If you read nothing else, read this…
• Corporate platforms can help employers show the breadth and value of their savings offer.
• Purists believe corporate platforms should feature a pension scheme, an individual savings account and a form of savings account.
• Employers must ensure their corporate platform products are relevant to their workforce.
Case study: Svitzer steers staff to investments
International towage and salvage company Svitzer implemented a corporate platform from Hargreaves Lansdown in July 2011 after closing its defined benefit (DB) pension scheme.
Its primary aim was to replace the myriad trust and contract-based pension schemes it had inherited after a number of acquisitions with one defined contribution (DC) scheme that was more attractive than a standard company pension scheme. Accordingly, Hargreaves Lansdown created a platform featuring a self-invested personal pension (Sipp), for which employees can choose the default fund or make their own investment selections; an individual savings account (Isa); and a fund and share account.
Employees contributing more than 15% into the Sipp are able to contribute additional funds into an Isa rather than the pension scheme, which enables them to invest through payroll into a short-term savings vehicle, thus avoiding having to lock away their money until retirement.
As part of the service, Hargreaves Lansdown has provided Svitzer employees with a range of financial education to help them understand the offering and its benefits, and a range of interactive tools with which to manage their investments on a bespoke website. The results speak for themselves: 570 employees have joined the Sipp, which is 10% up on membership to Svitzer’s previous schemes; 25% have selected their own investments rather than using the default fund; and 5% of members have so far joined the corporate Isa through payroll.
Svitzer was the winner of the ‘Most effective pensions change strategy’ at the Employee Benefits Awards 2012 for its launch of a corporate wrap.
Read the full Svitzer story
Case study: City and Guilds in talks on corporate platform
City and Guilds is in the throes of deciding whether to implement a corporate platform to help it optimise the attractiveness of its benefits package, which includes private medical insurance (PMI), group income protection (GIP), childcare vouchers and a bikes-for-work scheme.
Sangeeta Mistry, group reward manager, says: “We offer a really competitive benefits platform and want to continue with our focus on a total reward package, making sure we are ahead of the game. It is about keeping on top of our benefits package and making sure we are competitive and have a low-cost but high-impact offering to staff.”
City and Guilds’ platform considerations have been triggered by auto-enrolment, for which the organisation’s staging date is September/October 2013.
The discussions with Fidelity follow City and Guilds’ implementation of a corporate individual savings account (Isa) last November.
Mistry is looking at how the Isa can work alongside its hybrid pension scheme on a platform as an alternative savings vehicle for the 40% of its 900 to 1,000 UK staff who are not members of its Towers Watson-administered pension scheme.
Corporate platforms can help employers co-ordinate and automate their savings offerings, says Clare Bettelley
There are few HR and reward professionals who don’t yearn for simplicity and streamlining in the employee benefits they offer, and this desire is no different when it comes to workplace savings, hence the rising popularity of corporate platforms.
A corporate platform, also known as a corporate wrap, is essentially an online platform that aggregates savings products and automates their usage as much as possible. Jonathan Watts-Lay, director of Wealth at Work, says: “You can add a pension, workplace Isa (individual savings account) and sharesave and then you have the ability to transfer the shares into the Isa to potentially mitigate capital gains tax. It should, in theory, be as easy as pressing a button and the transfer is done.”
Until now, corporate platform take-up has been driven primarily by employers’ desire to replace their defined benefit (DB) pension scheme with a more cost-effective, but valuable, alternative savings scheme. Svitzer is a case in point (see box below).
But now employers are waking up to the fact that platforms have a wider appeal and can be used to recruit and retain talent. This is demonstrated by the example of City and Guilds (see above).
Daniel Smith, director, DC business development at Fidelity, says many employers want to expand their benefits offering to boost their competitiveness. “They want a corporate platform to plug into their flexible benefits platform,” he says. “They are looking at how they can make their benefits package as attractive as possible, from gym membership to financial wellbeing. They are looking at the whole package. They have flex and are trying to expand the products offered.”
Integration relatively simple
Smith says integration between flex and corporate platforms is relatively simple. At the front end, a single web interface can be created allowing access to both platforms with a single sign-on for employees, while at the back end, the platform can be pre-populated with the staff data already held on the employer’s flex system.
But the jury remains out on the number and type of benefits to put on a corporate platform. Purists believe the best way to promote benefits is to keep the platform simple, relevant and savings-focused, which they say can be achieved with three savings vehicles: a pension scheme, an Isa and a savings account of some description.
Self-confessed purist Emma Douglas, a partner at Mercer, says: “Corporate platforms should offer a gamut of savings products. I don’t think they should include, for example, bikes for work. Products should meet short-term, medium-term and long-term savings goals. There should be a pension, because that’s where the money still is; beyond that, an Isa; and beyond that, a general savings account. You have to get employees comfortable with short- to long-term savings vehicles.”
Jamie Jenkins, head of workplace strategy at Standard Life, says: “It is important to focus on savings. Employers have a responsibility to staff to ensure savings [vehicles] are embedded, and a pension is the long-term vehicle for that. A platform should have that at its heart.”
Jenkins says platforms should also have a corporate Isa for employees’ short- to medium-term savings goals. “These are good for helping youngsters get on the housing ladder or repay student debt.”
But whatever a platform contains, its effectiveness as a recruitment and retention tool will only ever be as good as the communications supporting it. Email and intranets are key media to use, as well as total reward statements, which can show employee and employer contribution rates into each benefit, plus a breakdown of total savings achieved.
Fidelity’s Smith says some employers are also introducing benefits handbooks for employees.
However, Mercer’s Douglas thinks employers are some way from reaping the rewards of platforms as a recruitment and retention tool. “Employees are not used to buying these products through the workplace, so it will take some time to see increased take-up,” she says.
No doubt auto-enrolment will help nudge this process along as employees gradually realise their need for savings, and not just for retirement.
Read more articles from the Workplace Savings Quarterly