Back-slapping all round
NEST launched its third Insight into the state of the UK auto-enrolment project yesterday. This was a land grab for AE glory. At the front of the pack was Joanne Segars whose NAPF hosted the event. Hopefully the NAPF will find a way to get involved in 2015, if only to help the 2012 stagers work out how to do re-enrolment!
While the NAPF led the way in the early stages, thunder was stollen by the beaming Laurence Churchill in his last public outing as NEST Chairman. Laurence used to be my boss and I’ve never quite forgiven him for it. But he’s done a good job at NEST and he’s got plenty of life left in him – so he deserved a hearty round of applause- Taxi for Mr Churchill.
Laurence’s lap of honour was eclipsed by his friend Steve Webb who did his now familiar wrap on his five years in government. this took the form of 8 things he’s done brilliantly and two things he’s left for his successor (who might be Steve Webb) to do next term.
Webb and Churchill have every right to be proud of themselves though if we’ve got another 100 days of this, I’m going to lose my temper.
That I didn’t lose my temper yesterday was mainly down to Tim Jones who is increasingly behaving like Dennis the Menace’s Dad and can best be described as a pantomime sergeant-major.
What NEST have discovered
Holidays remain the best way to spend (spare) money but saving comes second with short term saving still pipping longer-term saving to the post
People seem to have gone off using their house as a pension, presumably they’ve worked out that you can’t buy a sausage with a brick
People are getting more confident about their pension
And employers are much happier about auto-enrolment
The shape of things to come – it’s a bit like a loudspeaker with all the noise still to come!
Employers are still needing intermediaries though it’s not clear who they’ll be
Intermediaries seem to have bought the idea of collaboration.
All this high level stuff is very encouraging. It suggests that things are working out nicely but it’s only when you start picking into the detail that there’s some worrying information.
Here’s what the report has to say about employer’s purchasing
“Our research was only with small and micro employers using NEST,but, similarly to DWP’s research with a variety of different providers, we found that employers were reluctant to spend much time and effort choosing a provider. Some had been turned down by other providers. The majority had very quickly decided on NEST and had wither not considered any alternative or had only reviewed the other master trusts”.
If 66% of employers consider the workplace pension important, this can only reinforce the views of many that you can’t differentiate one from another.
If NEST is going to be successful , it is going to be successful by inertia selling. We are currently trying to unpick the consequences of the inertia selling of annuities.
As I tweeted at the event
This should be something for NEST to be concerned about.
Nigel Stanley, who I like very much, made the point from the podium that NEST had done a job of levelling up standards in workplace pensions and he may be right (in terms of governance).
However I am concerned that NEST has yet to sort out its ridiculous, failing reverse lifestyle strategy for younger employees (NEST Insight demonstrates that they are their most loyal -not most fragile customers). I am concerned that NEST is not adopting PAPDIS (despite what Steve Webb implied) and NEST is a long way from implementing its response to the pension freedoms.
For the £400m it has costs us, NEST has got it all to do.
How to use NEST Insight
NEST Insight is a valuable piece of research which is ,like NEST itself, being spun to meet the political purposes of the DWP and wider Government.
It’s most interesting insights are into the changes in the needs of smaller employers and developments in the support that they can expect. The last ten pages of the report are valedictory with platitudes a plenty from the ABI,CBI, ,CIPP,IOD,FSB and any number of other acronymous organisations (plus Which and Age Concern).
Ignore all this boring nonsense and concentrate on the middle bit (pages 16-50 where the research on what consumers, employers and intermediaries are thinking and doing is really fascinating).
STEPS (Second Tier Employee Pension Scheme) was designed within the Federation for Self Employed and small business (FSB) as a ‘funded’ replacement for SERPS and GIVEN to the government actuary’s department. Where Laurence Churchill (banker) and Joanne Seagars (trade unionist) enter an actuarial and financial planning problem I have yet to discover. Nest is the nationalisation of commercial pension arrangements. At its 2017 peak 31% + of employees earnings will be going into ‘state’ controlled pensions. Replacing SERPS was and remains the priority. NOT socialist doctrine.
And I like you a lot too Henry. But NEST’s foundation phase for new young savers is carefully thought through to encourage saving, and dsicourage opt-outs. It has little effect on outcomes as they only build up a small pot in their first few years and it gets moved to a more growth oriented strategy by the time that compounding starts to make a significant difference. Of course you can argue a different approach, but good governance has meant thinking through from first principles with a lot of modelling, and having the evidence and arguments to back this decision..
We wil agree to differ Nigel – cordially!