Auto-enrolment is getting within touching distance
It is now a matter of months and not years until the first employers reach their staging dates, and it suddenly feels like there is a lot that needs to be done.
The overarching view at the Corporate Adviser DC Summit in Hampshire last month was that auto-enrolment and the retail distribution review will be embraced successfully. But there is still a lot of detail to be resolved between now and then.
The consultancy charging market, currently incubating in a Petri dish in the development departments of providers and intermediaries, looks like it is growing into something that some may not have expected. If feedback from the Summit is anything to go by, big chunks of first year’s contributions, whether from employer, employee or both, now seem to be out of vogue, except for the very smallest schemes, and AMC models look the more likely model. Is this a good thing? If the government introduces a charge cap on auto-enrolment schemes, which effectively means all schemes, then that could arguably knock big up front deductions from contributions on the head completely. Or, depending on interpretation, will consultancy charges fall outside such a cap, as they are advice charges and not technically management charges?
Auto-enrolment is also going to put greater pressure on default fund design. This month’s cover interview with Dr David Blake of Cass Business School hopefully brings some clear thinking to the direction that default strategies should be going. Agree with him or not, few would accept that what we currently have is ideal.
And auto-enrolment will not just affect pensions advisers. Group risk and healthcare intermediaries will also find their business impacted by these pension reforms. Ensuring business is protected through this period will be crucial for both sectors.
It is time for the benefits industry to take a holistic view of what pension and other reforms mean so it can best position itself to continue to offer employers the best possible service into the future
John Greenwood, editor