In the few months since our most recent feature on the rapid development of corporate platforms (October 2009 or tinyurl.com/platforms2009), we have seen considerable movement from the main protagonists in this space.
Back in October, there was a single provider in the market, Wealth at Work, with three in the wings waiting to unveil their offerings in the coming year: Axa, Friends Provident and Standard Life.
Since then, many more have indicated their interest in this market, including Hargreaves Lansdown and Paradigm Pensions, while a few have backed off. There are several reasons for this increased interest and pace of development.
The ongoing shift from defined benefit (DB) to defined contribution (DC) schemes has implications for different parts of the relationship chain. Insurance companies will have many more DC schemes to manage, and their old structures simply can’t cope with the volume and sophistication of individual accounts.
In an increasingly commoditised group pensions market, focus is also moving from product manufacture and administration to asset gathering.
This approach is put to good effect by consulting companies in other jurisdictions. In a DC environment, there is less opportunity for consultants to derive revenue streams from actuarial and investment consulting, and they therefore must evolve or perish.
Mercer made the successful transition in Australia by adopting a mastertrust structure and securing revenue by holding funds under management.
This asset gatherer approach – as opposed to asset guardian or administrator – is an ambition for all those seeking a toehold in the corporate platform market.
Gathering the wagonsFive companies participated in this survey (table one, opposite). Only one of these, Wealth at Work, has a product currently available to the UK market.
The others listed – Ascentric, Axa, Friends Provident and Standard Life – are all due to launch by the end of 2010. Of course, the trouble with technology rollouts is that they can be as prone to delay as a bride on her wedding day.
We asked those surveyed how many companies they thought would enter the market in the next 12 months. The average answer was four to five, although a few did expect a considerable influx in 2011, with more than double that.
Certainly, those projected four or five entrants are covered by the intended launches in the table – and we know there are others waiting in the wings with offerings. Legal & General, despite telling PM in October last year that it was indeed in the corporate platform space, has since backtracked.
Simon Pardoe, development and marketing director, workplace savings at L&G told PM that despite being active in this area, there is more work to be done.
“We shall be developing our WorkSave platform through the addition of further product wrappers, including EFRBS [employee-funded retirement benefit schemes] and cash ISA, plus increased tools, educational content and further development of integrated technology around provision of customer data and services.”
Zurich and Scottish Widows are also known to be pushing ahead with the development of a platform. Zurich had hoped to take part in the survey, but could not pull the data together in time.
Prudential was also known to be discussing the possibility of developing a corporate platform. However, these plans were shelved late in 2009 and there are no plans to revive them in 2010.
Aviva is not considered to be looking at this market, but given the woeful track record it has for developing an individual wrap platform, that is possibly a demonstration of prudence.
Table one offers a conspicuous lack of hard data, but it does contain a few interesting points.
First, we know there will be five players in the market by year end. We also know that, with the exception of Wealth at Work, none of the others have any clients as yet, although Ascentric has £10m funds under administration and its system will be administered from one regional location.
Curiously, although Ascentric is part of the Royal London Group with Scottish Life, it has no apparent alignment of interest or even common culture. Scottish Life says it has no platform offering, nor does it plan to launch one within the next 12 months (see page 4).
PM has discovered that several of the companies, while having no clients at the moment, have determined a considerable appetite for a corporate platform within the reward structures of FTSE 100 and FTSE 250 companies.
However, not everyone is convinced by the new kid on the block. Alistair O’Connell, managing director of Aon’s pensions consulting business, told PM there are more effective means than a corporate platform for meeting clients’ objectives of best value and differentiation from their employee benefit programmes.
