There’s nothing stopping SMEs purchasing good pensions

benefitspensions-370x229This article plugs the needs for good pension purchasing and argues that both in terms of quality (governance) and quantity (supply) , employers have never had it so good.

There is a lot of talk at the moment about DC governance, most of it from investment consultants who think they should be allowed to control the DC agenda as they do the investment of defined benefit plans.

There are a lot of employers purchasing DC plans for their employers who have no interest in “DC governance” and simply want what’s best for them and their staff.

Bridging the gap between the purchasers (who know too little) and the experts (who know too much) is no easy job.

But it’s what we are trying to do at . We think of the problem in two ways

  1. Quality – are smaller companies able to work out what makes for good and decide on a quality option
  2. Quantity-is there capacity in the market to make quality pensions available to these companies at a reasonable price.

I will deal first with…


What we’re learning is a new set of skills which allow us to make governance relevant to people who don’t do governance.

This is not the same as dumbing down. The key areas of DC governance, VFM, admin controls, contributions, provider durability, investment and durability have to be expressed in a way that organisations not used to pensions relate to.

Durability in a pension provider, for instance can be likened to a house, it should be good for generations  with solid foundations , good construction and be linked to its  infrastructure. There is nothing stopping employers getting there heads round what makes for a durable pension provider.

It is possible to explain other aspects of a quality pension in a similar way.  There’s a good analogy between investment administration and plumbing.

Leaky pipes may go undetected for years and will cost you dearly both in your water supply and the price you pay for it. So will the inefficiencies in pension processing

Small employers are perfectly capable of getting their heads round this stuff and are demonstrating an appetite to get good schemes for their staff.



And employers instinctively know that the price their staff have to pay for pensions depends on supply and demand.

Yesterday saw the publication of the DWP’s  Landscape and Charges Survey 2013. This has been variously reported in the Telegraph and Professional Pensions as indicating that the cost of workplace pensions ha increased since 2011.

This proves not to be the case, the following statement was posted on a thread I started yesterday on the Pension Play Pen linked in group. Since the post was from the report’s author Andrew Wood of RS, I include it verbatim

“Our research covers all schemes that employers are using now, as long as they are open to new members. For contract-based schemes the AMC fell from from 0.95% in 2011 to 0.84% in 2013.

The ABI’s 2012 research said “the average AMC at a scheme level across pre-existing GPPs is 0.91%” – in other words, almost slap bang in-between our 2011 and 2013 figures.

The ABI’s reported AMC of 0.52% covers new auto-enrolment schemes only.
We conducted our research at the start of 2013 when only the largest employers had started auto-enrolment. So the best comparison we have is our AMC for large, contract-based schemes of 1,000+ members, which we reported as 0.51%.

So overall, I’d say the figures largely agree!”

It is important that this message get out to the market. The price of pensions is not rising as reported, it is actually falling. There is no evidence yet that small companies cannot get quality pensions at a reasonable price. Indeed the evidence from those using is the opposite. Smaller companies who know what they want, are now purchasing pension schemes for their staff cheaper than at pre 2012 rates because they are not having to pay commission for advice (see above).

Provided that we can convince the public that there is value to their staff in purchasing quality pensions and demonstrate that they can do so at a reasonable price then we believe that workplace pensions will prosper.

The two great threats can again be defined in terms of quality and quantity.

The threat to quality comes from those who argue that “all pensions are the same”- downgrading the importance of prudent purchasing and ongoing governance on quality.

The threat on quantity comes from those who falsely talk up a capacity crunch and wrongly suggest prices are being forced up as a result of increasing demand and insufficient capacity.

In practice, employers have never had it so good. If you don’t believe me, come and shop at

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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