Corinthian Affinity offers auto-enrolment solutions to employers, accountants, payroll bureaux and other ‘Affinity’ groups. What are the main challenges associated with operating within the sector?
I think that the biggest industry challenge is lack of understanding and lack of engagement from both employers and employees. Auto-enrolment has been thrust upon hundreds of thousands of employers that have never had pension schemes in the past. At the moment, we're seeing the antithesis of engagement, since employers have no choice but to comply with auto-enrolment. Their employees are auto-enrolled into a pension scheme without any real understanding and due to inertia. Very few make the decision to ‘opt-out’. Since the Retail Distribution Review back in 2012, advisers can no longer get a commission from pension providers. This typically would have paid for education and engagement exercises, such as presentations and one-to-ones. Therefore, many employers don’t understand the concept and see it as a tax, rather than a benefit. This means many are not willing to pay for education exercises themselves.
This has begun since one in five companies now miss their staging date. In fact, the Pensions Regulator’s quarterly bulletin showed that the number of compliance notices (the notice you receive if you fail to meet your first deadline) went up by 25% in the last quarter of 2016. Today, 31 680 compliance notices have gone out since auto-enrolment started in October 2012. This worrying trend will continue as we’re now looking at the smaller end of the market. The small employer that probably doesn’t know much about the legislation and the impact it will have on them.
Another issue we are faced with is the fact that most employers are completely missing the point of auto-enrolment. Auto-enrolment actually has very little to do with pensions, it is mainly all about process, administration and data. This lack of knowledge results in many people using NEST. NEST is the workplace pension solution set up by the government for all those employers who can’t or don’t want to find another pension scheme.
The problem with this is the main reason for a lot of people using NEST is simply because it’s free. They register with NEST and then don’t do anything regarding their actual duties, which results in them getting fined. This is why our main goal is to educate these people. We want to make sure people understand all the processes involved in auto-enrolment. When they understand it fully, they will realise it is a benefit, not a tax.
The Department for Work and Pensions is currently consulting on a review of the legislation. The biggest change, that I think everyone in the industry wants to see happen is an increase in the contributions. Come April 2019, the contributions will be 8% – 5 % from the employee and 3 % from the employer. At Corinthian, we don’t think that’s going to provide the typical employee with a suitable pension when they reach retirement age. However, this is not in scope for the review.
Thus far the UK has been closely following the Australian method for pension saving. I believe that if we continue doing so, we’ll soon see a scrapping of the opt-out rules. At the moment, although automatically enrolled, the employer still has to give the employee the option to opt-out. Although, due to apathy, the vast majority of people won’t do anything. It would be more efficient if employees have no other option but to stay in the pension scheme.
Another thing that’s been looked at by the government is tackling the issue of the self-employed. At the moment, there’s no legislative requirement in regards to their retirement savings. I believe that the government’s next focus will be on legislation for them.
In terms of the sector, I foresee a merger of a lot of companies. I think the number of employee benefit consultancies and pension providers will be reduced. I think the larger employee benefit consultancies will swallow up some of the smaller ones. We’ve already seen the start of this trend with Aviva and Friends Life’s merger. At Corinthian, we want to work with real companies and their employees. Being part of a larger employee benefit consultancy won’t necessarily suit us, therefore we’re in it for the long haul.
Recent legislative changes will make our job of increasing education, understanding and engagement more important. This is because when there are changes of this magnitude, it’s important that employers know about them and understand them. Our aim is for all employers to see auto-enrolment as a benefit as quickly as possible. We also want to make sure employers give the opportunity to their employees to understand it too.
Although we approach every meeting with a potential client afresh, Corinthian Affinity offers three main solutions. The first is for an ‘affinity’ group who operate payroll. We provide them with the auto-enrolment solution so they can give an all-inclusive service to clients, saving them time, money and stress. The client doesn’t even have to know we exist! We provide the accountant, payroll bureau or bookkeeper with support, so they can white label it as their solution.
The second options is for if a company doesn’t operate payroll and can’t administer auto-enrolment (e.g. many IFAs). In this case we can do all the work to make their clients fully-compliant and assist throughout the process. All that the client needs to do is send us their payroll data and we’ll do the rest.
Lastly, the most popular consulting solution that we offer, called Assist. This is mainly aimed at those employers who want to do a little extra for their employees. It also ensures they understand the pension scheme and the benefits it provides. We help the employers with communications and engagement programs. We will provide branded booklets, bespoke presentations and salary sacrifice for pension contributions. In addition, we will provide the employer with governance meetings to ensure that they are fully engaged and understand the importance of the benefits that they provide.
Our approach is very much tailored to what the client wants. Unlike many of our competitors, we still want to meet every potential client face to face. And we want to go into every meeting with a blank piece of paper. We ask what their ideal solution is, regardless of whether we’re talking to an accountant, IFA or an employer directly. We then put together a bespoke plan for them. I believe having different levels of service and not having a set product works better for our customers.
It’s down to the lack of understanding about the legislation. Regardless of the legislation that the Government is introducing, they always seem to make it as complex as possible. If you go on to the Pensions Regulator’s website, you’ll find 484 pages of guidance on auto-enrolment and see how complicated that legislation is, which results in a huge lack of understanding. As mentioned earlier, our clients don’t understand that it’s all about the process and that it’s their responsibility to ensure that they fulfil their duties. Therefore, what we’re trying to do is improve their lives by making the complex simple.
I think that our top three main priorities are around education, understanding and engagement -making sure that both the employer and employee understand what’s going on. These have been our top priorities since the very beginning – our main focus has always been on real companies and making sure that the employer is getting a return on their benefit spend, by employees understanding their pension schemes and the other benefits they receive. Corinthian has tried to develop the same as what we developed previously with Alexander Forbes – helping employers and employees gain a full understanding of their benefits package, seeing it as a total reward rather than focusing purely on the basic salary.
When Corinthian Affinity was established early in 2015, our aim was to support those small and micro employers staging between 2016 and 2018. As many of these will turn to their professional adviser for help, it was important that we provided a service to those ‘affinity’ groups, hence why we are supporting so many accountants, bookkeepers and IFAs. We see this continuing until auto-enrolment is fully embedded and becomes second nature. We also see a very big secondary market of accountants, bookeepers, IFAs and employers who have worked with other employee benefit consultancies or with NEST and are suddenly realising that they get no value from this partnership. At Corinthian it’s all about a value added service and we’re spending more time on this aspect so that we can provide our partners and clients with a solution that’s going to save them time, money and stress.
I expect more digital and online solutions – we’re certainly looking at developing our online capabilities further. Our website was completely revamped in October last year when we launched as Corinthian, but we still want to develop more digital solutions that can help with the education, understanding and engagement of pension scheme members.
In relation to the sector – I feel that everyone is going to try to compete for the secondary market in auto-enrolment. However there will come a time when we all get back to our day jobs of assisting employers and employees with all of their employee benefits, and not just the pension schemes.
2017 is going to be a massive year for us – there are still 800 000 employers who haven’t reached their staging date. This means that many companies will need our help and there’s a lot of people that we can assist this year. We’d be happy to get to work with even 1% of these 800 000 companies to ensure we make their lives easier and allow them to focus on running their business.
I’ve known the MD and the other two directors for a long time, so in 2015 when they asked me to come in and set up the separate business, which is now Corinthian Affinity, I was delighted. Initially I designed the proposition and spending time with our own accountants to find out what it was they wanted. Once I understood their needs it put me in a better position to start discussing this with other accountants, bookkeepers and IFAs who needed help. I spent a lot of time coaching and working with our relationship managers to ensure they provide exceptional customer service that we pride ourselves on. Over the course of the next two months, we’re moving offices to Tunbridge Wells and all four of us directors are completely dedicated to supporting each other and the wider business to ensure that we can continue to deliver on our core values.
They need to engage with their clients more. A lot of our competitors offer free services but they don’t offer any value added service – they’ll set up the pension scheme and then walk away. I believe that it’s vital to provide ongoing support to our partners and clients that we’re working with and actually engage with them. We try to add actual value to our clients and give them all the support that we can, so they can continue running their businesses. I’d say that the vast majority of our competitors just don’t do that.
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