The Brexit/Remain of automatic enrolment

 

It’s in the nature of referenda I suppose that we’re awash with data and views on a wide and diverse range of issues. Then we have to choose from one of two opposite positions. In this case it’s simply leave, or remain. It’s not easy is it?

 

Underlying the Brexit/Remain debate, it seems to me, are two equally opposite views of life. Should we see the EU project in the context of what’s best for 500 million people with whom we have a lot in common, or should we view it as “us and them”.

 

Automatic Enrolment

 

And so it seems to be with the automatic enrolment project. The “us and them” seems to be pensions sector and the payroll sector.

 

I was surprised to see a linkedin post in the last week or so from a respected pensions commentator, backing the payroll sector as the future custodians of automatic enrolment and warning that pensions people must start working with them. A couple of days later I saw a couple of posts from another pension practitioner lambasting the payroll sector for knowing nothing about pensions!

 

So who will win (if it really is a competition) between pensions people and payroll people? More importantly, does it matter? Surely what matters most is that automatic enrolment delivers a resurgence of and belief in, workplace pensions.

 

The real issues

 

Underlying the divisive comments that are being made are some serious implications for both sectors that each needs to consider for the future.

 

The pension sector’s perception of its value to customers is built on supporting medium and large employers with pensions and employee benefits at a time when complexity and pension contributions were much greater than they are now. In the past the market accepted that view.

 

The market view of the value of the payroll sector has traditionally been much lower.

 

For my money, the market will determine the value of a combined proposition to be somewhere between the two.

 

So pensions people, particularly pension advisers, need to review their business models. Are the structures and remuneration levels that they’ve enjoyed in the past sustainable in today’s market, particularly for small employers?

 

And payroll people do need to think carefully about upskilling. There is more to pension schemes than uploading data. Employers will expect them to know about governance and investments among other things and employees will, naturally, expect their questions to be answered.

 

If both “sides” take appropriate steps, the resulting competition can only be good for consumers.

 

In the meantime…..

 

We work together.

 

The small employer sector, representing by far the greatest number of employers, does not generally buy directly from payroll software providers anyway. So whilst payroll companies can legitimately increase their value by becoming pensions experts, they’ll find it difficult to deliver their expertise to the front line. The front line is made up of many thousands of payroll bureaux, some run by accountancy firms, some not. And many of them will be reluctant to upskill to become pension experts for a long time to come.

 

As a pension specialist in the front line of automatic enrolment, helping small employers, I can testify to the fact that we already work collaboratively with payroll suppliers. It’s the only way, isn’t it?

 

I’m voting to remain by the way :)

 

Ken

 

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