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The Distribution of Stakeholder Pensions: 

The Distribution of Stakeholder Pensions Life 2000 Actuarial Conference Prepared by NMG Financial Services Consulting November 2000

The Distribution of SHP: 

The Distribution of SHP NMG Distribution experts Worksite experts How the market may pan out Role of worksite in distributing SHP Global best practice Enabling technology Employers Employees Critical success factors

NMG Financial Services Consulting : 

Focus on distribution – channel creation and re-generation Provide consultancy input in three ways: Project management Expert bespoke consultancy Product provision – “off-the-shelf” solutions NMG Group’s other main business line is Employee Benefit Services NMG is second largest EB firm in South Africa NMG Financial Services Consulting Specialises in developing and implementing financial services solutions for clients around the globe 15 cities over 5 continents Uniquely combines strong financial services marketing skills with actuarial skills An holistic approach STRATEGY CONSULTING DISTRIBUTION CONSULTING FINANCIAL & ACTUARIAL KNOWLEDGE & RESEARCH South America Europe Asia Australia Africa NMG Distribution + Worksite

How the market may pan out: 

How the market may pan out Key distribution channels Key providers Forecast take-up How the market may pan out

Key distribution channels: 

Key distribution channels Worksite Targeting non-pensioned employees via their employer’s SHP obligation and the AVC market for organisations exempt from SHP 19 million people employed by 1.3 million UK employers* B2C Targeting individuals via direct campaigns, DSF, branches, IFA’s Affinities Targeting individuals via their affinity relationship Case Studies: Legal & General with ‘Affinity’ (BMA & Jardine Lloyd Thompson), Spring.com, Powergen. Johnstone Douglas with National Packaging Council. How the market may pan out * Organisations that employ at least 1 employee

Breakdown of the employed market: 

Breakdown of the employed market 21.7 million workers in UK 1999* 19 million employed in organisations with 1 or more employees 1-9 employees 1.2m orgs 3.9m employees 3.7 million active businesses 1.3 million with employees 2.3 million sole traders or partners w/o employees 10-99 employees 170,685 orgs 4m employees 100-499 employees 12,955 orgs 2.6m employees 500+ employees 3,515 orgs 8.6m employees * DTI, 7 August 2000 How the market may pan out

Key SHP providers: 

Key SHP providers Large financial service organisations Particularly those with access to global resources Cap Gemini Ernst & Young predict these to be the only ones able to finance the SHP cost burden over the first 3 years and that each SHP sold will only become profitable once held with same provider for 10 years By Oct 18, 26 companies had applied for registration with Opra including NU, R&SA, NatWest Life and Britannic Small financial service organisations Many are entering the SHP market but may struggle to afford the initial investment and long-term payback Some may consolidate with larger players in future or may be left behind Types of providers Life & pension companies Banks Investment houses Employee benefit consultants How the market may pan out

Forecast take-up: 

Forecast take-up How the market may pan out ¹ Those earning between £9,000 and £19,000 per annum ² NOP Solutions research for Abbey National Mintel predict only 15% of the core target market¹ intend to take-up a SHP 50% of small firm owner/managers are still unaware they have a statutory requirement to provide employees with access to a SHP from Oct 2001² 59% of the core target market believe pension contributions should be made compulsory 72% of 18-24 year olds say they know nothing about the forthcoming SHP and its benefits² 39% of 18-34 year olds are aware they should be saving for retirement but fail to do so²

Role of worksite in distributing SHP: 

Role of worksite in distributing SHP Why through the worksite? Drivers for worksite sales How through the worksite? Worksite Strategies Propositions Delivery Role of worksite in distributing SHP

Drivers for worksite sales: 

Drivers for worksite sales Employer obligation forcing them to take action This will give cost effective access to groups of potential customers with regular incomes Employer’s implied endorsement through their cooperation and involvement Employees’ access to financial information & education Advisers’ focus on wealthier sector in response to Government introduction of low margin products resulting in the ‘mass market’ losing easy access to financial advice and products Pensions and employment go hand-in-hand Role of worksite in distributing SHP

Worksite Strategies: 

Worksite Strategies Proposition Stakeholder Soloists SHP only Stakeholder Top Ups SHP led, supplemented by limited range of employment related financial services products Worksite Comprehensive Core, voluntary, flex benefits May not even start with SHP, but SHP will definitely be a feature of the offering Not product-based proposition, rather service based and focused on key life stage events Role of worksite in distributing SHP

Worksite Strategies: 

Worksite Strategies Delivery Key Personnel Account Managers Employee seminar facilitators Enrollers Technology Internet and Intranet platform Call centre support Marketing Communications Informative employee seminars Self-help tools and decision trees Brochures On-line information & purchase Role of worksite in distributing SHP One-on-one meetings Group seminars Clinics in workplace On-line info pages On-line purchase ability Intranet/Internet Brochures Call Centre

Global best practice: 

Global best practice USA 401(k) plans – retirement savings Enrolment techniques are either Internet-based or by use of an enroller in the workplace Employee self-service via personal member web-pages to view and enable small amendments on-line USA voluntary benefits Little use of Internet. Predominantly laptop-based enrolment by enroller or broker in workplace Attractive group rates compared with individual rates Access to financial advice and information not available otherwise Popular - life and health products Global best practice

Enabling technology: 

Enabling technology Our traditionally low-tech UK worksite marketing techniques will change as a result of: Requirement to handle policyholders’ service requirements efficiently and speedily Growth in popularity of Intranet and Internet access to personal records for employees Ability to capture data at point of sale for later downloading direct to the administration systems Enabling technology 90% 51% Intranet Internet access UK Companies 2000 Graph: DTI 2000 ² Jardine Reeves Brown Survey 2000 Half of all enquiries between pension providers and customers are now done over the Internet²

UK Intranet Penetration: 

UK Intranet Penetration Enabling technology 65% 44% 32% 19% UK Companies 2000 Large 250+ Medium 50-250 Small 10-50 V.Small 0-10 * DTI 2000 Company size by employee numbers

Employer views: 

Employer views Re-assessing their benefit programmes Move toward flexibility and choice Want inexpensive alternatives Large employers have the infrastructure to support an electronic worksite initiative Industry-type plays a role in determining interest in a broader benefits initiative Industries in growth phase, eg modern and high-tech, have recruitment and retention challenges and are most likely to have technology infrastructure Will allow reasonable employee access and time to their chosen Financial Services provider(s) in the workplace Employer concerns of administration burden, endorsement, liability, privacy and security of information Often unequal access to technology for workforce The Customer

Employees: 

Employees Cannot be segmented by industry-type, but rather traditional life-stage and socio-economic factors Traditionally expect benefits but don’t value or understand them Flexibility and choice are simultaneously feared and valued A need for information to make informed decisions Buying financial products through the workplace is not yet commonplace Though almost for employees of large companies Demand better price or terms Interested in short-term products and solutions for ‘today’ Want personal contact for perceived complex products and remote communications for others Value employer’s implied endorsement demonstrated through cooperation and involvement The Customer

Critical Success Factorsin SHP Distribution: 

Critical Success Factors in SHP Distribution Target carefully ID benefit gaps Predisposed to change Deliver on promises Lowest possible admin burden High quality account exec Encourage employer contribution Provide an on-line solution where possible Ensure one or more of the 3 D’s Discount Differentiation Donation (by employer) Implied endorsement via employer involvement ‘Personal’ contact Education & self-help Deliver on promises Integrate with existing benefits Multiple communication channel options Critical success factors Employers Employees