If you were to read some of the reactions to the announcement yesterday by People’s Pension that they would be charging employers either £500 or £300 to set up a pension with them, you’d think that some intermediaries had just had a close encounter with Chicken Lickin.
Take this thread on Accounting Web for instance. I particularly delighted in
In a pithy article , Richard Hattersley comments
Businesses will now have to pay the mastertrust £500 plus VAT, but if a client comes through an adviser they will be charged £300 plus VAT.
The new charge will affect businesses who sign up from 23 November with a 2016 staging date.
And goes on to quote an old friend of this blog
Steve Brice from LP Auto Enrolment Solutions believes this charge is ‘entirely appropriate’. “Auto enrolment is not free for anybody,” Brice said.
The People’s Pension underwent a consultation earlier this year to decide whether they should add an annual management charge, and at the time decided against implementing a charge – perhaps due to the market pressure of potentially being the only one of the big three mastertrusts charging. However, with the announcement that close rival NOW Pensions will charge from the start of next year, Brice theorised that The People’s Pension are now free to charge as well.
With both People’s Pension and NOW charging for implementation, NEST will be the only provider left to break ranks. Brice questioned how long NEST will remain not charging. “Two commercial organisations like the People’s Pension and Now Pensions have done their sums and said that they cannot on-board small companies over the course of the next couple of years without making a charge. And if NEST pension doesn’t apply a charge then tax payers will end up paying it”, he said.
“Now People’s Pension has joined NOW: Pensions, will NEST follow suit?”
Well you know we’ve been asking this question of NEST all year. Yesterday I sat between Malcolm Small, a non-exec of B&CE (People’s parent) and Charles Counsell – the Pension Regulator for auto-enrolment. As I was chairing the session I got to ask the question that Steve had.
Predictably I was told that any answer would be speculative, but those who have read this blog know damn well that speculation tends to come true when it is backed by cold business logic.
- NEST is already over £400m in debt and continues to burn money
- It has a £600m ceiling on its loan to the DWP
- The bulk of its stagings are still to come
- The National Audit Office this week confirmed NEST was committed to being “no cost” to the taxpayer
- It has taken just 50% of its target of employees in the first half of auto-enrolment
- With lower employe numbers it is behind target in repaying its debt to the DWP
- It has within its constitution the power to charge employers without recourse to primary legislation
- It is an accountable public body dedicated to not creating a market distortion
- By becoming the only MAF accredited master trust without an upfront or ongoing charge to employers it is distorting the market
- It is a sensible and reasonably managed outfit which I’m sure will do the right thing.
My message to anyone who believes that choosing a pension on the basis of upfront or ongoing charges to the employer is to think again, The cost of choosing the wrong pension in terms of the way it operates and the satisfaction it delivers to your staff will outweigh the puny costs of Peoples and NOW.
NEST is a great pension , but so are the pensions of NOW, People’s Legal and General, Standard Life, Aviva and many many more. Many of the smaller mastertrusts such as Salvus and Smart are investing to the Master Trust Assurance Framework. You should not be making a comparison between providers purely based on what it costs an employer in November 2015.
Accountants! – Do not listen to Chicken-Licken!
The sky is not about to fall on your head because your plans to put all your clients with NOW or Peoples have to be revisited. There is no certainty that putting all your eggs in the NEST will be any more sensible a strategy than putting them with aforementioned trusts. Legal & General have stated they have no plans to charge and personally I prefer their business model to NEST’s (in terms of solvency).