Insurance and pensions major Aviva is in the process of developing a pension product that can rival the government’s auto-enrolment scheme, the Nest (National Employment Savings Trust).
The company has already identified a potential market for the scheme as the auto-enrolment day approaches and is developing a product to tap the segment.
“We’re aware that there is a very large market out there. It is establishing whether those schemes can be set up on a commercial basis”, said Steve Jackson, group pensions manager at Aviva.
However, he was quick to add that Aviva’s new product is in the early stages of development and is unlikely to be launched within the next one year.
He said although the product is being developed keeping Nest in mind, it will not be a replica and may not appeal to the same consumers.
“Nest has to offer a solution to every employer. It may be that we would have to draw the line somewhere. We think that for some employers NEST is going to be most suitable”, Jackson said.
He pointed out companies with lower average pay and high employee turnover may find it difficult to handle Nest and commercial operators are likely to do a better job, albeit at a higher cost.
“You would end up with lots of small funds, he said, adding that providing a pension for companies with fewer than 20 employees could be difficult but that it would not necessarily be an excluding factor. It is going to be based on the amount that is contributed on average from an employer”, he added.
Aviva currently offers Group Personal Pension (GPP) scheme to smaller companies with only 20 employees; but the new product is likely to be more hands off.
“It would probably not offer the same level of functionality and be a lot lower touch. If we had a cut down product everything would probably be very low touch”, Jackson said.