I think my employment record, and therefore my pension saving, is fairly typical for someone my age.
I’m in my mid forties and was at my first job for three years. Pay was pathetic, but after one year’s service I was given a pension. Today, 25 years later, it is worth about £2,000.
Job two I was at for little over a year, after six months I was allowed in to the pension. When I left I was given the choice of having my contributions back or of keeping the very small pension where it was. I took the money back – silly decision, I was young.
The next job I was at for six months, no pension, and then I started at the Daily Mail. I was there for three years and saved in to a DB scheme.
I left for a seven month stint at the Mirror, from which I have no pension, before returning to the Mail, who after a year let me back in to the DB scheme. That became a career average scheme and then a DC scheme. Three years ago I moved to the Times and have a good DC scheme.
So, six jobs, seven pensions, half of them not worth much at all.
Today’s young starters are blessed with auto-enrolment which means that when the terrible restriction that I faced – the rule that prevented you from joining the company scheme immediately – is no longer in force.
That is a major benefit for younger workers who will also, like me, probably go through a few jobs at the start of their career.
It is disappointing though that the other issue of having lots of small pensions scattered around still exists.
Auto-enrolment has been a great success in many ways, getting 10 million people saving into a pension for the first time is a staggering achievement for a society to make.
But the time has come to stop patting ourselves on the back and really get to grips with the next big issue: size. Small pots and small contributions.
There are clearly huge logistical and administrative problems with solving small pot pensions and stemming the tide of the 27 million we are due to have by 2030 – the wide running report issued by the Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI) makes that clear.
The problem is that nothing is ever going to be solved until philosophically the industry agrees on the best path forward. Without that unity ministers and regulators will be left with conflicting lobbying efforts which will lead to an imperfect outcome.
To begin with we should work from the position that we are never going to get to a stage where members are sufficiently engaged with their pensions that they will always transfer them themselves. This is a fine ambition, it’s just a pipe dream at the moment.
What we also need to recognise is that the great success of auto-enrolment is the element of compulsion, and as a result that principle should be embedded in to any outcome the industry wants to achieve.
For me this leads to one conclusion: pot follows member. What you would achieve from this would be the increased engagement that providers desire. You’d have to fill out your pension scheme details with your new employer in much the same way your bank account.
If I think back to my own example as a young man, I could have been helped hugely by feeling as though I were carrying my savings from job to job, rather than in starting afresh.
I certainly would not have handed back hundreds of pounds of employer contributions (again, silly boy).
Clearly the stumbling block with this proposal are the issues over potential mis-selling – how can you be sure that the original pension you were sold is the best? – and then assets under management.
This latter point is the fundamental conflict for the pension industry, that though they don’t like administering small pots, they do want to get their hands on as many big ones as possible.
Pension providers need to sort out the small pots problem quickly, otherwise all they will look like is a group interested in accumulating assets, not in helping people actually helping them through their working life.