To all intents and purposes, auto enrolment has now finished, as the majority of employees have now been staged. This does not mean the end of workplace pensions however, as 2019 should prove a very interesting year. That is because pension providers will be focusing their efforts on retaining existing clients and competing in the secondary market to grow their assets.
Many employers who have had an auto enrolment pension for the last six years will have accumulated a sizeable pension pot that will now be attractive for many competing providers’ attention.
It is my understanding there are many employers who are not particularly happy with their current choice of pension provider. Poor service standards, lack of member functionality and the administration of monthly payroll submissions are frequently referenced as ongoing issues. There is, however, a resistance from employers to go through the operational upheaval and cost involved to transfer or switch.
Understanding the strengths of provider propositions and the benefits it can deliver to the member should be of the upmost importance. As cost margins – for most providers – are now extremely close, a focus on streamlined operational capabilities and additional member features, will in many cases be the deciding factors.
From this month, master trust pension providers will have six months to apply for authorisation. Those who do not successfully apply will no longer be allowed to operate under The Pension Regulator and yet it has been reported that only two-thirds of master trusts will be applying, meaning the market will become even more competitive.
Our own analysis shows that aside from fund performance and achieving good member outcomes, factors such as scheme set-up and implementation, administration servicing, online facilities and member communications are some of the key features advisers and employers assess when selecting a pension provider. F&TRC will shortly be announcing our 2018 workplace pensions and auto enrolment ratings.
‘Financial wellness’ is a term commonly used in the pensions arena, yet we are yet to see it fully deployed by any UK providers. Helping members understand their weekly or monthly finances will assist in ensuring monthly contributions to long-term savings are met. Services that will allow individuals to take control of their income, expenditure and debt will make a difference to a consumer’s financial life.
Next April, when we reach the final contribution increase, many UK employees may struggle to commit 5% of their monthly payroll. Any pension provider who has integrated such financial wellness services or who can help with this will have an advantage. Open banking should play a major role in this.
Using new technologies to interrogate spending patterns and behaviour will enable pension providers to gain a level of insight into their customers that has hitherto never been possible. More disposable or surplus money each month means more available to save. This is in the pension providers’ best interests.
Some 10 million employees have now been enrolled in to automatic pension schemes. It is imperative that employers choose the right pension provider for their staff to ensure ongoing success and continued long term savings.
Jason Green is head of workplace research at F&TRC