Pension Pillar - The Future of Advice

With the recent discourse around auto enrolment being solely focused on charging, the industry seems to be forgetting that with any new legislation or changes to the corporate benefits process, education and advice will be the key in ensuring smooth implementation. Therefore, making sure everyone has access to the right advice should be of utmost importance to the pensions industry rather than debates around consultancy charging.

 By Martin Palmer, Head of Corporate Pensions Marketing at Friends Life

 We would all love to live in a world where everything was easy. And of course, on the surface, a key appeal of the National Employment Savings Trust (NEST) is its perceived simplicity. For employers and employees who have found the range of choice within the contract-based scheme world confusing, a limitation on choices might be seen as a good thing. However, we must be wary of assuming that the simple path is always the easiest.

 Though NEST may be able to give basic guidance, particularly in terms of compliance, it lacks practical employer support. When it comes to pensions, we all have different long term goals and different risk objectives and it is imperative that pensions are explained properly, giving companies the opportunity to ask questions and make certain that their choices are the right ones for their employees. A good pension is about more than just low charges.

 The majority of smaller businesses are set to auto-enrol in the summer and autumn of 2014. Unfortunately signing up for auto-enrolment can be very complicated, and there is no doubt that most companies will need help in some form. At a time when vast numbers of businesses are already struggling with financial difficulties, auto-enrolment could present challenges for many employers setting up a pension scheme for the first time. Businesses will not necessarily see the benefits directly, especially in the short-term, and digging deep from their own coffers may well prove a difficult step.

 At Friends Life, we know how important employee engagement and education is to the success of auto-enrolment, and indeed pensions savings more widely. Every business’ needs and culture is different and a ‘one size fits all’ approach to advice is not one we would ever recommend. Increasingly, we are finding that tools and practices for corporate benefits need to be flexible and adaptable to fit each business and individual and that the right advice is crucial.

 Worryingly, it is employers who are least well equipped to manage the auto-enrolment process that are set to suffer the most. As research from the Institute of Directors shows, it is inevitable that many companies will be reluctant to take on the burden of extra-costs, potentially making desperately needed advice inaccessible. 

 However if companies are forced to muddle through without the correct information and advice, there is the very tangible risk that procedures will be followed improperly, and fines incurred.

 Therefore, in the long run, not seeking the right advice could prove more costly to companies than the initial outlay and ensuring they are well prepped for when auto enrolment is implemented across the board.

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