Fiona Murphy reveals the results of this month's auto-enrolment-themed Inquiry
Our auto-enrolment special has been focusing on what advisers think of the whole process and the challenges they face. This Retirement Planner Inquiry looks at how advisers are preparing for auto-enrolment and what issues their clients are dealing with.
As with previous Inquiries, we sent out an online questionnaire to our readers, with 129 advisers taking part in the survey.
We asked first whether they were advising companies and their employees on auto-enrolment. Just 71% of respondents said they were. Those who said they were not providing advice were screened out at this point.
We then went on to gauge how their clients view auto-enrolment. More than half of participants (57%) believed employers are not seeing it as a priority right now.
This was followed by 42% who said clients see auto-enrolment as a drain on time and expenses during challenging economic times. Only 1% supported auto-enrolment (see chart one).
We then asked how far employers had come in choosing their pension provision. A third (33%) said they hadn't done any preparation, while 59% said they were starting to think about it but no firm decisions have been made.
Only 7% made some key decisions with ongoing progress, while only 1% have made all the major decisions and are ready to proceed.
Employers will have to take the decision as to which provider to go with for their pension provision. Will they remain with their current provider or will they look elsewhere? What kind of role will NEST play? We asked advisers to tell us how they think NEST will be used.
The most popular choice is using it alongside existing pension provision (48%). A further 34% said they will implement an alternative scheme instead, while 11% said they won't be using NEST as they already have a qualifying scheme in place. Only 6% said they will solely use NEST (see chart two).
We then asked about employer concerns. Cost was highlighted by more than two-thirds (71%) of survey participants. This was followed by administration (48%).
When asked to explain, several advisers said employers were put off by the extra company expense due to implementation costs and raising employee contributions.
Many were concerned that if a large number of employees opted out, it would be money wasted. Another adviser said employers felt it was unfair to reduce employees' take-home pay in favour of a pension due to rising living costs.
The potential for being fined for administrative or legislative breaches weighed heavily on many advisers' minds. Further responses included additional paperwork, complex eligibility criteria and the lack of trust when relying on a non-pension company to run the administration of a scheme.
To follow up, we asked how these concerns were being addressed - 34% said they were not yet being dealt with. A quarter (25%) said salary sacrifice. In addition, 13% said consulting an IFA, which advisers confirmed was communication and compliance advice.
Those who responded "other" provided interesting solutions for employer concerns. Some advisers said they were planning timetables or assisting HR with advice around cash-flow and phasing in payments.
But many look to outside parties for assistance. Those who believed concerns were not being adequately dealt with urge the DWP and providers to give clarity to employers.
We then shifted focus to find out how advisers felt employees were responding to the impending changes. We asked whether advisers were fielding queries from employees about the introduction of auto-enrolment. The results were close, with 54% saying "yes" and the remaining 46% saying "no" (see chart three).
The employee views were broadly similar to employers, with cost (51%) and administration (28%) being the greatest cause for concern. Again, "other" came in as a popular answer (19%).
One adviser said that employees who will be auto- enrolled worry they will have a lower contribution level than others.
Similarly, another said employees felt the benefits would be poor. Others were conscious that wider issues were at play. One adviser said that employees were responding negatively to auto-enrolment due to the adverse coverage of pensions in the press.
Another had encountered the belief this was just another incentive from a new government and wondered why the coalition didn't enforce the stakeholder scheme model instead.
Next, we wanted to see what advisers really thought. The majority (62%) believe auto-enrolment will be unsuccessful. So we probed them further and asked: "Why not?" The biggest issue was employer and employee apathy (42%), with the perception too many will opt out coming second (25%). Only 4% respectively charged IT issues or government support as a potential failing (see chart four).
So, it appears that the deadline for auto-enrolment looms in the distance, while advisers are seeing less optimism among employers and employees.
But as they have misgivings, more work will need to be done to raise the importance of employers and employees adequately planning for the changes, and using it to their advantage.
Chart one: How are employers viewing auto-enrolment?
57% - They are not looking at auto-enrolment as a priority right now
42% - They see auto-enrolment as a drain on time and expenses during difficult economic times
1% - They support auto-enrolment
Chart two: How are employers likely to utilise NEST as part of their auto-enrolment strategy?
11% -They won't be using NEST as they already have a qualifying scheme in place
34% -They won't be using NEST as they will be implementing an alternative scheme
48% - They will use NEST alongside existing pension provision
6% - They will use NEST on its own
Chart three: Have you fielded any queries from employees about the introduction of auto-enrolment?
Chart four: Why don't advisers think auto-enrolment will be a success?
42% Employee/employer apathy
25% Too many will opt out
21% Complicates to administrate
6% Lack of information
4% IT issues
4% Needs more government support
Senior Managers Regime
Interest rate outlook unchaged
FCA made demands last week
'Unsung' part of FSCS work