Pension Providers Withdrawing from AE Should Be Fined: Defaqto

With a number of traditional providers expected to pull out of the AE process as SMEs come on board, due to lack of cost-effectiveness, wealth analyst Richard Hulbert for the financial research firm said:

“We’ve had some discussion here about ways to get around that and one of the things which has come up a couple of times is if there should be a levy on those providers that exit the market before auto-enrolment is completed.

“That way the money could be used to support those smaller providers that are meeting the need because creaming the profits off and leaving is somewhat selfish really.”

According to figures from the company, 20% of workplace schemes through traditional providers have a minimum contribution per month of £80 or higher. Another 30% or so were demanding minimum contributions of £20.

Defaqto also found that 18% of the schemes had a minimum of 11 enrolled employees and the majority, 82%, demanded a minimum age for members.

These restrictions are, according to Hulbert, acting as a barrier to smaller companies too.

However, the director of group savings and investments for LEBC, Glynn Jones, said that this was simply about traditional providers targeting employers wanting quality schemes for their staff.

He explained that it was for the government-backed NEST scheme and schemes such as The People’s Pension to fulfil the requirements of those firms only wanting to comply with the AE basics.