The majority of young people are in favour of government plans for a pension pot for life, according to a new survey.
According to a UK worker poll by the Social Market Foundation and Cushon, 78 per cent of 25-34 year olds, 73 per cent of 35-44 year olds, and 69 per cent of 45-54 year olds support the idea.
The SMF survey looks into public perceptions of member choice. It found that member choice is supported by 72 per cent of Defined Contribution (DC) pension participants overall. All demographic groups continue to have substantial support for this, with support marginally rising with greater education and pre-existing pension involvement. Member choice is popular even in the face of certain disadvantages, such as losing employer guidance only 25 per cent of respondents voice concern.
But SMF warns that wanting member choice doesn’t necessarily mean intending to use it. Only 28 per cent of those in favour of member choice would opt for a different pension provider than their employer’s. Furthermore, 67 per cent prefer their employer managing their pension, while 48 per cent believe they don’t need to actively oversee it.
The survey comes as the government consults on a “lifetime provider model” to address the issue of small pension pots resulting from automatic enrolment. But the industry opposes the proposals, stating concerns about fees, market competitiveness, and engagement levels. The ‘pot for life’ approach, which gives people control over their pension contributions, is one way the SMF advises resolving these difficulties.
The SMF emphasises that in order to fully realise the potential of a “pot for life” system, policeymakers must actively encourage the transition “passive and disengaged to active and engaged”. The results of the study show that offering members an option won’t immediately increase involvement. The SMF recommends that there needs to be assurance given to businesses and workers on the continuation of protection. Furthermore, strict rules like to those governing automatic enrolment funding should apply to lifetime providers.
Social Market Foundation researcher Niamh O Regan says: “Past success with pensions policy – particularly automatic enrolment – was able to effectively utilise consumer inertia.
“However, as working habits have changed and people move jobs much more frequently, we now have an issue where an individual’s pension savings are spread over a collection of small pots, and the level of retirement savings is inadequate. Member choice can play a role in improving this picture, through stopping the creation of a new pension pot with each job, and ensuring pension savings can accumulate and appreciate in one place, likely leading to better retirement savings. It will also give consumer greater control over what could be their largest financial asset.
“With that said, while moving to member choice rightly reflects changed consumer preferences and working styles, it would be a mistake to assume that consumers will adopt member choice right off the bat. Having relied on consumer inertia for so long – it will take a lot more reassurance and support from government and industry for consumers to make such a leap.”