Paul Avis, sales and marketing director at Canada Life Group Insurance, takes a closer look at what auto-enrolment means for advisers and the group risk market.
Recent research found that advisers believe auto-enrolment (AE) will have a positive affect on the group risk market.
In all, 72% of those surveyed think that, as employers seek financial advice to ensure they are compliant with AE regulations, advisers will be presented with more opportunities to speak with them about their employee benefits. As much as 68% think businesses will need to review their benefit offerings alongside their workplace pension scheme.
So, there is plenty of opportunity and, in theory, we are set for boom times in the group risk market.
Auto-enrolment will boost group risk market
But this is dependent on the adviser market embracing the opportunity, and this is where insurers can offer support. Firstly, AE, from a group risk perspective, needs to be fully understood before any consultation can happen and working with informed insurers is the best way to start this.
Many of the initial materials provided for group risk business centred around how ‘actively at work’ conditions would be treated and how any long-term absentees would be covered when automatically enrolled. However, there is more to understand, such as the complexity of accounting, as people coming in and out of schemes leads to fluctuating earnings, previously underwritten benefit decisions and how they may affect automatic inclusion, and so on.
Greater understanding will differentiate a rounded risk adviser from a purely pensions-oriented one. Indeed, technical and thought leadership will provide opportunity for discussion and offer earnings potential, as clients become more focused on their impending staging dates.
For new to market schemes, the challenge may be taking the technical points and using them to provide coherent consulting messages. One of the unintended consequences of the legislation is that anyone auto-enrolled will lose their fixed or enhanced pension protection – unless they opt out. This is normally the domain of high net worth financial planning, so it offers a great opportunity for an adviser to talk with these clients.
Perhaps by asking for a meeting with the human resources or finance director of the personal clients' companies, intermediaries can ensure rounded advice is given. In addition, a significant tax charge awaits people who fail to immediately opt out of AE in these circumstances and the onus is on the adviser to spot this and advise the employee, employer or trustees.
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