How Payroll can avoid offering pension advice (in 5 easy lessons)!

Pension information

The blog in a nutshell

This is a long risk-warning to payroll bureau and their software suppliers  who may be considering providing advice to employers by reducing the choice of pension options to one – a default.

If you don’t want to read it but want my advice upfront – here it is

  1. Do not short-cut advice on the choice of workplace pensions
  2. Use someone with skill and knowledge if you don’t have skill and knowledge yourself
  3. If no such person exists, find a digital guidance service that will take the advisory risk
  4. Pay money for this service, if it looks too good to be true, it is probably A SCAM!
  5. If you cannot find a way to sort this problem for yourselves go to


Interested? read on!


I am hearing some odd stories from payroll managers using including this comment I came across on a CIPP board.

Has anyone in a bureau situation decided to adopt a default AE pension scheme? What would be the line between advice and providing the service. A TPR representative spoke to us this week and brought up the idea of a ‘default’ pension scheme.

I was planning on veering away from any suggestions as to a scheme employers should use as I don’t want to fall foul of any regulatory authorities.

I asked Kate Upcraft who lectures on payroll for  her take on this; her reply

most of the bureaus I work with are either taking all comers but then working out a price for the client if it is a new interface to be developed or saying here are a stable we already do business with if you want to use them for our entry price or pay more if it is a new one on us.

Payroll are between a rock and a hard place and need some help. We need a common data standard.

PAPDIS and Pensions BIB

If  this is the new reality for SMEs and Micros, we not only need a common data standard, we need those providers who are currently deemed “new interfaces” to adopt it.

That means some of the household names such as Aviva, Royal London, L&G and Standard Life who risk being priced out of the market by payrolls who cannot afford to set up bespoke interfaces for their clients to use them.

As it stands, it is only a handful of mastertrusts who have developed the capacity to adopt the common data standard but the outstanding work of Will Lovegrove and SystemSync with the support of the Pension Regulator , Steve Webb , the friends of auto-enrolment and the CIPP, PAPDIS has the capacity to keep choice in the market.

Pensions BIB have created a tool in PAPDIS which we should all support!

If you don’t know about PAPDIS, read this excellent article by the CIPP and the video from Friendly Pensions (a PAPDIS user)

Pensions BIB?

Pensions BIB?

Auto-enrolment in the long-term is about pension outcomes

I very much hope that the report that the Regulator is suggesting bureaus adopt defaults is wrong. It goes against the Regulators own attempts to encourage choice, both in its work to set up a data standard and in its attempts to set up a Directory (however flawed they may be).

Auto-enrolment is a process, but workplace pensions are investments. They are investments of the money of ordinary people who consent to have money deducted from their wages for their long-term benefit. They are also investments made by employers who share the burden of contributions. The results of the decisions made today, won’t be available for up to 40 years but (read the end of this article) payroll may find advice given in 2015 still haunting them in 2055.

You heard it here first

You heard it here first

It is not just a crystal ball – it is possible to tell good pensions from bad

No one knows which of the various schemes on offer to employers today, will do best for its members.

  • But it is clear that some are more likely to offer better investment returns than others.
  • that some will provide better options for people wanting to spend their pot than others…
  • that some will provide more support to employers’ payroll and HR systems than others
  • that some will last longer than others

And there are some very good ways to assess who are likely to be winners and who losers

  • Some have a sustainable business model that reduces the risk of them having to pack it in over time
  • Some have a clear strategy, or are working to one, to adopt the pension freedoms
  • Some have proper investment governance in place and a clearly reasoned default
  • Some have adopted PAPDIS or assisted payroll to build links to them.
  • Some help employers with communications

and some don’t.

Both the FCA and the Pension Regulator agree about the nature of regulation




but the Pension Regulator makes it equally clear that skill and knowledge of pensions is needed for a recommendation be made

Skill and knowledge needed

But to understand which are doing the right things and which aren’t takes “skill and knowledge” and a system that allows employers to assess the workplace pension for their staff.

This is something that a consumer would normally find help with from a number of sources

  • the consumer could search on money saving expert
  • the consumer could go the library and consult past copies of Which (or use its website)
  • the consumer could go to a shop and look at the products on display.
  • the consumer could ask friends what they did and how they found it

From this kind of research, an everyday shoppers could make an informed choice.

But there are barriers to small businesses doing any of this.

  • workplace pension are not  toasters or credit cards and don’t appear in Which Surveys (yet)
  • they cannot be measured for success in the short-term, they are long-term investments; which is why MSE does not currently rate them
  • they cannot be displayed in a shop , nor do they lend themselves to glossy brochures
  • nor is there (yet) any common database of knowledge to which the employer can refer (as they could when buying a toaster or credit card)

But let us not give up hope!

The employers would, were it “no skin off their nose” sooner choose a good pension than a bad…if only to stop complaints from staff. If employers were aware of the class actions that happen against them in other parts of the developed world, they might see choosing a pension as an important duty.

And it is not impossible to build a system that allows employers to compare and contrast the offers made to them using digital guidance.

And it is not impossible that such guidance could be made available at a cost that could be justified many times over in terms of risk reduction and “value add”.


Digital guidance is the only way to deliver skill and knowledge at an affordable price

Indeed, as any reader of these blogs knows, such a system exists and is being used by many bureaus, employers, accountants and advisers.

It’s being used because it outsources the risk of the adviser being sued for incompetence, or straying into regulated territory and falling foul of the Financial Services and Market Act.

It’s also being used because the cost of providing a fully compliant advisory service that is inclusive of all reputable pension options . provides proper direction and fully documents the scheme chosen, cannot be delivered manually at a price most SMEs and micros can afford.

Indeed many forward thinking advisers, who until recently were offering a manual service, are now adopting the digital technology available through


Why Pension PlayPen supports PAPDIS

But for the moment, it is incumbent on us to make it clear to those who are providing the software for bureau, to those who run bureau and to the pension providers, that we urgently need to adopt the PAPDIS standard. will be upgrading the scores for all providers who use PAPDIS (and downgrading those that do not)

A default is not a safe-haven, it will be seen as a recommended course of action- advice.

So we need to ensure that the bureaus who may be being nudged into adopting default pension providers do not do so (I am writing to the Regulator- to ensure this is not happening).

For there is nothing so risky for those who know nothing about pensions, as to suggest a pension as a safe haven.


No safe haven and no short-cut.

I’ll finish with one very frightening example of the ruin can be brought about by short-circuiting proper governance and providing advice without proper regard to risks.



APFA,  the Association of Professional Financial Advisers , is currently campaigning to get a long-stop in place which will stop their members being sued for events that occurred decades before. Read this article to understand how advisers who did not do the job properly and are now in their 80s are being hounded by policyholders and regulators for advice that may have been given 40 years ago.

The long term consequences of the advice we give, even if it is no more than a default position, will hang around and are financially toxic for decades.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to How Payroll can avoid offering pension advice (in 5 easy lessons)!

  1. Brian Gannon says:

    I agree with the principles of this article but I thought that “advice” to employers is not regulated and therefore where is the risk for payroll providers? Isn’t it more that they should avoid default AE pension schemes because it is potentially selling employEEs short rather than it being a case of risking a claim against giving advice?

  2. henry tapper says:

    The perceived risk is less than the actual risk but since the definitive statement last March, statements about employers being employees and the need for advisers to demonstrate skill and knowledge have made things as clear as mud

  3. Mike Lacey says:

    I hate to sound sycophantic, but what an excellent article, Henry.

    I raised a similar issue ( but not as eloquently) in the LinkedIn AE group when I asked “How can one recommend a Provider whose default fund takes no account of duration?”

    I am growing increasingly concerned about the level of expertise some stakeholders in AE think they have, when it can often be woefully inadequate.

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