New B&CE CEO Patrick Heath-Lay has complained of the "confusion that for some people auto-enrolment equals NEST" in a frank interview with Pension Funds Insider.

Heath-Lay said that "the market is tilted in NEST's favour" due to their extensive funding from the government and high public profile.

He invoked a recent controversy about the Pensions Regulator giving NEST 'free advertising' in a letter to all companies set to automatically enrol employees into a pension.

Heath-Lay also accused NEST of going beyond their remit to cater for the lowest earners who private pension providers would not want to serve. He said he was surprised that NEST are "active in trying to attract larger employers".

B&CE's The People's Pension was launched last year in direct response to NEST competing in the group's target market.

B&CE is a long-established employer benefits provider in the construction sector, mainly servicing smaller employers, but is looking to new sectors with its latest offering.

Heath-Lay said he wants to draw on B&CE's experience on offering simple but effective pensions in the People's Pension.

He is unenthusiastic about new formats for pensions like corporate wraps, which some other providers are promoting, saying "we want to make long-term savings simple."

The People's Pension will aim to get down to basics.

Heath-Lay said "we looked into online pension statements and we didn't see massive demand for things like that. We are actually offering one as it is simple enough to do but are not going to focus on these kinds of devices."

Comparing like for like

Heath-Lay recognises that charges are likely to vie with ease of use as a decisive factor for pension providers winning the 11 million people set to be automatically enrolled.

He added that "charges are going to become more of an issue as long as investment returns remain modest".

He feels that employers needing to choose providers ahead of auto-enrolment are getting a raw deal from the current complexity in charges, saying that he favours more transparency.

He said: "Even within our market of low to moderate earners, charge structures vary greatly between us, NEST and NOW Pensions and I don't think that's helpful. More work as an industry to co-ordinate charge structures would be beneficial."

Heath-Lay is critical of suggestions by politicians that NEST's annual £4200 contributions cap should be scrapped. He said: "there is a commitment to review the cap in 2017 and it only seems fair to see whether the private sector has the right solution for larger companies and higher earners first."

The CEO's experience of pitching for business indicates a 'two-tier' approach of companies offering a new pension alongside their existing scheme will be a norm. In these arrangements a new scheme would cater for those not previously covered but obliged to start saving by the auto-enrolment legislation.

He said that under a two-tier approach "it's a real challenge to do compliance twice but with the right providers it's still the easiest way".

Opt-outs

Compelling employers to automatically enrol staff into pensions has been criticised as a bureaucratic burden on employers at a time of economic uncertainty.

Heath-Lay recognised this uncertainty will have some influence, on the day that Balfour Beatty, one of the larger companies in the construction sector warned of major job losses.  

Speaking to Pension Funds Insider he said: "The economic challenge will definitely impact take-up". And explains he feels warnings of as many as one in three savers wanting to opt-out will prove unfounded though – at least to begin with. 

Heath-Lay said: "The initial 1% minimum contribution is fairly insignificant – only when that is rounded up to 8% by 2018 will you begin to see people really beginning to opt out".

Making staff aware that they are going to be enrolled into a pension without their explicit consent looks set to be an important struggle.

The new chief executive officer welcomed the new awareness campaign from the Department of Work and Pensions, but says that "employers will bear the brunt of efforts to educate".

He said: "It's not easy to explain auto-enrolment in a poster of a 15-second commercial. It's also not easy to drag a construction worker to the side of the road at six in the morning to talk about pensions so employers have their work cut out on that too."

Heath-Lay is encouraged by the fact that smaller companies that are not yet due to enrol their staff for a few years are beginning to get the message. He said smaller companies not due to automatically enrol until 2017 or 2018 are attending the education workshops that B&CE is providing, whereas a year ago just the largest companies went.

All this detail can detract from the wider purpose of auto-enrolment in plugging the UK's retirement savings gap.

On that Heath-Lay was unequivocal in saying, "it's important as a society that we get auto-enrolment in, get it right and get it working."

dbillingham@wilmington.co.uk