Maybe it’s not the members who should be worrying.

There are 1.3m employers in the UK operating pensions auto-enrolment, a few thousand of whom use the services of actuarial and employee benefit consultants..

So we can reasonably talk about the employers who pay for advice on workplace pensions in being in one bubble and those who don’t being “outside that bubble”.

The organisations that take their workplace pensions seriously often maintain a scheme exclusive to their staff and pay the maintenance costs out of corporate profits. While the share of profits devoted to pension operations is small, in nominal terms it dwarfs the capacity of most smaller companies.

The difficulty the Government has in introducing a pot for life system is that while the employers outside the bubble really don’t care much about pensions beyond “being compliant with the law”, those in the bubble care a lot – which is what their consultants are spending time reminding us.

David Millar, a comms guy from LCP has written about this very well – commendably publishing a blog within a couple of days of the Autumn Statement which questions whether the pot for life concept will , as the Government claim, improve member VFM.

Here are David’s concluding paragraphs

The company pension market is driven to be competitive by the buying process – the providers know that TV advertising techniques won’t sell their pension products, and where UK pension providers do advertise, it is where they have retail arms. The corporate sell is still focused on good propositions being built to impress a highly competent advisory world, who invest in people to do the detailed comparison of products and services which drives much of the innovation, service level and low pricing. If the buying decision moves to the member, we risk losing that. If a snappy TV advert and inertia are the things that drive profitability, where is the business case to invest in anything else?

And worse, we undermine what could be the most effective channel of communication open to employees – their employer. At the moment an employer can let its employees know about things that are happening on a scheme – the launch of a provider’s app, access to a new guidance service, a free telephone helpline etc. If we reach a world where the employer has no idea what the pension proposition is for its workforce, that channel could break completely. The relationship between employer and employee – as far as pensions savings goes – could become entirely transactional. And I think the UK pensions industry will be the worse for it.

These are compelling arguments for ring-fencing the large employers who use the highly competent advisory world and this appears to be what the Government intends to do. This is taken from the consultation on Pot for Life published last week.

We anticipate the need for exemptions to the lifetime provider model in circumstances where an employer provides a better offering than the lifetime provider. This would include defined benefit schemes and may include some defined contribution or collective defined contribution single-employer trusts, Master Trusts or Group Personal Pension Schemes that have more generous features in the default than the lifetime provider – for example, a protected pension age, significantly higher than minimum employer contribution levels or tax-free lump-sum. In those circumstances we would want to continue to encourage employers to be more generous to their employees, and so allow them to pay contributions into their own scheme. (my bold)

And herein the problem. We come to a problem where the bubble wants to protect itself from bursting and achieves this by arguing its scheme are “better” , have “more generous” and can be ring-fenced by having a “protected pension age” or higher contributions or ??? offering a better tax free lump sum.

This opens the door to a whole new industry of special pleading. People’s Partnership can ringfence itself because of their ill drafted scheme rules which cannot be adapted to offer anything but 55 as a scheme retirement age. A section 226 pension (remember them) can be ring-fenced to offer more than 25% tax-free cash and any employer who offer a higher than AE minima contribution into a workplace pension (no matter how bad) can keep than pension out of the pot for life system. Well theoretically…

If pot-for-life is to be meaningful, it needs to be a universal system, as it is in Australia. There are exclusions in Australia but they are minimal and very well defined. They do not include pensions that claim to be “better” and I suspect that APRA, the Australian regulator would strike a line though the paragraph above.

Pot for life spells doom for the DC consulting industry, unless it can find a ringfence for its bubble. David’s is the first article I have read that properly identifies the threat. I am sure that it won’t be the last.