If UK employers haven’t already woken up to the fact that they will be responsible for the costs of pension provision, then the UK government has given them yet another wakeup call. The latest instalment in pension reforms targets the charges levied on members’ pension pots in defined contribution schemes.
The Government is one prong away from ruling the seven seas and the world of pensions
The plan of attack is twofold, or ‘two-pronged’ if you prefer the Government’s terminology – presumably they would also have been able to rule the seven seas (as well as the world of pensions) if they’d just been able to find one more prong. Nonetheless the first prong is a ban on consultancy charges, whereby the cost of advice received by the employer is passed on to scheme members. Such charges can be substantial in comparison to the size of a member’s pension pot. It also has a greater impact on individuals who change jobs frequently, as these charges are typically much higher in the first year of pension saving.
The second prong, less sharp than the first but no less capable of inflicting damage on the balance sheets of employers, is a plan to cap the investment charges on default funds. Default funds are by far the most common investment option used by scheme members, especially those with limited financial knowledge.
And whilst these changes are intended to benefit millions of pension savers, they may in fact reduce the quality of service and advice that members receive. But this is the world the Government is telling us we need to operate within. It is now the role of employers and their advisors to reduce costs by finding more efficient ways of delivering solutions, not by passing on those costs to members.
Meanwhile, the next time your son or daughter refuses to tidy their room or your work colleague misses that important deadline, you can forget the carrot and the stick, maybe what they need is a nice sharp prong.
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
News has broken today that the Pensions Regulator along with the police and other regulators have raided premises in England and Scotland, seizing documents and computers and making a number of arrests as part of their campaign against pensions liberation.
Police/tPR raid pensions liberators BREAKING NEWS
The Pensions Regulator has come under what we have always said was a bit of unfair pressure recently from the pensions industry over its action (or lack of it) in relation to pensions liberation. I would like to congratulate all those involved in Wednesday’s raids, which I know involved a massive amount of preparatory work and intelligence gathering over a long period of time.
Pensions liberation fraud is rife at the moment and as I recorded in a recent blog, even I received a text message offering to liberate my pension. The Pensions Regulator promised a crackdown on pensions liberation this year and is delivering on its promise.
Now is the time for the pensions industry not only to congratulate the Regulator, but, to do all it can to assist in making life for fraudsters as difficult as possible. Sadly there is a cost to schemes and administrators from carrying out additional checks on transfers out, but if they lead to raids such as those carried out on Wednesday the costs are worth it.
Let this serve as a timely warning to other fraudsters that pensions are not an easy target and, if they remain in the business of pensions liberation, they can expect a visit from the police and the Pensions Regulator sooner rather than later. If the fraudsters have any sense, now is the time for them to run for the hills.
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
Are you in compliance with the new HIPAA regulations? Are you sure?
On January 25, 2013, the Department of Health and Human Services (HSS) published the long-awaited final HIPAA privacy and security omnibus regulations. All covered entities (including group health plans) must be in compliance by September 23, 2013 – that’s just shy of four months from the date of my blog post – and you know the way time flies.
Are you in compliance with the new HIPAA regulations?
Did you know that there are crucial issues that your organization should immediately consider reviewing, such as:
- If you have a self-insured group health plan, do you have HIPAA privacy and security policies and procedures, business associate agreements, a privacy notice, documented risk analysis, and training material? If yes, when was the last time they were updated? You are required to review these materials periodically and update them, as needed.
- Are you aware of the increased penalties and enforcement? Could you produce all the required documents in the event of an audit?
- If your plan is fully insured, are you aware that you still may have HIPAA obligations if you receive any protected health information?
- If you recently self-insured any group health plan coverage – including a health care flexible spending (FSA) account – are you aware of the additional HIPAA obligations?
Some of the documents you should be reviewing and updating (as necessary) are:
- Privacy policies and procedures
- Privacy training materials
- Privacy notices
- Security policies and procedures
- Security risk analysis
- Security training materials
- Business associate agreements
We will cover all of the above – and more – on our May 22 webinar, “HIPAA regulations require action. Are you in compliance?” Why not register now – while it’s on your mind − by clicking the link.
You might want to download our FYI dated March 8, 2013, which reports on the significant changes and includes a HIPAA checklist for employers. If you have any questions or comments, feel free to use the comment area on the blog. We look forward to hearing from you.
Tami Simon, J.D.
Managing Director, Knowledge Resource Center
Buck Consultants
If the show's not going so well, start doing the jokes
“Send in the Clowns” is a song from the 1973 musical A Little Night Music. It comes from the theatre idea that if the show is not going well, start doing the jokes.
With local elections taking place tomorrow, all three main parties are fearful of losing voters to the UK Independence Party (UKIP). Until now thought of as a fringe party, it is perhaps not surprising that they have come under increased scrutiny in recent days. Veteran pro-European conservative Ken Clarke has waded into his party’s war of words with UKIP by branding them “a collection of clowns” with no positive policies.
Meanwhile, Iain Duncan Smith, the Work and Pensions secretary, has said wealthy elderly people who do not need financial support in the form of the State old age pension, benefits to help with fuel bills, TV licences, or free travel should “hand it back”. I don’t, of course, know how many multi-millionaire pensioners have applied for a bus pass (because you don’t get given one unless you apply) but I suspect not many. The winter fuel allowance is worth between £100 and £300 tax free to help those over state pension age with heating bills, and a free TV licence is worth £145.50 for a colour set for people over age 75.
There is a real risk if you started means testing pensioners that the cost of carrying out the means testing would far outweigh the cost of just paying what are, in effect, minimal benefits. After all, we have one of the least generous State pension arrangements in western Europe and you would not need to employ many administrators before you more than used up the benefit from stopping free television licences for those pensioners over 75 who have a good income.
Ken Clarke’s comment on this was: “I think every pensioner and retired person, like myself, obviously has to make up their own mind about whether they really need it and whether they’re going to give it to some worthwhile cause.” It’s a bit like some big companies I could mention, plus the odd comedian, deciding whether they want to pay tax.
Then, of course, we have seen the coalition government reduce the Annual Allowance and Lifetime Allowances on the amount you can put into pensions to an all-time low, and the Department for Work and Pensions is still banging on about complicated GMP equalisation, which will cost a lot to administer and achieve relatively little. In addition, the introduction of automatic enrolment stumbles on with the amounts being contributed to automatic enrolment schemes woefully inadequate to produce a decent pension in defined contribution arrangements. And while we are at it, every time we get a Budget or Autumn Statement there are more rumours from the Treasury about further attacks on pensions.
Send in the clowns… don’t bother, they’re here!
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
- “Predators stalk your pension”, warns The Pensions Regulator
I recently had a text message from one of these organisations offering me the opportunity to liberate my pension. Tempted to reply? I might have been, if I had been an ordinary member of the public and didn’t know it was a scam.
It came on the day after news broke that the Advertising Standards Authority (ASA) had banned a lead generation company from sending unsolicited text messages offering pensions liberation to consumers. The ASA found the messages were sent unsolicited and did not reveal the identity of the marketer and thus broke the appropriate advertising code.
There has been an increased focus on pensions liberation schemes this year. With all the regulators taking increased interest in pensions liberation activity. The Pensions Regulator has also launched a highly visible awareness campaign with literature featuring a large picture of a scorpion on the front and headings such as “Predators stalk your pension”. If you are sent an unsolicited message think of the scorpion.
Unfortunately this year has seen a significant increase in companies singling out savers and claiming they can help you cash your pension early. There are limited cases where it is possible, but the vast majority of such claims will turn out to be bogus with serious tax consequences for you. You should be particularly suspicious if you are approached out of the blue over the telephone or via a text message. The best advice is to simply not reply and never give out personal information or financial information to a cold caller. Remember if it sounds too good to be true, it probably is. Never rush into a pension transfer, for if you make a transfer to a pension liberation arrangement, even in good faith, you are risking tax charges and penalties of more than half the value of your pension savings. The only people getting rich are the fraudsters and you will get an unpleasant tax bill.
I know of cases where we have tried to warn individuals off pension liberators, and they have come back to us to say they have rung up their dodgy advisers and have been assured that all is well or there is a legal loophole and so they want to go ahead. There are some people you just cannot help. If you have been tempted by one of these offers don’t accept the assurances of those involved in the transaction, get the advice of an independent IFA who is not involved in the transaction and not linked to the organisation offering you the deal. In some cases, checking addresses of advisers and schemes on Google Maps Street View should start alarm bells ringing. If the premises looks dodgy, or is it obviously a mail box company, ask yourself why! And what are the odds if the money disappears of getting it back?
Pensions liberation has never been more in the spotlight and, if you have been unlucky enough to make an illegal transfer, the odds of the tax man not finding out have never been smaller. I know that Buck is in almost daily contact with one regulator or another over pensions liberation matters.
I am, I understand, in good company. The Pensions Minister Steve Webb received a similar text message not so long ago. It’s never been easier for villains to contact vast numbers of potential “marks” using your phone or by text, and in every thousand there is always going to be one who bends down to see what that is in the sand.
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
Keith Williams, Reward Manager, Unilever joins me, Karim Kurji, Buck Consultants at the WorldatWork 2013 Total Rewards Conference. We’ll share with session attendees how this global giant created one of the largest personalized total rewards online portals attempted in the marketplace.
Unilever launches one of the largest personalized total rewards online portals
Unilever has 15,000 managers in 100 countries, so designing this portal to be accurate, flexible, and relevant to varying preferences and clearly link performance to rewards was no easy feat. With Buck Consultants helping behind the scenes, Unilever engaged its organization with this homegrown total rewards system and communicated a refreshed value unique to each employee.
Don’t miss out on this great story as our session follows Unilever’s path to success and discusses what’s next. The session code is: T11M3, and is on Monday, April 29, 2 – 3:00 p.m. We look forward to seeing and meeting with you.
Karim Kurji, Director
Technology Solutions
Buck Consultants
The Emerging Technology in Health Engagement Survey looks into the organizational use of social networking, social media, gamification, mobile technology, and other technology
tools to engage employees in improving their health and well-being. Tools from vendors currently abound, but what really works? Which methods drive the right outcomes? What role can the employer play in promoting these tools?
Key findings from the report include:
- 73% of responding organizations have a health engagement strategy to encourage employees to improve and monitor health, but two thirds have conducted little or no assessment of employees’ preferences for various types of communications technology.
- Mobile technology is one of the least implemented tools but the highest priority for adoption or expansion
- Gamification is the most prevalent tool used and ranks highest in respondents’ perception of effectiveness in achieving objectives
Join me, my colleague, Ruth Hunt, communications and health consumerism thought leader, and Lenny Sanicola, senior practice leader at WorldatWork to discuss the findings from this survey and what employers need to consider for their future health engagement strategy. Our session is Monday, April 29, from 10:15 – 11:45 a.m. and the session code is B08M2.
Stop by our booth, #506 and share some of your thoughts with us. We look forward to seeing you!
For more information about the conference, and to register, visit http://www.worldatwork.org/waw/philadelphia2013/attendee/index.jsp.
Barry Hall, Principal and Innovation Leader
Buck Consultants
Lower fees don’t mean a better service
Not all companies are charging unreasonably. And cheap is not always good.
The British sitcom "Only Fools and Horses" chronicles the Trotters' highs and lows in life, in particular their attempts to get rich
Axa has announced the closure of its bancassurance arm, which provided advice through the Clydesdale and Yorkshire Banks. It is the latest in a line of high profile companies to exit mass market advice. Axa has said that the charges they can impose for such advice no longer makes its provision profitable, and that this arm of its business had to make a stand alone profit if it was to survive. Traditional face to face advice via branches of banks is likely to become a thing of the past as banks concentrate on high net worth individuals.
The introduction of the Retail Distribution Review (‘RDR’) is leading to advice being withdrawn for ordinary members of the public, as providers cannot make any money in providing this service and are not willing to provide it as a loss leader. Moreover, if Banks, with their size of clientele, cannot make a profit in this area, smaller organisations have little hope of doing so.
Adviser charging for financial advice and pensions has recently come under the spotlight. But a reduction in the charges is not always the right solution. I have long argued transparency is the key. It’s absolutely right I should know to the penny what the charges are, so I can decide if I want to pay for the service, or compare providers. It is also important that providers charges are easily comparable, and not like electricity and gas companies, whose tariff structure makes any comparison impossible unless you are a rocket scientist.
But lower fees in themselves don’t mean a better service. Sometimes you get what you pay for. In this case the lowering of the charges is leading to the withdrawal of the provision of financial advice to ordinary members of the public. Only the rich have nothing to worry about. Why, I can keep asking myself, is there this fixation with lowering charges on financial advice transactions and not in other areas?
I had in mind mobile phones – why is it not okay to use some of the monthly payment to cover the cost of advice (which will be disclosed) in a financial advice transaction when it is apparently okay to charge £40 a month for a mobile phone contract including a ‘free’ phone? The free phone is probably costing £20 a month, half of the total, with the rest covering calls, data and costs/profit for the network provider. So does anyone actually believe the phone is ‘free’?
It would be interesting if phone companies not only had to disclose exactly what their charges are, but had to also limit their profits to the levels being expected of those who provide financial advice. One wonders how many consumers would make a different choice if they had transparency over the costs.
So, please can we move the debate from lowering charges, to transparency, comparability and value for money. Why should the consumer not be able to choose to pay more for a better service? The market would then regulate the amount providers are able to charge, with those charging more having to justify to their customers the higher charges.
Axa say they need to charge an adviser fee of 6% to make a profit, and with advice charges at 3% have left the market. It just goes to show that with the best intentions in the world you can squeeze charges too hard. Would it not have been better to allow AXA to charge 6% and for the ordinary customers of the Clydesdale and Yorkshire banks to have continued to have access to this service and make up their own mind if what Axa was charging was reasonable? If Axa was overcharging then customers could go elsewhere, if it wasn’t then 450 job losses could have been avoided.
The Financial Conduct Authority is apparently monitoring the situation and will decide whether changes are needed ahead of their 2014 review. For Clydesdale and Yorkshire Bank customers this will come too late.
This time next year not all advisers are planning on being millionaires!
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
…from employer-directed, fragmented system to employee-centric, integrated marketplace
Public health insurance exchanges have been described as a marketplace where, beginning in 2014, individuals will be able to shop for health insurance by easily comparing different plan benefits and cost. The idea of a health insurance marketplace hearkens back to the traditional market square in a city where traders and vendors set up stalls and buyers browsed the merchandise.
In reality, though, health insurance exchanges are just the tip of the iceberg in a monumental evolutionary shift in health care. Rather than the marketplace, exchanges are but a component of the future of health care – an integrated marketplace with consumers and employees at the center, directing the purchase of care. In the future, employers will no longer be at the center of the employee health care universe. They will have a vital role, but it will have significantly changed. Employees will be empowered and responsible. They will be in the driver’s seat.
If it’s hard to imagine the future state of health care as I described it, that’s because what we have today is very different. Today, when it comes to employee health care benefits, the employer is at the center, directing the purchase of care in a fragmented marketplace. As the provider of health care insurance to the majority of the insured in the United States, employers today are focused on cost containment strategies, including wellness, lifestyle coaching, and incentives. These strategies, unfortunately, see little engagement from employees.
Employees will be empowered and responsible. They will be in the driver’s seat.
In the current state of employer-provided health care benefits, employees are largely uninformed consumers without access to marketplace transparency. They are uninformed about the cost and quality of their health care and unable to make good choices about insurance coverage, doctors, and treatment options. Like employees, health care providers are part of a system poorly built for efficiency, efficacy, and transparency. They are not incentivized to promote quality, preventive care, or wellness. In today’s fragmented market, they provide fragmented care. Likewise, insurers are focused on the wrong things – administration, discounts, and paying for care for people who are sick. And technology, in many ways the backbone of an integrated system, today exists in silos. Data are difficult to obtain and do not flow freely between key players in the health care system.
With this current state of health care, it’s little wonder that in 2010, health expenditures in the United States neared $2.6 trillion, more than 10 times the $256 billion spent in 1980 and accounted for 17.9% of the nation’s gross domestic product, according to the Kaiser Foundation. Yet, with all of the money spent, our health care systems ranks 37 in the world, according to the World Health Organization.
So what does all of this mean for the employer? First and foremost, it means take action now. The future, employee-centric health care marketplace is not that far in the future. In three to five years, health care will look very different. In fact, the transformation is already under way.
For employers, taking action means transitioning to a “sponsor” role in which they provide employees with:
- money to purchase benefits
- more plan options
- education to make better, more informed decisions
It also means being flexible, innovative and open-minded to the opportunities of which we’re not yet aware.
In future blogs, I’ll examine each component of the future health care system. In the meantime, I’m interested to know how else you believe health care will change and what employers need to do to change along with it.
—
Dave Ratcliffe, principal
Health and Productivity
Buck Consultants
Love it or hate it
Marmite is a spread made from yeast extract, a by-product of beer brewing
Marmite is a spread made from yeast extract, a by-product of beer brewing. The British version is a sticky and dark brown with a distinctive, powerful flavour, which is extremely salty. This distinctive taste is reflected in the British company’s marketing slogan: “Love it or hate it.”
According to an article in the professional press, up to 20 million employees will, in the future, receive a lower state pension because they will not receive accrual based on the earnings-linked state second pension (S2P). We don’t know just how many, and I suspect you have no idea if you are one of them. The state pension system in the UK is hideously complicated (and far from generous) and most people do not have the faintest idea of what they are supposed to be getting. The proposed new level state pension of £144 per week is being introduced largely without a murmur of discontent. Basically the 20 million employees potentially adversely affected, and who will be worse off in retirement, are not aware they are being robbed.
We stand on the very brink of the greatest change in the state pension system for generations. But do not be fooled into thinking the changes being introduced are being done because the new system is necessarily better, or more generous. A flat rate state pension is necessary if workers are going to be persuaded to go along with automatic enrolment. Automatic enrolment is aimed at the lower paid and the idea is that people save more for their retirement and do not have to rely on state hand-outs.
It’s not that the government is seeking to make them better off in retirement , it’s just trying to ensure the government’s bill for looking after the low paid is reduced. It is terrified that large numbers of workers will reach old age and be below subsistence level, and it (the government) may have to foot the bill. Currently, if a pensioner’s income is below a certain level, not un-associated with £144 per week, then means tested benefits are going to be payable to top things up.
So, in introducing a flat rate pension the government is reducing its means tested benefit payments and ensuring that those who make payments under an automatic enrolment scheme have something, however little, more than the £144 per week. However, the 20 million employees who will be worse off in retirement, and not the government, are paying for this. I certainly do not want to have to try and live on a total of £144 per week, do you?
Now the new state pension arrangement was going to come into effect in April 2017, but the Government has just announced this is being brought forward a year. So, one year’s worth of retirees will receive the flat rate pension early. Will they all be better off? No, of course they won’t. They will need a 35 year NI record, rather than the current 30 year record, to get the full flat rate pension. One person who will be £5 billion better off is the Chancellor because National Insurance contributions will go up that much a year earlier with the abolition of S2P. Nearly 7 million people will see their National Insurance contributions rise dramatically a year early. I have no doubt that this was not the reason the Chancellor is bringing forward the measures by a year!
As the current state system is so complicated, and because I would like to see automatic enrolment (however imperfect it is) make a difference, I don’t actually disagree with the idea of a flat rate state pension. I could argue that it ought to be higher, and that it compares terribly against the state system in most western European countries I could name, but at least it is certain – provided you have a 35 year NI record. But depending on whether you are a winner or loser then I suspect, a bit like Marmite, you are going to love it or hate it. Always assuming that the losers realise their pocket has been picked.
I suspect the Chancellor likes Marmite.
Fraser Smart
Managing Director, Europe
Buck Consultants
The postings on this site are my own and don’t necessarily represent Buck’s positions, strategies or opinions.
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