The great and the good of the pensions industry have delivered their verdict on “pot follows member. In sententious fashion the actuaries follow Steve Webb’s lead and see pot for life as breaking the umbilical between saver and employer.

The PLSA have commissioned research which draws the same conclusion

Undermining the primacy of the employer to choose the workplace pension also risks the primacy of the consulting actuary’s and the PLSA’s core revenue base; both are ultimately dependent on discretionary spend from larger employers so long as the role of pension fiduciary remains intact.

“Pot follows member” threatens that fiduciary responsibility, putting decision making in the hands of members who could soon have the right to choose where their money is invested (heavens forbid).

If , as I see as inevitable, the choices for savers are limited to authorised master trusts and AE enabled GPPs , then there should be no “bad  choices”.

Defaults where defaults suit

Flicking past the headlines that demand that employers retain the right to choose pensions for their staff, I come to an article from another trade body , the SPP (Society of Pension Professionals).

They are pleased to see two further initiatives from the Government which would also change the choice architecture of UK pensions.

The SPP are clearly pleased to see proposals from Government that providers will be able to clean up the mess made by employees changing jobs

In the absence of an active choice by the member, the pot will be transferred to the consolidator scheme where the member already has a pot (or the largest pot if the member has multiple pots with consolidator schemes).

So the concerns of the ACA about employers keeping control of their staff’s money can be ditched so long as staff have left behind a small pot, stuffing up the pension administration. The trade bodies seem in agreement that the consolidation of small pots into dustbin funds is fine, it’s just the ongoing money that matters. Do I get the feeling there is a whiff of double standards here?

Default decumulators

The pension industry has hit on a double-whammy of user-friendless cant to describe the latest proposals to deal with “pension freedom”.

The DWP’s latest proposals are to place duties on all trustees of occupational pension schemes to offer a range of decumulation products and services that they consider suitable for their members. Trustees can either provide this themselves or partner with other providers who offer these solutions. Legislative change is planned, but in the meantime, The Pensions Regulator (TPR) intends to produce interim guidance to show how trustees can support their members in decumulation and encourage innovation in this area.

This is well and good , but it goes further. The SPP note with approval steps being taken by TPR to encourage an auto-enrolment mentality into how we take our pensions

This contrasts with when a member comes to access their pension savings when the member is faced with complex financial decisions, which the member may not be well equipped to make. This problem may only get worse with cognitive decline as a member ages. The DWP therefore supports the development by trustees of default decumulation solutions, based on the profile of the scheme membership, into which members could be placed on an opt-out basis. (my emphasis)

So while the ACA and PLSA undermine pot follows member for putting savers in charge of their own funds, the SPP encourage a carousel that will take away our small pots like  airline baggage to be returned at the other end of the flight. At the other end of the flight we will find ourselves being herded through customs into a pension of other people’s choosing, from which we will have to opt-out if we have our own ideas.

Am I alone…?

Am I alone in finding all this pompous nonsense?

Actually, the money we have in workplace pensions is our money, it may be under the fiduciary care of trustees but it’s us who are taking the risk of things going wrong and it’s us who have the right to have it paid back as we please.

The idea that our employers know best for us has a pretty small evidence base these days. Our employers have abandoned DB pension accrual, dishonoured expectations of discretionary pension increases, dumbed down to DB and would happily get rid of small pots from whatever control they still have on their workplace pension.

Indeed most employers have virtually no control of their workplace pension and could no more tell you why they chose Nest or Legal & General or Smart than they can tell you whether their staff are getting value for money. I am reminded of what the OFT said more than 10 years ago now

The reality is that there is a framework of advice and support to employers to allow them to think that they are doing a good job for their staff and that framework includes the SPP, the ACA and the PLSA. There are many more such bodies who are there to help employers feel good about their role in pensions.

However, the vast majority of employers have no interest in pensions and use the most convenient workplace pension for their payroll, paying in the least they can get away with and offering staff precious little support at retirement.

Those small number of employers who pay the subs to the PLSA and pay retainers to consultants are a tiny minority of the 1.2m employers in the auto-enrolment system.

Meanwhile the 28m of us who save for our retirement in employer sponsored workplace pensions struggle on without dashboards , with vicious headwinds when we try to consolidate our pots and with the feeblest of guidance about how to spend our money (Pension Wise downwards).

The answer

Many people will not want to make their own choices about pensions and will go with the flow. For them , the employer’s default settings remain important. They will continue to rely on payroll to make contributions and employers to make sure they get at least the minimum VFM for not opting-out.

But when it comes to retirement , everybody has to make an active decision, if only to hand bank account details to the people who pay us back our pots. There is no opt-out of this, there is only an “opt-in”.

The sooner we offer people the right to choose their pots going forward, make it easy for them to consolidate historic pots and make it clear what choices they have at retirement , the better.

The SPP, PLSA and ACA have  made it clear that they have misgivings about members doing it for themselves but I see little evidence that they know any better than we do. Where is the innovation that demonstrates the contrary?