Should intermediaries be getting into setting up their own auto-enrolment schemes? It is hard to read the tealeaves on this one.
On the one hand we have pronouncements from Andrew Warwick-Thompson down at the Pensions Regulator that one of his primary risks for the next few years is a proliferation of master trusts. He is understandably concerned that a 2014 gold rush to set up master trusts will see some prospectors get it wrong. And if and when that happens, he will be the one having to pick up the pieces.
It is a view shared by the Pensions Institute – its Value For Money paper earlier this year predicted that the market will very rapidly contract to about five or six master trust players as soon as 2020. Given there are already many times more than that many master trusts out there – I have heard unsubstantiated reports that there could be as many as 70 – and several intermediaries planning to launch their own versions, that would suggest we can expect a considerable amount of consolidation.
On the other hand we have the organisations setting up master trusts in an environment where everyone is talking about capacity constraints. The massive demand coming down the line will surely mean these schemes get some level of scale. But will it be enough to keep the business competitive over the long term? Advisory businesses I have spoken to going down this route tell me they have TPR, FCA and DWP completely on board, and I have no reason to doubt that.
But I do wonder whether immediate capacity concerns aren’t holding back regulators from taking a tougher line on issues such as conflict of interest and charges than they might do five years down the line. Will we see a change of attitude from regulators once the dust has settled and everyone is enrolled?
And if so, how will intermediaries that have taken their first steps towards becoming a product provider cope with what could be an even more austere environment than we have today?
This is a new market, and some entrepreneurs will doubtless do a fantastic job and set up propositions that work for employees, employers and themselves. But nobody should be deluded into thinking this is going to be a short gravy train ride to big money.