The Pensions Bill has begun its reading in Parliament. Will the creation of the National Employment Savings Trust open the market to businesses never before involved in providing financial support to their employees and create opportunities for advisers to cross-sell group risk and employee benefits products?
Steve Herbert, Jelf Employee Benefits
I believe NEST and auto-enrolment will significantly widen the scope of benefits provision for employees.
Traditionally, providing employee benefits in the UK has essentially been a choice made by the employer. Auto-enrolment changes this, with all eligible employees now having a legal right to a company pension contribution.
This will drive change in three key areas of the group protection market.
Firstly, many employers have often traded on their offering of a pension scheme, however basic, as a main recruitment and retention tool. Since pensions are now a right not a privilege, a greater focus on other employee benefits offered in addition to the pension contribution is likely.
High benefit, but low-cost, benefits such as income protection and group life are likely to be favoured here.
Secondly, benefits have traditionally been a cost too far for some employers. These same employers no longer have a choice on pension provision. This gives benefits professionals an excellent opportunity to engage this hard-to-reach audience in a conversation covering the entire employee benefits landscape.
Finally, it is surprising how many employers offer risk benefits cover only to employees who are members of the company pension scheme. Clearly, if all employees are to become pension scheme members, this not only extends the population to be covered, but will also put a much sharper cost-and-return focus on these benefits. In the long term, this can only be a good thing for both the market and the risk gap in the UK.
Robin Hames, Bluefin
NEST will not provide health and risk advisers with any opportunities, but the introduction of the new pension auto-enrolment duties may well do. These are two separate issues.
The new auto-enrolment duties will require all employers to enrol eligible employees into a qualifying pension scheme and contribute on their behalf. Our view is that the opportunities arising will vary between employer segments.
For many employers with a pension and other benefits already in place, eligibility for benefits is sometimes linked to membership of the pension scheme.
Auto-enrolment will drive up pension scheme participation rates with an immediate knock-on effect for the associated health and risk arrangements.
These employers will need consultancy support as the overall cost implications become apparent. Salary sacrifice, scheme redesign or the introduction of tiered benefits may all feature as means to offset some of the costs.
For medium to large employers with no pension in place, this appears to be a clear opportunity to encourage the introduction of a broader suite of benefits.
However, our own experience does suggest that a number of these employers do actually have lifestyle benefits in place, but have not introduced a pension. This is especially true of younger, faster-growing companies and so opportunities may well vary sector by sector.
Small employers with no pension will least welcome the cost and administrative burden of auto-enrolment. It seems unlikely such employers will increase their costs further and they are, to a great extent, the least likely to be able to obtain attractive rates in the market.
