Monetising the mammoth job of helping firms reach auto-enrolment staging is preventing advisers engaging with employers. But help is at hand...
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Staged payments v fixed payments
The road to AE may be long and, as advisers are likely to be heavily involved early in the process, fixed payments at the end of staging will lead to a mismatch between when the work is carried out and when an adviser is paid, says Cochran.
Staged payments, on the other hand, work well in the AE process and The Pensions Regulator (TPR), among others, has helpfully broken the process down into identifiable steps.
How to charge for auto-enrolment advice
Cochran says to make these stages ‘pay points’. That way, advisers are being paid at the time of doing the work. “Consider it a bit like building an extension – you may be charged when the foundations are complete, again when the building is waterproofed, and again when the job is complete,” he says.
Time-costed payments v fee per member
If advisers are happy with their recording systems, then time-costed payments make a lot of sense in getting to successful auto-enrolment, according to Cochran. It is the only surefire way both employer and adviser know they are being charged for the work undertaken.
The employer will want an estimate of the likely costs involved and advisers may be able to provide estimates from previous experience or from looking at those published elsewhere. This approach to fee charging does away with cross-subsidy – those employers with good-quality, accessible data will pay less than those with complex data arrangements.
The fee per member approach seems attractive again for its simplicity, says Cochran, and it may well have a role to play post-staging date, particularly where an adviser is using a third-party solution for AE that charges a fee per member and may provide access to a range of flexible benefits.
However, he warns this model may, or is even likely to, lead to a cross-subsidy approach where employers that do not engage are charged too little, while those with simple schemes and good data are overcharged.
Cochran points out that neither the time-cost or fee-per option need to be mutually exclusive: “It’s perfectly feasible to offer a time-costed payment approach to get the firm to staging and a fee per member approach thereafter, for ongoing compliance and, perhaps, access to advice.”
Here are a couple of interesting titbits about AE: firstly, TPR has told firms to prepare for their staging dates a full year-and-a-half in advance; secondly, employers will likely need to divulge more than 30 bits of data per pay period to their AE provider.
That sums up the size of the task facing firms (and advisers) in the next few years, as does this sign-off from Cochran: “The job of auto-enrolment is more complex than anybody expects it to be, will involve more time than anybody thinks, and will require a charging proposition flexible enough to cope with changing demands as advisers and employers navigate the auto-enrolment journey.” Easy, then.
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