As auto-enrolment proceeds smaller employers can struggle to get the support that they need. The Auto-enrolment Advisory Group has launched AE in a Box, a low-cost system aimed at supporting small employers through the auto-enrolment process.
Director Chris Daems tells Helen Morrissey about how the industry can best serve small employers.
What prompted you to launch your AE in a Box product?
As we go further through auto-enrolment, we find that employers of 40 people, for instance, cannot afford to pay much for their auto-enrolment solutions. They often can't afford to pay consultants like their larger counterparts did.
However, there are more than one million employers in this market that need help and so we have looked to see if we can package everything we've learned over the past three years to see if we can in some way commoditise the consulting model for these types of scheme.
If you run a garage or a shop, then how are you going to cope with auto-enrolment? Where is the support? The big issue is how do we make the consultancy model profitable in that space?
You are seeing some firms doing it for £5,000-£6,000, while others are doing it for £100 per month with full consulting. You've got to ask how that model can work in a profitable way. There needs to be a more support-lite model.
Tell me about the AE in a Box product?
The important thing to say is that we aren't competing in the middleware market here – that is already a crowded space. Many smaller employers – if they have a payroll provider, then they are ideally looking for some kind of plug-in between their system and payroll, so they can effectively push the button and get started. However, the problem with middleware is the gap – where does it lie?
Employers need to understand that the auto-enrolment project is only about 10% pensions – the rest of it is project management. AE in a Box lets employers know what tasks need to be done by which date, with relevant instructions and links to help then perform each task successfully.
We need to make things simple and help employers to choose a pension, for instance. When we get to the smaller employers, there is only a limited range on offer and employers need to ensure that they are able to get terms from the providers they want to work with and this system can help with that.
At this stage in the game, it is pretty much master trusts only serving this market. However, if the client does not want a master trust, then we will outsource that to another party.
With AE in a Box, the employer logs in and we develop a project for them. They could be working with a payroll provider such as Sage, for example, and we will set up a task to ensure data is backed up regularly. It's all about making it simple for the employer.
People want to have choice, but it is knowing at what point the choice becomes too much and we can't have people who are new to this becoming overwhelmed. They need to be guided through the process and understand this is something that happens on an ongoing basis.
You need to let people know the tasks they need to do on a day-to-day basis, as well as making them aware of when regulation changes.
How does a 20-man business keep up to date with regulatory changes? We know when things are going to change, and we can keep them up to date with what these changes can mean for them and help them through the process of ensuring they remain compliant on a day-by-day basis.
Finding a way to support smaller employers is tough. We could, say, provide a service whereby they email in their queries and we respond within 24 hours.
We are also looking to provide something that helps people check in with the regulator. People tend to be quite scared of the regulator, but really it has done a good job in dealing with schemes about auto-enrolment.
If we can get to a point where they feel they can contact the regulator with a query, then that would be good. The regulator is keen to see that the market runs smoothly and we are in regular contact with them.
We have had plenty of experience dealing with the 2,000 member schemes and that has been a massive knowledge curve. We have built up a massive knowledge base over the past few years and the chances are we will have dealt with most of the issues schemes are dealing with right now.
We have built a knowledge base that will be open to those who use our system. If any new queries or situations arise, we can add them to the knowledge base.
Does the system help employers communicate with their staff about auto-enrolment?
The big issue we find with employers is that they don't want to talk about pensions to staff. They are scared of being seen to have offered advice or inducing employees to opt out.
We have developed a series of videos on the system for employees to watch. These videos cover various topics such as why you should not opt out of workplace pensions. The viewer then needs to give an online signature to say they have watched it.
When are you looking to launch AE in a Box and what kind of interest have you had so far?
We are hoping to launch either at the end of August or early September. We have had a decent amount of interest with a number of conversations ongoing with people who are concerned about how they are going to project manage smaller cap clients through auto-enrolment.
These employers might not come to us individually – it is likely we will be introduced to them via their accountants, IFAs, etc. There is an upfront cost of £79 and then it is £29 per month per employer – this does not include the cost of middleware, of course.
Advisers looking after mid-sized practices might believe that there are, say, 30 people within that business that they might want to engage with more in terms of private client work. But you still need to find a way to help the other employees in that business in a cost-effective way.
To find out more about AE in a Box please go to http://www.aeinabox.co.uk/
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