The pensions industry’s ability to offer support services to employers will hit full capacity in May and demand will be seven times normal capacity by the end of this year, according to Towers Watson research.
Capacity issues could lead to providers temporarily closing to new business, putting up prices, reducing ancillary services and cherry-picking new clients, says the report.
Towers Watson modelled pressures on pension providers by comparing the number of employers that will pass through staging in 2013, taking account of the pre- and post-staging date provider support that employers may require and assumed that only 50 per cent of employers will need external assistance.
Towers Watson senior consultant Rudi Smith says: “Providers may have no alternative but to temporarily close to new business and may even have to scale back the level of service that they are able to provide to existing clients.”
Aviva managing director, corporate benefits John Lawson says: “Any capacity crunch is likely to end up at Nest’s door. And the industry may end up having to ask for breathing space, although that would not look good.
“Could this capacity issue push up prices? Prices have been rock bottom for too long. So they may return to healthy levels.”
Nest managing director of product and operations Helen Dean says: “Nest is prepared and has been designed specifically for automatic enrolment, and for scale. If wider market capacity starts to dry up, it has to be true that with Nest’s public service obligation more business may come our way. We are prepared for that.”
For more on this story see the April edition of Corporate Adviser