Another day, another pensions launch – Now Pensions unveiled their master trust in a relatively low-key fashion. Without a bell or whistle in sight, Morten Nillson outlined the philosophy and modus operandi Now will provide
- Unconditional acceptance of applications from any employer ready to use Now’s digital interfaces (payroll -member communications etc)
- Unbundled charging structure 0.3%pa on your assets as an investment fee , £1.50pm to cover administration
- Life Cover option
- No negotiation on charges
- Will take transfers in and give transfers out
- Single investment fund with growth assets in a Diversified Growth Fund with low equity exposure (rumoured to be c5% currently)
- Lifestyling into a cash and annuity protection fund with the option to accelerate or decelerate lifestyling (but no option to revert to growth)
- Administration from Xafinity using a simplified version of Compendia.
- Assistance with identifying relevent jobholders (though this appears to be at an extra cost)
- Mastertrust in place and advisory board present and correct
- Open for business from January 1st
Detail is skimpy, there were no takeaways and no press releases. The Q & A were conducted with the Advisory Board who included John Monks (lately of the TUC, Chris Daykin (lately the Government Actuary) Nigel Waterson (Tory Grandee) Imelda Walsh (of WRIC fame) Lars Rohde (investment guru) and very expertly compared by Sarah Pennells (@savvywoman).
Clearly the Monks/Waterson pairing is designed to provide political balance and there was a strong political undercurrent in the room with Lawrence Churchill and Tim Jones prominent in the audience. Michael Johnson of the awkward squad asked what would be the political implications if ATP outnested NEST and became the go to pension for the majority of employers. The question might better have been directed at the DWP who must have been squirming in their seats as the bill for NEST passes £300m.
Certainly the epithet “the pension NEST wanted to be” sits easily on Now’s shoulders. Without the contribution constraints and the restriction on transfers that shackle NEST, many advisers will find NOW a considerably more flexible than it’s more illustrious sibling.
The Federation of Small Businesses were concerned that many of their members were not internet literate and would not be able to manage the digital interfaces. I hope that Now keep up their tough stance, small businesses that cannot transact using the web are fewer than they were and will by the latter stages of auto-enrolment be looking distinctly archaic. We cannot allow them to dictate the rate of progress for the majority of businesses that have embraced new technology.
Legal and General via the omnipresent and omnicognescent Adrian Boulding asked the panel to discuss the question of decumulation to which there were no new answers. While Now uses collective clout on the way up, it is (like NEST) not providing collective decumulation solutions – yet. Let’s hope in the meantime that they are talking to the better end of the annuity broking market so we get good quality at retirement decision bolstering good quality pension accumulation.
An interesting question came in on pension accumulation. Morten’s response was to point at ATP’s Danish experience which implies that small Danish DC pots are few and far between. As Stephen Nicholls of the Pension Trust pointed out after the session, if ATP have £73bn under management and 4.7m members, then the average DC pot in Denmark is only £1500. If that experience is repeated here then the £18pa administration charge is going to take the total Now charge to an average over 1% pa. As ATP have been at it in Denmark for 45 years, let’s hope that Steve Webb’s small pot to big pot consolidation initiative is a little more effective.
The unsaid question elephantising the room was who would sell Now. My mind went back to the ill-fated magazine of James Goldsmith which for all its glossiness, sat on the newsstands for a year before being withdrawn to the general derision of Private Eye. It would be a shame indeed if NowII suffered a similar fate.
For Now to succeed , there is going to need to be a new trend of direct purchasing from employers or an increase in the number of genuinely independent advisers prepared to recommend a pension scheme that pays no commission or any other form of financial inducement and – unlike NEST- does not have a state seal of approval.
The question posed in the title of this blog is relevent. ATP should be wary of sitting on its reputation in Denmark and with the pension literati. 200 people enjoying Carlsberg and canapes in a posh hall in Westminster may look like success but it’s a very different world in Telford, Rochdale, Lees and Abergavenny (where I have pension meetings next week). For ATP to reach anything like the volumes of business it anticipates , I suspect that it will need to address the distribution question and quick.
I like the look of Now Pensions and I like the team of people they have assembled in the UK. Philosophically they seem to be in the right place but they need to accept that the UK is still and will remain an intermediated market and they will need to work hard to use and develop the advisory infrastructure if they are to achieve their ambitions. The sooner they can publish the detail the better.