Being a nosey parker, I ask people I meet who run companies how they feel about giving their staff pensions.
Whether they run a FTSE 100 or a micro, they’ll fall into two camps and their answers range from the enthusiastic to the unprintable! The enthusiasts see pensions as part of a reward strategy, the unprintables see pensions as “unwanted risk”.
Both attitudes include employers who are AE ready and those who “haven’t a Scooby”! Let’s call these sub-sets the “diligent” and “dilatory”.
I’m sure that my unscientific approach is trumped by some clever dick with a full segmental analysis but I can live with four customer segments with two fundamental concerns.
As I lie in bed on these hot summer nights, wondering how we will manage the spikes of demand over the next four years, I conjecture how much attention employers are going to pay to this “workplace pension” decision.
If you read the DWP projections for NEST, you would expect NEST to manage over two-thirds of the 800,000 micro-employers. So NEST becomes the SERPS of DC , providing small pensions through employers who minimally engage with the process.
But you can’t “minimally engage with AE, and NEST isn’t allowed to provide the support services that many of the larger insurers are bundling into their proposition. This is (to the first-time-employer) a much more relevant restriction than those on transfers in and contributions.
Counter-intuitively, it may be easier for employers to look at other options. If it’s free to join a workplace pension scheme that promises you “compliance in a day” – why trouble yourself further?
But there’s your problems begin. Once you have decided you are going to shop around and get yourself the right provider, how do you go about it? If the advisers have got the “no vacancies” board above the door- who are you going to call?
Are you going to walk up the garden path to ACME insurance who is promising you the earth-or are you going to take a look next door as well?
If you are a risk-averse employer with time on your hands you will want to test the market. If you are a risk-averse employer with staging tomorrow you may have no choice to take a punt. “Taking a punt” is not a phrase that sits well on a risk register
And if you want to Reward your staff, you are going to want to show you have conducted due diligence. “Ran out of time” is not the kind of audit trail you want to present at your next employer representative meeting.
And of course the Reward driven employer who is well organised has probably got his adviser to do a “full market search”.
So I don’t buy the DWP’s idea that the market will collapse into NEST. There’s ample motivation for all of my four types of employer- the risk and reward driven, the diligent and the dilatory, to shop around.
My bet is that there will be a lot more concern about choice than people currently think!
This article first appeared at https://www.pensionplaypen.com/top-thinking/show/109/what-bosses-really-think-about-pensions.html