Friends charging employers £15k to stage

Friends Life is levying charges of up to £15,000 on employers who use its auto-enrolment hub services, but denies the fees are being used to control volume.

The provider says the charge is justifiable given the extra work involved in assessing which employees are to be enrolled, managing opt-outs, communicating with members and maintaining records of compliance.

Friends has rejected claims it is using the charges as a way to control business volumes as a widely-anticipated capacity crunch looms in the coming months.

Friends Life head of market, corporate benefits Martin Palmer says: “If people want to use our additional auto-enrolment hub services then we charge a fee, although it is optional and if they want a payroll provider or adviser to do it, then that is fine.

“The price varies from scheme to scheme but £15,000 is the maximum we are charging.

“We will calculate who needs to be enrolled, send out communications and manage opt-outs. We don’t think this is out of line with what other providers are doing. Some providers are charging for this in different ways, whether through the AMC or other ways. At the end of the day it is an additional expense and one would expect people to pay for it.

“We are definitely not trying to control volume by doing this.

”All auto enrolment schemes can stage with Friends Life without incurring any charge. A menu of support options are available to schemes when they stage, including for example, investment solutions, member assessment, facilitation of opt out requests and communications and technical support. Some of the additional support services are optional and will incur a charge. The charge applied will depend on the level of support requested. We are keen to ensure corporate clients are aware of all of their options and receive relevant support from Friends Life, so that they can make timely decisions about what level of support they require. Any scheme wishing to source additional support services from their adviser, payroll provider or other third party is free to do so with no additional charge from Friends.   

”Any scheme wishing to stage, without using any additional support from Friends Life will not incur any additional charge.”

Towers Watson senior consultant Will Aitken says: “We have had L&G charging £1,000 on their sub-500 employee schemes, but fees up to £15,000 are at a completely different level. This would seem to represent a step-change in the relationship between providers and advisers.

“It has been taking providers two decades to recoup their outlay so this would be a way for them to recoup some of their outlay sooner.

“If they are going leaner on price to reflect the up front cost then fair enough. But if someone is offering to do this for free with the same charges, I know where I would be going.

“We have been predicting a capacity crunch for some time. If you think that demand is going to outstrip supply then it is no surprise that prices will go up.”