I spent yesterday morning with Aviva at their future of Auto-Enrolment event in the City.
Here’s Aviva’s 10 point wish-list for Auto-Enrolment.
1. Phase towards 12.5% contributions by 2028
2. Adopt a flat rate of tax relief – save 2 get 1 free – and rename as a ‘savers’ bonus’
3. Capture multiple job-holders
4. Explore options to capture the self-employed
5. Remove the upper enrolment ceiling of the state pension age to encourage a longer working life
6. Officially encourage consolidation of small pension pots of £10,000 or less
7. Permit “without consent” transfers of contract-based workplace pensions, so long as savers are no worse off
8. Increase the eligibility threshold to £10,400 and lower the contribution threshold to £5,200 so that individuals can easily understand when they will be enrolled (once they earn more than £200 per week) and how much they will pay (contributions due on earnings over £100 per week)
9. Adopt Aviva’s three rules of thumb
– 40 year rule: Aim to begin saving at least 40 years before your target retirement date
– 5% rule: Aim to save at least 12.5% of your monthly salary towards your retirement
– 10 times rule: Aim to have saved at least 10-times your annual salary by the time you reach retirement age
10. Encourage the digitisation of pensions through government policy and regulation and a minimum level of digital functionality
I’ve got nothing to respect for the new Aviva; four years ago they were a basket case, totally confused about who their customer was. The Financial adviser was put before the policyholder, distribution of product above long-term outcome; Aviva was a shambles.
Now things have changed; they’ve even turned the car park under their offices into a lecture room with the largest curve screen in Europe (what a nightclub it would make).
Yesterday, one of the usual crowds gathered to have a proper discussion about what we could expect from the 2017 Auto-enrolment review. The other “usual crowd” wasn’t much evident ( the payroll people, the accountants and the employers getting things done).
The two crowds work in parallel worlds. The policy-makers and social do-gooders who gathered in the room yesterday were 80% in favour of changing thing sin 2017 while Mercer reported that 80% of the people they surveyed (generally employers) were keen that the 2017 kept things just the way they were (at least for a bit).
To some extent this is a battle between pragmatism and patience on the one hand and idealism and social concern on the other. A few years back, I’d have been more cynical of Aviva’s wish list as they are pretty “Aviva shareholder-friendly”. But there is -among pension companies, a fundamental alignment of interest between policyholders and shareholders (the bigger the pot the bigger the profit).
But I fear there were people in the room showing signs of unnecessary impatience. This may have been born out of the ongoing love-in at the DWP and tPR (initiated by Steve Webb a couple of years ago) that in Auto-Enrolment Government may just have a “success story on its hands”. OK guys – things have gone well so far, but we are on the North Face of the Eiger and the people not in the room are busy with ropes and crampons and all that stuff.
It doesn’t play well to the people doing the work to hear the DWP and tPR and associated policy makers crowing about how well they’ve done – when they haven’t done the work.
(Hey DWP) Leave AE alone!
Aviva’s wish list is a great list, I don’t have any problems with any of it – the rules of thumb are going straight into my financial education notebook – I’m all for auto-consolidation, digitalization and a proper examination of who should be enrolled.
But I really don’t want any more fiddling with limits and I certainly don’t want to scare the hell out of employers with talk of 12.5% compulsory contributions. As someone said, the success of the Australian system has been based on “slowly does it” when it comes to Government intervention.
NEST- where were you?
There was an elephant in the room and it was NEST, no one had the courage to ask the obvious question about its role after the 2017 review.
NEST’s consultation on its own future is now over. Clearly it feels it has a mandate to become a “payer of pensions”. Well let it pay its own pensions. But let it do so for its own pensioners and not as a hoover- upper of the rest of the market’s assets.
I am now convinced that NEST must make the best of the assets it has gathered and that the restrictions imposed on it at outset should be maintained – especially the ban on transfers in.
This was imposed by the EU to ensure competition was maintained. Removing the ban on transfers risks breaking the backs of the private providers in the room yesterday. Without them – as yesterday proved – auto-enrolment may not have worked.
A conference that no-one would have though would happen
The strangest thing about yesterday’s event at Aviva’s central London HQ was not that NEST was making no noise, but that everybody else was.
Who would have thought at the outset of auto-enrolment that a debate of this calibre would be initiated and carried out by the private sector.
NEST did not join in yesterday, as they did not join in creating PAPDIS as a common data standard. They felt themselves, once again, unable to play in the pension playpen.
But Aviva and other workplace pensions were there, working together to common good , working with the DWP and FCA and tPR.
The true heroes who weren’t there
I didn’t miss NEST yesterday, but I missed not having representatives of Sage, Iris, QTAC, Star, Moneysoft, Bond, Intuit and Zero in the room. I missed not having the true heroes of Ae – Armstrong Watson, AE Robbins – Kate Upcraft, the CIPP and BASDA.
There are parallel world in AE who are hardly meeting and that is why the 80% of those at Aviva yesterday were surprised that 80% who weren’t wanted a “steady as you go” policy from the DWP in 2017.
One thing we may have learned from recent political events, is that it’s those who do the work, not those in policy, who really wield the power!