I’m sorry to be so brazen with the news that only 16.6% of Chinese people in 2011 thought that Retirement Pension for the Elderly was the country’s biggest problem- but I had to catch your attention somehow! – especially if you’re a boss of one of the million or so employers who will need to get a staff pension in the next five years.
In the eyes of the DWP all companies are equal but to the insurance companies some are more equal than others and to make sure you get “favoured pension” stages, it’s well to put your best foot forward. Which means knowing what turns on pension providers and what kills passion like a wet night out in Wigan.
So here’s the list y’all been waiting for – Taps’ top ten underwriting criteria for workplace pensions
- Workforce size matters – the smaller your workforce, the harder to attract a provider’s attention. Insurers want to know the number of staff eligible for a workplace pension.
- Total contributions add up; – insurers think over time and they see your monthly pension cash flows for what they’re worth today but in 2013 ,2023 and 2033.
- Contributions per member is a key metric, each member is a “unit cost” the higher the conts per member , the lower the impact of your unit cost
- Member Contribution structure; insurers look for the potential for members to make voluntary contributions, a low minimum member contribution means more scope for growth.
- Corporate Contribution Structure; this is where you can show off your saviness; if you are phasing contributions, using salary sacrifice, and incentivizing member contributions by sharing NI savings or even matching contributions – tell the insurer.
- Staff turnover; small pots need servicing and have their own unit cost. Sub 10% staff turnover and you’re a pension fleshpot, above 20% and you’re a wallflower. The proposed pot-follows member will increase the importance of this underwriting criteria.
- Seed capital; nothing gets an insurer gong like the prospect of short term revenues, if you’ve got capital that is available for transfer , look for some salivation.
- Percentage of workforce online; think “Digitability” ; (ok that’s my word) but some workforces lend themselves to digital communications and some don’t. Insurer’s look for those that do. The percentage of staff with company e-mail addresses is a key stat.
- Self-service culture; promote your self-reliance, minimise the prospect of manual processing and demonstrate “self-service and straight through processing”. If you operate flex and want to promote workplace ISAs under a corporate wrap, say so!
- Full disclosure; No nasty surprises; if you know there’s a problem flag it;disclose and be trusted, This is typically an issue for auto-enrolment – share your workforce assessment
We anticipate that in the months and years to come, more and more companies will be forced to go direct to the market to get terms for their pensions.
Those who can’t be bothered to engage will have NEST , other mastertrusts and at least one insurer who will offer blanket terms (eg – they’ll disregard all of the above).
But if you think your workforce special, you’ll want to get a whole of market quote. You wouldn’t insure your business assets or your liabilities any other way.
There will probably be some pension providers who will turn you down; Zurich, BlackRock and Fidelity are, at present, quite open about not wanting quotes from companies with less than 500 employees and a strong employer covenant (eg a high contribution per member and an attractive workforce).
But there are a large number of insurers, Aviva, Standard Life, Scottish Widows, Scottish Life, Friends Life and Aegon who historically relied on IFAs to provide them with these sexy stats. Many of these IFAs are no longer interested in this work, that’s an unexpected consequence of the RDR and it’s compounded by the banning of consultancy charging (Commision v 2.0).
Those companies who learn the ropes and get savvy with the providers will find their way to the front of the queue. The graph below shows just how long that queue could be. Demand for these workplace pensions is going to be “spikey”!
The stark message is that you will probably be on your own! So the sooner you get your firm pension savvy and “ready to buy” – the better!
- Do consumers benefit from risk-based pricing? (henrytapper.com)
- No learning without doing! (henrytapper.com)
- Replacing the financial salesman in the workplace. (henrytapper.com)
- Can social media play a part in pension scheme governance? (henrytapper.com)
- “Fit lean pension machines” – an uncomfortable prospect? (henrytapper.com)
- Who speaks for workplace pensions? (henrytapper.com)
- Comprehensive Life Insurance Analysis (creditloan.com)
- A democratic way to improve DC investment. (henrytapper.com)
- Pot noodles member (henrytapper.com)
- Ban on pensions middlemen whose rip-off fees wipe out retirement savings (thisismoney.co.uk)
- Pension boost for low-paid workers (thesun.co.uk)