More questions – no answers!
Yesterday’s blog created a lot of questions from people who shouldn’t have to ask so I reckon it wasn’t clear enough. The blog was itself a voyage of discovery, for as I pressed the various links on the Pension Regulator’s Find a New Pension page, I became more and more frustrated. The full title of the page is “find a new page for your clients” and is part of the business adviser’s section of the website.
In conversation with representatives of the big master-trusts featured on the page directly (and some indirectly through the links) it became clear that the page was integral to their marketing strategy. One told me that the Regulator even had to rotate the order in which NOW, People’s and NEST were presented on the page because the provider top of the list found a surge in enquiries because of the positioning.
If this is true, then it suggests that the Pension Regulator is perfectly aware of the importance this page has in shaping where the business is going. Which makes the fact that contract based providers are relegated to a link to the ABI page even more absurd. In the case of Legal and General (and other non-ABI members) there is no mention of their service at all.
A Comprehensive Directory is not the answer
When the Regulator abandoned the idea of providing a definitive list of Qualifying Workplace Pension Schemes (as it ran for Stakeholder Pensions), I was glad.
Online directories are pointless unless they are tagged and categorised in such a way that people can make use of the information given them. Without any proper research into either the quality or popularity of each workplace pension, a directory can do as much harm as good.
I and others with the capacity to distinguish schemes by category and tag had made a representation last autumn that our services be included on the advisers page. to be clear there are four of us
Defaqto, Pension PlayPen, Husky and F&TRC.
The Regulator heard our call to take down links to the unbiased and vouched for directories (which were cul-de-sacs as most advisers were not interested in – let alone capable of – advising at a reasonable fee).
But to date they have decided that a list of providers who’s parents subscribe to the ABI or who pay fees to the PLSA to be PQM ready is preferable to advertising services that attempt to provide IFAs (and in the case of Pension PlayPen at least, business advisers and employers) with a service that helps choose a pension using applied research on the suitability of each workplace pension to the employer’s circumstances.
What of FinTech and Robo-Advice?
So the ABI and PLSA marketing machines win out over the kind of digital tools that other parts of the Government are trying to promote. I speak specifically of the promotion of FinTech and its subset Robo-Advice aimed at bringing high quality advice to the mass market of purchasers unable to afford traditional advisory channels.
The PQM link’s as useless as the ABI’s
The links to the ABI and PLSA sites are clearly useless. In yesterday’s blog I pointed out how unhelpful the ABI site and – to be even handed- I will now point out the problem with the PQM approach.
To be PQM ready you have to be
a) an occupational scheme- almost certainly a master trust
b) prepared to pay the PLSA (via their PQM subsid) money
c) conform to a set of rules known as the PQM standards.
This is a slightly more quality orientated approach than getting on the ABI’s list (where you just have to be a member of the ABI) but the approach is no good in helping you choose a workplace pension scheme
Firstly, the PQM ready standard is simply another kite mark competing with the Master Trust Assurance Framework. It tells you that you are dealing with a quality pension but it does nothing to tell you if that pension is right for you.
Secondly, by dint of it being a “paid for” service, it attracts the master trusts with the budgets , excluding the contract based plans (and fledgling master trusts) and creating yet more of a distorted market.
Finally, two of the master trusts listed (Atlas and Lifelens) are not for employers choosing workplace pensions, they are vertically integrated services designed to bring assets under the advice of Capita and Towers Watson respectively.
Why would tPR create a bias towards large master-trusts?
Of course the Pension Regulator do not want to be distorting the market but it is clear that there is ample reason for them to do so. Firstly, they exist to regulate occupational pension schemes, master trusts are occupational schemes and creating a bias towards the big master trusts keeps tPR in control
Secondly the DPW is under pressure to keep numbers of firms using NEST up. Only yesterday if came under further pressure to tell the public how it intends to repay the £400m it has borrowed from NEST which needs £20bn rather than the £640m it currently manages- to even break even. Promoting NEST -“uber alles”suits tPR’s paymasters very well.
Finally the Pension Regulator rightly sees all the problems in terms of poor governance and even malfeance in small occupational schemes, any barrier (MAF, ABI or PQM) that excludes the small scheme helps in the fight against the dodgy workplace scheme.
I don’t have a problem with NEST, large master trusts or the Pension Regulator’s war on crime and poor practice. But promoting these things is not to be confused with promoting proper choice in workplace pensions. The market not the Regulator should be the judge.
Why is this wrong?
Firstly master trusts aren’t the only place to find value for money from workplace pensions; tomorrow we will publish research that shows that the standards of support from contract based plans can be every bit as good as that from large master trusts, the workplace GPP can deliver brilliant investment strategies and can be highly competitive in price. There is no justification- in terms of employer or member outcomes for creating a bias to master trusts.
Secondly, even if there was good reason- in terms of outcomes, it is not tPR’s job to move the market. The purpose of Prudential Regulation is to avoid risk and not to shape the market according to the views of a “pensions view”. The market is not tPR’s – it belongs to the 70,000 employers that have bought workplace pensions and the 1.5m + employers who are still to do so.
What is to be done?
The current pages on choice – appearing on tPR’s website – are woefully inadequate, they are not working – in fact they are creating misconceptions and providing short-cuts that allow advisers and employers to choose without proper information.
These pages need to be reviewed urgently and reviewed with a view to creating a level playing field for all workplace pension providers , serious about auto-enrolment.
We do not want a directory that gives credence to miscreants but nor do we want meaningless lists such as the ABI’s , the PLSA’s or – dare I say it- the MAF list created by tPR itself.
Technology exists to provide employers and their financial and business advisers with the capacity to make informed choices, the Pension Regulator should be linking to this resource – immediately.