Employers hold the key to pension provision

Jeremy Ward, Head of Pensions Marketing, Friends Provident, gives a view on the vital role of employers in averting a future pensions crisis

Engaging employers to deliver high quality company pension benefits should be at the top of the agenda for providers committed to the work place DC pensions market. Whilst acknowledging the vital role of specialist pension advisers, we focus here on the importance of building relationships with employers.

State pensions paid by future UK governments will not meet the need for income in retirement. The majority of workers left to fend for themselves would not save enough to accumulate a sufficient second tier private pension. So employers hold the key, they have for several decades and must be encouraged to continue sponsoring company schemes in the future.

The government benefits because employers play a prominent role in retirement savings. Employers on average make significant financial contributions to employees pensions. They also perform the vital role of collecting regular contributions by payroll deduction and remitting payments in bulk to the provider. Psychologically, employees regard payroll deduction as more acceptable than personally writing regular cheques or making direct debit payments to a provider from disposable income.

However, the employers role in pension planning cannot be taken for granted. An employer is under no legal obligation to contribute to a pension scheme. In 2012, (at the earliest) this could change with the introduction of personal accounts.

Meeting the employers expectations
A pension scheme is a significant budgetary expense but the operation of the scheme should not distract senior management from driving the business forward. Clearly, providers need employer schemes to flourish. In return, we have an obligation to ensure the set-up and operation is as straightforward as possible. The fundamental objective for the employer is that the pension scheme is regarded as a positive employee benefit, which aids in retaining and recruiting valued employees.

The pension providers role is straightforward but challenging:

  • Offer competitive, tax efficient products which are
    excellent value for money
  • Deliver consistently accurate and timely service
  • Present all information in style and content which
    recognises the knowledge and interest of the reader
  • Develop and maintain, systems and processes,
    which hold assets securely and protect confidential

    Long-term relationships
    To deliver excellent service requires understanding the specific needs of each client, now and in the future and meeting, or exceeding, the client expectations. Achieving this can create competitive advantage.

    Most employers expect their business to operate for many years. Similarly, providers should aim to build long-term relationships with employers and on multiple levels. For example, relationships with the scheme sponsor, (normally a senior executive(s)), the trustees (for trust based schemes) and people in the employer organisation, whose role is to deal with all pension payroll related issues.

    Organisational strategy and the right people

    Organisation structures should make it easy for the employer to do business with the provider. A client service manager should be assigned to each scheme. That individual should be the focal point for all contact with the client company and liaise with the providers servicing team to resolve issues.

    Providers must recruit/train people with strong technical knowledge, and who enjoy dealing with customers and giving good service. Employers will expect the people they deal with to understand the intricacies of their scheme. Teams should be organised to handle a portfolio of schemes and manage all the servicing tasks required by the scheme. The team manger would have a portfolio under their care, with experienced administrators assigned to lead on individual schemes.

    Talk is cheap, but the objectives are clear. Those who wish to succeed in this market must put employers firmly at the centre of their business.