The prince of Denmark

Danish pension provider ATP is entering the UK market with its version of the National Employment Savings Trust, in a bid to ‘modernise’ the British pension market.

From next year, employees earning more than £7475 as of January this year, must be auto-enrolled into a pension scheme provided by their employer. Nest is being set up as a low-cost option specifically designed for this purpose, but there is no reason why employers cannot use another qualifying scheme, which is what the new company Now:Pensions, the UK arm of ATP, is hoping to exploit.

Morten Nilsson, chief executive elect of Now:Pensions, said: “We are keen to share our long experience and expertise of low-cost pensions in the UK. We believe that the UK pension market is ripe for modernisation – and we firmly believe that, with 45 years of experience, we are well positioned to enable employers to give their employees a better deal on their pensions.

“The UK market has suffered from high costs, lack of alignment of interests, and poor performance, which has led to a lack of trust within the industry. We will offer member-centric, cost-efficient, simple pension products, and our investment approach has a proven track record of long-term stable returns, enabling us to deliver greater retirement income for employees.”

Employers are already looking at ways of reducing their auto-enrolment costs, according to a report from the Association of Consulting Actuaries, as it is likely their costs will increase significantly due to auto-enrolment starting next year. Just over a quarter of employers have budgeted for the cost of auto-enrolment, and larger employers are expecting 12 per cent to 17 per cent of their workforce to opt out, according to the ACA.

Yet smaller employers seem to be expecting a much higher opt-out rate, at 33 per cent to 39 per cent. There has been evidence that as employees’ income has become squeezed over the last three years, more are opting out of pension provision, with this trend being reported by a fifth of employers.

Stuart Southall, chairman of the ACA, said: “As things stand, there is a clear danger of more ‘levelling-down’ - a trend which our surveys have identified for some years now. With contribution rates into many schemes failing to keep pace with the pension costs of longer lifespans, and with employers expecting, and in some cases relying upon high anticipated levels of pension opting-out for budgetary purposes to keep their auto-enrolment costs down, warning bells are ringing.

“At least two-thirds of employers presently offering no pension scheme say they are unlikely to auto-enrol employees into either Nest or an employer’s scheme. This suggests many smaller employers have as yet not understood the new legal requirements. Of those that seem to have addressed them, 25 per cent are likely to use Nest and 11 per cent set up an employer’s scheme.”