Automatic enrolment is bringing significant change to workplace pensions – affecting 1.2 million employers and around 11 million people. Pensions are moving from being an added extra for a relatively small minority, to being the norm for the majority. It means employers of all shapes and sizes have to get to grips with new legal duties – not only when they hit their ‘staging date’ – the date they become subject to the law, based on their PAYE number – but for every pay period from that point on.
For advisers, automatic enrolment is also a game changer – many advisers are telling us, that combined with RDR, it fundamentally changes how they will approach their corporate clients in the future and what services they offer. Corporate pension advice in the future will be less about talking individual workers through investment options, and more about supporting employers in managing their new responsibilities for their entire workforce.
Our research suggests that many employers will want third party assistance with these changes a recent Nest study showed that 98 per cent of employers aware of the reforms have already sought or plan to seek advice.
Understanding what the changes mean for them, and implementing automatic enrolment on time, is a key concern for employers. The largest employers tell us that they are particularly worried about payroll integration and cleaning up their data, identifying which workers were eligible for automatic enrolment and dealing with enrolment issues in areas of high turnover.
The research also revealed that communication was a key issue. Workers will want to know what’s happening – particularly when they see deductions on their pay slips – and employers want to avoid answering lots of questions. Getting their worker communications right is a key part of that.
We believe automatic enrolment presents a significant opportunity for advisers, in a number of areas.
First, helping employers to understand what the new rules mean for them. For example, even if an employer has current pension provision they need to check whether that scheme meets government requirements for automatic enrolment, and to consider whether it can be opened up to all staff. Many of the large employers we are working with are using Nest alongside existing provision because they don’t want to, or can’t, offer access to their existing scheme to the rest of their workforce.
As well as getting to grips with preparing for and implementing automatic enrolment, employers have to comply with the duties every pay period. Automatic enrolment isn’t a one-time exercise and many employers want help on an on-going basis.
Nest has developed a delegated access function which means employers can hand over both the set-up and the on-going administration to a third party, such as an adviser. Nest is already working with a number of advisers who are considering setting up their own administration hubs, to service this market.
Nest’s delegated access service allows advisers to have different levels of access depending on what duties the employer wants them to deal with. This can be enrolling members, managing the contribution schedule, or even having full access to take over the entire administration role. With this the adviser would act as the scheme manager on behalf of one, or more, of their corporate clients. The service allows advisers to act on behalf of many clients at once, at different levels of access for each client depending on their needs.
Nest has also just launched a new employer section on its website with downloadable guides, communication templates and planning tools. These are free for advisers and employers to use. To see what’s on offer, visit www.nestpensions.org.uk/NESTforemployers
With 1.2 million employers affected by the changes, and in some periods of staging up to 20,000 employers coming under the duties each month, there is no doubt that advisers have a critical role to play in helping employers, and pension providers, get this right.
Nest has been designed specifically for automatic enrolment, and for scale, and whilst we believe many smaller employers will use Nest direct, our research shows that many other employers want help. Corporate advisers are ideally placed to do that, whether they recommend the use of Nest or another provider.