Not all advisory firms are doing auto-enrolment as well as Capita Employee Benefits says its new chief executive Susan Ring. In fact, says the former Unum CEO, the firm is being approached by increasing numbers of distressed employers wanting the project done all over again.
“We have come across employers who have had a torrid experience, primarily because of the fact that the technology has not successfully worked, whether the provider’s or the intermediary’s technology,” says Ring, who took over from the firm’s now chairman Nick Burns in March.
“So we are taking on distressed employers, whether it is because they are right up close to their staging date because they have been through it once and it was a bad experience and it hasn’t really landed that well, or both,” she says.
“We are getting what we now call second stagers. It has primarily been the technology that hasn’t work as expected,” she says, without naming names, although saying some clients approaching Capita have come to her after a poor experience with big name consultancies.
“We have seen problems from a number of different intermediaries and a number of different providers. Some of the names getting it wrong are big, well known firms,” says Ring.
Capita has staged nearly 200 employers, including its own massive organisation early on in the process.
“In the initial stages it was very challenging. We also took the Capita scheme as one of the first cases we moved and that had 65,000 log ins requested and 37,000 people opting in. That tested us and made sure what we had in place was robust and able to handle volume and scale which is positive,” she says.
Ring sees a key role for corporate advisory consultancies in the new liberalised pension world created by George Osborne in this year’s Budget. So does she think that people will run out of money?
“There may be certain cohorts that take the lump sum and then will have choices about what they will do with that, but there is also an argument to say there will be other cohorts who, with more guidance and education around that might not have made the decisions they have in the past.
“The interesting thing is to what extend the guidance guarantee is going to have an influence. Is that guidance going to be too little, too late? The government is giving £20m in two years. By our tallying that is £30 per person. The question is what can be provided within that sort of envelope. The Treasury slips in references to advice and guidance, but we will have to wait to see what the consultation says in September. But the key question is, is it all going to be too little too late? I would advocate the need for education, communication and engagement far earlier on in the process,” she says.Susan Ring, Capita EB
So does the Budget’s massive relaxation of pensions rules, which allow individuals a greater range of target retirement outcomes mean will we have a trend away from single defaults, to choosing bespoke portfolios through technology?
“One of the things we are promoting is the audience of one. So where we take the full benefits proposition but we personalise it to the individual. One of the key points to success with employee engagement with benefits is communication, and we are doing that through our Orbit platform. So we are developing roles and personas for people at the various life stages they have got to, so they can click on them, identify with them and engage with that.
“I don’t think the one size fits all approach as attractive, for defaults or generally,” she adds.
And does she think that investors who are guided out of the default option should be allowed to invest into funds that cost more than the maximum permitted annual management charge for auto-enrolment defaults?
“We are giving that some thought at the moment and determining our position on it,” she says, adding: “We think we have been very responsible about our charging approach and we intend to continue to do that. So if you look at the average charge for us on a commission basis is 0.6 per cent, and on a fee basis it is 0.35 to 0.4 per cent.”
Ring argues that Capita will not lose much revenue as a result of the abolition of commission?
“It will have a very small impact on our business. We have been anticipating the changes for some time and have been transmissioning clients to a fee basis, even before the Retail Distribution Review. We have always set clients’ terms against a fee basis, even where we have been paid commission,” she says.
Ring has calm but firm words for providers hoping not to have to reduce charges proportionately when commission is turned off?
“We would hope that providers will recognise that charges will come down. We would hope that they will reprice. Hopefully they will be sensible about that. Obviously if that is not the case then we have got a duty to our client and we would have to have a discussion with the client about whether we conducted an open market review,” she says.
She also predicts more rebroking as a result of employers reviewing their whole proposition once they have got auto-enrolment out of the way.
“One of the things that came across at the EB Connect event is that the HR community have been living and breathing auto enrolment to the point of making sure that they are compliant and will then come back and revisit their benefits and reward strategy. So we will find that people will revisit their pension arrangements in the context of the broader rewards strategy review. We are working on analysing trends to find real insights so we can advise on a whole range of benefits when pension is in place for everybody,” she says.
This will include a potentially greater role for group risk, health insurance and wellbeing benefits once pension is a basic staple.
To be able to do this, consultancies will have to have a greater understanding of employee behaviour and response to benefits offered to them. Capita has appointed a chief data scientist to look at trends and provide insight for employers in terms of the selections that employees are making and the behavioural dynamics of their workforce and what their preferences are by way of benefits.
“We have also recently relaunched Orbit. So it is now fully device responsive so if it is viewed on a tablet, a smart phone, desktop or a smart TV, the tiling is reworked to suit the device you are using. We have also pulled all the information for a single individual together into one place, whether it’s DB or DC pension, healthcare, bike to work or whatever else. It is all presented to the individual as a single picture.
“We are working with Orbit in a way that is intelligent with the individual. For example, if they are selecting and getting their holidays approved online through Orbit it then prompts them as to whether they want travel insurance” she says.
Rather than seeing a deterioration of the provider/adviser relationship with time, as some have predicted, Ring envisages further consolidation in the advisory sector with a smaller number of chosen intermediaries enjoying stronger connections with providers. “We have a number of providers who are richly connecting to our Orbit platform, Standard Life, Aegon and Aviva, for example, although that is not an exclusive list,” she says.
Her strategy is to grow the business to take maximum benefit from this trend, and that will mean both organic and inorganic growth across the areas in which Capita has strength in depth.
“We have a really strong pensions admin business, which is a staple for us. That is something we intend to grow. We also have a strong, award-winning consulting business. And then both of these are underpinned by leading edge technology. All these will enable us to give a really unique proposition for employers,” she says.
“So the objective is to build on what we have already got through organic growth, but also inorganic. We are certainly looking for acquisitions. We are looking to buy pension administration business, actuarial firms, tracing firms. We are very open to acquisition opportunities, provided it delivers the value we expect for the business.”
All about Susan Ring.
Warwick University – BA combined honours in German and English
Chartered Company Director qualification.
In financial services since leaving University
CEO of Unum for eight years before joining Capita
Joined Capita in May 2011, regional managing director, South.
Chief executive of Capita Employee Benefits since March 2014
London in the week, Surrey at the weekends.
“Anything active that keeps me fit” – Skiing, walking, sailing and gardening.