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Aviva develops plan to tackle Nest head-on

Aviva is developing a product to compete with the National Employment Savings Trust scheme.

David Barral
Barral: Fear that Nest will seep into existing market

UK chief operating officer David Barral says the firm is working to counter the threat of Nest on private pension provision.

He says: “We will have all the requirements in place to enable us to compete head-on and avoid Nest dumbing down the private pension market, which is what the threat is.

“In terms of making auto-enrolment work and having an appropriate default-type fund, which will probably be target date funds, we are working on all that now. Nest will have a very simple default fund and if we are competing effectively alongside it, we have to have the same.

“The worry is that Nest will seep into the existing market. We are lobbying extremely hard to make sure that does not happen and that our product design and benefits mean we can defend ourselves very vigorously.”

Barral says providers with a focus on investments rather than risk-based products could struggle the most in adapting to the changes.

He says: “If you only focus on the GPP market or Sipp and wrap, your internal rate of returns are wafer-thin, so you will have a hell of a job adjusting.”

But Barral says Aviva plans to “dominate” the group pension market despite the thin margins.

He says pricing in the fourth quarter was “incredibly aggressive”, adding that Aviva, which is the third-biggest player, lost market share to other commission-paying rivals.

He says: “Pricing in the GPP market is incredibly tight. We lost a bit of market share in the fourth quarter, which is absolutely down to aggressive pricing. We chose to keep our discipline in managing the margin.

“We are reasonably comfortable at the moment. We make sure that each scheme is right and assess the adviser as much as the scheme.”

Aviva is bringing in customer agreed remuneration on individual pensions from April and could accelerate an RDR-ready version of its GPP.

He says: “We are looking at accelerating an RDR-ready version of a GPP because the rules are now clear on consultancy charging. Clearlycommission is banned on GPPs from 2012 so we need to have that in position.”

Aviva is also looking at launching a corporate wrap and is planning to bring its fixed-term annuity to the market by the end of the year.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Anyone who has ever dealt with Aviva pensions will know that this is no real threat to NEST.

    I would rather deal with the Governments scheme to be honest!

  2. Not much more of a threat to NEST than if Windsor Life said they were bringing somethiing out too. Difficult to get worse than a disjointed monolith (albeit with afunky new ‘international’ name) with call centres abroad who are entirely unable to handle current business enquiries.

  3. Pensions Manager 11th March 2010 at 4:13 pm

    PensionMan – you do not seem to have had much experience of dealing with the DWP or NICO!

  4. Couldn’t agree more with the the other 2 contributors. If you’re thinking of supporting their new SIPP platform…don’t, it’s a joke!

  5. The cuckoo in the NEST is indeed the amalgamation of all the life office funds under management, if they had thought ahead and not allowed the rot to set in with ‘Stakeholder’ pensions (anybody remember them? They took two years to get to market!) then they would not be in fear for their businesses, not that they had a future after ripping off all concerned including those gullible IFAs who handed over their goodwill, all their clients that is. To think that the ABI complained to the Treasury about all those ‘demanding IFAs’ who take 40% of their total costs in commission. What a pack of lies that was..

  6. I agree with others’ sentiments. We find AVIVA’s admin is extremely poor so I am not at all surprised they have lost market share.

  7. It’s dead simple – Aviva should butt out. Then maybe there’ll be some clarity (long overdue in the pensions arena) and people who badly need to will start providing for their retirement. These people don’t need a wide range of choices – they need something simple to understand that they can have faith in.

  8. David Trenner - Intelligent Pensions 11th March 2010 at 5:34 pm

    Aviva are either stupid or arrogant to think that they can compete with NEST. In any event do they really want contributions that will not rise to 8% until 2017??

    If Aviva really wanted some of the NEST cake, why didn’t they bid for the Admin?

  9. The product manufacturers in this country have been conned time and again by the government. Stakeholder and Sandler Medium Term Savings plan just two examples with ridiculous low charges even the goverenment could not meet.

    @Trenner – what NEST admin cake? everybody ran a mile when they saw the commercial terms

    Also look what the government is doing to building societies with NS&I.

    They are out there to break product providers, IFA’s and would no doubt only prefer to have a state bank.

  10. Paul Goodwin - Aviva Head of Pensions Marketing 12th March 2010 at 4:20 pm

    It is really easy to dismiss NEST and auto-enrolment as a non-event and not a threat to much of the core business written by IFAs through providers. Although the aim is to provide pensions for those not currently saving, the regulations apply to all schemes and there may be unintended consequences for existing schemes. The provider community is therefore lobbying hard to address these concerns and protect the many thousands of existing group pension schemes that are currently in place.

    A quick look at, for example, the auto-enrolment regulations will highlight the very real risk that many employers will be left with the possibility of dealing with two lots of payroll deduction – one to NEST and one to the current scheme. Our research shows that most employers will not run with this for long and will end up taking the line of least resistance – that being the ‘compliant’ route of NEST.

    The knock on impact of this is a huge threat to many of the group pension schemes managed by IFAs.

    The lobbying work that we undertake, across all parties in The House, is designed to protect the schemes of employers that have been good enough to pay into a pension arrangement on behalf of their employees. We all want the same outcome – a thriving employer-based savings market.

  11. Aviva’s pension administration has come a long way in recent years. My experience on their current pensions has been excellent. TBH I’m not keen on the current proposals for the NEST admin so would choose aviva every time

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