Facts and Opportunities

Justin Corliss: Hello everyone. Thank you for tuning into this session today. Now my name's Justin Corliss. I'm joined, by my colleague Craig Muir. We're both part of the technical marketing team here at Royal London, and as the name suggests, today we're going to look at workplace pensions and particularly at your employer.

Clients who have been through that automatic enrolment process with one provider and may be considering moving their scheme to another provider. So, as we know, the staging process for automatic enrolment finished in February 2018. But of course, employers’ duties with workplace pensions didn't end there.

There's reviews, there's cyclical re-enrolment, there's member needs that all need to be considered on an ongoing basis. And of course, there are new employers as well who will also have to set up an automatic enrolment scheme for their employees as automatic enrolment’s been going for a little while.

Now, that's perhaps, less common. A lot of the time it is workplace pension scheme switches, so that's why I tend to focus on that a little bit. But do you know what, not every employer is happy with their choice of automatic enrolment scheme. And as I've just mentioned, sometimes they're unhappy enough to want to change provider or maybe they need a little nudge from you as an adviser by explaining the benefits of changing their scheme.

And that's largely what today's session's all about, how you can get involved in that workplace pension market, how you can help these employers and their employees, and of course, the benefits that it can add to your business as well. And do you know what? Now might be a really good time to get involved too.

Okay – because, the world has changed dramatically since some of these schemes have been put in place. Scheme charges probably changed. Technology certainly improved, and employee wellbeing and financial wellbeing tools are now more prevalent within quality, workplace pension schemes than they probably were during the automatic enrolment staging period that I'd mentioned, finished back in 2018.

So I think it's fair to say this is an evolving market and if employers aren't regularly searching for the best option, of pensions to attract and retain the best talent, then they're in danger of losing quality staff to those that are. And do you know what, before you begin thinking that all these employers must be all over automatic enrolment now, staging finished six years ago.

Can I just point out that in the, the pension regulator compliance and enforcement bulletin covering July to December 2024, it's still the most recent one we've got access to - there were 21,504 fixed penalty notices. That's that 400 pound fine for falling foul of the rules. And that's just over that six-month period as well.

And, there was 7,608 escalating penalty notices, they're the big ones that range from 50 to 10,000 pounds per day until the issue was put right. So, employers clearly still need advisers’ assistance. Of course, for all this to be CPD-able though, we need to have some learning objectives. So, by the end of this session, you'll be able to identify the features of different workplace pension arrangements, to demonstrate the benefit of salary exchange in workplace pensions, and of course to identify ways to add value to workplace pension schemes.

Okay. To begin with, I think we should look at the main types of defined contribution (DC) workplace pension schemes being used for automatic enrolment today. Look, what we're not going to do is consider all the public sector and the very few private sector defined benefit schemes used for automatic enrolment.

So, looking on then, the defined contribution, the DC workplace pension market is dominated by two types of arrangements. First of all, you can see on the left in the green we've got master trusts. And then across to the right in the purple, we've got contract-based schemes, what we'd probably all have previously called a group personal pension.

Now, beginning on the left over here with master trusts, a master trust is run by the trustees who might outsource the administration to a third party. They may deal with it in-house. Now, particularly if it's out sourced, that can make it sometimes a little bit difficult as an adviser to get the management information, the MI that you need on the scheme if you're going to provide an ongoing service to the employer and to the workforce.

We know that Master Trusts are governed by the pension regulator, not the financial Conduct authority as their occupational pension schemes. They usually operate a net pay system, for tax relief on the pensions. Now, the suitability of that has been questioned for some members of workplace pensions, and while there is a fix in place for this, I wouldn't say it was a perfect solution.

And the last point there is that they’re government backed. And do you know what I, I tend to throw that in because I've had advisers say to me a few times or there seems to be a little bit of a misconception sometimes, that, particularly Nest is government backed. The reality is however, that none of the master trusts are government backed.

Nest was certainly established via a government loan, and it does have to take any employer who wishes to establish a scheme with them. But of course, there's still got to be commercial. That loan still needs to be repaid. Moving across now to our right-hand side to contract-based schemes, they are overseen by an independent governance committee, an IGC as we've got up there, which every provider to a workplace pension scheme, or to a contract-based work, workplace pension scheme needs to establish. They're governed by the financial conduct authority, the FCA, rather than the pension regulator. Although, as automatic enrolment is generally governed by the pension regulator, there is a bit of crossover there.

Contract based schemes provide tax relief via the relief at source system rather than the net pay system. And the final point I've got there around flexibility, and that's just to say that on the whole, they tend to be a little bit more flexible or certainly have a greater breadth of ‘at retirement’ options than some master trusts do.

Now, anyone who's looked at the Department of Work and Pension (the DWP), helping savers understand their pension choices, will know that the government have told master trusts to offer the full breadth of their retirement options. Now, a couple of things to say about that. Okay. Firstly, some of the bigger master trusts already have absolutely, fine at retirement functionality and options, but for those that don't, you'll need to consider when these will be in situ as there's no definitive timeframe mentioned in the document. And the other side is cost and expertise. And by this I mean how much will it cost to develop and implement these new options? Who's going to bear the brunt of these costs? And of course, as they have no history of flexible decumulation options, will there be any teething problems?

I think this is massively important as ensuring clients have access to the options they need sits within the consumer duties cross-cutting rule of avoiding foreseeable harm. Now, in November 2024, the government produced a consultation considering consolidation in the workplace pension market. Now, their intention is to deliver economies of scale to release funds to invest in UK infrastructure.

I think we've probably all heard quite a bit about that. Now, this wasn't specifically aimed at master trusts, but the workplace pension market in general and in fact covered a myriad of local government pension schemes, 286 of them in England and Wales, which could be consolidated. Now, the government in their consultation suggested that the benefits of scale start to arise at 25 billion to 50 billion pound mark and the proposed minimum asset requirements for default arrangements by 2030, is that they expect, anyone who wants to remain in the market post 2030 to have assets in the default fund of around about 25 to 50 billion.

Now, on the 29th of May this year, 2025, the government press release confirmed these reforms are set to be introduced through the pension schemes bill and will mean all multi-employer defined contribution schemes and local government scheme pools operate at mega fund level, managing at least 25 billion pounds in assets by 2030. Now in March 2025, okay, Lane Clark and Peacock, LCP, you might have seen them referred to, produced their master trusts unpacked paper, and it looked at which master trusts would meet this minimum asset amount, and by extension, which ones would need to consolidate to get to that 25-billion-pound mark. And this is an act, an extract of that you're looking at just here. Now, as you can see, there are only three which met the minimum level - Legal and General, Nest and The People's Pension. Now, I do need to point out that the assets are the total assets in each master trust, so not just how much is in the default fund, which will be lower. Also, some of the traditional pension providers on the list will also have a contract-based schemes, okay.

With a default fund. So, may indeed reach that minimum 25-billion-pound figure. So, this is really just a snapshot. I also just want to point out that Royal London's default fund is close to that 25 billion mark on its own, so we don't really have the same concerns about having to consolidate, but as you can see, some of these master trusts, could potentially be at threat.

So if you're speaking to employers and they're in one of these master trusts, maybe you should highlight that their master trust may need to consolidate shortly and also highlight the implications this may have for both the employer and the employees as well. Okay. Before we go on and look at some aspects of workplace pensions in a little bit more detail, let's look at some of the key points you might want to raise with employers when discussing the suitability of their existing workplace pension arrangement.

And we've got them along a bit of a timeline here. Okay, is the employer spending too much time dealing with problems in the scheme? Now, I won't elaborate too much as I think that's pretty straightforward. If the tool you've got isn't working properly, hey, you either buy a new tool, or I guess you suffer the consequence of a job poorly done.

Is the default investment option suitable for the employer's workforce? And that's huge because you see various figures for it, but around 95% of workplace pension members sit in the default option. So, it needs to be robust and transparent, and it needs to cater for the whole workforce. Now, overlay that with environmental, social and governance considerations, ESG considerations, and you can see that that is an issue that will grow and grow and grow as time passes.

Are member communications clear, simple, and jargon free? Furthermore, who's sending them? Is it the adviser's responsibility or the provider paper or electronic? Is the employer just given generic documents to alter and send to the employees, or does the provider deal with all of this? And if the provider doesn't deal with all of this, how much additional cost does all of this add for the employer?

Moving along, we've got what retirement options are available. Now, pension freedoms were a bit of a game changer for defined contribution pensions. I don't think it's unreasonable as a member of a workplace pension arrangement to expect all this functionality will be available within your scheme.

Yet we know that the last largest master trust out there, Nest, is currently unable to facilitate pension freedom functionality. Therefore, any member wishing to take benefits via say flexi access drawdown, will need to switch to another provider, which could incur set up costs. Although, some providers, ourselves included, don't have any set up costs.

Is the scheme as cost effective as possible? And do you know what I do mean cost effective, not just cheap. Now, workplace pensions are somewhat unusual in this respect as you have more than one party to consider. Firstly, there's the employer, are they paying a fee for their automatic enrolment software that they use?

Is that something that they have to pay for monthly? Are there admin issues in the first point that I mentioned there, impacting on their productivity? Hey, it's a hidden, but it's a very real cost. And then you have the members, are they getting the best value for money? Now, clearly, nobody wants to pay more for something than they have to, but due to that 0.75% charge cap on the default fund in workplace pensions, you'll find pricing differentials tend to be quite small.

So just remember that a scheme with an annual management charge of say, 0.5%, that does everything that the employer and the workforce needed to do at no additional cost. And we compare that to a scheme that does very little but maybe has a slightly lower annual management charge. Let's say, 0.45, that additional 0.5% is only pushing the cost for a client with 50,000 pounds in their fund up by 25 pounds per annum.

So I guess the point that I'm driving at there is let's make sure that what we are considering is value, not just the price. So, our planning point here is, could you add value in this market with the right support? And I just want to point out that our business development managers are very experienced in this market.

Many of them were around to help advisers with, of course employers at the very start of automatic enrolment. So, when employers first stage, you'll probably find that many of them have written dozens, sometimes into the hundreds of workplace pension schemes. So real, live and breathe an expert who can provide you with a wealth of breadth, best practice ideas. They’re, ready and willing to help.

Okay, what I'm going to do is I'm going to pass you across to Craig just now to take you through the next section of the presentation.

Craig Muir: Thank you. Okay. Now, we're going to look at some employee, some, employer and adviser research, and I think it probably makes sense to start at the beginning and get an idea of how often employers review the workplace pension scheme.

As you can see from this graph here, it's a bit of a mixed bag, isn't it? Now, this Royal London research covering just shy of 500 schemes suggests about 17% do a review annually, and it jumps to around 26% for advised schemes. And that's not on the screen there, excuse me, further 27% review it every two to five years.

And then that the large bar there, 38% say they have no set timeframe for doing so. I might be making too great a leap here, but from your perspective, I think that that 38%, but no set timeframe represents an opportunity. These employers didn't say never, which as you can see was an option. So presumably they are open to the idea of reviewing the scheme to achieve a better outcome for both themselves and their employees.

Now, this 38%, it can be split into two groups, advised and non- advised. And if they're non-advised, then there's an opportunity to create relationship with this firm and extol the benefits you can bring through regular reviews, and we'll talk more about those as we move through the presentation.

Alternatively, they do have an adviser, but for whatever reason this adviser isn't reviewing the scheme on a regular basis. And I suppose here it'd be worth discussing with the employer whether the advice was just initial help with establishing the scheme, but no significant ongoing assistance.

And if that's the case, once again, this is an opportunity for you to approach these employers to outline the benefits. A regular review provided by your firm could bring. The more embedded that automatic enrolment has become and the more it's recognized as a tool to attract and retain the best talent, the more open to regular reviews to enhance scheme benefits the employers have become.

And as you can see here, this really is important stuff. Now this is research from, work buzzes October 2023 reports entitled ‘The State of Employee Engagement’. And it shows the responses from roughly 300 people leaders, surveyed. Now it shows the top priorities for HR departments. And while I don't have the full list here, you can see the top six.

Now the 2023 report shows the movers and shakers comparing 2023 and 2022’s top priorities. And as you can see, retention’s up two spots. Employee wellbeing’s up five places, and recruitment dropped one place. Now many of the top priorities are precisely what we're trying to achieve with the robust pension offering.

We want employee engagement because engaged employees are less likely to leave. And two of the top three are attracting and retaining talent, which we've mentioned a few times already. It's also interesting to note that the second one we have is employee wellbeing and many pension schemes offer significant financial wellbeing tools for scheme members to use, and we'll come back to employee wellbeing later in the presentation.

It's also interesting to see what your peers in the advice industry say a scheme absolutely needs to have. Now, this is from Corporate Advisers 2024 Workplace Pensions into Retirement Report and considers the functionality the scheme needs to have to meet the needs of the employees. Partial tax-free cash withdrawal, flex access drawdown, partial and crystalized fund, special lumps from withdrawal and drip feed drawdown are seen by advisers as core functionality requirements for workplace pensions. And you can see there, most providers offer either all or some of these options. Now, most contract-based workplace pension schemes, as Justin mentioned earlier, what we'd have previously called the GPP, will offer all of these, but that's not the case with every master trust.

You can see from this report that two of the largest master trusts now pensions and Nest have limited at retirement functionality. We're not trying to bash master trusts here, but that's just the case. So, it's definitely worth checking the at retirement functionality of any workplace pension solution because your peers are saying that's what's important.

So we're seeing what employers have to say and what advisers say a scheme absolutely needs to have. But what about the key group themselves? What about the employees? Well, this research from the 2024 Royal London Workplace Pension Survey outlines the challenges employees face with regard pension saving.

And this is a considerable survey of 4,000 workplace employees. As you can see, 34% say they've never checked their forecasted pension. Another 21% have not checked in the last two years. That's pretty concerning as it's very hard to know if you're on track to achieve your goals if you don't even know what your goal is.

57% say they've never found out where their money's invested in their workplace pension. I’d imagine it's pretty hard to engage with your pension if you don't know where it's invested. So, a definite education piece needed there. Incidentally, and the, these stats aren't on the screen.

When we just look at the 50 to 69 age group, 65% said they've never looked into where their money's invested. Now, having said that, some of these will be in defined benefits and may not feel the need to understand where their pots invested. But most will be in defined contributions and are either approaching taking their benefits or may even have taken some.

And that sort of thinking is very unlikely to make you more engaged with your pension. 60% say they're not saving enough for retirement, or they don't know if they are, and only 27% of those asked said they knew they were saving what they needed for their retirement. So that's not supposed to be a doom and gloom story.

Rather, what all that tells me is that employees are crying out for help to understand some of the basic elements of workplace pensions and you know what, that represents opportunities for you as advisers. And rather than you having to guess exactly what parts these employees need help with, this Drewberry Workplace Pension Report kindly tells us. As you can see at the top, by far and away, the number one thing people want to know is, am I saving enough for retirement?

I'm sure you get asked that plenty, but something that can really help with this is the Pensions UK, used to be the Pensions and Lifetime Savings Association or PLSA, but they've rebranded to Pensions UK - their Retirement Living Standards. Now we have a follow-on presentation that covers these retirement living standards in quite a bit of detail in it that outlines the actions you could suggest to clients to help them achieve these.

So if you are interested in that, please have a word with the usual Royal London contact, or indeed you can refer to, it's called Maximizing the Benefits presentation, which is in the CPD section of our adviser hub. Anyway, I'm not going to go through the rest of these just now. I just want to draw your attention to the third point, which is salary exchange or salary sacrifice as it's sometimes called, because we're going to take a look at that in a few minutes time. Now, given that automatic enrolment’s been going for, it's over 10 years now, you're probably more likely to encounter employers looking to switch their existing pension to a new provider than need to set the first scheme set up.

You might come across a few who do have to have the first scheme set up. So next, let's consider the reasons why employers might want to switch workplace pension schemes. And these points are really from discussions with advisers. If we first look at the drivers to switch, so why would they want to in the first place?

Now we've got lack of support, poor service from existing schemes that's on the left-hand side and poor member communications the next one down. Now I've grouped these two together because they both have a negative impact on the employer. That lack of support or that service from the scheme means there's a drain on the employer's resource and profitability.

When they have to deal with issues and find solutions to issues, the provider should be sorting out for them. Poor member communications. That results in the workforce approaching the employer for answers, and that indirectly results in the same issues for the employer that the lack of support does. Now, the next two on the left-hand side are, I'd say they're about making things better for the employee. Charges too high and by that I mean the annual management charge of the plan. Now that's not something that impacts the workforce. Sorry. The impacts workforce, not the employer, unless of course the employer is part of the workplace pension scheme. And I've grouped that with another point I often hear mentioned. They're what I refer to as paternal employers looking to provide better benefits for employees.

Now, I'm not saying this is always altruistic. They're possibly doing it as a means of attracting and retaining talent, but I do hear from our business development managers that they're seeing more and more employers taking this approach. It's also important to know why some employers, even when the benefits of switching are clearly outlined to them by advisers, they still decline to switch.

Now, the reasons we hear for this are much narrower. You can see them there on the right-hand side. They don't want to pay another fee, just want to tick the box and the existing schemes doing that. Then there's inertia, apathy, it's more hassle than it's worth. So, we've effectively got three groups here.

First, we have the blocker side. They don't see a whole lot of value in the workplace pension to themselves and possibly feel they're paid a contribution for their employees, and that's enough. They see the workplace pension as something it needs to be complied with. So, as we say there, it is just a box tick, not much else.

There are enough open doors in this market. I wouldn't waste a lot of energy pushing it the closed ones. The second group are employers who will switch because the scheme is causing them problems. Maybe they've converted a pre automatic enrolment scheme to use for auto enrolment. It turns out it's not fit for purpose.

And the challenge there will be identifying if the employer's interested in any additional services you may want to offer, if they just want the scheme set up. It's hugely important to set your stall out early as to the additional value add services you offer and whether you still want to act for the employer if they're not interested in these.

It may be that you're still interested as you look after the owner, for example, as an individual client, and you don't want another adviser in there. So, you take on this scheme. And then finally, we have the paternal employers. Those looking to get the best offering possible for their employees, perhaps as an aid to recruitment and retention, and that's an ideal client, but it's still important to outline from the start what service you offer and what you don't offer.

And then of course, how much all this will cost. Now speaking of cost, we need to remember the cost to you, the adviser. The workplace pensions are somewhat different to at retirement advice due to the different timeframes for providing the advice. A common timeframe from initial contact to first premium paid in a new scheme, is around six months.

Now, obviously it can be longer or short than this, but six months is a decent benchmark and that raises another point. When are you remunerated? Now the point of this graph is simply to illustrate that with a workplace pension switch. You, the adviser, you do a lot of work early in the process, but the client doesn't get to see much of it.

So they don't value it as highly. Now, once the scheme's up and running, so you can see stage five along the bottom, they implement. Once you get to stage five and beyond, the client sees an enormous amount of value. They've got this shiny new toy with lots of new bells and whistles, but at that stage, much of your work to establish the new schemes already been done.

So the point here is to ensure the employer understands this and ideally agrees to provide a portion of the remuneration at different stages in the process, rather than one lump sum payment at the end. Because you don't want to get to stage four, that recommendation stage, by which time you've already done a significant proportion of the work only to find that the employer's cooled on the idea and no longer wants to go ahead.

Now if they've already paid the portion of the remuneration, or at least they've got a contractual commitment, they're less likely to walk away at that point. Now, one way to overcome this could be an itemized menu of services. Now this is ours at Royal London. No doubt there are many others available in the market, but we can't show you theirs because we don't have access to them.

The font's quite small, so I'll just talk you through what it does. So, you decide who's involved from the adviser side, so is it you yourself or is it paraplanner, is it administrator, et cetera. And then you attribute an early rate to each. There are actually three pages, to this covering the redesign of the scheme, implementing the scheme, and then running the scheme.

And it's just the run page that I'm showing you here. Now, this helps, I think, it enables you to offer an itemized menu of services to the employer cost at either on an hourly rate or at a scheme level. Just remember, these employees you're dealing with have probably been through scheme setup before, so they're going to want to know what they're getting and how much it's going to cost.

And if you're a bit new to this market, it also helps as an aid memoir, a breakdown of all the services you might want to offer. I also think this fits nicely with the consumer duty, so if you haven't already, you can use this to itemize your services, cost them out, and then use this for the price and value outcome.

Just remember a key component of consumer duty is to document and be able to demonstrate how your proposition is value for money. And something like this is hugely advantageous as a list of the services, the time they take and the cost to provide them, but also the ability for the employer to see at at granular level all the services you offer, and then they can make an informed decision about which ones they value.

It may also give you the opportunity to explain how valuable some of your services are, which, they may not have considered. I should also point out that this tool is editable so you can edit the services you offer. For example, on this one right at the bottom left there, I've included a review of business protection arrangements previously being established, which provides a cost inclusive of VAT for these to be reviewed on a regular basis.

And, all this goes a long way to help with prod and consumer duty requirements to be able to demonstrate ongoing value of which cost will form a part. So, our planning point here is outline your proposition clearly at the outset, and if I'd had a bit more space in the box, I would've also said, where possible get remuneration and stages throughout the process.

And, of course, I'm just going to gloss over the fact that I drew the box and could've made it any size I wanted. So, I've clearly just forgotten to add that. But in apologies. Right. Moving on. An exceptionally hot topic for employers at the moment, and I suggest it's going to continue to be for quite some time, was a result of the announcement by the Chancellor Rachel Reeves.

It was in the October budget in 2024 that employer national insurance rates will increase from April 2025. So, I just want to have a quick look at what this means to employers as it's definitely something you could be speaking to them about right now. Now straight after the budget last year, Royal London's customer insight function did some research to see what customers, advisers, and employers said will impact them most as a result of the October budget and what actions they're likely to take.

Now I'm just going to focus on the employer research and the impact to the changes to the national insurance contributions. Now, having said that, I do want to highlight that in the research there was a real concern about IHT on pensions for family-rum businesses. And we will talk more about this later in this session as it's worth thinking about raising awareness of protection products such as whole of life and joint life second death to aid tax and mitigation, particularly for family-owned businesses, as clearly, they're on the lookout for some advice. But getting back to our main subject, I'm, we're going to examine the actual changes in a couple of minutes, but employers told us the impact of the increase in employer national insurance will lead to concerns about the increase in employment costs.

One medium size employer stated there'd be 10% increase in their employment costs. There were some concerns about the impact on business growth. There's an expected reduction in profits, and then when we asked them what actions they were going to take as a result, we were told employers will be looking to reduce direct costs from employment, which may involve things like recruitment freezes or redundancies.

Alongside this, they said reviewing where there may be opportunities for tax savings will be important. Employers also said they may look to review plans

For growth expansion as the increased costs they face may no longer make it viable, particularly for smaller businesses. And ultimately, we were told in some cases the increased cost for businesses on the back of the budget may result in these costs being passed on to consumers.

I think we're seeing that in the market at the moment. Also, salary exchange was mentioned by some employers to help maximize tax efficiency. And I'm going to talk a bit more about that shortly. So, employers national insurance rates, I'm sure you know this, for employers, it increased from 13.8% to 15%, and that was from April 2025.

Now, at the same time, the threshold at which employers need to begin paying national insurance contributions that decreased from 9,00 pounds to 5,000 pounds. Now, that part alone means additional employer national Insurance of 615 pounds per employee per annum. Now we mustn't forget about the change to the employment allowance.

That the employment allowance lets eligible job hold. Employers reduce their national insurance liability by up to 10 and a half thousand pounds. And prior to the budget, it was only available to employers whose Total National Insurance bill for the year fell below 100,000 pounds. And if that was the case, they wouldn't have to pay the first 5,000 of the national insurance they would otherwise have been liable for.

However, from the 6th of April 2025, that employment allowance increased from 5,000 pounds to 10 and half thousand pounds and is available to all eligible employers. So that means it's now available to employers with an NI bill over a hundred thousand pounds too. It was really designed to support smaller employers with their employment costs.

The employer needs to claim for this, usually through selecting the employment allowance box on the payroll software. If not, they need to get in touch with HMRC directly. They can also claim for the previous four years actually, but only if their total NI bill was below a hundred thousand pounds.

And remember, they wouldn't get 10 and a half thousand back, but it was 5,000 pounds for 2022 to 24 and only 4,000 pounds for 2021. But that's still potentially another 19,000 pounds for previous years plus 10 and a half thousand pounds for this year. Now, this increase in national insurance costs means that employers are looking at ways to help manage potential additional costs.

And in particular, you can explain how salary exchange can help mitigate some of these costs. When, Justin and I speak to our business development managers about workplace pensions, and the advisers they have who've been successful in this market, there's one common theme that sticks out and it's salary exchange.

You know what, most schemes don't currently utilize salary exchange, despite it not being as complicated as many people imagine. I think in my experience, it's not many people understand it, but most advisers understand it. And if you can successfully convey the benefits to employees and employers, it's possibly the easiest way to demonstrate a tangible benefit you can add. We've been given numerous examples of schemes being off the back of explaining and highlighting the benefits of salary exchange.

So what I'm going to do is I'm going to run through a brief case study to bring this to life. So here we have Sam who works for Royal London Sockets Limited. RL Sockets has a pensionable salary of 35,000, which is, roughly the average salary in the UK. His automatic enrolment scheme sees him contribute 5% of pensionable salary and his employer 3%.

So we're assuming there's no band of earnings here. So, the 8% is paid from pound one. RL sockets limited. Sam's employer have approached an adviser to review the workplace pension scheme for their one hundred employees and they don't currently use salary exchange. Okay so, what we're going to do is we're going to look at Sam's position pre and post salary exchange, then at the employer's position, pre and post.

And then we'll look at overall. And before we get started, I just want to say, don't get too hung up on the mass and numbers at this stage. Rather just focus on what it is that we're trying to achieve. So, if we look at Sam first. And if we look at before salary exchange, so that's kind of on the left-hand side there.

Before salary exchange, Sam's salary is 35,000 pounds. He makes his own pension contribution. It's 1400 net that gets crossed up to 1,750. And you can see Sam's take home pay was 27,320. So that's in the purple. After salary exchange, his headline salary is lower. He makes no pension contributions.

That's because his employer now makes it all on his behalf. But his take home salary is still 27,320. So, it's lovely Sam's take home salary hasn't changed, we haven't seen any real benefit to them thus far. And to see that we really need to look at the employer's position. So, by the employer paying Sam less salary, Sam makes a national insurance saving.

So does the employer. Now, in our example, we're going to say that Sam's redirected all his national insurance savings to his pensions. The employer's going to redirect half the national insurance savings to Sam Pension and then the employer's got to keep the other half for themselves, which, they're quite entitled to do so.

In fact, the employer could keep all their national insurance savings. And there are a few other options too. And again, if you want more information then please have a word with your usual Royal London business Development manager or account manager. But in our example, Sam's redirecting all his national insurance savings to their pension.

The employers redirecting half their saving to Sam's pension keep the other half for themselves. So, we know Sam's headline salary has gone down but look at the employer pension contribution role. The employer's pension contribution's gone from 1,050 per annum before salary exchange to 3,140 after salary exchange.

And that's because they still pay their 1,050 contribution. Plus, all of Sam's contribution, plus all of Sam's national insurance saving plus half of the employer's NI saving. All into Sam's pension. Now, even with all this additional pension contribution employer's making, the cost of employing Sam has reduced by 146 pounds per annum.

And Sam now has 3,140 per annum going into his pension, which is 340 pounds extra each year. And that's for the same take home pay you receive when making a pension contribution without salary exchange. And this is a key point. It doesn't make the pension contribution free. You simply get more bang for your buck.

Now, as we've already seen on Royal London sockets limited, the total cost of employing Sam for the year reduces by 146 pounds. And if we had a hundred Sams in the scheme, that would mean a saving every year for the employer of 14,600 pounds. And I'd argue you've gone a good way towards creating your own fee, plus maybe enough to pay for any business protection and solicitor cost to set up salary exchange contract.

I'd really hammer that home with the employer. maybe something like, in the first year, this is my fee for doing the transfer of this scheme, et cetera. And then on an ongoing basis, I'll charge X proportion of the saving as my ongoing retainer. Now make sure the employers aware that when it comes time to pay your fee next year and the year after that, the year after that, this isn't a cost to them.

This is money they were never going to have if you hadn't created a saving by implementing salary exchange. But they clearly also have the ongoing business protection costs. But the solicitor fee for the change of contract would be a one-off payment, no ongoing cost for them. And although this isn't on the slide, the additional cost of employing, employing Sam as a result of the increase in employer national insurance from April 2025, which I mentioned earlier is 926 pounds increased in national insurance contributions, and if we apply that to the hundred employees in RL Sockets, that's an additional cost of 92,600 pounds per annum Just remember that's each and every year, it doesn't take a genius to work out that 50% redirected and saves 14,600.

If the employer doesn't redirect any of the national insurance, and we're certainly not advocating this, but as an option and may help to keep the employer afloat, at the end of the day, the savings double, so it'd be 29,200 pounds. I am sure employers have already worked out what the additional cost the national insurance increase is going to make to the business.

And they've created plans to try and offset this, perhaps thinking about downsizing, reducing salary, increases in bonuses, increasing their charges, or a combination of all of these. And although salary exchange won't be right for all employers and it can't mitigate all additional costs, you can help by demonstrating how salary exchange could ease the burden.

Now we've always advocated salary exchange to employers, but for me this demonstrates how salary exchange has become even more important to employers from April 2025. And of course, we must forget about the employment allowance, which will reduce the total NI bill by a further 10 and a half thousand pounds.

And potentially there's over 19,000 pounds in addition, for previous years if they haven't had that employment allowance. So, check to see, if they could say, make that saving as well.

Right, just a few warnings here because you know what, Salary exchange won't be suitable for absolutely everyone. And a few pitfalls you should be aware of and make employees aware of include - it will reduce headline salary so it can impact things like death and service, lump sums and may impact borrowing ability.

Having said that, the employer could produce a statement of remuneration. Now what that does, it shows a salary, pre-salary exchange and I know banks and building societies are quite happy to accept this. Likewise, actually the death and service can be based on pre-salary exchange too. You do need to be careful not to reduce anyone's salary below minimum wage or below the level to be an eligible job holder.

And it is a change of contract, so you will need to include a lawyer, but provided you can address these points, using salary exchange can be highly advantageous for both employer and the workforce. So, our next planning point here is simply have you discussed salary exchange with your employer clients.

I think this is a ripe time to be speaking to employers about this. Right. I'm now going to pass you on to Justin, who will take you through to the end of the presentation.

Justin Corliss: Thanks very much, Craig. Okay, everyone, what we're going to do now is look at, a few wider opportunities and why advisers, who have been in this market, value being in the market.

Now much of this really comes from speaking with advisers who have been successful in the workplace pension market and asking them what value do they gain from being involved in this workplace pension market? And it can be loosely broken down into, well, the, there's three of those areas that you can see on the screen there, and we'll go through them in a bit more detail as we go through the next few slides.

But those were the advice to the business itself. Okay, so corporate protections and investments and that sort of thing. Probably likely to be, even more to the fore, from April next year with the changes to business property relief, you would imagine. Probably a few advice points there.

One, one would think, the advice to the business owners and senior staff or, that was actually a pretty big driver for a lot of those that we spoke to. And then of course there is, the advice to the wider workforce. Now, a lot of the comments there do generally tend to focus around the at retirement advice for this group.

Not all of them though, but a lot of them do. Now, one point often repeated was the importance of the scheme governance report in identifying those approaching, 55 at the moment's going to be 57, soon is going to be the minimum pension age, isn't it? But 55 currently, so that the adviser can speak to them. Now, access to the management information, the MI on the scheme membership absolutely vital there.

So really worth checking what output the provider can give you here before deciding to go with that provider. Now I just want to point out though, okay, that you don't have to deal with every part of the business to get involved in this market. Maybe you don't want to get involved with dealing with the wider workforce.

Perhaps you are quite happy just to deal with the business owner and senior employees and the protections for the business itself. That's absolutely fine. There is no model that you have to follow. Okay? That said, the comments I generally hear from advisers in this market is corporate work opens doors.

In fact, we're, we, were actually almost going to call the presentation this. Now interestingly, I say interestingly, pension's interesting. Not necessarily real life, but we'll go for it with for now. When we ask advisers if they use professional connections, we get the usual, yeah, solicitors and accountants, you often hear that. A couple that are slightly less common though, but probably worth a mention - payroll providers, okay yes, it could possibly be grouped with accountants, but it's a bit of a nuance I thought was worth mentioning. And of course, the other is other financial advisers.

So if you are thinking of getting into this market or more involved in this market, it might be worth perhaps through your network or service provider or whatever other means that you have of making it known to other advisers in your area that you are active in this market and open to receiving referrals because not all advisers are active in this market and they do come across opportunities and might be looking for a home for them.

Okay. I mentioned just a second ago, that you don't have to deal with every aspect of the business to get involved in this market, and that is absolutely true, but the next few points do probably focus a little bit on those advisers who would like to service the wider workforce. Okay. So, we've got a little bit of a windy road with some points on here.

I'm not going to cover salary exchange. Again, I think Craig already did a, an excellent job of outlining the key benefits there. And look, if you want more information, have a word with your business development managers about that. I'll give you a chapter in verse. Next one - they're clinics and seminars.

Now, this really is probably relevant to those that do want to target the wider workforce. Although Targeted clinics and seminars for high-net-worth individuals can work too, but if you want to connect with the wider workforce, simply setting up the scheme and then being invisible to everyone, but the directors thereafter probably isn't going to work.

Okay. And clinics and seminars can be a great way to get your message across to, large volumes of people all at once. And that might be the only opportunity because the employer might not be keen for, every single person to take time out to get bespoke advice and possibly not for something that you'd be looking to do anyway.

But clinics and seminars can, can convey large amounts of information pretty quickly. And then those who want further can seek it out. The next bit there, I've got financial planner back up the top again there. Now, some firms that I've spoken to have used the opportunity of advising the general workforce to bring on a financial planner, often promoting from within.

Remember, this could have benefit with the longevity or even the saleability of your business as well. If you are mid-fifties, as many financial advisers are, and your client bank are predominantly at or in retirement, the likelihood is your assets under management will reduce over time, as these clients will often have finished accumulating and are possibly busy decumulating.

Now, this in turn could impact the sale price of your business, often linked to the value of assets under management. And, a steady stream of new potential clients could alleviate that to some extent. Now, I do appreciate that these clients might not have a high level of investible assets at this stage, so it might be a bit of a longer-term strategy, but some of them will become the high-net-worth clients of tomorrow.

And do you know what, also, they could improve the age demographic balance of your client bank as well, which may also have a positive impact on the saleability of the business. Going back down to the bottom of the screen, further to the right again now, the financial Wellbeing app, you can see I've got there.

Although this is probably a little bit advanced for what we're talking about today, I think if you do choose to get heavily involved in this market, you might want to speak, you probably would be well served to speak with providers of employee wellbeing systems, employee benefits portals to service the breadth of the workforce.

Now, once again, if you're wanting to explore that further, have a word with your usual business development manager, and then the last bit there is wills and power of attorney. I should probably just have entitled it as guest speakers because that's really what I'm driving at there.

And my point is, remember, you don't have to do all of every single clinical seminar yourself. You could cultivate a relationship with and invite specialists in things like will writing or power of attorney, which is why I put those bits up there. Or perhaps protection specialists or mortgage specialists, if that suits the demographic of that workforce.

Okay. it's just a matter of getting your brand in front of them and talking to them about issues that are relevant to them. So, they need to know who you are. And a guest speaker could be just the ticket. Okay. You might just want to top and tail the seminar with who you are and why you've invited that guest speaker along.

Right. So, you'll all be very much aware of how to advise, I suspect high net worth individuals. And of course, getting into the workplace pension market may open up some prospects to target high net worth individuals and at retirement individuals in those workplaces. Now with the consumer duty.

You know, you have to consider the protection for your individual clients. But with workplace, there are a number of other different protection opportunities too. So, I just want to, continue, to look through some of those. So, I'm not going to touch on the right-hand side of individuals. I'm going to assume that you're probably, fairly well versed on that.

Let's look at some of the opportunities within the organization itself. So first of all, let's touch on group life cover. Okay. Right. I'm loosely following the example of the case study that Craig ran through for salary exchange there. I do appreciate group life cover, perhaps not the most lucrative per piece of work that you'll ever carry out, but it is valuable to the employees and particularly if it hasn't been looked at for a while, you may also be able to save the employer a considerable amount of money on their renewal.

Okay. There was, in many, one of our many discussions with advisers and BDMs around this, we came across one adviser who said that they'd saved the employer 20,000 pounds in death in service renewal. Now, a couple of things about that. A. It was a pretty big scheme. B, it obviously hadn't been looked at or the death in service hadn't been looked at for a while.

But, I'd imagine, that sort of thing would you know, give you some real kudos with the employer and probably make them a little bit more receptive to some of your future suggestions as well, even if the savings not quite as big as that, but still substantial. Another point I just want to touch on there is the impact of death in service schemes on, the pension lump sum and death benefit allowance, that LSDBA as it's often referred to.

So if a group death in service plan is set up as a registered group life plan. Okay, so basically written under pension scheme rules as many are. Then the proceeds are added to the value of your pension arrangement for measurement against the lump sum and death benefit allowance. If it's an accepted group life plan, so not written under pension scheme rules.

Okay. Then it isn't, and the point that I'm driving at there is somebody on, let's say a hundred thousand pounds a year. They're a pretty senior person in the organization with 800,000 pounds in their pension scheme, might think that they have no immediate issues with tax free limits in the event of their death.

I'm not in excess of the, of the lump sum death benefit allowance. If my beneficiaries wanted to take it all as a lump sum they probably could. But if they're a member of a registered group life plan on say, four times salary, and if they pass away in service, then suddenly you've got the 800-pound pension, but four times their salary, 400,000 is added onto that to make 1.2 million.

And suddenly, if the beneficiaries wanted it all as a lump sum, they would face a tax charge, if they took it all that way. And do you know what, it's not uncommon to see death in service plans of four times, six times, eight times salary these days now. The reality is that most people probably don't have an issue with limitation of lump sum and death benefit allowance.

Be nice if they did, but probably most don't. But you know what? The three directors of, of this company that we are looking at here might, and that brings me on to another point of things like relevant life policies. Okay? Now the issue of death in service, adding two pensions for lump sum and death benefit allowance.

Measurement is most likely to hit, more senior people directors perhaps at the firm. And if changing the structure of the general group life plan isn't suitable for whatever reason, then there is an option of setting up relevant life cover for the three directors where, the limit isn't an issue, okay?

Because relevant life plans aren't, are not measured against the lump sum and death benefit allowance. And these are the types of key advice points that I'm referring to that come out of getting involved with the workplace pension. In fact, it's quite common from conversations that we have with advisers that the remuneration for the associated work can often exceed the remuneration for simply establishing the scheme in the first place.

Relevant life plans can also be particularly beneficial for small businesses that maybe don't have enough eligible employees to want a group warrant, a group life scheme. Okay. They can also be, attractive for high earning employees or directors, who have those, those big funds and lump sum and death benefit allowance issues.

Moving on next and moving down one there, key man and business protection. Look, to be honest with you, that is a presentation in itself, So I'm not really going to try and do justice to all of this in five or 10 minutes, but there are two key things to highlight here, okay?

Because these are about protecting the business itself, it's about control and remuneration. So, let's say that three directors own this firm and unfortunately one of them passes away, right? The other two really need to be in a position to buy out the deceased member share of the business. Or of course it can impact control.

Now, it would be bad enough if the three of them, were owners of equal shares in the business. But what if the one that passed away was the majority shareholder? If the ownership of their shares perhaps passed to their spouse, then of course there is always a danger that the first thing that the spouse might do is look at the company accounts and go okay how much of a dividend can I take?

And then they might look to sell the shares maybe with a limited period of time for the other directors to come up with the money. And if the other directors can't come up with the money, then I guess, that person, their spouse, is going to continue on with the sale their shares are maybe going to go to the highest bidder.

And who's that likely to be? Well I tell you what, there's a good chance that it will be the competition and then suddenly, your competition owns over 50% of your business and there's a danger that they'll come in and go sales director, right? Got one of those. Finance director got one of those as well.

Operations director. I've got one of those too. And then soon as we, quite quickly, you still own a portion of your business, but you don't necessarily have a role in it anymore. And I know that, many business owners, and you'll know this because some of your advisers will be business owners as well.

You'll know that this is quite dear to business owners’ hearts. This is something that they've put blood, sweat, and tears into building up. The idea of losing that is the sort of thing that keeps them awake at night. And let me tell you, you can insure their worries away and you can add real value there.

Now another thing I will just touch on within that is that many directors take a significant proportion of their remuneration via dividends. Okay? Once again, one of them dies, shares passed to the spouse. What, if the way that the share classes are set up means that you can't pay a dividend to two directors, but not the third, do you really want to have to change your whole remuneration structure to salary, or to have to pay a dividend to somebody who actually not contributing to the profitability of the company?

So those are just a few reasons there as to why these business protections are so absolutely vital to business owners and where you can add so much value in there as well. Moving on then and just looking I'll just conclude there because I, we are, we're just about out of time.

We know that the workplace pension is a really significant market. It will continue to grow and grow. Automatic enrolment is certainly here to stay. We know that many employers review their scheme regularly and a significant number are looking at switching their schemes to a new provider as they will.

As technology improves and prices change and that sort of thing. We know that employees are crying out for somebody to tell them what they need to do for a comfortable retirement and they don't really need to go. They don't really know where they need to go for help with this and you acting as a, using the employer perhaps as a conduit for it can help them with this.

Okay. But really the final bit that I, I just want to leave you with is just around corporate business opens doors and the advisers that we have spoken to in this market say that they came into it, they thought that it was a matter of writing the scheme. Once they got in there, they found that there was a world of opportunity that was opened up to them that they would never have known about if they didn't make that first foray into, the workplace pension arena.

Right, that is pretty much all we've got time for. I will let you have another look at the learning outcomes and the legals. Obviously, you wouldn't want to miss those, and it really just leaves me to say, thank you very much for your time. I hope you found that useful. Goodbye.