There’s no better protection than a group hug

Listen carefully – is that the rustle of protection providers gearing up for auto-enrolment? If they’re not they should at least be thinking about it because if you thought auto-enrolment was just about pensions it’s time to think again. The fact is it’s the chance to write protection business on an exponential scale for next to no effort – it’s time for a group hug.

From our perspective the auto-enrolment and Nest reform represents the biggest opportunity for increased contact between the financial services industry, employers and their employees in history.

For sure there will be opt-outs. But the appetite for information and help will be vast.

Many advisers and providers will hope to retain or win the most profitable business, establishing very good qualifying schemes. Advisers also have a huge opportunity to charge fees for putting in place compliant schemes and the systems for running them. The offer may well be that they will allow employers to sleep at night without worrying about the Pension Regulator knocking on the door

Yet let’s think more laterally. Even in these difficult financial times some employers may want to turn the reform to their advantage by retaining the “employee benefit” nature of offering a pension, so that they are seen not just as offering a minimum. And if that is the case – some for example are considering paying the employee contributions as well as their own to emphasise the point – might they not also be interested in bringing in other benefits too?

If so, then group risk fits the bill perfectly as a cost effective way of doing more for employees. Certainly from an employee point of view, group policies could be a way of accessing cover much more cheaply than on an individual basis. It’s never a bad story to tell employees that ‘the Government has required us to do one thing, but we are also offering something extra’.

Something of an aside here, although certainly an issue that should not be overlooked, some very high paying employers particularly in financial services may not have traditionally provided a pension. Generally these will tend to be bonus driven businesses from the worlds of private equity or hedge funds. They may not be as numerous as they once were, but suggestions that the whole sector was about to decamp to Switzerland have certainly proved unfounded. These businesses are going to need to adjust the pattern of their remuneration.

Auto-enrolment impacts them, no matter how much they are paying. It is quite likely they may consider auto-enrolment along with various tax changes on bonuses and see if there are ways to ensure their offering remains competitive. They may take the attitude that if they are going to have to do something, they may as well bite the bullet and do something different. In a sector less cash–strapped than others, this may take the form of protection or other value adds.

The inescapable truth is that auto-enrolment is going to see business owners, HR directors and finance directors talking to advisers about all sorts of aspects of their benefits strategy. It may be that private health cover is still regarded as a valuable benefit. Maybe gym membership will still appeal. Child care vouchers will still be held dear.

Many employers will be looking at what they offering and adjusting it to the new world. Maybe employers and employees will start to think a little more long term and about the value they are getting. That’s good news for providers and advisers alike. And it may be time to make PHI part of those conversations.

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