It is hard not to feel sorry for the team working to bring Nest to market. These days barely a week goes by without there being some other issue that will make their task significantly more difficult.
As a Londoner my first reaction on hearing that Capita had won a seven year contract to act as the administrator from The Pensions Regulator was, will this be Congestion Charge Two? Even years after administration of the London system moved to a different administrator, the media reaction to the early days of the system is, in my mind and doubtless millions of other drivers, synonymous with Capita.
According to the press release Capita will have responsibility for “limited enforcement activities including administering compliance notices and, where non-compliance persists, fixed penalties”. I am sure many will watch how this works in practice with considerable interest.
Nest will rightly point out that The Pensions Regulator is an entirely separate part of the auto-enrolment process. However, will millions of employers understand the finer parts of this distinction? Perhaps more to the point, will the media? The financial press will of course be aware of the differences, but when stories start emerging of employers receiving non-compliance notices and fines on behalf of The Pensions Regulator, what are the chances journalists on small regional newspapers or in the tabloids will comprehend the nuances?
I have considerable sympathy for Nest, it has to facilitate pension contributions for vast numbers of businesses, large but predominantly small, including addressing vast numbers of short term joiners and leavers at margins that are challenging to say the least. It will need to be processing hundreds of thousands of employers a month fulfilling its auto enrolment obligations, at a pricing that simply cannot accommodate the level of support that decades of experience has shown is necessary for the smooth establishment of schemes.
However does it have the infrastructure to support this? If not, will we be in a situation where a lack of resources at Nest leads to Capita, with the unquestionable efficiency they demonstrated with the Congestion Charge, distributing large numbers of enforcement fines?
There is no doubt that the workplace market is seeing new and innovating technology based solutions emerging at a greater pace than ever before. As research to be included in this magazine next month will indicate employers have never had such a wide array of choices when looking to find solutions to help their employees save for retirement and take better of control of their finances.
This is really good news for members of schemes taking advantage of these. At Nest margins however does it have the resources to deliver such equivalent content? A good benefits scheme is always going to be about more than just the core pension proposition. On this basis, one has to ask if an employer wants to deliver anything but their minimum legal obligations is there any case for even considering Nest?
From the adviser standpoint, it is important to ask will Nest be able to facilitate the deduction and payment of consultancy charging? Other pension providers clearly see this as a crucial service.
If Nest is not able to offer such services, in practice the adviser must ask the employer to make an extra payment for the consultant’s charge. In reality I expect many situations where the employer’s instruction to advisers will be ’find me a solution where I don’t have to write a cheque to you’, hence in practice Nest will have excluded itself from vast swathes of the market.
If it is not going to provide a mechanism to enable advisers to get paid, will Nest at least build interfaces to the adviser’s main client administration systems? To look at two of the many areas where this will be important, will it communicate directly with advisers systems around the scheme establishment process, and will it supply information directly to the adviser about contributions received or not received?
It will be right to judge Nest’s offering by direct comparison with the technology and e-commerce services delivered by other pension providers. At this time this would appear to be a test they will fail dismally. Not only will Nest not facilitate the consultants’ remuneration, if there is a lack of equivalent services to take cost out of running the pension scheme they will considerably increase the cost the adviser will need to pass back to the employer.
