The Investing and Saving Alliance (TISA) has welcomed the aims of the Pension Schemes Bill but, in its response to the Public Bill Committee’s Call for Evidence, urged the government to refine the detail amid concerns about how the proposals may work in practice.
Tisa highlighted the use of Default Pension Benefit Solutions (DBPS). These defaults can help people who don’t want to make complex decisions, but they also carry risks. Tisa notes that defaults that lock someone into an “irreversible option” such as an annuity could be highly unsuitable, particularly for people with shorter life expectancies.
Tisa argues that savers must always have the flexibility to move away from defaults if their circumstances or level of engagement change.
Tisa also highlighted that strict scale requirements could end up concentrating the market into just a few very large schemes. That could mean less competition, less innovation and fewer choices for savers, with poorer outcomes as a result.
Tisa also pointed out that the Bill is highly complex and will only succeed if government works closely with the industry but without that collaboration, the reforms risk missing their mark.
Tisa head of retirement Renny Biggins says: “It’s vital that this landmark piece of legislation delivers the improved outcomes for the consumer and the sector we all seek. We very much appreciate the constructive way that Government is moving forward with this agenda and are hopeful they will take our concerns into account.
“It’s imperative that all DPBS offerings are obliged to have a degree of flexibility built in, so that consumers can, if they wish, engage and benefit from a different solution.
“We understand the need for scale as a means of reducing overall administration costs and the provision of a more compelling proposition. However, applying the scale requirements in an indiscriminate way to smaller multi-employer schemes can have the perverse outcome that even those performing very well under the Value for Money (VfM) criteria face being wound up, whereas single-employer schemes performing average against VfM are left alone.
“Therefore, we are urging the Government to take a more holistic and nuanced view of how to apply the scale criteria to smaller multi-employer schemes. Our additional concern in this area is that by squeezing out the smaller multi-employer schemes, we risk the creation of a market dominated by a few very large providers, which would reduce competition/innovation and remove the nuanced choices employers currently have.
“Tisa are very appreciative of the consultative and collaborative approach being taken by Government in these complex and detailed matters. However, due to the number and complexity of the Bill they emphasise the need for this approach to be ongoing.
“This Bill contains a very high number of measures that address complex areas in which getting the detail right is absolutely crucial. Continued close and consultative working between all stakeholders will be required to ensure that the pacing and sequencing of the measures proposed are done in such a way to increase the chance of success rather than hinder it.”
