Steve Webb’s presentation to Pension PlayPen was both fun and fierce. You can see it play out in this video. I hope those who were not at the event will take the chance.
There are four distinct camps emerging
The first is the Steve Webb camp, which I suspect will support a broad consensus among those who use words like “institutional” to describe the pensions they deal with.
The second, which I will deem the Tom McPhail camp, considers DC pensions “personal” and pots anything but institutional. They might be called “retail”, though that seems odd when the aspirations of workplace pensions are to manage upwards of £50bn of assets per trust.
The third, which includes Steve Groves, is putting its trust in technology to sort the problems of small pots
Instead of solving for what the industries can be bothered to do we should take the strain and make things simple for our customers. We need to have ambitions beyond how we conveniently shoehorn them into existing structures and processes.
— Steve Groves (@Sjg3G) April 23, 2024
The final group, which includes Bryn Davies and Andy Young, would like to return to a funded version of SERPS, possibly on a CDC basis. Here, auto-enrolment would become sidecar savings. A variation of this view comes from Stefan Lundberg who reminds us that the Swedish system works on one administrative platform and has a single range of funds from which people can choose.
Such is the range of thinking on this, you should be surprised that the hour passed harmoniously and gave us all a lot of fun.
Moving beyond “pot follows member”
Webb reminded the session that “pot follows member” has been legislated (and pot for life hasn’t). The 2014 Act envisaged a system of “nodes” which made the pots fly. The “magnet” is new and it’s all about the pension dashboard. Webb envisages a system of delegated authorities granted trustees when a member joins a workplace pension , enabling the trustee to “look up” the member’s latest workplace pension and request the pot if (a) it is small enough and (b) it hasn’t already been transferred voluntarily.
The prospect of delegated authorities put a furrow on the normally imperturbable brows of Richard Smith and Alan Chaplin. I suspect that anything that disturbs the plotted progress of the dashboard will be met with agonised cries reaching from Westminster to Bedford. Which suggests to me that we are still some years away till we see anything of the magnetised pot.
Don’t give magnets to bad people
One of the aspects of the session that grabbed both me and Steve, was the question of whether bad schemes could attract good pots.
Of course there are no bad master trusts because all master trusts that are authorised are deserving of the full confidence of the general public. However while all master trusts were created equal , some have become more equal than others. Mentioning no names (though I’d love to) , if we ever get to see the VFM promised sanctions, they could be applied to demagnetise the wrong kind of workplace pension and prevent it attracting pots.
Bad people and bad schemes shouldn’t have magnets and here are a few simple bars that a good scheme will need to have to climb.
- Value – schemes should have to exceed an agreed benchmark over 5 and 10 years
- Money – schemes should be able to show that the money it is taking from savers is being used to improve value and not to give all involved at the provider a good time
- Member experience- general appreciation of the scheme by way of saver feedback.
Schemes that are unloved, under-performing and demonstrating they care more about spending money on themselves than their membership are BAD. The people who run them should be banned from profiting from the magnetisation of any kind of pot.
