But alongside the crusading “0.5 per cent for all” sound bites there have been few questions about the type of business L&G is looking to attract.
A Money Marketing reader attempting to place a new scheme with the provider was told last week of the strict criteria being applied, including the fact that it won’t offer a scheme for less than 50 members and that average monthly contributions need to be £200 per member. The correspondence is below:
“Unfortunately in respect of this group pension scheme enquiry I regret to inform you that we shall be unable to offer you any terms for this prospect. This decision has been based predominantly on the fact that the minimum number of eligible members that we typically offer group pension scheme terms on is 50. We would also require a monthly average contribution of £200 per member.”
Now when first questioned about this, L&G said the size of schemes it is willing to write is dictated by next year’s staging dates, with 50-249 employee firms taking priority, and that it will be looking to write schemes for smaller employers in time.
This could well be the case, although the wording above appears a bit more definite in its exclusion of smaller employers. Other insurers I’ve spoken to say they are indeed talking to smaller (less than 50 staff) employers ahead of 2015 staging dates.
With those on average earnings looking at monthly contributions of less than £120, even if the full 8 per cent is contributed from the start, a £200 a month barrier will exclude many schemes.
From a business point of view such moves are understandable. Insurers aren’t charities.They need to ensure the business they write is likely to be profitable based on estimated contribution levels, staff turnover and size of firm. Other providers I’ve spoken to say an average £200 per month contribution is the sort of level where a 0.5 per cent charge becomes workable for smaller schemes.
But is it right for a firm to be lobbying so forcefully for a charge cap of 0.5 per cent if it may not end up operating in areas of the market where such a cap could hit the hardest?
When questioned again about the high level of monthly contributions required, L&G is now saying that the above communication was made in error and that the two limits quoted are not in fact its policy.
When asked whether it will look to be a “significant” player in the smaller employer market, an L&G spokesman says it is too early to say, although he clarifies that it will definitely “be active” in this area.
If L&G is able to offer a decent pension at very low cost to large numbers of people with small employers and low contribution levels then great. It’s strong track record and resources in passive investing certainly gives it an advantage compared to some rivals.
But alongside its proclamations about the need for an ultra-low charge cap, L&G needs to be clearer about the areas of the market it is likely to be operating in.
Paul McMillan is group editor at Money Marketing- follow him on twitter here