There is no shortage of activity to address the savings gap; in addition to personal accounts and RDR we now also have the Thoresen report. The latter proposes pleasantly practical and pragmatic ways to guide consumers. The Government finally appear to understand that market interference such as enforcing price caps á la stakeholder does not work.
There is a need for someone to take overall responsibility for all the new measures. Who is pulling all these different strands of the various reviews together to achieve an overarching strategy to help all citizens? At the present time it looks likely that we will end up with a patchwork quilt of different approaches rather than a new blanket consumers can wrap around themselves in old age.
Whilst compulsion is a welcome step, one of the main concerns in the industry appears to be dumbing down and the risk that employers will take the opportunity to reduce contribution levels to the minimum required by the new legislation.
Thoresen rightly recognises that a one size fits all service will inevitably fall short of the mark. But whilst Otto’s report recommends multi-channel delivery including face to face, call centre and internet technology, and the RDR’s general tenet for simpler forms of advice seems to recognise that the delivery of much of this via self-service tools, the work around NPSS appears to be taking far less account of managing low cost delivery.
If we are to avoid dumbing down arrangements we presently have in place, should not the Personal Accounts Delivery Authority be taking steps to ensure clear disclosure to members of the financial benefits of their previous scheme compared with amounts they would receive from personal accounts? In many cases the quality of online benefit information presented to consumers for group arrangements is more comprehensive than the equivalent for individual products. Whilst there is still much more that needs to be done around both functionality and the extent to which they are used by members, large numbers of schemes give consumers the opportunity to project financial benefits.
At this stage I believe Government should draw breath and reflect upon the various options on the table to look at how a range of cohesive options might be delivered to really help consumers make the right financial provision for their retirement. To me, pressing ahead with personal accounts before the path finder implementation of Thoresen have had the opportunity to demonstrate the validity of money guidance shows all the hallmarks of a dying government that knows its time is up and is determined to make its mark on the future before the electorate cast them from office.
Fortunately the electoral timetable is such that conceivably a first-year Tory Government in 2010 might have the wisdom to reflect on what can be learnt from the Thoresen pathfinder and reform NPSS to interact more effectively with other forms of advice before it even commences.
Group pensions providers need to start building comprehensive functionality within their tools to enable members to be able to compare and contrast the differences between benefits under their group scheme and what they can reasonably expect from personal accounts.
In order to protect quality group pensions against the dumbing down of personal accounts, providers need to start a major communications exercise and they need to start it now. Any group pensions provider that wants to maintain a significant portfolio of such business after 2012 needs to be investing heavily in building tools to help members have a clear understanding of what their pension will give them and engaging in major activity to drive their use. Let’s be clear; building the tools is not enough. Providers need to run campaigns to ensure members actually use them.
If in 2012 an employee has become a regular user, say twice a year, of a tool that enables them to have a clear understanding of what their benefits will be in retirement and can contract the benefits of the national scheme, the pension provider will have a far better chance of retaining the customer. Conversely if they have not convinced the customer of the real benefits of that scheme they will be far less resistant if the employer wants to take the saving dumbing down will offer them.
We have a head start to make clear to consumers that for existing members, quality group pensions are a better option than the NPSS but we need to start that campaign urgently rather than wait until it is too late.