Nigel Mills MP now quizzing @greggmcclymont about how People’s Pension markets itself to employers. He notes that of the 9 reasons listed on People’s Pension website why employers should consider the provider, not one is
that the members will get a better pension.
— Josephine Cumbo (@JosephineCumbo) January 23, 2019
Nigel Mills asks the right question, but it is not for Gregg McClymont or People’s pension to answer. This question needs to be aimed squarely at the Department of Work and Pensions and its Pensions Regulator.
We are now six and a half years into auto-enrolment. Ten million new savers have been included in the second “workplace” pillar of pensions. The vast majority of them can now say that they “have a pension”, though what they mean by that , I doubt many could explain.
As for People’s Pension, the 4m pots that they manage will be unlikely to turn into pensions – in the sense that most people understand “pension”. They are unlikely to turn into a “wage in retirement”, the pots will simply augment other sources of savings, albeit in a tax-advantaged way.
People’s have done exactly the job they have been asked to do.
It should be noted that the 4m people who have pension pots with People’s pension, are paying a very low amount for the management of their money (only 0.5% of the amount in the pot each year). Many of the employers that People’s provide workplace pensions for, engaged with People’s at no cost and those that are now paying to sign up are paying a low amount.
People’s has had no Government loan yet it has been competing with NEST that yesterday announced another loan from the tax-payer, this time for NEST to meet its obligations under the Mastertrust Authorisation regulations.
People’s do not have this backstop, while NEST can boast they are well on their way to self-sufficiency, they will have got there with the help of up to £1.2 billion of our money lent to them on non-commercial terms.
It is in this context that the Work and Pensions Select Committee should consider statements to employers on People’s websites.
People’s are the real deal.
Employers value their staff, they are pleased to run pensions for their staff – but as I know from running Pension Play Pen since 2013, employers do not feel they have an obligation to provide better pensions, they have an obligation to comply with the rules, to stay solvent and to reward shareholders but they are not obliged to become pension experts.
A genuine not-for-profit
As Gregg McClymont likes to remind me, People’s are a not-for -profit organisation and do not have a shareholder to reward. They share this with Royal London and several other smaller master-trusts.
It does make a difference, not just in terms of the commercials, but in terms of the care that the organisation can focus on individual members. In my experience (and Pension PlayPen’s, People’s Pension have done the right thing for members, they have not fallen into the net-pay trap, they offer good member support and they are working towards a more sustainable investment default with the help of the relatively new CIO – Nico Aspinall.
People’s Pension should be getting a round of applause from W&P Select for achieving all this with no soft-loans and in the teeth of competition with a Government backed organisation that operates with the tax-payer’s safety net sitting below it.
It’s a commercial not-for -profit and like its parent B&CE – it always has been
Time to put the member first?
It’s clear that People’s are beginning to think about the peculiarities of being seen as a pension provider, without actually providing pensions. People’s don’t offer an annuity, nor does B&CE (the life insurer).
As their membership matures, helping those members to spend their money will become an increasing feature of what Peoples Pension does. It is not a wealth preservation outfit, the majority of its savers will need at the very least a top up to the state pension, at best a proper wage in retirement paid from their People’s Pot.
This will mean, at some stage, getting those 4m odd savers to take decisions. Decisions such as whether they use People’s or some other pension scheme as their big pot. People will have to have a basis to decide to move money to or from People’s pension and they will do so on the basis of their perception of who has done best for them in the past and who is likely to do best for them in the future.
That value for money estimation is not something that most people are prepared for. The decisions that lie ahead of the 4m employees who Nigel Mills is thinking about are hard and right now there is precious little advice to go round.
So far, to survive as a commercial not-for- profit, People’s have had to focus on the needs of their employers and not on member support.
But that strategy has to – and I’m sure – will – change.
I expect that if W&P Select to ask that question of People’s Pension in another six years, they\d get a very different answer.