The advice industry has played a significant part in the success of auto-enrolment, not only in helping employers meet their duties on time but also in providing an ongoing service. This includes ensuring the pension scheme is the best fit for the membership, and helping the employer communicate the benefits to employees so they understand and value them.
The staging process and phasing in of minimum contribution levels are now complete, however this doesn’t mean the opportunity for advisers to get involved in this market has come to an end. Advisers who’ve been successful in the workplace pension arena often highlight three main areas of opportunity:
Let’s look briefly at each of these:
This could include reviewing existing schemes, discussions around the use of salary exchange, corporation tax advice or possibly looking at employee benefit platforms to aid recruitment and retention.
Group life cover is a valuable benefit to employees, and invaluable for those struggling to get cover elsewhere due to existing health issues. In fact it may be their only opportunity to secure this at a price they can afford.
Many companies offer registered group life cover which is set up under pension rules, so will add to lifetime allowance measurement if the member dies in service. While this probably isn’t an issue for the majority of workplace pension members, for senior staff it may be, so perhaps relevant life policies, or excepted group life policies are required?
Key man and business protection can be useful to protect remuneration and control of the business. These are the sorts of things that keep business owners awake at night, and there’s an opportunity to insure their worries away.
This is often a strong driver for many advisers active in this market. It may simply be that you already have the business owner as an individual client, and don’t really want another adviser looking after the pension scheme, so you take the scheme on.
You may be helping the business owner with an exit strategy, with lifetime or annual allowance issues, or individual tax planning. If the business owner’s spouse is a director of the firm, as is often the case, there may be an opportunity to make contributions to the spouse’s pension. This can be useful to balance retirement income provision and ensure both parties can utilise their full personal allowance each year to reduce tax. To these clients you’re essentially offering a wealth management service which may already be your target market, so I won’t elaborate any further other than to say, please push back against “my business is my pension” with some of the limitations of this strategy.
Much of the focus here is possibly at-retirement advice, but there’s also potential to build in employee benefit packages, links to guidance sites, or possibly even an advice service aimed at mass affluent rather than high net worth. This can cater for clients dealing with issues specific to their life stage, which may be more immediate or short term. Perhaps this last point is an opportunity for new advisers, maybe a paraplanner looking to make the jump to adviser. They may deal with a younger demographic which could also benefit the firm’s longevity. Remember this group are likely to share in over £300bn1 expected to cascade from older generations over the next decade.
We’ve merely scratched the surface of the opportunities in this market, and while you may not be very familiar with workplace pensions, as an adviser you’ll be familiar with their constituent parts. Given there’s over £50bn2 per annum going into private sector workplace pensions, it may be an opportunity too big to ignore.
We have a range of materials you can access to support your client conversations. These include:
Find out more about our workplace pensions.
1 Intergeneration advice: Seizing the opportunities presented by wealth transfer, Brooks MacDonald, May 2019
2 DWP - Automatic enrolment evaluation report 2019 – February 2020