The corporate wrap concept has started to excite our industry. Unfortunately, most employers and employees aren’t yet quite as enthused. So far, it’s mainly larger employers that have shown interest in corporate wrap (or workplace savings), which is because most existing solutions are designed for this target market. But these solutions are unlikely to be suitable for the majority of employers (or employees) and there’s a danger that the market will emerge in a way that attempts to straight-jacket customers in to inappropriate solutions.
Employer research carried out for Aviva found that there is no strong appeal for greater employer involvement in employee finances and that employers are reluctant to promote savings vehicles from a single provider. It also showed that communication is important, with a need for a consistent delivery of messages.
This suggests that an old fashioned industry approach of marketing an inflexible product, supported by traditional financial-services style communication, will not work.
However, the research also showed that there is an employer desire for something more relevant than pensions for younger workers, and high earners, as well as an ability to demonstrate the true value of workplace benefits to aid recruitment and retention. So there is clearly a demand for a solution that offers more than the traditional GPP.
As yet, no model has emerged as the template to engage employers and employees across the market. There are potential problems with some existing solutions. For example, some provider corporate wraps offer access to a suite of in-house investment products. Even though
these may be the outcome of costly and elegant platform developments, they risk failing to meet customer needs. As mentioned, there is an employer reluctance to promote the products of a single provider, and a restricted product choice also limits the value advisers can add. Also,
this type of structure can be too complicated and irrelevant for the majority of the employees.
Another problem is how to charge for these propositions. Some models load an addition to the pension annual management charge.
This seems unfair to those employees that choose to join the pension because they end up cross-subsidising those employees that don’t. There are many potential commercial models, which could include charging the employer – but it needs to be cost effective, transparent and demonstrate clear value to the employer.
So, what features might emerge to fulfill customer needs? Certainly there’s a need for clear and engaging communications.
This may be achieved by allowing employers to bespoke employee communications for workplace savings – to ensure they’re appropriately targeted to their workforce. Employees can be encouraged to use workplace savings features by providing a simple and engaging on-line entry-point, together with the possible use of online tools to explain how their proposition works.
Workplace saving solutions that offer provider choice for each element of the proposition will help employers demonstrate to their workforce that they have chosen providers that offer the best value. This may include NEST for some employees. And, it’s unlikely to just be savings vehicles – but health, risk and other benefits too. This is where the concepts of corporate wrap, flex and total reward statements may merge in the future.
Aviva’s employer research showed that the simple introduction of Total Reward Statements (TRS) alongside a GPP could demonstrably add value. If deployed effectively they can benefit employer retention and recruitment as well as enhance take-up rates and contributionlevels in to the GPP. This kind of solution could form the first step on the workplace savings journey for many employers.
Advisers can add more value here too, with the need for discussions about full employee benefits and the ability to capture robust MI on the workforce (which can also help demonstrate the implications of autoenrolment). As we move towards the introduction of RDR and auto-enrolment it’s essential that, as an industry, we get workplace saving right. This means designing solutions that engage and offer value to customers. If we get it wrong, not only will the industry regress, but we will fail our customer base – which will result in continued under-saving
for retirement.
Steve Jacks
Group Pensions Marketing Manager
Aviva