A pension is a problem most of us don’t want to own

I haven’t written much about SEI’s mastertrust but a chance conversation with Hyman’s Michael Ambery attested to some affinity in views between SEI’s DC boss – Steve Charlton – and myself. As we’ve known each other some time it was good to read that we are on the same page with regards people’s attitude to their retirement money.

Definitions are important


This is how SEI’s report on the “ownership gap” begins

People generally do not have a sense of ‘owning’ their DC retirement savings in any substantive way.

Individuals do not often choose their provider. They do not, on the whole, choose their investment funds. They rarely take responsibility for actions, relying on the whole on a raft of third parties such as consultants, advisers, providers, and asset managers to look after them–none of which they have picked themselves. Even trust in their employer is waning.

All of this can lead to a lack of tangibility. There’s a disconnect that led, in part, to the ‘dash for cash’ following the introduction of the retirement freedoms. It was only by taking funds out of the DC plan that people felt the money was theirs. People even described receiving back their hard-won savings as ‘a windfall’.

Behind the report is Janette Weir of Ignition House who I admire for her succinct style and her meaningful infographics.

Engagement with what matters.

I recently found myself writing an introductory email to more than 6,000 staff of an employer who wants to tell each one, the value they are getting for their money. As I wrote the words I realised that this would be the first time that anyone had offered them the chance to see how their money had done.

It seems extraordinary to me that we do not report to the people on whom our financial institutions are built on the progress they are making and on the value provided by the people they are paying to manage their money.

The money we have in pensions becomes progressively more important to us as we grow older as this simple chart suggests. But while  people see their money as important to them but nearly three quarters of us think that pensions feel “a bit different”.

The research we have done with Ignition House suggests we tell people the things they don’t want to know (with fund factsheets) but don’t tell them what they want to know – how their money is growing.

Age increases concern – but it doesn’t solve the problem.

You’ll notice that the numbers in the orange boxes don’t match, even though people feel their pension money growing more important to them as they age, their sense of ownership of their pension remains the same , those three quarters who feel pensions are a little different – remain “three quarters” whether they are under 30 or over 60.

Pensions remain something that is “done for us” and so long as we have no idea whether we are getting value for our money, we are happy for it to “just sit in the background“.

Size doesn’t matter – much

And its not just about size.

Over half (52%) of those with pots between £50,000 and £100,000 said that they felt disconnected from their pensions, while three in 10 (31%) of those with pots over £100,000 indicated they felt this way.

Of course the older you get, the bigger your pot gets but it’s amazing that a third of people with pots of more than £100,000 didn’t feel their money was theirs.

Surely this tells us that we are seriously screwing up in our consumer duty?

The wrong kind of engagement

Steve Charlton concludes that

the current engagement model has not been working well enough to shift the dial, and by all accounts, fixing the ownership gap won’t be easy. A fundamental shift in industry thinking is required.

There are two potential answers to this conundrum

Solution one

The first is to try something new. Instead of trying to shift the responsibility of managing our retirement income away from the people we pay to do it, why don’t we turn this round and shift the responsibility on those managing our money to tell us how they are doing managing our money.

Instead of insisting we are accountable for a pension we had no part of , how about we demand those who we paid to manage the money, tell us how they are doing?

Solution two

How about – instead of telling people to take control of their money, we gave them choices that they not only understood, but wanted to make.

The first of these choices is the freedom not to take a choice, the right to sit back and have a pension paid to me which I can trust as value for money. This is essentially what CDC is going to end up giving – though it will probably end up being called a “pension”.

The second of these choices is the choice to do something, to move money away from the organisation managing our money to somewhere better, a choice which we will only make if we feel confident to make it. For that we need a way of comparing how our money has been and is being managed. We need to protect people from false claims by scammers, but so long as there are standard ways of assessing value for money for all pots, we can define what is within and what is outside the tent.

Our right to know how we’re doing and our right to get what we paid for

We know that most people want to do nothing and we must ensure that by doing nothing , they do not self-harm, That understanding that pensions are being “done for them” does not mean they cannot own their pension. I own a computer but I don’t know how it works.

We know that people who want to manage their financial affairs proactively, will take decisions such as appointing an adviser or setting up a SIPP and managing their own drawdown, we know that some people will put two fingers up to pensions and take their pot in one go. We allow people the freedom to do that.

If we manage people’s money, we must be held to account for how we do it. People want to know they are getting value and they want independent certification. We can’t expect people to be accountable for their pension  if we aren’t accountable for how it’s managed.

Giving people the freedom not to choose is as important as the freedom to choose. Everyone has the right to see how their money is managed but nobody should be forced to manage the nastiest hardest problem in finance on their own.

We have the right to know the value we are getting for our money and we have a right to get what we pay for. Right now we aren’t told how our money is growing and we aren’t getting a pension from our workplace pension. Is it odd that we feel “disconnected”?

Some problems we do not want to own

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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