Jonathan Watts-Lay, director, WEALTH at work answers questions on Group SIPPs.
As workplaces look to extend the range of savings products they offer to employees how this
will affect Group SIPPs?
Jonathan Watts-Lay: This is likely to increase the demand for
Group SIPPs as it will commonly be selected as the pension element of employee
savings choices. The move towards greater savings flexibility will mean that the
Group SIPP is an attractive proposition for employers and employees alike.
Employers will be attracted by the increasingly competitive pricing attached to such arrangements
while being able to offer a valuable pension benefit with contribution, investment and income
flexibility. Employees will benefit from contribution flexibility to support on-going contributions
but also transfers of shares where the arrangement is linked to all employee shares schemes.
Investment flexibility will mean that all employees will find investment options to suit them, with
potential segmentation depending on employee groups and profiles. Income flexibility will provide
retiring employees with access to both open market option annuity selection and drawdown
pension.
How can employers ensure members understand how these different products can be used
together to form a viable long-term savings strategy?
Jonathan Watts-Lay: Employers will need to take action to ensure they communicate
a holistic view of employee savings choices and avoid presenting savings choices in isolation.
Employees should view a menu of savings choices designed to meet their short, medium and long-term
savings strategy. Effective communication will need to be accompanied by
financial education to develop employee knowledge of the various savings choices,
but also in how the various elements can work best together. For example, a joint pension and ISA
strategy with an on-going link to all employee share schemes may be extremely valuable but only if
employees understand the opportunities available.
What role can corporate platforms play in this shift?
Jonathan Watts-Lay: Corporate platforms can help create a single holistic view of
employee savings. Whereas previously an employee would simply be monitoring the value of their
pension savings, the corporate platform can combine all the various savings elements. This will
encourage employees to develop a holistic view of their long-term savings and appreciate how the
various elements can work best together. In the same way that an employee may currently access
flexible benefits online, they will follow a similar process for their savings choices by accessing
the corporate savings platform to make their selections, adjust their contribution levels and view
the value of their benefits.
How do you see the workplace savings model evolve over the coming years?
Jonathan Watts-Lay: The
workplace
savings model will become increasingly flexible over the coming years combining
pension, ISA and all employee share schemes as companies compete to ensure the savings choices on
offer are competitive within their comparator group. This will increase the emphasis placed on
employee financial well being, which will become a key element of an employer’s corporate social
responsibility. The move away from defined benefit pension provision has transferred risk from
employer to employee. The new emphasis and increased savings flexibility will go some way to
helping employees respond positively by empowering them to take ownership for their long term
financial well being. The provision of
financial education will increase as without it the benefit of the new
workplace
savings model will not be fully understood and utilised, leaving employees exposed
to the risk of having insufficient income in retirement, a risk that is now theirs to
manage.
