Corporate wrap, an integrated financial planning platform for employees, is taking shape as a proposition for employers, but the concept has its doubters, says John Greenwood
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- Corporate wrap is not yet available, but is likely to be in the next 12 months.
- Staff will be offered a range of financial products, including Isas, share plans, savings products, pension and life insurance, through a platform that allows them to switch between these.
- Staff will be able to see data on all their assets, including pensions from previous employers, personal savings and investments, through a web-based portal.
- Some people question whether staff will want to hold personal data on an employer’s system.
Corporate wrap products aim to put employers at the heart of employees’ financial wellbeing. Rather than directing the majority of spend at pensions, the concept offers staff an integrated, financial planning platform that allows them to use the tax wrappers and savings vehicles that are most suitable for their life stage.
A corporate wrap has several elements. First, it offers staff access to a wider range of financial products and tax wrappers, such as an individual savings account (Isa), self-invested personal pension (Sipp) and even a child trust fund, as well as traditional pensions and share plans. Second, it allows staff to move their money between these tax wrappers when it is efficient to do so. Third, it is a web-based hub that gathers information from all the employee’s other pension and savings products and displays a full picture of their overall financial position on a single screen. It also includes an information channel offering access to sophisticated online financial planning tools, pension calculators and tax data.
Workplace benefits portal
By making the workplace benefits portal the place staff go to for all their personal finance matters, corporate wrap promises to increase engagement with what the employer is paying for. By allowing staff to effectively flex between the benefits most suitable for them, it aims to make employers’ offerings more relevant, and therefore more efficient.
All the elements needed to create a full corporate wrap proposition exist, but no provider currently has them bundled together. Life insurers and benefits platform technology providers are gradually adding functionality to their offerings that bring them closer to corporate wrap, but no one is quite there yet.
Setting the pace in the corporate wrap quest is insurer Standard Life, which bought benefits technology provider Vebnet last September. Standard Life plans to launch its corporate wrap proposition, Employee Wealth Plan, by the end of the year. It has not clarified what this will look like, but it is likely to include a corporate Isa and share scheme connected to the pension and Sipp it already offers. It will also offer the ability to connect into real-time valuations of an employee’s other assets, giving a full financial picture. Richard Morgan, director of consultancy services at Vebnet, says: “Current benefits arrangements offer people pay now and a pension in 40 years’ time. When corporate wrap comes in, it will allow them to make a plan, set goals and use the tax wrappers to achieve what they want from their money.”
Maximising tax breaks
Maximising tax breaks is core to the concept. Rolling maturing shares from a share incentive plan into pensions is one piece of the tax-efficiency jigsaw that is already developing through links with corporate Sipps. Corporate Isas can be used to take the concept further for staff whose career path is likely to make them higher-rate taxpayers in future by holding savings until they are entitled to relief at 40% on their pension contributions.
Today’s technology enables financial advisers dealing with individual clients to see all their assets, from a range of providers, on a single screen. This process, called aggregation, is a key part of corporate wrap. Some people say employees will not want their employer to know how much money they have or what they are doing with it. They also question whether employers and staff will want to put everything with a single provider. Michael Whitfield, chief executive of Thomsons Online Benefits, says: “What happens if the pension or Isa goes wrong and you decide to move provider? You will have to unravel the entire benefits programme.”
Others argue corporate wrap is a misleading description altogether. Martin Palmer, head of corporate pensions marketing at Friends Provident, says: “We do not like the word wrap because it is borrowed from the IFA market, where people consolidate all their pensions and other assets on a single platform. In the workplace, there will be no advice, and we do not see employees consolidating their assets there either.”
Only a handful of blue-chip companies are likely to introduce something that looks like corporate wrap at the outset, and benefits professionals will face challenges. Because of the complexity of what is being put in place, a lot of effort will be needed to explain it. There is a risk staff will be baffled by the technology and the choices available. But corporate wrap advocates say all these challenges can be overcome, and organisations that embrace the initiative will find their benefits leveraged into a proposition that differentiates them as a leading-edge employer.