The pensions freedoms announced in the 2014 Budget are claimed to have made defined contribution (“DC”) pensions more effective in helping people retire. This view is set out in the 2015 CBI/Mercer Pensions Survey, ‘A view from the top’. The Survey explains that the publicity around the freedoms “has helped to highlight pensions and their potential value to employees”.
The freedoms have certainly stimulated much conversation around pensions. The freedoms and related tax changes have increased the relative attractiveness of pensions as savings vehicles in the UK than was the case prior to these changes. However, I question whether these changes make pensions more effective in helping people retire. The positive impact these changes have had has been countered by the ongoing regulatory and taxation uncertainty affecting pensions in the UK. The Survey found that “the priority on pensions must be regulatory stability, including on the taxation of pensions”.
The Government seems to be intent on raising awareness of Workplace Pensions.
Hopefully, we will see more from the Department for Work and Pensions than from Her Majesty’s Treasury on that score. Workie might come with a multi-million Pound promotional campaign but that is cheaper than the consequences of the Chancellor of the Exchequer’s efforts. This promotional activity, both planned and unintended, is supportive of greater engagement with pensions.
This increased engagement needs to be converted into higher savings rates, ideally backed up by more relevant services/products, in order to make DC pensions more effective in helping people retire.
How can this momentum be harnessed before pensions stop being talked about?