Vincent Van Gogh, the State Lottery Office

The FCA and tPR have constructed a simple pensions consumer journey to be a framework for considering a standard response to pensions issues. In this blog, which forms part of my input to their call for evidence, I argue that regulators must guard against a provincial approach to pensions. For most people, their retirement income is dependent on more than the money coming from pension savings and the dependence on formal pension savings differs across groups. This blog picks up on discussions of the concept of the pension consumer journey and what it tells us about the mistakes we make along the way. . and will be followed by further blogs looking at  engagement, innovation, choosing workplace pensions , MaPS and joined up work by tPR and the FCA.

The paper looks at structural issues including, gender race , disability and the type of employment which impact on the level of financial resilience people have in retirement. But consideration of these societal factors needs to also think about the wider context of financial support and recognise that many groups in society have different support mechanisms in older age than is assumed by a financial model structured around individual self-sufficiency.

Historically , the pension gender gap was simply a reflection of the commonly held view that a woman’s place was in the home and that women were protected by a spouse’s residual pension.

These mechanisms may involve family or wider communities such as a church or mosque and for many people saving in the UK, the destination in retirement may be abroad, either returning to a homeland or to emigration.

But pensions and support mechanisms are changing and the pandemic may speed up the rate of change. Most importantly, the concept of a “spouses pension” arising from workplace provision will be gone in a generation. The parochial support mechanisms of ethnicity, religion and extended families are likely to be diluted over time as immigrants homogenize with indigenous savers and the idea of a single pension consumer journey is helpful in both tracking and driving standardization of later life support

How can these journeys help address structural issues with pensions?

At the end of the discussion on structural issues, the paper asks whether it has addressed the right issues and  “How can the pensions consumer journey be improved to address poor outcomes caused by structural issues?”.

My answer again is to start with the policy objective and ensure that it is being met by the default solution allowing people the right to opt-out but ensuring that by doing nothing, people will not be harmed.

While standardisation has its advantages, the framework created by the pensions consumer journey needs to tolerate and indeed celebrate diversity and non-conformity to a single approach

This means understanding the ways that different groups within society work. We have a surfeit of research on this and Government can draw on work from diverse sources including Age UK, the ILC, the Resolution Foundation, the Taylor Report and Nest Insight (to name but a few). However there is no substitute to talking with practitioners in delivering advice and guidance to diverse groups and the call centers of the pension providers , MaPS and those working in the workplace as pension managers as well as in payroll and reward teams need to be informing the debate as the structure is not static , it is in places highly dynamic.

Nowhere is it more dynamic than in the sector of the population loosely referred to as self-employed. This umbrella term of “self-employed” covers radically different attitudes to the pension consumer journey and this needs to be reflected in regulation

Where people choose to be self-employed, there should be a right to opt-out of pension contributions but where self-employment is accidental, the onus should be on the firm contracting the worker to treat the contractor as a worker and pay them a pension contribution under auto-enrolment.

Today, the situation assumes that the status of “being self-employed”, means a large number of workers in the gig economy are excluded from pensions on a technicality of the contract they have with what they consider their employer.

The Taylor report and other research into the self-employed by DWP sponsored working groups confirms that the binary structures of employed and self-employed are not reflecting the nature of people’s work or indeed helping with their pension planning. It may be beyond the scope of this CFI to address such structural issues in society, but it is important that regulators continue to address the needs of those who are involuntarily excluded from saving, either by including them or ensuring that they pick up benefits to which they are entitled.

Can a one size fits all approach create harmony?

The risk the regulators run in assuming a standard way of saving for retirement is in trampling on the needs of individual sectors of society. But excluding certain groups from pension saving carries its own risks. There are parts of the UK workforce who have proved signally hard to accommodate, I have mentioned the self-employed but there is a significant proportion of the population but work but get no pay and are therefore particularly vulnerable in later life. Most of such people are carers and their reward for caring should not be limited pension credit or worse- no recognition for their labour.

If we want to link work and pensions, then should earnings be the only measure? Should the capacity to save be the starting point of a pensions journey for those who do not earn but play a part in society? And what of those who for whatever reason, fall out of functioning society and spend their lives in the grey-zone of benefits and reliance on social services?

Concepts such as the Citizens Pension have been mooted to provide an entitlement beyond the State Pension so that those who contribute to society are included in retirement in some of the prosperity enjoyed by those on the pensions consumer journey.

If we want a harmonious society, there can be no gaps through which people fall into destitution and the role of regulators needs to extend beyond the regulation of financial services to ensure that those without finances are included. Here the pensions consumer journeys are most helpful in defining where exclusion is happening and the job of regulators is to recognise that where the structure of society is excluding some individuals from a wage in work, it does not exclude them from a proper wage in retirement.

A harmonious society looks after all its citizens without prejudice or recourse to poor laws.