Employee Benefits and The Platforum assembled a panel of corporate platform providers to discuss developments and prospects for this new benefits delivery medium. Padraig Floyd reports
Corporate platforms enable employers to better manage and communicate their workplace savings benefits to employees. But one size does not fit all. Small employers may seek a bundled approach, while larger organisations opt for best of breed.
The development of the corporate platform is being hailed by some as the solution for employers to manage and control their employees’ savings benefits while increasing their engagement and understanding of the packages on offer. The Platforum and Employee Benefits brought together a group of representatives from corporate platform providers to discuss this new proposition.
Corporate platforms (also referred to as corporate wraps) have burst onto the benefits scene in the past year in an area of benefits increasingly referred to as workplace savings. These generally comprise financial benefits, such as pension, individual savings account (Isa) and share scheme and these platforms are being touted as a one-stop shop to employers wanting better control and integration of these benefits.
But their offerings all appear to be different, said Debi O’Donovan, editor of Employee Benefits, at the roundtable, so just what is a corporate platform?
The consensus was that the diversity of offerings from providers reflects the range of requirements in the market. Some employers want the total package, while others only want a part.
At its core is a defined contribution (DC) pension alongside an Isa, and other saving vehicles, such as share schemes, are growing in importance.
It very much depends on what the start and end point is for the employer, says Chris Murphy, key account director at Legal and General. “Some want a very comprehensive suite of services, products and tools, while others have already decided they want a narrow range.”
Platforms are gaining traction particularly among large employers with flex programmes because they have already bought into the concept of a range of benefits, says Julian Webb, head of DC and workplace savings at Fidelity.
“Companies are increasingly looking to segment and achieve best of breed and are not necessarily seeking a single solution because, intuitively, that cannot be best of breed. It is unusual for one single provider to have the best product proposition in the whole market across all segments and there is a risk associated with it if that provider fails. Whether that means elements of the platform become incorporated into the flex structure or flex into the platform remains to be seen.”
It was felt larger employers that already spend more on benefits and have a strong benefits culture would be at the forefront of developing platforms, but Andy Taylor, strategic proposition manager for corporate platform at Scottish Widows, says he has seen a broad spectrum of employers showing interest.
“What gets them most excited, particularly HR professionals, is the financial education and guidance that is possible with platforms. So it can be deployed to smaller organisations or employers with many thousands of employees. Employers are interested in it for different reasons, but with education and guidance being the key.”
Jamie Jenkins, head of workplace strategy at Standard Life, adds: “If you go back to consumers, there shouldn’t be any distinction in the needs of employees within a large or small firm as you will have short-, medium- and long-term savings needs. The question is then how to deploy it to the small, medium or large firms. That is a different challenge.”
Employers’ growing realisation of the need to segment their workforce and provide benefits that suit them, whatever their stage of life, is reinforcing the desire for financial education, says Martin Palmer, head of corporate benefits and marketing at Friends Life.
“How many other propositions or products would you try to sell the same thing to someone who is 20 as to someone who is 50? It is crazy. People have different needs and requirements. The different generations are all in very different positions from a financial perspective, but also from the point of view of financial literacy, and so it is only natural to offer different benefits at different communication levels in different ways.”
Ultimately, there was consensus that employers want to see value for money in their benefits spend, and platforms’ online delivery combined with highly targeted communications can enhance member engagement, although it was accepted they will not be right for every employer.
“If we are delivering what people want, there is a much greater chance platforms will thrive,” says Jenkins. “But they must deliver something that gives people a better feeling of the value of their benefits and some confidence in their finances. Those are things people want and value.”
Auto-enrolment and financial education
The need to comply with auto-enrolment from later this year has led many employers into a root-and-branch review of their benefits structures, which has spurred them to consider a new type of approach, with corporate platforms at the centre of delivery. But does that mean platforms are in vogue because of efficiencies or because they improve engagement and access to benefits?
The drivers may be very different for each employer, says Jamie Jenkins, head of workplace strategy at Standard Life. “It might be that HR is focused on getting everybody in, while finance is focused on bringing costs down. Efficiency for the employer is particularly crucial at the moment because many large employers have figured out the cost of auto-enrolment in terms of participation and now need to focus on the administration, which can be huge.”
Fidelity’s Webb agrees that the focus is on auto-enrolment and the cost of implementation is higher than new members’ contributions. Employers do not want to add to current system requirements, cost or procedures. They want to streamline it so that if they are running flex, it must plug in and have the functionality of a corporate platform.
“Efficiency is the key,” says Webb, “but underneath there is still very much a focus on employee benefits, whether that is because they are moving from DB to DC and enhancing the overall benefit programme or it is simply a gap within the benefit offering.”
Scottish Widows’ Taylor says platforms have increased staff understanding of what is going into their pension scheme, and the amount they value their benefits. “Employees therefore think more about their pension and take action on the back of that,” he adds.
This is important, because good communication of a consolidated view of benefits, total reward statements and the ability to consolidate pension and Isa saving onto a single platform from other providers is as important as simply having the benefits. If an employer cannot explain the value to an employee, it is wasting its time.
“A good benefits package can gain greater value if people value what they have because it is communicated properly,” says Standard Life’s Jenkins. DB is a wonderful example of how benefits can be undervalued – despite an employer paying in up to 25% of salary, people understand what they have got only when it disappears.
Proof of increasing engagement added to efficiency is rather thin on the ground, admits Taylor, but it is early days and there is enough anecdotal evidence that the concept is sound.
“We have enough data to demonstrate that users will go onto the portal and anything pensions-related will be the number one priority,” he says. “Members are using tools more than anything else, while traditional materials are far down the list. They will do nice, short educational pieces and use the tools before looking for greater detail.”
Governance is very important to employers, and platforms will provide the facility to gather evidence of what their staff are doing. In time, this will prove very helpful to show employers what their employees actually want as a benefit, says Legal and General’s Murphy. “As more MI is gathered, you will be able to show employers what is and what is not working.”
Although providers say platforms will increase staff engagement, auto-enrolment poses different challenges. Although many more employees are likely to be involved in their pension, they are different from normal scheme members because in many cases they will not have made a decision to join.
Describing Fidelity’s intentions for the market, Webb says: “We will try to capture engagement before people are auto-enrolled, so we offer a service called pre-enrolment to encourage people to go to a website and choose funds rather than being defaulted and also choose contribution levels. The experience in the US is that the take-up rates are reasonable, but the big difference is that once people actually make decisions, they become more engaged in auto-enrolment.”
It was agreed that at the initial contribution levels, auto-enrolment will not be enough to deliver a decent level of income in retirement, but if it encourages people into the savings habit, platforms can be used not only to educate and engage, but also to consolidate smaller funds from elsewhere.
The industry spends a fortune on building and modelling tools for people to work out what they will receive at retirement, but the reality is that staff have six or seven different policies built up with various employers, and it is very hard them to get a picture of what they have built up, says Friends Life’s Palmer.
“If we can encourage people to try and consolidate more – and platforms are an obvious place to do that – that has to be the right way to go for all parties. Certainly, pensions minister Steve Webb has declared an interest in making consolidation of small pots much easier.”
Will platforms really solve the problem of getting employees to engage or does good, old-fashioned face-to-face always beat delivery through platforms?
Scottish Widows’ Taylor says it all starts and ends with employee segmentation. People who might typically pay for advice will be quite happy to make purchases online. Others will want face-to face advice or guidance. “You have to appreciate that one size will not fit all,” he points out.
It does needs to be a more segmented solution, agrees Palmer, but it must be remembered that the platform is only one part of the proposition. “Financial education, including worksite marketing, has to be an element of that.”
Webb adds: “If you can engage people in the process nice and early, they will use that as the default for accessing information, and that is far more cost-effective and engaging.”
Murphy says staff presentations remain a great opportunity to point scheme members towards further information, encourage them to go online and engage with the platform.
But all agree it is dangerous to make assumptions. Even though the use of websites, QR codes and other electronic communication channels is in fashion – and is even driving up participation and engagement in many businesses – it can be the wrong thing to offer.
Fidelity’s Webb says: “We worked with a large IT company to set up a DC plan, but the most effective way to engage with its workforce was through paper, because they regard everything online as junk.”
One of the key drivers of interest in corporate platforms is that staff see their employer as a trusted partner and the platform concept is valuable in this context, says Webb. “This is because it is simple and convenient, the cost is lower, and they see their employer has researched the market and come up with the best provider.”
Read more from the Workplace Savings Quarterly