The reduced charges for many workplace pension schemes means savvy independent financial advisers can now easily tap into the market.
This is according to IFA Daniel Elkington, who joins a long list of financial planners who say the fall in charges for workplace schemes allows advisers to negotiate great deals and discounts.
The drop comes after the government introduced a charge cap of 0.75 per cent of funds under management, or an equivalent combination charge, in respect of the default arrangements of workplace pension schemes used for auto-enrolment from April 2015.
This means many larger providers are offering to manage workplace schemes at much lower cost, and this is presenting opportunities for advisers to help small business clients.
Elkington, IFA at Lincolnshire-based Keep It Easy, says: “I think it’s a great opportunity to contact businesses and offer to negotiate discounts. Most schemes were set up when the company and the pension’s associated value was a lot smaller. So, the increased size of the scheme should put a lot of advisers in a position to negotiate much better fees.
"The downside of this is that it might require a lot of work to move to a less costly provider if the current provider keeps collapsing the ruck, which involves a lot of fees and time due to having to do the necessary pensions surgeries.
“Workplace pensions don’t tend to cost the employer – if they are then they should be having serious words with whoever arranged it in the first place.
"People’s Pension, NOW and Nest provide pretty decent master trust arrangements for smaller employers so costs really shouldn’t be an issue.”
A downward trend
A similar sentiment is echoed by Kusal Ariyawansa, chartered financial planner at Manchester-based Appleton Gerrard Private Wealth Management. “We continue to see a downward trend in such fees, be it is at scheme or fund level. Technology has played a major role, allowing advisers to add another layer of servicing for corporate clients and their employees.
"A more hands-on approach can be taken both in terms of advising and managing individual pots in line with goals, targets and investment preferences. Advisers should be able to showcase and justify their value above costlier options such as Nest,” he says.
Scott Gallacher, chartered financial planner and director at Leicester-based Rowley Turton, says the rising cost of living means that advisers face an increased challenge in tapping into the sector.
He says: “I understand that charges have fallen somewhat since auto-enrolment was introduced, and, given that schemes will now be larger, with accumulated funds, there may be an opportunity for employers, and advisers, to revisit the scheme selection.
"And, of course, this will be a potential opportunity for advisers. However, given the many other challenges employers will face – such as labour shortages, rising energy costs and a recession – convincing them to spend more on reviewing the company’s pension arrangements may be challenging.”
