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I noted with interest Chris Daems’ article last month, from which this title comes. Chris rightly points out that automatic enrolment is bringing about a step change in how people access financial services. I don’t mean those who already do – those with an adviser and a wrap portfolio – rather, the masses who haven’t previously been saving for retirement.
And over a million employers will need to establish or upgrade their pension schemes over the coming years and they will likely enrol around ten million employees. That’s going to require help, guidance, support, and at times, advice. Far more for the employer than the employee, who will sleepily find themselves saving with the benefit of employer contributions.
I don’t provide advice – regulated or otherwise – instead, I speak to politicians, regulators, trade bodies and press about how we collectively make sure this whole automatic enrolment thing works. How we get the nation saving again. And how we hopefully start to resolve at least one of the financial gaps we have as a nation.
For now, we need to focus on how we engage the many employers facing up to this challenge for the first time. And for many small businesses, the employer is very often represented by a solitary person. Unlike bigger firms, they won’t have a team of HR people, a pensions department and payroll staff to manage the project. And they won’t necessarily be engaged in the subject at all. Apart from a wake-up call from the Pensions Regulator, they probably don’t have pensions high on their business agenda.
A friend of mine runs a small but expanding business. He has around 100 staff now working across four bars and a restaurant. At the moment, the company doesn’t operate a pension scheme with any employer contributions.
Last year, having explained automatic enrolment to him, I asked him to present to our management team here on how he viewed pensions in the scheme of all the other things he has to worry about as a small business owner. He presented a list of priorities that started with ‘making sure the doors are open,’ ‘the staff have turned up’ and ‘the beer isn’t frothing.’ Things like that. At number 2,372, he listed ‘make sure pension scheme in place.’
Ok, I won’t suggest this represents every employer, and he was being deliberately provocative, but it certainly sounds familiar. And it’s certainly understandable. Like many, I think he’ll need support.
Here’s my humble predictions of things to look out for:
Individual clients suddenly in need of corporate advice, and willing to pay.
Small employers will seek to comply, little more.
Most small employers will leave it late, because it’s not a priority.
I’d be interested to hear what you think.