With unprecedented numbers of employers set to enter auto enrolment this year, the need for effective education and communication has never been more important. But there seems to be genuine confusion about whose job it is to educate members about the pension scheme, as well as making sure they know how much they are contributing. This could prove damaging both financially and reputationally for those caught on the wrong side of it. So, is there an educational and engagement black hole? And where does the buck ultimately stop in ensuring members are engaged and supported not just as they enter auto enrolment but over the longer term?
The need for ongoing support is already strong. Many employers have stated they will need additional, ongoing support with auto enrolment – up to 60% according to NEST. And some want to be able to outsource auto enrolment set-up and management, leaving them free to run their business.
At the moment, there appears to be a two-tiered system as far as the educational process goes. Some of the larger providers offer a full end-to-end service, including pre- and post-staging reports, calculators to help break down the exact costs and clearly defined parameters of what they will and will not do, as well as an appointed implementation manager. However, they also require a minimum of six months before the staging date to register the scheme and put support in place.
Alternatively, some providers offer a web-based self-service kit which allows the adviser to prepare quotes, template letters and reports and, through a telephone support service, helps the adviser set up online. In this case, the responsibility for educating and informing employers will lie with these providers.
Unfortunately, these options are not feasible for many smaller employers. Not only would the costs be punitive, they may only require a ‘lite’ service anyway due to the number of employees they have. This type of arrangement is more suited to employers who are happy to engage fully in the auto enrolment process, as it will require an element of time invested, at least initially, to set up and manage. Equally, many of these larger providers simply won’t take smaller employers, reserving their proposition for those with large numbers of employers which offers easy scaleability and minimal outlay.
For many of these smaller employees, taking direction from an intermediary such as an accountant or adviser, or going directly to a purpose-built auto enrolment scheme such as a master trust, will be a more appropriate option. Those firms, many of which are micro-businesses, are likely to approach an adviser for help to identify, set up and manage their pension scheme. However, this is where the boundaries of responsibility begin to blur.
The problem is that since auto enrolment remains a low margin business for many advisers, there is a real difficulty in monetising the education and engagement aspects of a pension. Similarly, smaller employers are often under resourced. While they have a duty to ensure their employees have grasped the new pensions scheme, they have little spare cash to throw at educating them.
There are some halfway house solutions available. Some schemes include free employee assessment and letter generation, which can involve manually assessing all staff every payroll and creating communications with employees. However, it is not clear who has overall responsibility for this: is it the employer or is it the scheme administrator?
What about the role of the government in this, particularly The Pensions Regulator (TPR), which has overall responsibility for auto enrolment? Surely it should be plugging educational gaps where providers and advisers are unable to do so? It has published a number of documents on its website aimed at readying employers and advisers for auto enrolment, including step-by-step guides. However, while its documentation may be high quality, it is not reaching enough of the people who need to see it. Anecdotal evidence from advisers suggests there is a real lack of awareness that this information exists, let alone where to find it. Equally, the scrapping of the Money Advice Service highlights a marked shift towards less availability of advice and information across the market.
‘Workie with sharp teeth’
For Graham Peacock, managing director of Salvus Master Trust, the question is not so much about the information that is available but how it is communicated. He cites the DWP’s Workie campaign as a case in point:
“The Workie campaign is a great example of a good idea that has not been implemented as effectively as it might have been. It does get the message across to smaller employers about many of their duties under the legislation, even if it’s just a single nanny or carer, but it doesn’t really tell them how or what to do. For me, this is a crucial error.
“What would have worked better would have been to structure the campaign around clearly defined tasks and deadlines. Creating clear signposted tasks such as when staging day is and a link to TPR’s website or easy access to a list of approved schemes would help.
“We need to make it simple to use but also make clear that you cannot ignore this or you WILL be fined. I have already spoken to TPR and suggested a new side to Workie with sharp teeth. It’s got to be a balance of encouragement and enforcement. Workie giving hugs and bumbling about in the park does not instil any urgency.
“There are still some grey areas in terms of responsibility and the Government and the industry really does need to come together to make sure they are supporting employers and their advisers through the transitionary stage and beyond.”
This highlights a definite need for the regulator to play a more proactive role in providing education to smaller employers. Publicising information more clearly would be a good start. However, initiatives such as free workshops on money management, and even basic information on where to access analysis tools such as Defaqto and Pension Playpen could be lifelines for employers and advisers alike.
Steve Bee, founder of Jargonfree Benefits, thinks the issue goes beyond those immediately in the pension space: according to him, there is a need for an overhaul of communications legislation.
“Every employer in the land is being required by law to communicate with their employees in a highly specific way on a regular and ongoing basis tied to their pay cycle. The subject of the required communication is pensions, something very few people in the country can claim to properly understand let alone talk about with any confidence.
“That is a potential disaster for employers and they will need the help of others to achieve such a difficult regular task. Will it be the pension provider community which has such a poor track record for communication? Or payroll companies who happen to be involved because the communication requirement applies as part of the pay cycle? Or financial advisers who are supposed to be good at explaining complex things like pensions?
“I don’t think any of the usual suspects will be of much help to employers in this new future. This is communication legislation and it is the time for communications businesses to rise to the enormous challenge posed by a new legal reality which is about to tie UK employers in knots of red tape.”
The message is clear. While a larger provider can offer a more prescriptive ‘cradle-to-grave’ approach, there is much the industry and others can do to plug the knowledge and accessibility gaps which threaten to undermine smooth auto enrolment transition for smaller employers.