Opportunities to review existing benefit provision

1 December 2009 Corporate Adviser

We can see a number of key themes in the corporate benefits market, driven by a need to improve engagement, mitigate risk and improve balance sheets. All of these initiatives provide great opportunities for improved benefit design and member interaction; this is hugely positive for all of us involved in advising on, and providing, workplace based solutions. However, this will all result in the end consumer (employees) carrying more risk and facing some potentially complex choices. It is therefore important that we ensure the right models are in place to provide support that is appropriate to each individual.

So, what are the main themes that are providing these opportunities?

1. Accelerated closure of DB schemes - According to a NAPF Survey* in January 2009, 1000 DB schemes are expected to close to new members in the next five years. A significant number of schemes are also expected to close to future accrual.

2. Deferred member buy out - A number of companies have already offered members enhanced transfer values to buy out their paid up benefits, and many others are still exploring this option.

3. The emergence of Workplace Savings - Employees are increasingly being offered solutions that include SIPP, ISA, Shareplan Rollover and so on. The combination of these products can be very attractive when used with effective tax planning; however there is an increased level of complexity as a result.

4. A maturing DC At Retirement Market - Increasing numbers of people will be reaching retirement with significant DC funds and will need to make the best possible decisions around securing their lifetime income. New options are coming to market all the time and the average consumer can not be expected to make an informed
decision without some expert support.

5. Flexible benefits - Increasingly employees are being given a percentage of their compensation to allocate towards a range of benefits. Guidance needs to be available to ensure that the need for immediate gratification doesn’t lead to short-term decision making and that long-term savings are still considered.

Improved levels of financial education and guidance will help. Easy access to well designed, intuitive planning tools will benefit some. However the need for face to face guidance and advice appears to be stronger than ever.

We don’t yet know the full impact of the Retail Distribution Review, especially in the corporate benefit market, but there is a danger that it could make the provision of advice more difficult. A number of the new workplace savings products will potentially be classed as retail products and will be caught by the full impact of RDR. With adviser numbers predicted to fall, and advisers charging for corporate products to be clarified, there is a danger that the end consumer may not be able to access expertise at the very time they need it.

Of course not everyone will want advice and, if a robust guidance and support service is designed, a number of employees will be able to make decisions without adviser input. Advice can then be more easily offered to those that really need it. A good guidance and support service would include:

It will be a challenge for all of us to offer these services in a manner that is cost effective for everyone involved. We are in a market that is becoming ever more complex and it is vital that we protect the end consumers by ensuring they get the guidance and advice they will undoubtedly need.

Alan Millward

Head of Workplace Distribution at AXA.

alan.millward@axa-sunlife.co.uk

If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing