Adviser > News > March 2010 > Pensions Reform Update
Pensions Reform Update
Find out from our Business Development Manager, Jamie Clark, what effect the 2010 General Elections is having on Pensions Reform and where you should be placing your bets.
Jamie Clark
There's never a dull day in pensions (no really, there isn't). Admittedly, there's been a bit of a lull following the publication of 11 sets of regulations filling in much of the detail on pensions reform and the employer duties as we all try to get to grips with them. But it's all started to kick off again:
Pensions playground politics
It was recently reported that, in an object lesson in futility, the Conservative party voted against the latest batch of automatic enrolment regulations. Some mud-slinging ensued with Labour inevitably (and comically) using the opportunity to question the ethics of voting against pensions reforms which would see millions of new pension savers.
Of course the real reasons that the regulations were opposed were pointed out by Nigel Waterson, Conservative shadow pensions minister. It wasn't the principle or concept of auto-enrolment. The extension of the period over which the new employer duties are to apply together with the announcement that Tata Consultancy Services would sign the contract to run National Employment Savings Trust (NEST) before the general election were enough to stir up this mini-storm in a tea cup.
All this playground posturing doesn't really matter. Let there be no doubt, Pensions Reform is still firmly on the agenda, regardless of the colour of the post election government.
What may change post election
What NEST will look and feel like
Although we now know the charges will be (0.3% AMC and a 2% contribution charge) we won't know the full story until the dust has settled after the election. There does seem to be growing consensus that for the NEST target market - employers with no workplace provision or high staff turnover and employees who are low to moderate earners - there must be an option that the traditional adviser/provider market cannot deliver. Whether NEST continues to be the proposition of choice and what tweaks may be made remains to be seen. Suitability and value are major issues, but there are relatively easy ways of taking care of these. Major players in the industry have already been in detailed discussions with the DWP as to how this may be achieved. We can only hope that they sit up and take notice.
Room to build benefits-led propositions
It's been reported that the DWP and FSA haven't managed to line their ducks up properly when considering auto-enrolment and RDR as part of the same post-2012 landscape. One fear is that this combination will result in mass levelling down as the adviser market contracts and moves away from the traditional commission models (historically driven, incidentally, by providers, not advisers).
Only time will tell how this will all pan out but it is absolutely right to identify this as a potential risk to the millions who will be swept into pension saving. What's clear is that providers and advisers can offer something better than NEST by building benefits-led propositions.
Employers may not see the benefit of a product that looks, smells and quacks like NEST. What they will need is a helping hand through the minefield of their onerous duties. Propositions that not only provide a (better) product alternative to NEST but also the ongoing services that employers will need to help them comply with their duties may be one way ahead. And establishing a value for these services and charging for them accordingly sits well with the principles of the RDR. We're already starting to see these seeds of propositions like this being sown as the industry prepares for 2012.
Engaging with employers
If employers are to be properly prepared for their new duties, now is the time to start talking to them.
We've produced a simple factsheet and sample wording that can be used to get in touch with employers identifying just some of the issues they will face.
Getting a copy is as easy as contacting your local Scottish Life consultant.
Hmmm - looks like DWP have just issued regulations covering changes to the anti-forestalling rules. Never a dull day...
We'd like to hear your comments or insights on Pensions Reform - email us at PensionsReform@scottishlife.co.uk.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice.
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