The Berkshire Farmer spoke on the BBC’s world tonight last week. He is not alone in finding himself helpless in trying to choose a workplace pension. I find myself conflicted in arguing the case for informed choice as I run www.pensionplaypen.com , a website that provides employers with an informed choice – I would say that.
So I will point to two articles that were published this week which were published not by people like me – representing the pension community but by Business Advisor, a magazine for small businesses and by the Mail on Sunday.
What links the two is the re-articulation of what the Berkshire Farmer is saying, that the employer is between a rock and a hard place. Here is James Lowman CEO of the Association of Convenience Stores in Business Advice.
The time and effort required to conduct sufficient research when choosing an auto-enrolment provider could put many of the UK’s smaller firms off, said Lowman, adding that employees are increasingly being pointed towards the National Employment Savings Trust (Nest) –the universal workplace pension scheme set up by the government –as a way for business owners to avoid liability, regardless of whether or not it represented the best option for workers.
The rock is employer liability and the hard place is the risk that the safe haven turns out to be a prison.
Here is Mike Cherry of the Federation of Small Businesses (also in Business Advice
We are all worried about whether that would be the right choice, there is no guarantees and that is a concern for most people
Some pensions have guarantees – the new state pension ,defined benefit occupational schemes and annuities! People can choose to buy guarantees – small businesses can’t – if we want to compete with big business. The FSB has tied its colours to the Scottish Widows mast and latterly to the Legal & General mast, both choices are problematic (for differing reasons).
Here is how Vicki Owen of the Mail on Sunday frames the issue of employer choice
The Government has been warned against continuing to leave small firms on their own in a ‘murky jungle’ of workplace pensions.
But the Government’s response will be to regulate the choices not the choice.
Last week, in a response to a question in Parliament from Labour MP Rob Marris about whether the Government would act on a ‘gap in regulation’ over the provision of master trust pension schemes, Economic Secretary to the Treasury Harriet Baldwin revealed that the ‘Government will bring in legislation to do with master trusts… as soon as practically possible.’
Knowing that there are a greater number of safe pension options is not the same as helping people to choose the right workplace pension. The Government is simply replicating the mistake of allowing NEST to be seen as a safe haven, many times over.
The Master Trust Assurance Framework does not , in itself , make a workplace pension a “right choice”. Nor does complying with the Independent Governance Committee regulations, make insurers the right choice.
What is needed is a system by which employers make informed choices and the promotion of that system by Government , the FSB , the Association of Convenience Stores and all the other points of contact for the 1.8m small employers having to engage with auto-enrolment.
Otherwise we will have purchasing on a level with PPI for consumer goods, Swaps for business loans, endowments for mortgages and personal pensions for liberating defined benefits.
We know what mis-buying led to- class action claims of mis-selling. So it’s not just the employers who should be worried, but those who advise employers and those who regulate that advice. All should be worried. But I am beginning to sound like a scratched record!
The articles appearing this week in the Mail, on the BBC and in Business Advice, should be making the Government very worried indeed.