If you spend time with workplace pension providers you will hear about crunches, particularly the advisory crunch (too little advice too many employers) and the capacity crunch, (not enough providers to go round).
Neither is an exact descriptor of the problem. What we are starting to see is a traffic jam with too many companies trying to get to staging with an inadequate road system to get them there.
Take a look at this chart
What it shows is the spikes in traffic between now and the end of the staging process in early 2018. The spike that everyone is terrified of is the first one over next summer when several thousand medium sized companies with workforces of between 6o and 250 squeeze into a three month window of staging.
The issue is not that the 20 or so serious providers who could offer schemes have no capacity. Their systems are geared to taking on these schemes and providing a service to the staff.
The issue is the intervention that is needed from the providers or the advisers or from the employers to integrate auto-enrolment and a (probably) new workplace pension into the day to day workings of the employer. If it’s 30 man hours per onboarding (as one provider told me) then there will be static traffic and a lot of missed-flights!
Realistically there are only three options available (if others emerge, you’ll be the first to know)
- Providers will upscale their on boarding teams and offer the service out of their margin of as a direct fee to the employer
- IFAs and corporate advisers will develop on boarding packages which can be purchased by employers (again out of margin or as a direct fee)
- E-boarding solutions will be developed that will allow employers to do it themselves.
There are two dynamics that change over time .
Firstly, as we go through staging, in-house expertise diminishes, smaller companies are less able to adapt payroll and HR processes, devise ways to reach staff and understand the employer duties for themselves.
Secondly the issues of smaller companies are less complex and easier to manage both in terms of scale and sophistication.
In one way the on boarding issue gets worse (less expertise), in another better (less issues).
In their planning, providers and advisers need to be aware that the nature of the problem changes but the scale of the problem remains the same.
If mass market providers like NEST and NOW Peoples Pension and L&G, decide to take on these challenges, they are going to have to have strategies that enable external advisers, e-boarder and internal on-boarding teams to be available to employers.
And it’s clear that the later that employers leave setting out on their journeys, the more likely they are to be late at their destination.
My guess is that many providers are only now waking up to the consequences of the ban on consultancy charging and the strain it will place on their internal on-boarding teams. It is now a matter of utmost urgency for them that they develop e-boarding facilities. A failure to do so will find them closing their doors to new business for much of the staging timeline.
Advisers who can transform themselves into “on-boarders” and technology providers who can turn middleware into “e-boarding ware” have a lot to win in 2014.
If there’s to be a traffic jam, those who can show a way to jump the queue will be able to collect a premium for the service whether that be paid in cash or goodwill.