Major changes to the UK pension system are underway. In particular, auto-enrolment and the new pension freedoms mean it’s important employees make decisions about their workplace pensions that are right for them. As online independent financial adviser Wealth Wizards points out, now more than ever there is a need for expert advice to make the most of pension savings and get the best retirement outcome.
The last three years have seen significant reforms for the pensions sector, nowhere more so than in the workplace pensions arena, where employers have had to get to grips with auto-enrolment and all the challenges that come with it.
They, and their employees, have had to get their heads around the government’s pension reforms that came into force in April, transforming the very notion of retirement planning by giving those approaching retirement far more choice in how to use their pension savings. While that freedom has been welcomed, it has also created dilemmas for those who’ve only ever considered using their pension pot to buy an annuity.
In spite of these changes, many organisations report that employees are still not engaging with workplace pensions.
“It’s not really a surprise,” says Ben Webster, managing director of employer solutions at Wealth Wizards. “Employees are faced with bewildering choice and complexity when it comes to pensions, and we don’t expect anyone except a small minority to be in a position to understand their investments or make informed choices without advice.
“For example, many employers select to enrol employees into default funds. While there’s nothing wrong with these, they are designed for the average employee. But who is really average?”
Clearly there is an urgent need for quality pensions advice, yet few employers are currently providing their staff with access to it. The main barrier, now that commissions have disappeared, is the cost and availability of face-to-face advice, which has to be paid for explicitly.
Wealth Wizards has pioneered a completely new approach. Their online services deliver expert advice in the workplace or at home, cost effectively and inclusively for all members of staff, advising on accumulation investment strategies, at retirement advice and encouraging take up of tax efficient options such as salary exchange.
The first true online independent financial adviser or “roboadviser” in the UK, Wealth Wizards’ advice has been developed with input from leading experts and consultancies, as well as in-house chartered financial planners and actuaries.
The biggest winners, however, are the many employees who need real help
The advice is delivered through simple online apps, using the latest technology. Once registered, employees answer a standard set of questions, which typically takes ten to fifteen minutes. In most cases a full advice report, including a recommendation on how to invest their pension, is instantly available.
While technology is opening up advice at scale, Mr Webster recognises that the overall complexity of pensions means a degree of handholding is necessary to engage employees fully. That’s why the apps will identify anyone who may need to provide more information or speak to an adviser directly. A helpline and Skype support is also available, along with employer training and on-the-ground help for employees from the client team.
And once an investment strategy is in place, a regular review should be as routine as getting an MOT for your car. However, without a formal checkpoint or legal requirement, Mr Webster believes employees need to be chivvied into looking at their pension annually and accessing professional advice in order to check their investments are still right for them and that their pension pot is on track.
Pension advice should be as much a core element of the employee benefits package as things like health insurance, sick pay and income protection
The benefits to the employer of offering such services are clear. By helping employees take control of their pension finances, they are sending a message that they value their staff. This is key to employee engagement, motivation and retention, all of which are linked to increased productivity and bottom-line benefits.
Another key benefit to employers is a reduction in the risk from any liability connected with unsuitable pension arrangements as the liability for any advice sits with the adviser. Finally, offering advice can help increase take-up of schemes, such as salary exchange, which benefit both employee and employer.
The biggest winners, however, are the many employees who need real help. Providing them with independent advice means they are no longer faced with making difficult choices they feel confused about or simply ill-equipped to make.
“We believe that workplace pension advice should no longer be an aspirational offering,” says Mr Webster. “The pensions landscape has changed dramatically and in doing so has put employees in a position of having to make important decisions about the way they plan for their retirement. We believe that employers, pension consultants, providers and technology companies need to work together to increase engagement in workplace pensions. Pension advice should be as much a core element of the employee benefits package as things like health insurance, sick pay and income protection.”
“And from the employer’s point of view, given that a simple and cost-effective online service is available, and the business benefits associated with supporting staff around their retirement finance planning and the quality of life they can expect in later life, can they really afford not to provide their employees with advice on their pension?”
HOW IT WORKS
Matthew Starks, director of human resources at First Rate Exchange Services, a leading supplier of foreign currency, says: “Our employees were asking for help with their pensions. They wanted something easy and quick to use, and to get quality and professional advice, given the complexity of pensions and the difficulty they were having in making decisions on where to invest their money for the future.
“First Rate researched the market and chose to work with Wealth Wizards because of the independent, professional advice they offer and shared company values around innovation. We also liked the fact that Wealth Wizards work with our existing employee benefit consultants and pension provider to action employees’ wishes once the advice was accepted, ensuring a seamless experience for our people.
“We’ve found Wealth Wizards’ services to be a really valuable addition to our employee benefits package.”