How to identify the right scheme for your firm

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Smarter. Simpler. Better.

How to choose the best scheme for your employeesMorten NilssonCEO | NOW: Pensions


• NOW: Pensions is a UK multi-employer trust

• Launched January 2012 and already servicing 600,000 + employees

• Parent company is ATP, Denmark’s leading pension provider

• ATP has £74bn FUM and 4.7 million members

About us

What we offer• Low costs

• High quality• Simple proposition

• Cater for all employers and every type of employee• A modular solution


• Picking the right scheme for your employees is imperative

• They have no say or influence in the decision making process

• They are being passively enrolled

• You have their retirement fortunes in your hands

• It’s a big responsibility

A responsibility to your employees


• Auto enrolment is complex – you need a provider who will help to keep it as simple and hassle free as possible:

✓Handle assessment and opt-outs / opt-ins (when your payroll doesn’t do this)

✓Handle all statutory communications✓Interface seamlessly with payroll

• Robust proposition that won’t let you or your employees down

• Low cost to you and your employees

A responsibility to your firm


What do employees want?


Aside from pay, which of the following benefits and rewards are most important to you?

NOW: Pensions research conducted by Censuswide in September 2013 with 2,000 people in employment

Number of d

ays h

oliday

The q

uality

of the p

ensio

n s...

Bonus

Private

med

ical in

suran

ce

Additional perk

s like

duvet ..

.

Maternity

policy a

nd pay

Dental

cove

r

I'm only

interest

ed in

the j

ob

Subsid

ised ca

nteen

Subsid

ised/fr

ee gy

m mem

ber...

0%10%20%30%40%50%60%70%80%


What do employees want from a pension scheme?

27%

18%

17%

16%

15%

7%

1%

High employer contribution levels

What I will get when I retire

Good governance

Low charges

Strong investment performance

Wide choice of funds

Other (please specify)



Would you value workplace education about pensions?

Yes74%

Don't know14%

No11%

• Strong desire for financial education

• Employees keen to improve their understanding of the pensions benefit



Who should this be delivered by?

Independent / financial adviser

37%

Employer30%

Employee benefits consultant

16%

Pension provider

16%



• Pensions are rated highly as part of the overall comp & bens package

•High employer contributions and certainty over outcomes are top priorities

• Investment choice is a low priority• Employees want to improve their pensions

knowledge and want their employer to help them understand

What does this research tell us?


An obligation or an opportunity?


Compliance or something more?

•Basic compliance is the route currently favored by most employers

•Give consideration to providing a package above the minimum – it may not be as costly as you think

•Well communicated benefits improve employee retention and productivity

•You can offer different provision to different employee categories

•Employees want to be taken care of and guided in complicated financial matters like pensions


What does a good scheme look like?


Source: “Value for money” Pensions institute report launched 16 January 2014. The report was co-sponsored by NOW: Pensions

Value for money In pensions

On 16 January, the Pensions Institute at Cass Business School published a report examining what value for money means in pension schemes.

The report surmised:

1. A TER (total expense ratio) in the region of 0.5%

2. A well-designed multi-asset default fund with a glide path that is subject to regular

modelling scrutiny

3. Expert independent governance fully aligned with all members’ interests including both

active and deferred

4. Effective member communications that focus on improving the outcome for members

5. An efficient consolidation system that helps members to transfer older DC pots to the new

scheme

6. A decumulation service that is part of the scheme and provided by a specialist


Charges do matter

Somebody who saves from age 22 to 68 based on average salary and 8% contribution:

• Pay 1% AMC and lose 24% of total pension pot to charges

• Pay 0.75% AMC and lose 19% of total pension pot to charges

• Pay 0.50% AMC and lose 13% of total pension pot to charges

• Pay 0.3% AMC and £1.50 per month admin charge (NOW: Pensions’ model) and 8% of the pot is lost to charges


Pension Quality Mark

• Set up in 2009 to recognise good DC pensions

• PQM Ltd not-for-profit and supported by NAPF

• Supported by Government, regulators, employer, industry & consumer groups

• 186 employers have ‘classic’ PQM for their scheme

PQM Ready

• Set up in Feb 2013 to recognise quality Master Trusts

• NOW: Pensions was the first master trust to attain PQM READY status

• Standards on comms, governance and charges

• 6 Master Trusts have gained PQM READY

Help to identify a good scheme


Summary


Securing the right scheme

• 2014 is going to be busy - 30,000 companies staging over a four month period in mid-2014

• Plan ahead and don’t make any assumptions – the market is shifting - don’t assume your existing providers will be suitable or willing to accept your entire workforce

• AE doesn’t have to be a trade off between good value for employer and good value for employees

• Keep it simple – complexity adds cost but delivers little extra value


• Pensions Minister keen to introduce “pot follows member” for AE

• A cap on workplace pension charges likely – but perhaps not soon

• The government might increase minimum contributions – there is widespread consensus that 8% contribution won’t be enough to ensure a comfortable retirement

Don’t assume the legislation will remain static

How to identify the right scheme for your firm

Economy & Finance

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