Here are the five things you should know about auto-enrolment – if you’re an insurance broker.
- Insurance brokers are no more exempt from auto-enrolment regulations than any other company
- Every insurance broker with “eligible jobholders” needs to set up a workplace pension for its staff
- Help is easy to come by and is generally free
- Risks are best managed by good planning
- A well run auto-enrolled pension can be an asset to an insurance broker
It wasn’t long ago that customers assumed that insurance brokers would manage the HR risks of a small company as well as the General Insurance The risks of employees dying in service, falling long-term sick or needing medical attention were insured like other corporate liabilities.
But times have changed and the biggest workforce risk – the risk of employees living too long is well outside the compass of most GI brokers regulatory permissions.
GI brokers may not be able to advise on workplace pensions, but they aren’t exempt from the laws governing auto-enrolment. Like any other business they will be required at their staging date to
- Register with the Pension Regulator a point of contact
- Assess its workforce and choose a compliant contribution structure
- Choose a workplace pension
- Communicate with staff
- Properly administrate contributions to those enrolled.
It’s not tough to create a project plan to get this done. The Pensions Regulator offers a project planning tool on its excellent website and provided you have an efficient payroll process, compliance with auto-enrolment regulations should not be overly taxing.
Ironically, the toughest step in the process is likely to be the choice of workplace pension. “Ironically” because in olden days, the choice would have been made by in-house brokers.
Working as most GI brokers do, with the very insurers who provide the workplace pensions (Legal & General, Aviva and Scottish Widows for instance), it is bizarre that such brokers now know little about the pension departments of their suppliers.
Of course the insurers do not have it all their own way. They are in completion with a number of large master trusts, the best known of which is the Government’s “in-house” option- NEST.
Choosing a workplace pensions should involve an employer in a full review of all options available including insured Group Personal Pensions and master trusts.Sadly, the concept of the whole of market review, familiar to the GI broker, is more honoured in the breach than the observance.
All too often employers put choosing a workplace pension in the “too hard box”; NEST is chosen not out of any conviction but because it is seen as a safe option. NEST may replace IBM in the “no-one got sacked for choosing…” statement.
But insurance brokers know only too well that lazy choices can come back to bite them. This is especially the case where no effort is taken to document a choice. The path to hell is littered with good intentions but no matter how well intentioned an employer may have been in setting up their workplace pension; if they cannot explain what their intentions were when choosing a provider, they may face an infernal future!
The process of choosing a workplace pension may sound daunting, but it needn’t be. While independent financial advice is both hard to find and expensive to purchase, there are significant regulatory dispensations that allow employers to engage with workplace pensions, get educated on what makes for good and become empowered to make an informed choice.
Their key ally in this is technology. Whereas a face to face advisory process with an independent adviser might cost £1000 or more, the use of an online technology service might cost a tenth of that. Fintech solutions already exist and are generally available to insurance brokers, typically through payroll.
The author of this piece declares an interest having created one such solution. Despite the obvious self-interest, he has no difficulty in requesting insurance brokers who have taken the trouble to follow his argument to see auto-enrolment as more than a box-ticking exercise.
In the long-term auto-enrolment will not just be about compliance, it will be about the outcomes of the investments that employers have facilitated. Those employers that have chosen carefully and have wisely chose on behalf of employers stand to gain and those who paid no attention to the pension will lose.
Insurance brokers don’t need to provide poor pensions to their staff, any more than cobblers need to wear derelict footwear.