Identity parade

Special Report on Corporate wraps

Last year saw the start of a transformation that may require certain parts of the pensions industry to adopt a new identity. Reports of defined benefit’s death no longer seemed greatly exaggerated – and auto-enrolment and personal accounts, under the new NEST tag, began to move into the public consciousness.

While much attention has been focused on the need to provide a pension for almost all employees, in parallel much of the benefits industry has been taking a look at whether saving into a pension is even appropriate for the duration of an individual’s working life.

Given the difficulties involved in getting anyone under the age of 40 to take an active interest in their pension, taking a broader approach to ‘workplace savings’ could be a more effective way of encouraging employees to save for the long term. Group ISAs might be more easily understood – and more appropriate for – younger savers. Share-save schemes will enable employees to make income paid in shares part of a longer-term savings strategy, and for those that are earning at an appropriate level group SIPPs give individuals greater flexibility on how they accumulate funds for their retirement. Of course, more traditional defined contribution (or indeed defined benefit) arrangements will also continue to have a significant place as a part of a wider range of retirement savings models.

At present, it’s not clear how some of the non-pension vehicles, such as group ISAs, would fit with the auto-enrolment requirements of NEST. In broader terms, however, NEST may prove to be one of the reasons why employers start to take a look at corporate wraps. Employers who have traditionally offered good quality workplace pensions will want to be seen to continue to do so. Giving employees the ability to choose appropriate savings methods and monitor them effectively is one way of making a clear commitment to your staff’s future.

Any employer could offer group ISAs, share-save schemes or group SIPPs at present. However giving members a one-stop overview of their savings and a coherent means of managing and monitoring their longer term savings is essential if employees and employers are going to get the most out of their pension/savings arrangements.

Wraps have been used in the IFA world for many years, but they are still a newcomer in the corporate marketplace – whether termed corporate wraps, or corporate platforms. Technology, communications and product strategy all need to come together to make them work in this new context. Whoever can bring these three elements together most successfully will carve a clear identity for themselves in the changing pensions market.