Why the Pension PlayPen supports NOW as a workplace pension
It’s no easy thing starting a master trust from scratch. Though NOW Pensions, had the experience of running a state backed pension in Denmark (through parent APT), coming to Britain and achieving top three status as an auto-enrolment provider in just five years is a huge achievement.
I carry a NOW rucksack in admiration of a pension scheme that has admirable governance, sound management , a great investment product and a pioneering approach to customer management. There is no more progressive collective pension in Britain and NOW remain a favourite both with Pension PlayPen and the employers and advisers who use it.
Trouble at t’pit
So I was a little surprised (and to be hones miffed) to have been presented as “slamming” NOW for imposing fees to employers reversing out of the master trust within two years of joining. Late last year I was reported as slamming now for their Christmas black-out when changing back office support from Equiniti to JLT. Anyone called Morten Nilsson might be thinking I’m on his back!
NOW are not yet the finished article
NOW do show some signs of inexperience, but it is because they are new kids on the block. Our ratings of NOW have always included some marking down for growing pains. You don’t expect a two year old colt to get tactics right on the race course but NOW has the potential (like the colt) to become a champion three year old.
There are a few trees getting in the way of a proper view of the wood right now. The choice of Equiniti proved unfortunate, we are not totally convinced about JLT and I wrote to Morten last year suggesting that they might need to consider an in -house solution eventually. The problem with exit fees (apart from us not knowing they were being imposed) is that they could be imposed on employers who are leaving through necessity not capriciousness.
A pension is for life and not just for staging and any employer who resigns from participating in NOW in the first 24 months has either had an awful experience with payroll or is going bust. I cannot see any reason for jumping ship for anything other than operational reasons. If any adviser or employer can give me one- speak now!
NOW are not a universal solution
If employers have problems with NOW for operational reasons, then one has to question what due diligence it did when selecting the pension. Steve Brice on a thread in Linked in
The main stream providers even chose who they will take AND apply their fee to, whereas NOW:Pensions are taking on all comers and only charging those who leave them shortly afterwards.
If care is taken up front when choosing your pension scheme and employers are aware of the exit fee within the first two years where’s the harm?
If employers don’t like this they will chose one of the other providers who do not apply such a charge….am I wrong?
It will however add a twist to the story of accountants setting up exclusively with NOW:Pensions for all of their clients if those client are not aware of the penalty…who will end up paying if the small company goes bust or leaves NOW early?.
In reality, NOW is not always the best fit for employers. It doesn’t work well with all payrolls (IRIS for one) and its monthly employer charge makes it expensive to deferred members of highly transient workforces. NOW doesn’t suit workforces that like to self-select funds nor is it a brand that works for all employers.
The one size fits all brigade (that Steve mentions) now have the emerging issue of explaining to employers who have been shoe-horned into the wrong pension , that they need to pay for the shoe-horn to get them out. Message to quoted firms- use a proper search engine in future (you know the one).
NOW have got the basics right
In reality NOW has generally gone down well with employers. They excell in customer support (I have sat in their contact centres). They are good with HR and payroll and though we have marked them down recently, because of the disruption that they have been through, we are genuinely shocked to hear that any employer would have had to leave NOW so soon after joining.
But expect growing pains
But I do worry about exit penalties. Like Steve, I would prefer the cost to be incurred up front, or better, borne by NOW as an underwriting cost. The exit penalty route smacks of bad practices from insurers in years past.
There are approximately 200,000 employers borne every year and roughly the same number fail. If NOW were to charge those employers that fail within two years of staging £500, then the exit penalty will become meaningful (NOW has a lot of clients).
That we have not been explicitly warning of these penalties on our website is an oversight on our part. That we did not know of them (if the reporting is correct) is an oversight on NOW’s part. these are the kind of mistakes that are made by two year old colts and hopefully they are not repeated.
I have written to NOW on this and will publish the response on this blog. As I said at the top, it’s not often that a newcomer to the scheme does as much good as NOW has done, I do not expect it to drop its standards and I see the problems of the past few months as part of growing pains.
For now, the message for NOW is keep on keeping on.
The CEO speaks
Since publishing this blog- Morten Nilsson has sent me this response which I am happy to include in the blog- verbatim.
Ever since we launched in 2012, we have provided a low cost pension scheme with a highly sophisticated investment solution that is available to all employers and all employees with no minimum contributions or set up fees.
We pride ourselves on our transparent, easy to understand pricing structure and have always been entirely up front and honest with our fees and charges.
The right to charge a break fee exists, and has been part of our contracts since we launched, mainly to make sure employers understand the long term nature of the agreement and is typically around £500. It is designed to recover our set-up costs if the contract is terminated within two years.
With every scheme we set up, there is considerable administrative work involved. Each employer has their own individual online portal and we proactively call employers to support them with their initial file uploads. Over the past year we have also invested heavily in online systems and tools to help employers with their ongoing auto enrolment administration.
The level of the fee is proportionate to the size of the employer, with small employers paying less than large employers, due to the differing levels of work involved. The break fee is clearly outlined (how much it is and when it would be applied) in the contract the employer signs with us. It’s certainly not the case that it’s in the small print.
To date, the break fee has only been applied in a handful of circumstances. By and large employers understand the long term nature of the contract they are signing and the commitment that this requires from both parties.
Morten Nilsson, CEO, NOW: Pensions