SMEs need advice on pensions – advisers need “VFM” to work.

The Value for money Framework may open  the door for advisers to talk to bosses about workplace pensions

Sarah Smart gave a pretty impressive presentation to a group of PLSA members this morning. Speaking from the PLSA, Smart – a former adviser and now Chair at the Pensions Regulator singled out advisers as key stakeholders in getting the  new VFM Framework right.  Most people in the room would have been thinking Isio, Barnett Waddingham, LCP, Hymans Robertson, Mercer , Aon and WTW.

I was thinking of the many financial advisers I know who work in networks or are directly authorised and who have had little to do with workplace pensions since the Retail Distribution Review , auto-enrolment and the abolition of consultancy charging made working for employers on their staff pension schemes an unrewarded risk.

There is an information deficit between the large actuarial consultancies who can leverage their skills in investment and pension consultancy and the remainder of the advisory profession who now focus on wealth and employee benefits rather than the “company pension scheme”. Indeed, many schemes set up prior to the RDR at the end of 2012 have had little attention paid to them since.

For the SME, pensions are dealt with by their accountant as part of the payroll compliance function. Advice has been marginalised because the employer has had no reason to take it.


Even for larger employers , the DC workplace pension is usually  considered an employee benefit rather than deferred pay.

These large  employers can  lavish attention on their DB plan , employing actuaries , administrators , accountants and legal advisers. DB pensions are considered integral to the business’ P&L and Balance sheet and retain an advisory budget that dwarfs their relevance to the reward strategy.

These same large employers may do little for their DC schemes but pay over the contractual contributions , perhaps switching to a salary sacrifice basis but paying precious little attention to the pension.

The importance of the VFM framework

The VFM Framework has the potential to make workplace pensions matter again to SMEs and large employers who currently shun advice

The proposals under consultation from the DWP offer advisers the capacity to advise on workplace pensions using the Value for Money Assessments on performance, service quality and charges. Since these assessments will be in the public domain , advisors will have a bridge across the information deficit and be able to manage scheme reviews and whatever comes out of them.

Workplace pensions could become an area where financial advisers could profitable return. Especially if work for employers unlocked work with business owners and senior employers.

From the adviser’s perspective, over-reliance on wealth management without diversification around the mass and mid affluent looks an increasing risk. The Consumer Duty is demanding changes in business models and advisers are responding.

SJP in its 2022  financial statements told the market

‘Ahead of consumer duty coming into force, there will be aspects of the way we operate that will need to change in order to meet regulatory expectations. The FCA is expecting action and where we identify this is required, we will respond to improve client experience and reduce any risk of poor client outcomes.’

There are now around 1,100,000 employers in the UK that have chosen a workplace pension into which a proportion of their  payroll is being paid to remain compliant with the auto-enrolment regulations.

Many of the owners of those 1.1m businesses are aware that what started as insignificant pots are now becoming valuable nest-eggs for staff. But while the workplace pension pot may not be a matter for personal advice, the scheme as a whole may now represent both a risk and an opportunity for the business that chose it.

The DWP’s consultation may not be high on many financial adviser’s reading lists right now. It is unlikely to come into force this year or even next. But it will mean – eventually – that every employer enrolling staff into pensions will be entitled to know if their workplace pension is offering value in terms of the growth on staff’s pot, the charges they pay from their pot and the quality of service they receive around their pot.

And those 1.1m business owners are likely as not the clients of the financial advisers for whom the VFM Framework could be a gift. Advisory firms should be looking now at the opportunities that will be presenting themselves from next year on, putting in place strategies that enable them to think about the workplace as a source of revenue again.

NatWest didn’t buy into Cushon for fun. Sarah Smart may not have been thinking of the end of the advisory market that I think of, but tPR and FCA are sworn to deliver what Smart called this morning “a consider and holistic approach to VFM”. That means a consistent and comparable approach to value and money whether you are an employer, an FCA regulated adviser or an actuary working under permissions from your professional body.

Workplace pensions could be a great leveller, one that can put actuaries and IFAs on the same field of play, delivering equal value for money.

Some advisers are already ahead of the game

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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