Scottish Widows has ruled out designing a stripped-back group personal pension to compete with the National Employment Savings Trust after two of its rivals announced plans to compete with the scheme head-on.
Money Marketing revealed last month that Standard Life is working on a GPP to compete with Nest. The insurer says it will use its existing processes and systems but make it a more off-the-shelf product. Aviva is also planning to counter the threat of Nest by developing a competing proposition.
However, Scottish Widows intermediaries director Simon Massey says he does not think there is space for insurers.
He says: “It is polarised between those who treat it as compliance and just do what they have to do – and Nest will be the answer for them – and those who want to start providing some decent employee benefits. The latter will look for the best solution to attract and retain good people.
“I do not think there is the space for providers to compete with Nest. Our focus is on the employers looking for decent employer provision because that is where we can add the most value. If all you really want to do is meet compliance, it is less profitable business and is not a priority for us. We think there is more demand for higher-quality schemes.”
Massey adds that advisers will struggle to sell stripped-back provider products instead of Nest because they will have to justify charging a fee.
He says: “Advisers are looking to find relevance in an environment without commission. How are they going to sell an Aviva or Standard Life stripped-back scheme and charge a fee for it when the employer can get Nest for nothing?
“Whereas if you say I am bringing you an all-singing, all-dancing package for employees, there is value in that which the employer is prepared to pay for. There is more future in this than in the stripped-back stream.”
Massey: ’Our focus is on the employers looking fordecent employee provision. That is where you can add most value’
Massey predicts the number of wrap providers will dwindle as a result of the FSA’s review of the market. He believes the proposals for advisers to use more than one platform and the ban on rebates will particularly impact on providers.
He says: “Many providers are hoping the status quo will continue. They will all be working on the premise that they can get so many advisers signed up and, from those advisers, they can migrate so many legacy assets onto the platform. As long as they can keep their costs under control, they can make profits.
“But what has happened is that the route to getting your assets under management has changed. Now, instead of getting 100 IFAs, we will have to deal with 500. “Have they got the sales and marketing functionality to do that or was it built around deep relationships with fewer advisers as opposed to thinner relationships with more people?”
Massey questions the benefit to the client of IFAs placing all their business on a single platform. He also reiterates that Widows is committed to paying commission up until the RDR and on existing business post-RDR but admits that persistency is a challenge.
However, he says: “The persistency we experience on our corporate book is pretty good and our margins look quite good compared with our competitors. Existing business retention is really important. If we see IFAs who are systematically taking advantage, then we will have a conversation with them to encourage them to think about the benefits of retaining the business with us.”