will reckon you know a good deal more about pensions than many of us !
What's more both the FCA and the Pension Regulator are actively encouraging accountants to advise employers on both auto-enrolment and the choice of workplace pension.
But I am sure Bridget is right in most cases, accountants have enough on their plates not to have to worry about the intricacies of investments, the legalities of salary sacrifice and the potential risks of messing up the algorythms of auto-enrolment.
In response to Bridget's question, I think there are three answers that predicate three credible strategies
- Agree; in which case beat your path to Bridget's door because there are few IFAs around who are competent and have capacity
- Disagree; in which case you may well have a pensions advisory practice or be looking to set one up in-house.
- Keep an open-mind; in which case you'd be well advised to research the market a little.
Research conducted by the Pension Regulator (and endorsed by NOW pensions in a separate study) suggests that over 50% of employers staging from April 2015 will do so with the help of their accountant and/or payroll bureau. The percentage increases into 2016 and again in 2017 as the numbers of employers staging increases but the support from advisers remains static.
There are only 23,000 registered financial advisers left in the UK, AccountingWeb alone has 105,000 regular subscribers and over 400,000 accountants and book-keepers read these pages.
Keeping an open mind
I don't suppose that we are going to see 400,000 workplace pension experts emerge between now and 2018 when the implementation of auto-enrolment is completed. But nor do I see the 1.2m employers still to stage being advised by the handful of the 23,000 financial advisers.
There will have to be a third-way that will allow employers and their advisers to choose workplace pensions and stage auto-enrolment ,without regulated financial advice but with the precision and integrity that we expect from our book-keeping, auditing and payroll management.
The answer must lie with technology; there must emerge a self-service solution that allows employers and their accountants and payroll managers to set up workplace pensions on-line, to learn how to assess workforces, decide on contribution structures and leave a proper audit trail to future-proof these decisions.
The pensions industry is reluctant to offer this third way; it sees the secrets to a good workplace pension, to salary sacrifice and to auto-enrolment compliance as their intellectual property. But that is plain daft!
By playing dog in the manger, IFAs and pension providers are likely to bring the pensions they rely on into disrepute.
At www.pensionplaypen.com , we believe in sharing. We share our knowledge of auto-enrolment and we share our knowledge of workplace pensions. We have been criticised by the pensions industry for being to open and providing too much "IP" for free. We accept this criticism. Were this business as usual for IFAs, pension consultants and actuaries, what we are doing would be commercial suicide.
But it is not business as usual.
There simply is no way that we can introduce 1.2m new employers to workplace pensions through conventional means. Which is not to devalue conventional means , and the service that Bridgit is offering.
A technology solution?
For most employers and accountants; a simple on-line solution is needed. This solution cannot cost thousands of pounds, we estimate that the total cost of sorting auto-enrolment ,choosing a workplace pension and providing yourselves with future-proofing should be no more than £500.
Of course this doesn't take into account the employers contributions to the pensions or ongoing management time managing the auto-enrolment algorythm but these are costs that are BAU for any employer as much as VAT, NI and PAYE.
Since we arrived at AccountingWeb two months ago, more than 200 accountants have registered to use our free service. You can register here www.pensionplaypen.com/register.
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I'm best known for helping small employers and business advisors with their problems with pensions. These are typically over choosing the right pension for auto-enrolment though through my work with First Actuarial, I get involved with big occupational schemes too.
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