LARGE companies should act now to find high-quality workplace pension scheme advice, or risk being “left out in the cold”, a leading industry figure has warned.
Mitch Hopkinson, head of the Workplace Solutions division at deVere United Kingdom, said that the Government’s pension reforms, which are due to come into force in April 2015, introduce greater freedom of choice for employees, but also require employers to offer high-quality advice. He said the problem lay in a national lack of skilled advisers.
“Companies that don’t act now may end up left out in the cold, because there aren’t enough consultants to go round,” he said.
“It’s not a crowded marketplace; there isn’t really any great capacity there. One company told me they had a list of less than 15 consultancies they would deal with.”
The trend has its origins in the move away from final-salary pension schemes, which might typically provide an employee with a pension of two-thirds of their final salary after 40 years’ employment. Over the last two decades, an ageing population has made these less sustainable, so large corporations that still run such schemes have tried to find ways of reducing their liabilities.
One way is by making employees an offer, and in this case an adviser, or consultant, would normally get involved to help on a one-off basis.
Now, however, larger corporations are increasingly moving away from the one-off project-based approach in favour of long-term service agreements which see them consulting with employees in relation to their workplace pension provision.
In response to the trend, the UK arm of deVere Group, one of the world’s largest independent financial advisory organisations, launched its Workplace Solutions division in April this year.
Mr Hopkinson said: “Immediately upon entering this market we discovered not only the change in approach by employers, but the critical need for provision of high-quality advice to employees and former employees in this very complex area.
“We’re relatively unique because we have an international brand behind us, which is rare now as a lot of the other firms that had that have disappeared since the shake-up of the industry – for example the banks and building societies that had a lot of advisers.
“Evidence of our quality in the key areas of engagement with and advice to individuals immediately resulted in our securing a three-year appointment with a major multi-national with a large UK presence.
“Achieving this so soon after we launched Workplace Solutions is astonishing and almost unheard of.”
Under the more traditional project-based work model, Mr Hopkinson said deVere would process perhaps 2-3,000 of a client’s employees within six weeks.
“But now we’re likely to be engaged for two or three years and can see up to 700 or 1,000 a month once we’re geared up and scaled up effectively. We have a core of four or five senior consultants, but there are another 20-plus in the wider business who we can co-opt if we need to.
“It’s a lot easier to deal with a company over two to three years because you can build up a relationship with them.”
But he warned that large companies looking for workplace pension scheme advice should be prepared to pay for quality.
“What we have to say as an industry is that that advice has a cost associated with it and if you want good advice you’ll have to pay for it.”