Small pots initiative derailed by lawyers and marketeers
How many people think they are going to retire at 55. How many people with a small pension pot of less than £1,000 think that it will allow them to pack up work early?
The answer is of course very few trending to none at all.
But penson providers who should be exchanging small pots by now have fallen out with each other because one or two of them have “protected minimum retirement ages” of 55 so will be excluded from raising their minimum retirement ages to 57 in 2028.
I’m not naming names but I know who the pension poopers are and I can see they think that they are at a marketing advantage by pleading the importance of this protected retirement age. The protection is not as a result of them doing anythin clever – quite the opposite – it’s because the drafting of their scheme rules didn’t anticipate the Government pusing back minimum retirement ages as they announced in 2014. Their marketing advantage comes from having lawyers who didn’t anticipate. Meanwhile the pension providers who have well drafted scheme rules are finding that they are deemed to be dangerous places to transfer to – because – should members transfer – they might lose their protected transfer status.
Once again, a simple solution that could allow millions of savers to have their pots combined through an exchange of small pots, find pensions complexity standing in their way. And for the miniscule number of members who might find they lose a little flexibility on what is self eveidently a small pot, every other small pot must remain a small and unlove pot which
- Has an administration cost to it
- Attracts a fee under the general levy – typically as much as the charge the provider can make
- Is annoying to members
- Has the impact of increasing costs unecessarily to providers who as a result cannot pass on effeciencies to larger pots (an unwanted cross subsidisation)
Nest has already ruled itself out of playing on the shabby excuse that it cannot manage bulk transfers (are they incapable of building a process with the money we’re loaning them).
Now those with protected ages are backing out of small pots consolidation too.
The result is that we are no closer to small pot consoidation than when the small pots consolidation group issued their report in December 2020.
We need someone to front up to the lawyers and take an executive decision so that the common good is not set back because of the special pleading on behalf of the tiniest minority of members who might have a little “detriment”.
We need the providers with the advantage to surrender it for the common good and not insist on protecting their assets. They need to let their people go.
Otherwise pensions will continue to be in the grip of lawyers who hold up their principals over all grounds of common sense or general good.
And if their “Jarndyce v Jarndyce” approach is allowed to continue, we will get a pension dashboard on which we can’t see sense for “red flags” – advertising our likelihood of suffereing potential loss at every turn.
Simplifying the pension system happens because people see the wood for the trees. It does not need those trees to be felled to provide further documentation.
Let the general good flourish and see pots combined automatically. Let’s not wait till we have a pension dasboard for people to see these nugatory pots and have to claim on them individually.
Do not let the gentleman on the right of this page win!