Retirement

001 | Auto-enrolment

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Tutors:

  • Steve Bee, Founder and CEO, Jargon Free
  • Adrian Sims, Intermediary Relationship Manager, Nest
  • Susan Smith, Vice President, PMI

Learning outcomes:

  1. The background to the introduction of auto-enrolment
  2. The role of Nest
  3. The opportunities for advisers looking to develop business in auto-enrolment
  4. What support is available for advisers

The Pensions Regulator adviser site

Nest website

PMI pensions certificate in auto-enrolment

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Retirement
Learning outcomes: 1.The background to the introduction of auto-enrolment 2.The role of Nest 3.The opportunities for advisers looking to develop business in auto-enrolment 4.What support is available for advisers Tutors on the panel are: Susan Smith, Vice President, PMI Steve Bee, Founder and CEO, Jargon Free Adrian Sims, Intermediary Relationship Manager, Nest The radical nature of auto-enrolment (AE) and the role of NEST Susan Smith: This is the most significant change we’ve seen for decades. It’s going to apply to all employers and all employees to a degree. There’s something that’s got to happen. This is about changing for the future. It’s not optional; it’s going to happen. So it’s going to have a big impact across and it’s setting a theme going forward for pension provision. Presenter: Steve Bee, why is it more radical than stakeholder or GPPs or all these other reforms we’ve had over the years? Steve Bee: Stakeholder and things like that are almost irrelevant compared to what’s happening here. Pensions changes all the time, always does. In fact the only constant with pensions is it’s constantly changing, a bit of a nuisance, but every now and then you get a generational change. We’ve had three of these really: Lloyd George’s time over a hundred years ago, the Beveridge stuff in the middle of the last century and what’s happening right now. This is fundamental change to the state pension system. We’re doing away with earnings related pensions from the state, replacing or pushing that burden onto employers, so it’s a massive, massive change. This is not a minor change, it will be with us. The remnants of, you know, what’s being put in place now will set the scene for pensions in the UK for the first half of the 21st Century. Presenter: Adrian Sims, given it’s such a radical change, what’s NEST’s role in it? Adrian Sims: NEST’s role in it, a good question Mark. These changes will apply to every single one of the 1.3 million employers in the UK. So over the next four years, because automatic enrolment has already started, so over the next four years every single one of those employers will have to comply with their duties. Part of which will be to put in a place a qualifying workplace pension scheme or schemes. NEST was brought into being through policy to be a pension scheme with a public service obligation that means that we must accept any employer that wants to use them, so NEST could be used to help an employer discharge their duties. Presenter: So you’re a friend, a foe, some fair-weather ally of financial advisers? Adrian Sims: We are, yet again it’s a fascinating question that has evolved over the past three years certainly that I’ve been at NEST, but I think NEST should be seen by any adviser as just a simple to use low cost pension scheme with a public service obligation, which means that we could be part of any solution for any employer. Opportunities for financial advisers in the AE market Presenter: Steve Bee, I mean how big a market is it for financial advisers? Because a lot of these employers are very small, they don’t have very many employees at all. Steve Bee: Well that’s the whole point. A very few large employers employ about half the people in the country, and always have. And the Government itself is the biggest of those large employers; they employ a big chunk of the workforce. The other half of the working population work for just over a million, maybe 1.2 million smaller employers. The vast majority of firms that are affected by auto enrolment have got fewer than ten employees. So the large firms that have always provided pensions employ half of us, these reforms are about the other half picking up on all the things that half the working population have taken for granted. Workplace pensions, benefits at work, their employer having an active interest in more than paying them just a salary, that kind of thing, this truly is a revolution. The fact is though that most employers affected are SME, medium sized firms and small firms. Why does that affect people like IFAs? Well, all the research says that the very first person they will talk to when this radical stuff hits their business is their accountant or their IFA. Any IFA who says they’re not involved in the corporate pensions market is thinking of the corporate pensions market of the past. The corporate pensions market of the future will be much, much smaller. The average employer will be very small and tiny really. Presenter: Susan Smith, from PMI’s perspective, as you look out at that landscape, I mean at what point do advisers get involved, what size schemes do say employee benefits consultants get involved, and where’s the bun fight going to be in the middle? Susan Smith: I think it’s interesting, I think that’s changing given what Steve said there. You’ve got a mass of employers sitting out there – we’ve heard the numbers – who really won’t have looked at pensions. They might, to comply with the stakeholder they’ll have their certificate sitting in the drawer, but really haven’t actively engaged with it, and that’s moved. That’s changing. More of those are going to have be involved; advisers are going to have to come in to do it. I think some of the big advisers are actually realising they’re going to be dealing with smaller firms than they’ve dealt within the past, and that’s where we’re going to see the move. It’s an opportunity for IFAs to get in there and talk to these clients about their options, their businesses, their costs, their spend, and that will all change. Presenter: But we’re sort of just going through RDR where one of the topics amongst advisers is this idea that perhaps there are clients that are less profitable or not really treating them fairly to charge them a fee for advice and they don’t want them. Isn’t this opening up a whole huge market of people in exactly that bracket? Susan Smith: It is, actually, but I think, one, the adviser’s also got to think about when they’re going in, it’s not just think about pensions when you go and talk about them, think about employee spend. You’ll be talking about owners of business, think about the opportunities to talk to them about what you can provide. It is a new landscape post-RDR, but this is an opportunity to consult with them on those options. Presenter: Steve Bee, how is the world moving from, the old world if you like classic of just pure pensions to actually employee benefits in a rounder sense? Steve Bee: Well, people that work for the large employers, they take for granted certain things. We’re here in the middle of London, at the moment, most of the buildings around where we’re sitting right now, here in Lombard Street, most of the people who work there take certain things for granted. They get pensions at work; they get life assurance; they get other death in service benefits; they get childcare vouchers. They get all kind, you know, health plans, dental plans, all of those things, and they take them for granted. The other half of the working population simply don’t have them available through the workplace. Bringing pensions into the workplace I think is the catalyst for bringing what’s normal for half of us to the other half - kind of how the other half lives if you like. IFAs, with accountants, have got a very good opportunity here to build good new strong corporate relationships with not just the owners of the businesses, which is if you’re talking about people, this flight to the high net worth, you know, we’ve got to be very careful that we don’t end up where financial advice in this country only applying to high net worth people and corporate pensions advice only applying to large, large employers - that’s crazy. Is there a place for the IFAs in this market? There’s no place for anybody else. The IFAs simply have to step up to this, get involved, not just in pension provision, but also in the wider workplace benefits provision. And guess what? The employees love it, because they’ve had no access to these things. Presenter: And, Adrian, if there is this shift taking place, will NEST have some mission creep from pure pension provision through to some of these other lifestyle benefits that Steve’s mentioned? Adrian Sims: NEST were brought into being with a particular purpose. So NEST was to be a pension scheme that had a public service obligation that made sure that where the private sector couldn’t offer a solution, maybe for commercial parameters, that NEST would always be there as a potential solution. We haven’t got a brief to be anything other than that. The role of The Pension Regulator Presenter: And, Steve, if advisers are listening to this thinking I should get involved, there might be a little thought in the back of their heads of are they going to double their regulatory burden? You’ve got The Pensions Regulator out there, you’ve got the FSA, soon to be renamed, should that be something that concerns them? Steve Bee: No, I don’t think so. I mean some people have been saying shouldn’t all these regulators be merged? I think the Government have said they’re against that. I agree that they shouldn’t be merged. What advisers can do is put systems in place to help employers manage pensions and other workplace benefits, but most importantly to manage the compliance with The Pension Regulator’s responsibility for looking after the recordkeeping if you like. Employers, whether they’re big or small, chip shops included, will have to be able to assess their employees, regularly assess them, do that at each pay round, and if they’re weekly paid that could be quite onerous, make sure each employee gets the right information, the right document at the right time. Part of that is to go into the right pension at the right time, but the pension scheme’s only a small part of that. I think employers will find that the big thing they need to get to grips with here is the recordkeeping and making sure they do the right thing at the right time all the time. So it’s a process thing. I think employers will need help with that, and I think IFAs and accountants are ideally placed to give that. Employer readiness for auto-enrolment Presenter: Susan Smith, is it more about process than pensions then? Susan Smith: I think there is an argument it is. Pensions, you know, we’re talking about putting auto enrolling people into pension schemes, but actually when you start to look at the regulations, understand what it is, that’s when you have to understand the process. It’s around identifying your workers, who’s there, what category they fall into. It’s identifying when you have to auto enrol them, whether you’ve got to give them an option to join a scheme. It’s about identifying when you’ve got to get that information to them. There’s regulatory timelines on when you’ve got to supply information, what you’ve got to supply, the records you’ve got to keep. And actually when you start talking to employers about these issues they realise there is more to the process side than purely just a pensions’ issue. Once you’ve got to grapple with that you can then look at pensions. And I think that’s why it’s quite important that employers start to look at it early on, because there’s processes they may need to change to deal with it; it’s not just about finding a pension solution. Adrian Sims: I was going to say, Susan, I think you’ve hit the nail on the head. I read a report on the train coming up this morning, but it was a report by the Association of Consulting Actuaries that specifically looked at employers employing 250 employees and fewer, and 82% of those surveyed had no idea what automatic enrolment would mean for the business, and of those that did have an understanding 53% said that the duties were very complex and 23% said they were very complex. So I think, I’ve been in the sales background for many years, and we sometimes talk about the 80/20 principle, and I think in automatic enrolment for many advisers their view is that 80% of what needs to be done’s around pensions I think is absolutely wrong. Maybe 20% is about pensions, 80% is around detail and policy, and I think that’s where the real challenge is for many businesses. Steve Bee: I’ve been involved in the pensions industry now, this is my fourth decade, so it’s a long long time, long time, I’m not that young anymore, but if I’ve ever seen anything that lends itself to a system based approach, then it’s auto enrolment, because it covers the entire range. Employers have to behave properly, and they want to by the way. You speak to loads of employers, I’m sure, employers want to comply, but it’s hard to comply with, because they’ve got businesses to run and it’s a new subject to them, they’ve had no need to do this. The state’s done it for them up to now with SERPS and the state second pension. So they’ve got to build a micro level in their businesses what the state’s already always done for them for the last 50 years on a macro level. That’s a big step change. Doesn’t mean it’s hard, it means that they’ve got to find people that can help them put those systems in place. AE-interested parties within a company structure Presenter: But Susan, we were talking about employers, but obviously a company’s made up of lots of different departments and people. If you’re an adviser, who would the departments that you sort of need to get on side? Susan Smith: Many I think’s the answer. You know, you need to talk to finance clearly. I mean that’s not just finance about planning for the contributions you’re going to have to deduct and collect and take from the employer, it also might be around cost and planning for implementation and change in process. We’ve talked about, it’s complex, there might be new IT systems you’ve got to bring in, or support services, so it’s talking to the finance side to prepare for that. It’s talking to HR, understanding the new definitions of workers, who has to be auto enrolled, who has to be given options, so how you categorise them. And what we’re find is some employers are finding people they didn’t think would be caught within this but are actually under the terms of the legislations - there’s new terms. Need to be talking to payroll, they are the people who’ve got to collect the right contributions at the right time, pay them across at the right time. You might be talking to people who deal with communication with your staff, of how they communicate, how can you improve the efficiency of that, is it paper based, can it go electronic? And if you’ve got different departments or you’ve got different sites how they all come together to comply. So you actually are bringing together quite a big range of people within the business who need to understand their different parts, their different workstreams in this new process. Presenter: But if I was an adviser listening to you say that, would I be right to then think well maybe I need people with a totally different skillset to what I have in my business already to plug into these kind of businesses? Susan Smith: I mean it’s getting up to speed. I think it’s getting to, you know, any one of those you can start talking to and raising the issues and identifying with them they need to pull the others in, so it’s actually understanding the issues and then you can start to pull those in. And that’s where I think the skillset is around understanding what auto enrolment is about, what the complexities are. And we can talk about how you can get qualified on that in a minute. Presenter: Yes. I’d like to come to that, but just before I do, Adrian, I mean some of this conversation’s almost implied that until you hit your auto enrolment date groups aren’t doing anything. Obviously there’s lots going on and a lot of people are putting in pension schemes at the moment that they hope will qualify for auto enrolment. What do advisers need to be aware of there if you’re putting a scheme in now? Adrian Sims: Well I think they need to understand what a qualifying workplace pension scheme must be and make sure that schemes that are sort of used comply with those criteria. I mean the private sector have been working hard to make sure their arrangements will qualify and NEST is a qualifying workplace pension scheme. Support and training for advisers in AE Presenter: Okay. Steve, anything that people need to be aware of there, is there a danger of putting something in place that’s expensive rather than value for money? Steve Bee: Well, if you look around the world or Europe at least, somewhere like The Netherlands, they’ve got a small number of very large multiemployer schemes, that’s how they’ve structured what they’ve got there, but here in the UK this legislation if it has a flaw at all is that it’s going to generate a large number of very small schemes. NEST is a multiemployer scheme. And by the way I don’t think the reforms could go anywhere without NEST because we do need a default, you know, if you left it to the market and nobody provides a scheme then where do you go? So NEST is absolutely crucial to the reforms, and other multiemployer schemes I think also would be. But I mean I’ve built a business over the last few years specifically to try and turn IFA firms who want to do it into a new form of EBC if you like. And that’s without, I’m not trying to advertise what we’re doing here, but I do think those skillsets don’t exist in the SME market for employers themselves. They don’t have all of these departments. You know, most SME firms won’t have an HR department or anything like that. So what you need to do it’s a journey that I think IFAs and employers in the SME and smaller, particularly the micro firms need to go on together. I don’t think IFAs should be worried about getting involved in this market, this market has never existed before, and I’d argue that many of the skills that are available to the market from next year from the existing SME marketplace probably won’t translate into the small employers. Very soon now, just a year’s time, something like 12,700 employers a month will be hitting their staging dates and those will be employers with between 90 and 1,300 employees. They’re all good sized firms for IFAs to be working with. Once you get beyond that you very soon get to 100,000 and up to 135,000 employers a month hitting their staging dates every month as auto enrolment kicks in for the micro firms. Who on earth can they turn to if it’s not people they already have connections with, business connections with, particularly if they’re business owners. So I think the IFAs need to get skilled up quickly to help employers who don’t have the resources in-house to deal with this. I don’t think there’s a chip shop in the land that has its own HR department. Adrian Sims: Yeah, I think for those IFAs that want to do that, I think there’s plenty of support available to them. So on The Pensions Regulator website they’ve set out eight steps to compliance, which I think is pretty methodical and relatively straightforward to follow. NEST, and I’m sure other providers as well, I mean we’ve got our five step guide, which once you’ve decided that, you know, NEST could well be part of the solution, what are the sort of five steps that we think need to be used? So, you know, there is plenty of support available. Presenter: And sort of you touched on it earlier as well, what can the PMI do to help people that need to skill up in this market? Susan Smith: Well I think recognising I mean the significant change we’ve got going on, there is new terminology to learn. We launched last year certificate in pensions auto enrolment to give people access to basic information about auto enrolment and what it means. That certificate was launched last year, and we’ve actually been very surprised, there has been a huge take up very quickly, and that grows. We’ve got over 200 already signed up to take it, and that’s growing weekly. And I heard about even today some more people who signed up. And what’s quite interesting is we talked about the range of people involved in auto enrolment, both as advisers and employers, we’re finding actually that it’s the EBCs that are joining up, it’s IFAs, it’s wealth management consultants, it’s employers, recognising the need to get skilled up, to understand the basic principles, so a great opportunity to get there. I think with IFAs, if they’re getting involved, it gives them opportunity to get a certificate. It gives them some credentials and get some in the market with that knowledge to actually be able to talk to clients. Presenter: What sort of time is involved to get this versus the perceived benefits? Because, you know, advisors are small firms, they’ve got to make these trade-offs. Susan Smith: Absolutely! I think, I mean there’s an opportunity. We reckon it’s about 35 to 50 hours study; it’s online support to do that. There is revision seminars as well that can be held, and then it’s a one hour exam, a multiple in choice exam at the end, which you get the certificate coming through. So I think, you know, you’ve got to learn, there’s the tools that, mentioned about going to look at the website, the TPR’s website, there’s the DWP toolkit to help. So I don’t think a huge amount of investment to get a good base knowledge of auto enrolment, what it means, to enable people to go out and talk knowledgeably to clients about the base information. Presenter: But Steve Bee, if you’re an adviser and you think that’s an awful lot of time, I won’t bother, thanks for that, what are the consequences of staying out of the corporate pensions market? Steve Bee: Well, it’s quite simple really, everybody you know personally and everybody you know through business will be affected by auto-enrolment. It’s as simple as that. And that will include, if you’re an IFA, if you’re a financial adviser, that will include your private clients, many of whom will be business owners. One day you’ll have a phone call from that business owner, private client of yours who will say look this thing’s just happening to my business, I’ve just had a look at it, wow, you know, it’s bigger than I realised, can you help me with this? If your answer to that is well no I don’t really do that, I think you might be saying goodbye to your client altogether and they will find somebody else who can. There are plenty of IFA firms who they’re going to get involved in this. They’re going to get qualified. I think the PMI qualification is excellent. I think they’ll get involved with this, they’ll get themselves in a position where they can help employers, and my guess is that those that get on side with the new corporate pensions reality in this country will be those who in five, ten years’ time will thrive and build different businesses to those that they had before RDR. This is about providing assistance for employers in the workplace that benefits employers and employees, a completely different basis, fee based, obviously, and there’ll be an interesting type of EBC these IFAs when they get there, because unlike most current day EBCs they’ll be able to give specific financial advice to people as well. Something that’s very, very valuable. I think those firms that get it will build very good and valuable businesses so that in ten years’ time they’ll look back and see this as a massively good opportunity for them. Advisers working with NEST Presenter: Adrian, could you give us more specifics of how NEST could work with an adviser? You talked about sort of linking the NEST scheme in, but how could it work in practice? Adrian Sims: I think there’s a couple of things: NEST was designed specifically for automatic enrolment, so of course it can be used as a standalone solution for employers, but also it was designed so that it will complement existing pension provision, so by using the public service obligation. Many advisers at the moment are maybe going to providers to say that we have an existing client where part of their staff are using this group personal pension, but when automatic enrolment comes along they’ve got to bring this other population of staff in, that will be okay won’t it? And in some situations the answer that they’re getting back from providers is we’re not sure whether we’ll be able to accommodate those. So by having a solution such as NEST with a public service obligation there is the ability to guarantee to any employer that they can provide a complete solution. So whether part of that solution is from the private sector and then the remainder coming from NEST. Steve Bee: It’s always been the case that employers have usually had more than one pension scheme. I think the Government when you read their legislation it was like one employer, one pension scheme. As far as I know, well in my experience that’s never been the case, and it’s highly unlikely to be the case after this. In fact if anything this will lead to most employers having certainly more than one pension scheme. NEST has a good part to play in that. You must have a pension by law, right. We’ve never had that before. You know, that’s enormous. You know, of course NEST has got a place in that and I think NEST will turn out to be one of the biggest schemes. Either in part for large firms, in total for small firms, it can’t help but succeed. Adrian Sims: No. Steve Bee: And I said it earlier without NEST there would be no reforms. Presenter: Listening to this somebody might say well if NEST’s so good, any deal that’s too good to be true normally ends up going bust. I mean if NEST has to suck up every piece of business when the market says they don’t see it as profitable, you’ve got a statutory obligation to pick it up, what happens when the accountants crawl over the figures in a couple of years’ time, I mean do you become an unprofitable pot? Adrian Sims: I think the modelling assumptions have already been done and I’m sure that every different scenario would’ve been accounted for, but I think the expectation based upon research is that somewhere between 6-800,000 employers will use NEST in some way, shape or form, and over the next five years will have somewhere between two to five million members. So NEST is as I say specifically designed for automatic enrolment, has been designed to accommodate scale. The challenge, as Steve alluded to before, is that nothing like this has happened in the UK before, and within 15 months we are going to be seeing in excess of 8,000 employers per month having to comply with their duties. And as Steve said if you look forward to the end of 2016 in excess of 100,000 employers per month will have to comply with their duties. Steve Bee: Yeah. Sorry, that’s two things there: 1) you must have a pension scheme; but 2) you must comply with the duties laid on you by the 2008 Pensions Act. Those two together are really separate decisions. You need a pension scheme or schemes I’d argue, because you’re bound to have some people in this scheme and you can’t change this and you’ve got to have that and this bloke’s awkward so you’ve got to have a scheme for him. So employers put up with that all the time. Having the scheme is one thing, complying with the regulations quite another, quite another, and it’s a distinct difference. So I agree NEST and other schemes like it will be successful, because you must have one, absolutely no choice. As this stuff washes through, employers will have to set up private sector pension schemes by law for the first time ever. But complying with it applies not just to those new employers, but to all the existing employers as well. And we hadn’t talked about that much, but any existing employers who are sitting there complacently thinking this will be a piece of cake I think they’re mistaken. Susan Smith: Yeah. Well we find employers you speak to they’re quite surprised what they’ve got to think about. But I mean for people advising there is a lot of change going on and the market has changed over the last few years rapidly of people come onto the market looking at opportunities and where it’s going. So there is an opportunity of advisers to be keeping their clients informed of what’s happening and what the choices are, because that’s changed. If somebody last looked at their pension five years ago the market is different now, the opportunities are different now. Responsibilities of employers who have a pre-AE pension scheme in place Presenter: So even as an employer if you’ve got a pension that covers everybody in the firm and you’re thinking well this is just the Government mopping up all those people who aren’t as proactive as I’ve been, you still need to go back and look it. Susan Smith: Still need to look at it, understand the regulations, how you’re going to deal with new people coming through. Do you comply with the regulations? Because just you’re providing a pension you might not meet the qualifying scheme, which we mentioned earlier. Are you picking the right earnings up on which you’re charging to meet the minimum requirements? So there is some checking to do. You’ve got to register with the Regulator for your qualifying scheme. So they will need to look at it to make sure they do comply. Presenter: Just a couple of things, Susan, what are your obligations to provide a pension to somebody who’s not say a British national but is working here, say perhaps an EU worker or whatever? I mean what happens there? Susan Smith: You do have to look at them, it’s providing for UK employers, and that’s one area that where employers have got people who are seconded over, or depending on where their contract is, they do need to look at it, and that’s where some of them are having to actually work through legislation. It’s not always that clear and they need to identify it, but generally it’s UK employees that are covered. Presenter: Right. But whatever it is the devil’s in the detail. Susan Smith: Absolutely. Presenter: You really need to go and look through it. Susan Smith: Yeah. Adrian Sims: Yeah. And I think, you know, in terms of the devil’s in the detail, the detail is very easily available. It’s on The Pensions Regulator website, it’s in their nine guidance notes, which when printed off I think is about 246 pages. And I’ve been talking about automatic enrolment and presenting for in excess of three years, I’m still yet to meet a business who have printed off each of those 246 pages, read them, digested them and of their own accord have formulated a strategy. This is complicated stuff and it comes back to is there an opportunity for advisers going forwards? Absolutely yes. Steve Bee: Yeah. I just follow on that Adrian that there is no chance whatsoever that the average employer in the UK who’s affected by this – who by definition is a small employer – will want to become a pensions expert, and I’d actually argue that they shouldn’t become pensions experts. What they need is someone to come along and take the problem away from them. In the way that if you put your mind to it you could do your own VAT return as an employer, if you wanted to, but it’s a lot easier if you can get someone in to deal with it for you as long, as it doesn’t cost the earth. And this is the challenge for our industry, the challenge is can we build systems and processes that can be distributed through IFAs working in conjunction with accountants that won’t put employers off because of the press? Right. And if they can then this problem, like VAT, and this affects more firms than VAT does, you know, this auto enrolment affects far more firms than VAT does, can this problem be taken away? Yes. Who are the best people to do it? IFAs without a doubt. Is it a good idea to sit on the sidelines as an IFA and ignore this? I don’t think so. Working with accountants on AE business Presenter: And take that point, you mentioned accountants there, how can you work as an adviser more closely with accountants? Steve Bee: Well I think what you’re doing essentially, if you’ve got an HR department, your HR department can handle auto enrolment for you, because they’re plugged into the payroll, and they’re plugged into the pension scheme and maybe other benefits that you’re providing. A small firm that doesn’t have an HR department, and a firm with 200 people, 300, quite easily not have an in-house HR department, working with the payroll provider, usually the accountant, and the pension provider, usually the IFA, you should be able to put systems in place that could plug into payroll and plug into the pension and manage the auto enrolment process for the employer. If that can be done cost effectively then the accountant working hand-in-hand with the IFA would be invaluable to the employer, particularly for the micro firms. Nearly a million of the 1.3 million employers affected by auto enrolment have fewer than ten employees. Presenter: Adrian, I want to come back on one point you were talking about NEST working alongside advisers, how does NEST charging structure fit or not fit with the consultancy charging and what advisers can do in the pension space? Adrian Sims: I mean I suppose quite easily I mean you cannot add a consultancy charge to NEST. So NEST has got a charging structure, which is broadly equivalent to ½% annual management charge over the longer term. But yeah, in terms of consultancy charging, I mean as with other master trusts we don’t have the ability to add consultancy charging to it. So if an adviser is going to use NEST it would need to be done on a fee basis, but structurally we have incorporated a thing that we call delegated access. Because we have seen, many employers have taken a view that NEST could well be a suitable part of our solution, but they actually don’t want to set it up and run it themselves. So we have a concept called delegated access where they can delegate the access to doing that to an intermediary, an IFA. So they would be able to access the NEST system, they’d be able to structure it, populate it and run it on an ongoing basis, and I’d suggest in the post RDR world that is a service that they’d be able to charge a fee for. Concluding thoughts Presenter: Thank you. And almost out of time, time for a couple more questions, Susan Smith, I notice the OFT seems to be quite interested in auto enrolment at the moment. Is that a sort of sign of troubles to come for the industry full stop? Susan Smith: Shouldn’t be a sign of troubles. I think the whole issue of charging is coming under scrutiny from all bodies, you know, the TPR, the OFTs have launched this investigation, the ABI have looked at it as well in value for money. There is a big change in the market, more people coming on and through auto enrolment I mean we haven’t mentioned it, but it’s particularly coming into defined contribution schemes where charges become onto the individual through the deduction from funds, which is not seen under the defined benefit scheme. So I think it shouldn’t be. There has to be fair value for money, we have to see a system that’s working. People have to have faith in it. And I think investigations that encourage good market practice will help in the long run about pension provision. Presenter: Steve Bee, does it ever depress you that it’s taken this long for the industry to go from asking a fundamental question would you like to be in a pension to a fundamental question of would you like to be out of pension? Steve Bee: Well I think this opt-out thing is unusual, but what I would say is that we’ve had, some people are saying is this all to do with, you know, is compulsion just around the corner? I think the answer to that’s no. We’ve had compulsion for the last 50 years since 1961 where you could not opt out of the National Insurance system, you know, so the state second pension, which currently today we’ve got about 13 million people accruing earnings related state pension through the S2P scheme today. The Government have decided to do away with that; in fact it was the last government that decided that and this current government that’s endorsed that by going ahead with the reforms. You can’t force people to join a pension scheme, but now that we’ve got finally the new basic state pension coming in from 2017, a good subsistence level for people, then every pound that people save in a pension will make them at least a pound better off than non-savers. That gives the industry a good argument, a solid argument to base promotion of pension schemes on. I think it’s a different world that we’re in now. Auto enrolment couldn’t work without NEST. It couldn’t work without the reforms to the state pension system and driving means testing out of the system. So we’ve now got a position where it is right for us to recommend that people should join a pension scheme. It’s good to join a pension scheme. You’ll be better off by joining a pension scheme and you’ll get the full value of your contributions. These reforms are happening in slow motion really. They always do when they’re big reforms. This started in 2007, it will end in 2018. This is a major change. All of the bits and pieces are being done properly in my opinion. We’ll end up with an industry that our job won’t be to stop people opting out, it will be to promote the value of pension saving. Look, if you put a pound into a pension, then your employer and the taxman will put another pound in. That is not a bad message for us to be able to go out with. But it’s not about product. Pension products, I know NEST is a product of a sort, it’s not about product. This whole thing about charges and products, I think that’s pre-RDR. I think this fixation on product is pre-RDR. I think products, particularly pension products in a few years’ time will be as relevant to people then as floppy discs are to computer users today. Product has had its day. This is about services in the workplace, which IFAs I think are ideally placed to give for employers, provide for employers. Presenter: Okay. Steve, thank you for that. Adrian, very, very quickly a final thought from you: if you were an adviser and you need to get into the auto enrolment market, what’s your piece of advice, what’s the next step? Adrian Sims: You know, if you’re an adviser you need to get in the automatic market. If you’re an adviser, you must be in the automatic enrolment market. And I think the first thing you need to do is go to the TPR website and print off the 246 pages, the TPR guidance notes, and read them. Because I think in the land of the blind the one eyed man is king and as we’ve seen numerous statistics, that one I quoted from the Association of Consulting Actuaries, 82% of smaller businesses have got no concept of what automatic enrolment will mean for them. So I think if advisers spend a little bit of time in understanding what policy means and they can then go out and deliver that message to their corporate clients. Presenter: Susan? Susan Smith: Yes. I think give yourself some confidence. The PMI, we’re giving an opportunity, the first qualification to help people give some confidence. They know the knowledge, they can go out and they’ve got some credentials to go and talk to clients and get them open, ready for that market. Presenter: We have to leave it there. Susan Smith, Steve Bee, Adrian Sims, thank you all very much.