Let’s not pretend otherwise, the consolidation process is a lottery.
I know that People’s Pension will consolidate to the best priced of multiple pots with them – @JoeDabrowski1 do you know what other MTs do?
— Steve Webb (@stevewebb1) April 21, 2024
The master trusts complain that they win or lose participating employers on price. But when it comes to getting people to choose the workplace pension or SIPP to combine their pension, the only guidance they offer is the price of their default.
Unsurprisingly, many people are choosing their own lifetime pot rather than rely on their bosses choice to pay them their pension for life. They are choosing on the basis of what they consider value for money and very often they are choosing more expensive options than could be had from their workplace pension.
When you consider that many older people saw their funds fall 20% in the final year of “lifestyle protection”, who can blame them, What does it profit a man than he saves 0.5% on his AMC if he loses 20% on his fund?
Listening to Jamie Jenkins on the Nico and Darren podcast, I’m informed that we should consider both ends of the VFM construction , but no-one has come up with a decent definition of value , let alone value for money. So the punter is berated by the likes of People Pensions for choosing “expensive” SIPPs over cheap workplace pensions, This usually ends with the punter being marched off to MaPS for a stern talking to,
What is clear is that the VFM debate does not include the “value” of the “decumulation” options offered to us savers. Despite master trusts and GPPs operating as auto-enrolment workplace pensions, I see no pensions.
It seems that it is one message for bosses and one for their staff
The DWP’s VFM consultation over the summer chose to exclude individual savers and the decumulation issue from the CFM equation, so you can see why master trusts can argue that price is the determinant of value. But punters like me don’t really buy on the basis of DWP policy decisions.
We choose on the basis of what looks right for us. Organisations that can put their best foot forwards , make it easy for us to chose them. People’s Pension and others may argue that these include scammers and very probably they would be right.
But with well over £20,000,000.000 of savers money in the coffers, you’d think that People’s Pension could present savers with a better argument to combine money to them, than they had a low AMC.
In the meantime, the arguments that the employer knows best (broadly corresponding to (pot follows member) need to be justified by evidence. The OFT in 2014 pointed out that most employers had no more idea of what made for a good workplace pension than their staff. I would go a step further and point out that they know no more but care a lot less.
The issue for employers is that they are being asked to make decisions on behalf of their staff and have no factor to use other than price.
The issue for staff is that they insist on choosing more expensive decumulation options faute de mieux.
Can we really be blamed for feeling a little confused?
Any of us can make decisions, as I did , to choose one of our pots to consolidate our pots to and many, like me, will be berated for doing so without taking advice and without using the cheapest option. Many of us will do porridge at MaPS.
But aren’t the real villains in this , the workplace pensions that can’t find a way to make themselves the obvious candidate?
At AgeWage , we believe that everyone is entitled to know the value they have received for the money they have paid into their pension pots. This can best be achieved by looking at the actual return they have received on their money. The data for making this calculation is with the provider of the occupational or personal pension pot.
It should be the fiduciary and/or consumer duty of all providers to offer members a clear statement of the return they have received as a matter of course. The means to do this, and to benchmark that return against the return others have received, is in the public domain.
http://www.agewage.com
