Over the weekend I heard a mortgage broker talk about automated mortgage underwriting as “mortech” and as Investec grabbed the technology high ground some years ago, I’m going to lay claim to “PENTECH” for www.pensionplaypen.com.
I’m proud that what was no more than an online social club, three years ago, is now the by-word for business focussed pensions advice. We’ve had a lot of people laugh at our name and a few pour scorn at the juxtaposition of “pension and play”, but those who properly understand gamification and the disruptive power of simple ideas – get it!
So what is www.pensionplaypen.com up to and how is PENTECH slashing the cost of pensions advice?
Around 100 employers a week have their data analysed by our workforce assessment and around a quarter of those employers are currently paying us to help them choose a pension (either to replace a duff one, or as first time buyers).
Around 20% of employers who use our system already have a pension, many are just checking that what they have stacks up, some are setting up a new scheme for staff to sit alongside an arrangement for Directors and only a tiny minority are ditching what they have and upgrading to a “newer model”. The secondary market in pensions is very thin, where change is happening, it is at the top end of the market, typically with employers going through re-enrolment today (with tens of thousands of eligible jobholders).
Keeping it simple not dumbing it down
For the first time pension buyers, our task is to get small employers engaged with buying, to educate them in what’s good and to empower bosses to make purchasing decisions that are in the immediate interests of the business and in the long-term interests of staff.
Purchasing is typically taken with hand-holding from either a financial adviser, an accountant of a payroll expert. The impact of these intermediaries is to bias the choice in terms of short-term considerations. Typically a low (or no) set-up fee, simple scheme set up and minimal ongoing charges to the employer are the primary drivers.
It would be wrong of me to criticise this behaviour as the sheer numbers of employers staging in 2016 and 2017 means that any kind of push-back from employers on upfront costs can lead to delays and the immediate risks of non-compliance.
But there are equal risks in hasty purchasing without regard to the outcomes of these workplace pensions. The Government has recently raised concerns that many of the auto-enrolment workplace pensions available to small employers are very fragile, lack the financial backing to withstand business problems and are frankly “winging it”.
Our analysis of some of the workplace pensions coming to market today suggests that the investment of money is a secondary consideration, controls and governance can be weak, little thought is being given to at retirement options and member support can be non existent.
No matter how cheap a pension may look in year one, the long-term risk to employers and their intermediaries is in the years to come. My worry is that as with other wonder products (low cost endowments, PPI, interest rate swaps and pension transfers) its not the drinking but the hangover that will be remembered!
Www.pensionplaypen.com enables employers to purchase pensions that work for them today and work for their staff tomorrow, balancing the immediate needs of the business with the long-term interests of staff (for whom pensions remain an employee benefit).
PENTECH’s keeping quality advice affordable
The business model we work to is very low cost. We take research from First Actuarial, a firm committed to offering larger employers whole of market advice. The research is applied to the needs of smaller companies through rules (our algorithm) so that employers have simple decisions to take.
For most employers, the decision can be as simple as choosing the highest rated provider on their league table. The league table is created by adjusting provider “ratings” provided us by our researchers to take into account the unique circumstances of an employer (the payroll software used, demographics, earnings spread and digital sophistication).
More sophisticated employers may look at pension issues such as the capacity of a provider to absorb individual or company sponsored legacy pensions, advanced investment options and their capacity to offer members in-house or third party provided advice.
The most sophisticated employers have the option to re-balance the scorecard by adjusting the relative weightings between employer and member centric metrics.
All this can be achieved within a price which is never more than £500 and often less than £100. The cost of a fully supported use of www.pensionplaypen.com is £499 +vat, but where lower levels of support are needed (typically where an intermediary is in play) our “cost to employer” is as low as £99 +vat.
How do we do it?
Running a low-cost business model is tough, it means keeping costs to a minimum and digitalising as much as we can. We have a stable team of coders who work out of India and everyone who works within our organisation is currently unwaged. That does not mean we aren’t getting rewarded, but our model rewards us for long-term performance and only covers our short-term expenses.
In short, everyone in www.pensionplaypen.com is investing in the future, trusting that employers will make decisions based on what is best for their staff and best for the business.
We preach this gospel up and down the country working with payroll software companies, accountancy networks and with groups of IFAs to get our message out.
As a start-up with very limited capital , we can’t afford to buy coverage so if you are hearing about us, it is probably through word of mouth.
Above all, our model is self-service. We believe that if you can get an employer engaged in the pension decision, they will (in time) get educated about what a good decision looks like and empowered to take one. If not the employer, then at least the intermediary!
Every employer using our system must (in their own words) state on the actuarial certificate which concludes the purchasing process, state why they chose the pension they did. That certificate is the future-proofing the employer has for years to come, it is what the staff in the pension focus on and it is the product of www.pensionplaypen.com.
We can provide every employer that chooses a pension through www.pensionplapen.com with such a certificate for so little because of technology, because of pension technology and because of PENTECH.