No auto-enrolment big bucks for providers, Logica
Services company says providers will see increasing volume of retirement business but “not necessarily making the value” following auto-enrolment.
Providers will not make much money from auto-enrolment as the pension pots for many savers will be too small, business and technology service company Logica told FTAdviser.
Allison Fower, head of wealth management at Logica, said that initially providers were “rubbing their hands with glee” due to the new business they will obtain due to auto-enrolment, however she believes they will be increasing the volume of retirement business but “not necessarily making the value”.
She said: “Providers will be dealing with the low end so where are they making their money? For providers it is not a lot of money for them from this. They will have a bit of the pie but the real challenge for them is to really understand where they will make their money and because actually you are increasing the volume but not necessarily making the value.”
Ms Fower pointed out that area in which providers can profit is by educating employers about auto-enrolment and Ms Fower said she is seeing “much of this”.
She said: “The key to them making money is really about segmenting their business and they should truly be understanding who they should be hand-holding, who can be more self-service etc. They do already understand their business but this brings a completely new dimension to it.
“So they have all moved away from rubbing their hands with glee and thinking that lots more money will be made. It’s about understanding how their business will change and it will change quite dramatically in some cases.”
Ms Fower also highlighted that surprisingly some employers have been keeping their “heads in the sand” when it comes to auto-enrolment.
She said: “I was at a conference recently and I was amazed that some employers were sat there, only just realising that they will have to comply with auto-enrolment next year. That’s really scary.”