The Government's philosophy for selling stakeholder has placed emphasis on new partnerships in addition to traditional employer groupings. A gateway is a term that has come to describe the new categories of group pension provision that will emerge as a result of stakeholder.
We have probably already achieved maximum pension coverage through employer-based groups, as the excluded classes are often characterised by temporary work, frequent job changes, self-employment or employment within very small firms. Stakeholder's low margins will make it even more difficult to reach these people.
But a group is no more and no less than a collection of individuals with a common affinity. If we take the trouble to look, there are a great number of affinities out there. So we shall potentially see new groups arising based on trade union membership, geographical base, social activities, sport, culture, religion and many more.
A fully inclusive system will be achieved by offering everyone a choice of so-called gateways through which to arrange their stakeholder pension. The great strength of this is that mobile workers will be able to choose a gateway that they are more likely to stick with.
The new gateways will be crying out for advisers who can help them clarify and achieve their goal as a pension provider. Gateways will come in all shapes and sizes. Some will potentially have more members than the biggest pension schemes today. These gateways may find the breadth of skills and advice they will need among our top employee benefit consultancies.
Other gateways may be inspired by prominent backbencher and former minister Frank Field MP to make welfare more than the impersonal movement of cash. They may embrace services, fellowship and kindness to promote social inclusion rather than social exclusion. Frequently, these will be the smaller, perhaps regionally-based gateways where a community spirit is easier to foster. Small local IFAs will be the natural partners for such gateways.
IFAs with widespread experience and a professional knowledge of the pension market will be able to:
Assist the gateway to choose a stakeholder pension provider and create tailored packages where the three main product components – investment, administration and insurables – are combined from different providers.
Assist the gateway with the design of the scheme, customising the variable elements within the stakeholder concept to maximise appeal to the target audience.
Create a marketing strategy and literature to inform potential members of the attractions of the scheme.
Assist with the provision of administration and trustee services.
Gateways are likely to have a fiduciary responsibility to members akin to that of today's occupational scheme trustees and may need assistance in discharging these duties. Even if they do not formally embrace the trust structure, the Myners review makes it clear that anyone in a fiduciary role needs to pay more attention to discharging their duties to members.
IFAs can look forward with confidence to stakeholder pensions. In many ways, it will be a whole new environment but one which calls on the skills and core competencies that IFAs already possess. Some IFAs mistakenly believe the game is up for pensions but it is really only just beginning.
Adrian Boulding is pensions strategy director at Legal & General