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The
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Mass
market products hit the high street Are people still prepared to pay for the gourmet, silver-service option of a la carte pensions, or will the ‘one size fits all’ approach seduce even those with more sophisticated palates? It seems that the issue is moot for both providers and employers: why would employers, who until now have never offered a pension scheme, decide on a GPP product where they are obliged to make contributions and designate a trustee? And why would a provider promote stakeholder when they could never charge more than one per cent? On inspection, the clientele appears to differ greatly. But will providers cater for those who want the choice of a steak and a Big Mac? Or will the arrival of stakeholder reduce all products to the level of the lowest common denominator? The general consensus appears to be yes – and no: according to some figures in the industry, there is no issue of competition because the target markets are totally different. Andrew Wilkinson, head of marketing at National Mutual, professes “not to be concerned about stakeholder”, and will implement “no significant changes” to the firm’s GPP products as he sees no overlap in the market. GPP customers tend to earn at least £50,000, be more financially aware, and demand more flexibility of investments, says Wilkinson, qualities which hardly fit the stakeholder criteria, as intended by the government. National Mutual intends to concentrate more on the value-added GPP market, and predicts a growth in popularity of self-invested personal pensions (SIPPs). It is this concept of ‘value-added’ which is going to determine if providers can hold their own in the marketplace and justify charges over one per cent, although, as Clerical Medical’s senior product marketing executive, Kevin Neal says: “We’ve already seen the charges on GPPs come down.” The GPP survey (see over) reflects the issues providers see as important in continuing to give clients a quality product, including improved customer service and more transparent charges. Lorraine Thompson, retirement solutions manager at NPI says: “Charging structures have changed, they’re cleaner and simpler, with more choice and flexibility being key differentiators.” She also mentions NPI refining customer service with “smooth administration and fast rectification of errors”. Along with other providers, NPI is also developing internet access and communication, although it is impossible to prove whether this is in direct response to stakeholder requirements or simply a general increase in the use of technology to improve customer service. Similarly, Clerical Medical has developed a web-based administration platform, the Lamda system, to facilitate communication with clients. Legal & General’s Andy Agar is positive about the future of GPPs. He says the market will “continue to thrive” despite lower charges, (L&G has a GPP with a charging structure identical to stakeholder), but admits that “there’s not much they [providers] can do within the charging structure to make the products more attractive.” He therefore sees service as a key issue, both face-to-face customer service and self-service (web-based access), although he says take-up has been relatively slow for online applications. Improved internet access was identified as essential by a majority of the respondents, but its development must go hand in hand with improved human contact service. Norwich Union noted increased call-centre support, and Royal & SunAlliance, AXA Sun Life, NPI and Scottish Life are commited to keeping service promises to avoid losing customers to competitors. Other key issues include ensuring that providers have sufficiently sophisticated facilities to cope with the rush of applications for new GPP schemes in the run-in to the October stakeholder deadline, and encouraging both employees and employers to contribute to the schemes. Just as some employers will require a simple, blanket approach for a large company, others may demand the choice, flexibility and advice that stakeholder simply cannot provide within the stipulated charges. Those who are providing both stakeholder and other GPPs are ensuring that any higher charges are justified by a quality product, and those who choose not to offer stakeholder are concentrating on specific areas of expertise: advice, good personal contact, and choice and flexibility of investment. And whether the employer chooses the fast food or a la carte option, they expect a friendly and efficient service. The
future looks quite healthy for pensions, whatever is on the menu. – Pensions Age September 2001 – BACK
TO SEPTEMBER FEATURES
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