Pensions Minister Ros Altmann has said outside players such as Amazon, Google or Facebook could take the pensions market by storm.
Speaking to the Financial Times, Altmann said she believes “outside disruptive players” will enter the market, as current pension providers have become “far too complacent”.
The Minister thinks the introduction of auto-enrolment has increased the problem; since 2012, over five million people have been auto-enrolled in workplace pensions, with millions more expected over the next two years.
“Pension companies previously didn’t engage with the end customer at all. They would sit there, waiting for a salesman to bring them the customer’s money[…]And so they designed products that the salesmen could sell rather than those customers actually needed,” she said.
However, Altmann stated that auto-enrolment means the government is “ensuring that millions of people are coming to the pensions industry without the needs for a salesman.” As a result, she said pension providers need to take a different approach to designing products and think about what is good for savers.
“I don’t think many people would argue that this was the case before. And certainly some of the issues that are being uncovered by the regulatory review of asset managers and what we know from past pensions scandals would suggest there is more the industry can be doing to treat customers well,” she stated.
Altmann said that she has no problem with companies making a profit but they must treat people fairly whilst achieving this.
“If providers don’t grasp this opportunity, don’t make the most of the opportunities provided by auto-enrolment, don’t treat customers well, then some disruptive outside players will. Other people will surely arrive because there is so much money at stake. In 2014, £80bn went into pensions. By 2020 it will be closer to £100bn.
“We don’t know who will come in yet because it hasn’t happened. It could be somebody we have never heard of who takes the market by storm, but it could also be Amazon, Google or Facebook,” she stated.
The head of Amazon China Doug Gurr has recently been appointed to the board of the Department for Work and Pensions as a non-executive director. Altmann was asked whether she has spoken to the companies about their interest in pensions, and said: “I can’t talk about that”.