Have you wondered what the future of employee benefit consulting holds in a world where 1.5 million employers will have workplace pensions?
One thing’s for certain, with all those employers there will always be employees. With employees come employee benefits. And as sure as eggs is eggs, with employee benefits come a veritable army of clever people looking to help employers with them.
Actuaries are supposed to be pretty good at looking at what the future holds, so…
The more things change, the more they stay the same
Against a general backdrop of rising costs (think Auto-Enrolment, the introduction of the National Living Wage, rising health costs as well as any (indirect) costs associated with Brexit), technological advancement, globalisation and a changing UK workforce demographic, I suggest there are a number of trends we’ll continue to see at work:
- Further consolidation within the industry, enabling Employee Benefit Consultancies (EBCs) to grow their bottom line as well as to invest in technology. This in turn will allow them to add value to high volume work – for example through the practical multi-platform implementation of nudge theory, the provision of robo-advice, or the introduction of real-time flexible products. Despite these efforts, Auto-Enrolment will mean we’ll see the encroachment of payroll providers into the traditional EBC arena.
- Sitting alongside this work will be the continuation of high value benefit consulting – notably dealing with high earners, with tax efficiency prominent on the agenda.
- Work on Defined Benefit (DB) pension schemes will persist for some time, as capacity constraints within the insurance market mean that, even if employers could afford the premiums, there remains insufficient capacity to deal with the c.£2 trillion of remaining UK DB liabilities.
- The continuing growth of niche providers across a range of areas; playing an important role with small to medium size employers, taking on specialist work and filling gaps that the bigger players are unable or unwilling to address. Regardless of size, however, EBCs will increasingly need to demonstrate value for money in all they do.
- Regulation will continue to impact. The world of pensions in particular is one where there has been no let-up in legislative driven change. The sooner we have political consensus and a higher degree of long-term stability, the sooner we can shrink the army of professionals required (and hence reduce costs to employers).
As people live longer and with the financial pressures on the NHS, health and wellness benefit programs will be ever more important. On a related note, as there is a realisation that the level of contributions currently going into defined contribution (DC) pension schemes is woefully inadequate to meet benefit expectations, change will be required. Somewhat depressingly, this is likely to go hand-in-hand with further legislation.
In an increasingly litigous environment, and with a number of individuals foregoing, unwilling or unable to obtain independent advice (or to be blunt, make good financial decisions for themselves), the onus will be on ensuring default benefit choices are appropriate. Benchmarking, or indeed specialist ‘default option’ design and review companies will find more work.
Ultimately the best EBCs will continue to align themselves with employers’ objectives, innovate, refine and improve what they do.
As for those of you familiar with the work of actuaries, you’ll know one thing for certain – that there is no certainty in our predictions. You have been warned.
Matthew Masters, actuary and proud recipient of employee benefits!