Advisers must shield themselves against potential charges of misselling auto-enrolment schemes says F&TRC director Ian McKenna
Over the past few months I have become increasingly worried that workplace pensions might be the next misselling scandal. The recent appearance of ‘Workie’ on TV certainly sent a shudder down my spine and reinforced these concerns.
Memories came flooding back of the late-1980s government advertising campaign endorsing personal pensions, which precipitated the original pensions misselling scandal. When it all went wrong, the government went looking for someone to blame and the adviser community were the perfect fall guys. Too many good advisers lost their financial future, not because they had not done the right thing but because they had not documented their recommendation in the right way. It is essential the industry is not lulled into making the same mistake again.
The briefest look at social media services such as LinkedIn or Twitter shows the extent to which payroll providers are seeking to assist employers in meeting their auto-enrolment duties. Positive steps have been taken by payroll organisations – both software suppliers and bureaus – to streamline the movement of data to pension providers. In addition, SystemSync has made such a capability available to even the smallest payroll companies.
A year ago, the payroll community might have argued that pension providers had not done enough to understand and accommodate their role. This is rapidly changing. I see an increasing number of pension providers embracing different ways of working with payroll data. And it is important for advisers to understand different providers’ capabilities in this area.
Payroll has a crucial role to play in making an employer’s AE obligations manageable. But while it may be an important factor in helping differentiate between providers when all other matters are equal, it is hard to make a case that it should be the deciding factor in selecting a pension provider. One thing is for sure: now these links are going live it is important for advisers to understand the detail and depth of different pension provider integrations as they can have a major impact on how much work the employer has to do.
Significant research also points to the role of the accountant as the natural trusted adviser for small-business people. They will be the natural place for employers to turn for support when seeking to select a workplace pension. Some studies suggest as many as 60 per cent of all employers will make their accountant their first port of call for AE help. This, however, begs the question: how many accountants will want to take the responsibility for a workplace pension recommendation? How many have the research tools at their disposal, or indeed the necessary skills and experience to make such recommendations?
There is still the option of putting forward a single solution but The Pensions Regulator is clearly saying it considers it best practice that, when offering a single solution, business advisers – and this includes payroll firms and accountants – should notify the employer that there may be other more suitable pensions available.
Where, however, does this leave the employer if in the future one or more disgruntled employees complain about the pension selected? If the employer had been told there was a better option but had not acted on it, would it be vulnerable to a claim?
An adviser with the right professional knowledge and research tools at their disposal should be best positioned to help employers, accountants and, indeed, payroll providers make sure that the most appropriate pension solution is recommended for the members’ long-term needs. That said, it will be crucial from a compliance perspective to clearly document the rationale behind any recommendation and how different providers compare at the time. After all, if such information is not clearly recorded at the outset, how accessible will it be five years on? Will the original adviser still be with the firm?
Adviser firms should be best placed to help with AE but, in the interests of employers and themselves, they must ensure the reasons for their recommendation are clearly documented to protect against any allegation of misselling in the future.
