Is Your Auto Enrolment Adviser Expert & Experienced?
The Pensions Regulator warns that if business advisers are giving (non-regulated) advice they should “consider the ethical standards set by their professional body and the scope of their professional indemnity insurance”.
By Business Advisers, TPR would include Business Advisers, such as Workplace Pensions Direct, Financial Advisers, IFAs, Accountants, Payroll Administrators and Bookkeepers. There really is no distinction between Regulated and Unregulated, as the act of providing advice to employers on workplace pensions schemes is not currently a regulated activity.
TPR adds: “we are mindful that many small and micro employers will not put much thought into the choice of pension and may simply select the scheme their bureau / accountant uses as ‘standard’ (typically NEST). So, we have been asking business advisers if they can provide information about pensions (and advice if they have the expertise/experience) to their clients and encourage their clients to think about which scheme would be best for their staff.”
What do the Regulations Say?
Many professional bodies will not allow members to advise on areas where they have no competence. For example, at the ICAEW, code 330.1 states:
“The fundamental principle of professional competence and due care requires that a professional accountant in business only undertake significant tasks for which the professional accountant in business has, or can obtain, sufficient specific training or experience. A professional accountant in business shall not intentionally mislead an employer as to the level of expertise or experience possessed, nor shall a professional accountant in business fail to seek appropriate expert advice and assistance when required.”
TPR guidance states “In practice, the FCA authorises many advisory firms. However, in terms of providing advice to employers, the majority of this is not covered by conduct of business regulation.” It adds: “The FCA regulates advice to members of contract-based schemes and investment advice to trustees. Advice to employers on scheme selection is not regulated. Intermediation (remuneration of intermediaries/regulated advice to individuals) is regulated.”
Also, the activity of business advisers providing advice to employers on workplace pensions, in the majority of cases, is not covered by Professional Indemnity insurance.
TPR have discussed whether advice to employers on pensions should be regulated with FCA, but this is a matter for FCA and the government.
TPR’s Spring research provides all the evidence required by an employer should an Accountant fail to comply with ICAEW Code 330.1, etc, when it comes to making a complaint against them both:
a) for the Accountant not being suitably expert or experienced to choose Nest, and
b) they should be aware of this with TPR having identified a relatively low understanding of the regulations amongst business advisers in general.
On a rare occasion, employers may be referred to business advisers who may intentionally mislead an employer to the level of relevant expertise or experience possessed. The risk is even greater where the advice is unprotected under the terms of the adviser’s Professional Indemnity insurance, which leaves the employer exposed.
Business Advisers need to be aware that they too can be fined by TPR.
Workplace Pensions Direct Limited (WPD) is a national and specialist business adviser firm simplifying auto-enrolment for small businesses, on behalf of other business advisers and direct. Their in-house advisers have specific training and experience for the task, and they have relevant professional indemnity insurance in place.
I am pleased for the clarity TPR has provided encouraging employers to choose a scheme appropriate for them and their workers, ethical standards and professional indemnity insurance.
This is all very helpful for everyone.