Recently, I published a list of workplace pensions that had quite recently been available to staff, the list has been added to by readers who’ve come across others. The blog is here.
A pension is for life, not just to get you through staging auto-enrolment and the durability of a workplace pension as a market leader depends on the commitment, acumen and financial strength of the provider.
Case study – the Prudential
Ten years ago, the Prudential were generally considered one of the most stable workplace pension providers in the UK, but in 2009 they effectively closed for new business leaving existing policyholders and sponsors in a “legacy” arrangement. The impact was predictable, low levels of service, low levels of innovation and high levels of customer dis-satisfaction.
Are there independent ratings on Durability?
If you go on http://www.pensionplaypen.com , one of the 6 ratings we give to each provider is “durability”, this is our score on the likelihood of a provider being open for new business in ten years time. It is an expert rating based on meetings with the providers, analysis of their financial reports (often through ratings agencies such as AKG), movements in senior management and public pronouncements, but most of all it is about their capacity today to show they can deliver tomorrow. This final metric is based on feedback from our customers and our personal experience of dealing with a provider. I won’t list the durability ratings of all providers but will say that they are headed by NEST who scores the maximum because of the covenant offered by its backer, the DWP, NEST may not be the highest rated overall, but if your sole consideration is a “safe pair of hands”, we cannot look beyond NEST.
But your experience is your best marker
Whether you are an adviser, an employer or a member of a workplace pension, you are entitled to a pro-active service from your pension provider who you are rewarding each year with a percentage of the money you have under their management (and maybe more if they take money from your contributions and/or take a flat fee from your account.
The Five Signs
So hear are five tell-tale signs that your provider may not be planning for the future
Sign One
Between now and the end of the year, providers will have to demonstrate a strategy to deal with the new pension freedoms announced in the budget, they will have to be offering those approaching their selected retirement age, information necessary to make the Guidance session successful- Will your provider embrace change positively or will they be doing the bare minimum to be compliant.
Sign two;-
By April 2016, any commission payable to advisers on a workplace plan used for auto-enrolment must cease. Forward thinking providers are already addressing this issue and the mechanisms by which commission were generated (active member discounts) and higher AMCs. Is your provider and adviser talking to you about these changes and the impact it will have both on advice and on service from your provider?
Sign three:-
By April 2015, all contract based (GPP or Stakeholder Pension ) Plans must be subject to the governance of an Independent Governance Committee (or their little brothers AGGs). Those insurers who we see as taking governance seriously already have these in place (L&G were the first). If you hear nothing from your provider on this ask how seriously they are taking workplace pensions?
Sign four;-
Over the past couple of weeks, we have seen a number of insurers take impairments to their accounts to ensure that their existing book of workplace pensions complies with the forthcoming charge cap on the default investment option of auto-enrolled schemes. These are insurers who are taking their legacy books seriously and are taking active steps to stay in the market. If you still have a charge on your workplace pension default fund of more than 0.75% and have not yet heard from your provider, you should be worried.
Sign five;-
The nature of how people spend their retirement savings is changing and annuities will not be the “obvious” choice they once were. Most investment strategies set up by workplace pension providers will have to change to reflect this. Conventional lifestyle strategies put in place to protect people from changes in annuity rates will no longer be so applicable. Pension Providers that are serious about staying in the game, will be confronting this problem , finding solutions and communicating them. If you haven’t heard what your provider is doing on defaults by Christmas, you should be asking them (and yourselves) questions.
Providers have three options
They can adapt to the changing environment and view the changes as positive
They can accept the changes, comply with them to the minimum standards
They can withdraw from the market not wishing to work within the constraints of the new rules.
All three strategies are legitimate, but unless your provider is adapting to the new world and seeing the changes as a positive, I suggest they may not have a long-term future as a workplace provider. If this is the case, then it may be time for you to be considering your long-term relationship with them as your provider.
This article was originally published at http://www.pensionplaypen.com
