For the first time in a few years, I took a weekend off blogging and spent Saturday on the river with new friends. Sunday gave me some time to think about the Pension Regulator and the FCA’s joint call for input (CIF) on “the pensions consumer journey”. It asks 10 questions of its readers and I will be publishing my responses over the next few days.
The CIF has ten questions in all and together they look at the framework for pension decision making for the majority of savers in the UK, they also stretch into the decisions taken by employers on the workplace pensions used by their staff
I am encouraged that these questions are being asked as there is too little common ground on issues such as guidance and advice, adequacy, VFM and the spending of pension pots.
There should be only one pension consumer journey which acts as a foundation for all pension policy making. We need to understand policy on pension saving in the wider context of Government incentives and benefits – especially the state pension. These incentives and benefits may not be regulated, but they are critical to the journey and they are hardly mentioned in this call for input.
The import of the CFI is to improve engagement, but this should not absolve Government itself from its duty of care to people, especially people dependent on the state for their pensions consumer journey. Nor should we expect people to engage in difficult pension decisions if they don’t have the tools to make choices. There should always be a default, and this means in retirement too.
It is good that the CIF extends to decisions being taken by employers on workplace pensions and of their capacity to influence the consumer journey. The issues many employers and trustees have is in working out what they can and cannot say to staff, especially when that might be inferred as advice or guidance.
So, it is vital that this input leads to more standardization. The simple consumer journey referred to in this document is the right one and so long as the saver’s interest is kept at the heart of policy making, standardizing in this way is a good thing.
I am writing as a blogger, as CEO of AgeWage (an FCA provider of guidance) and Chair of Pension PlayPen, which helped employers choose workplace pensions.
1. Is this the right pensions consumer journey?
The CFI claims the pensions consumer journey includes decisions around:
- when to start saving
- how much to save
- which savings vehicle to use
- how and when to seek pension advice
- how and when to access their savings
Is this understanding of the consumer journey an appropriate foundation for regulatory policy making? If not, what other elements of the journey should we be considering and how might the changing nature of retirement and working patterns in the future shape the support required?
This would have been a better assessment of the consumer’s journey prior to auto-enrolment but it is not quite what happens today. The journey as it is today does not involve conscious decision making , more an acceptance they are on a journey and might as well accept saving for the future as part of the work experience.
Most savers find themselves in a workplace pension and saving an amount that has been agreed by someone else. People have little choice over which savings vehicle to use and 90% of savers never pay for financial advice, their decisions on how and when to access their savings are typically made without so much as a consultation with pensions wise.
In short, many people enter saving, save and spend gathering the information they need from whatever they can get hold of , including provider websites, internet searches and a lot of asking around. Despite Pensions Wise being there, most people who need it don’t seem to use it.
This is the reality of the pensions consumer journey for those who don’t have access to advice and who aren’t looked after by the trustees of defined benefit schemes.
Most people don’t like taking decisions about pensions and are happy for the decisions to be taken for them, the pensions consumer journey is rarely one of conscious decisions. The regulators need to consider urgently whether anything is likely to change. At present hopes are that the journey will include regular use of a pensions dashboard, updates from simplified pension statements and the use of investment pathways, but in practice there is no evidence that people are following any pension strategy of their own making, if they are on a journey, they are generally lost.
My reason for responding to this CFI is to ask the question of FCA/TPR, “do you think that interventions like the dashboard, simple statements, pathways and Pension Wise will help, or should we accept that for most people, the lesson we have learned is that people want to be auto-enrolled from one stage of the journey to the next without ever engaging too much in what is happening to them?”
If we believe we can engage, educate and empower people to take good decisions, then the journey is the right one but evidence suggests that we had better start planning around a default means to get people spending their money – despite the pension freedoms.
At this point it becomes clear that TPR has deferred to the FCA in the way individuals are described: formerly regarded as scheme members, and then latterly ‘pension savers’, they are now just ‘consumers’. Ultimately consumers of retirement income, yes, but arguably not the most helpful way to describe those struggling to save.
With half the people in the UK paying no income tax clearly the question of UK productivity laging its citizens ambition and aspirations continues to be a major consideration.
There is a well trained army of financial advisers available but instead of promoting their use millions of pounds are wasted every year on well intentioned providers of “guidance”.
Illustrations need to be expressed in outcomes real statements such as the State pension provides 30% of NAW at best
Nothing happens until someone sells and people need persuading, in good time, not to borrow to consume. If only the 50-30-20 message was endorsed there would be less poverty in retirement
There is plenty of research on the subject but this does not reach the general public
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