That Workie lumbering around the park has a price tag. If he’s the NOW workie, he costs £40pm and if he’s People’s Pesnsion’s Workie you need to dish out £3-500 to use him in your workplace . Standard Life charge between £80-!00pm and Aviva and Scottish Widows have a range of price tags for Workie – depending where you hire him.
Only NEST and L&G of the big players are free to use and of the remaining smaller master trusts and insurers, the issues are more to do with the durability of the product offering as the sustainability of the price.
Shopping with no regard to the quality but with a fixation on price is not a good idea. Value for Money is a more complex matter than comparing the price tag on the rail.
With the duration of a workplace pension a matter of several decades and with pot proliferation a real concern for those switching a provider, it pays to get the decision right first time.
Employers need guidance in these matters, especially those who have not had to set up a Workie for their staff before. The research suggests that it is their accountants (more than their IFA) who they’ll rely on for advice about the right scheme. So how can accountants get quality research on the sustainability of pricing?
There is a proper answer to that question . http://www.pensionplaypen.com offers a sustainability rating against the pricing of each provider offering an employer a pension. It is not the same as a durability rating- which measures the capacity of a provider to stay in business (the old financial strength measure). It is a measure of the capacity of the provider to maintain its current level of pricing.
So what could impact pricing going forward?
- The financial strength of the provider (available cashflow, access to capital and cost of capital)
- The appetite of the provider for new business; – a matter of strategy
- The stability of the provider’s management – the sustainability of the strategy
- The cost of new business acquisition for the provider relative to the value of that business over time
These are complex questions and no rating organisation can get them right all the time. But it is clear that short-term market distortions arising from mis-pricing will damage providers in the long-term.
So our message to providers coming into the hard miles of 2016 and 2017 is to be clear about your intent, what business you want and what you don’t want. Be clear about what you are charging today and don’t provide the market with nasty surprises tomorrow. Above all, price responsibly and don’t put existing customers at risk because of the new business strain mis-pricing can create.
And Regulators – regulate! This is a free market but you have a responsibility to maintain an orderly market. The National Audit Office has commented on the need for the biggest market player – NEST – to ensure it is not a burden on the tax-payer, let’s see how that works.
We have had three years to work this out, we are now at the critical juncture where auto-enrolment moves from being a minority sport for the great and the good to being a mass-market occupation of 1.8m pension virgins. To play in this market requires a degree of responsibility from all participants.
Workie is lumbering around the park, he needs a home – but not at any price.