Money Marketing is reporting that insurers are cherry picking the workplace pensions they take on .
That this is news says a lot for the appalling lack of underwriting applied by insurers to the pricing of new business in this market over the past 20 years.
It also shows that for the first time in my memory, pensions are a seller’s market, demand is exceeding supply – at least for those suppliers not geared up for straight through scheme take-ons.
So what’s changed the game?
- RDR- the relationship between insurers and distributors (IFAs) has changed. IFAs are back advising and insurers no longer need them as distributors.
- The DWP’s 2015 workplace pension reforms require insurers to operate within a cap and not to reward advisers by a share of member funds. TRANSPARENCY,GOVERNANCE and CAPPING are in.
- The economics of auto-enrolment from now on change against the insurers whose bespoke services are better suited to the mid-market where concepts such as flex, fund platforms and bespoke member communications are valued. We are moving into a commoditised space that suits master trusts but not GPP providers.
But there are other forces at play. EU solvency rules have forced insurers to reserve against risks such as unprofitable business making unprofitable business doubly unattractive.
CEOs have become used to reporting on new business volumes and fiddling the accrual of profit to show analysts a supposed profit. That games up, neither Europe , nor the analysts or the auditors are falling for 20 year persistency assumptions. The salad days are over.
And what does this mean?
Well it means that insurers are getting tough on underwriting and this applies equally to existing customers as to new ones. What might have looked attractive to an insurer in 2012, now looks about as attractive as a PPI book to a bank.
So much of the business that was established in the past ten years by GPP providers sits in red on the balance sheet and insurers are not going to take on the most unprofitable sectors of the workforce (the auto-enrolled) to make already unprofitable schemes – profitable!
Which means that you may find your organisation looking for a new provider, you may find your company looking for a new adviser and if you’re an adviser you may find your client asking some searching questions about why they are getting pushback from the provider at a time when they most need it to play ball.
And what can you do?
Well there is capacity in the market. As the Money Marketing article makes clear- there are many master trusts, not suffering from these legacy problems with an appetite for new business. Some of these are sound and some are winging it.
Your existing provider may still be your best bet (assuming you have one) but don’t assume you are home and hosed.
Register now at http://www.pensionplaypen.com ! By simply downloading details about your payroll, our CAP service can tell you which providers will deal with you at no cost, which will deal with you at a price and which are out of your market.
The service is free to use and you can choose to onboard a pension provider at the end of it- or not!
What you shouldn’t do.
You should not sit on your hands. Whatever the capacity situation today, it is likely to detoriate tomorrow.
Just look at this graph to see how the numbers of schemes still to stage increases over the next three years.
Only 1% of all employers staging auto-enrolment have already done so. The chances are that if you work for an employer with less than 50 workers, you will be in a long and slow moving queue.
To make sure that you are at the front and don’t miss your staging date without a qualifying workplace pension scheme in place, we suggest you go today to
http://www.pensionplaypen.com/register .
