Many in the pension world have questioned the urgency of reform of small pots and most definitely there are misgivings about pot for life or a lifetime provider model.
In this fourth podcast in the series, journalist John Lappin discusses those concerns with the Pensions and Lifetime Savings Association, two big pension providers Aegon and Royal London and finally a corporate adviser who sees a big mis-selling risk.
The PLSA’s deputy director Joe Dabrowski says that the case still needs to be made for the lifetime provider model and he would like to see more evidence before such a change is countenanced. He says there are already a lot of big moving parts to the wider pension reform process in train. Only then, he suggests should we assess saver behaviour and a lifetime provider model.
Dabrowski has concerns about the ‘retailisation’ of pensions suggesting that by taking employers out of the equation, AE may simply becomes a compliance task.
Aegon’s head of public affairs Kate Smith looks at some of the details of what is proposed, saying it will be interesting to see how many master trusts apply to be consolidators around small pots.
She says the call for evidence is ‘very strategic’ and likely to be phased with member choice coming first with the lifetime provider model in a possible second phase. However, if it all goes ahead it could mean seismic changes.
She says what matters most is what any change means for retirement incomes and outcomes.
She says the UK will need a complex IT build for small pots and lifetime provider reforms, even while the dashboard has not yet been delivered. She is concerned that lifetime provider model will lose any identification of the pension with the employer and notes that Aegon’s pension comms and engagement specialists say the best campaigns are where they work with an engaged employers.
Any change needs research especially considering the impact on the lower paid.
Royal London’s director of policy and external affairs Jamie Jenkins says there is a difficulty in separating existing small pots (already decided) and future pots (TBD) and that may become a commercial consideration for potential consolidators.
He is actually sceptical whether even small pots is today’s pressing problem.
Under the broad plans, he says a lot of existing pension books could be put into a run-off, closed book environment. All that said, a move to a more retail orientated market remains hypothetical.
Broadstone’s head of policy David Brooks is worried about the misselling risk and doesn’t want to see a new Wild West of pensions come into existence. He says there is a huge regulatory infrastructure that will be required to avoid scams and poor value. People may stick with the first pension scheme they choose or indeed the one they are stapled to first.
He also points that the highly engaged can already transfer to another pension. A lifetime provider model could prove to be a mirage, he concludes.
