Corporate intermediaries predict that while the workplace benefits sector is proving to be amongst the last to feel the shocks in the financial system, the recent market volatility will underline to finance directors the risk that defined benefit pensions leave on their balance sheets.
Describing the current situation as a ‘period of opportunity’, advisers are emphasising the cost saving solutions they can offer to finance directors under pressure. Experts are emphasising however the importance of choosing well-capitalised product providers that will be able to stay the course, and some have predicted that HBOS business Clerical Medical will be subsumed into the Scottish Widows stable. Neither provider was able to confirm the future of the brand at this stage.
Tom McPhail, head of pensions policy at Hargreaves Lansdown says: “There had been talk of Clerical Medical making a comeback but there are probably better economies to be made by merging it into Widows as that is a brand that is actually up and functioning well.”
David Marlow, marketing director of Alexander Forbes Financial Services says: “Nothing is happening overnight but it is death by a thousand cuts for defined benefit schemes and this is yet another round of cuts hastening that death. But one of the more positive messages we are able to give is that with the right communication programme, actually replacing a DB scheme with a DC alternative can leave employees happy, meaning finance directors can get good value for their employee benefits spend.
“We are also getting some anecdotal feedback that finance directors are feeling the pinch and might be looking at reigning back their benefits spend. But we haven’t started to see it filter through in terms of actual reductions in contributions.” Nick McMenemy, corporate consultant , Morgans Corporate Benefits says: “If anything there is more reason to be talking to prospects and clients than when everything is going well. We see this period as one of opportunity. Apart from lower pension fund values from members, our corporate clients are not directly affected by the recent crisis. But pressures may emerge later as the real economy contracts. “The uncertainty does however reinforce the need for thorough due diligence when reviewing and recommending group pension providers in particular.”
