People’s Partnership

The upcoming government has been urged to prioritise savers when forming pensions policy, with People’s Partnership outlining a four-point plan designed to ensure fairer retirement saving.

This is how Pension Age reports news that People’s Partnership are alive to the pension policy agenda. People’s Partnership is the funder of People’s Pension , the £25bn DC workplace savings scheme.  I do not want to labour the point but £25bn is a lot of money to be managing without a “pension” policy.  As far as the four-point plan is concerned, it does not mention a pension at all. The  People’s Partnership have no plans to offer pensions to any of its 6.7m savers.

It believes that whoever wins the General Election on July 4 should consider its proposals, which it believes would put savers at the heart of pensions policy.

This is an odd. PP claims to have 6.7m out of the 11m savers who’ve been auto-enrolled. But why should these savers be prioritised? What about the self-employed who don’t get enrolled? What about those who don’t get paid but work as carers? What about pensioners? Why should savers be at the heart of it all? WE AREN’T Told.

The not-for-profit provider is calling for political leaders to commit to:

• A target retirement income. Too many people are on not on track for an adequate pension in retirement. Government should set out target pension incomes, to be achieved through a combination of the state pension and workplace pensions saving. Without clarity over what the combination of state pension and workplace pension saving should achieve, it’s impossible to say what the level of either should be. Clarity is critical to helping UK savers plan for their future.

This is a morass of value judgements. What are “adequate pensions” and why should Government target levels of income? What’s unclear about the state pension and what’s wrong with pension saving providing pensions? The People’s Pension is a pretty clear statement of intent. I’m struggling to work out how telling people what they should be getting by way of a lifetime pension will do to help. What would help savers is a clear idea of what their pot will provide as an income.

• Competition should work in the interests of the saver. People’s Partnership supports measures to help judge whether or not pensions offer value for money. Regulatory policy should encourage healthy competition on the things that drive good outcomes for consumers. Too often competition is opaque and unhealthy, focused on brand and marketing. There should be transparent and standardised value for money metrics that enable anyone to make objective judgements about pensions and these should cover the whole market. These should focus on the outcomes that savers are likely to receive from pension saving. They should be front and centre on pensions dashboards.

This doesn’t make much sense either. How can people make objective judgements about pensions when they don’t have any idea what their savings will buy them by way of retirement income. What are the outcomes that savers are likely to receive from pension saving – if not a pension? We should note in passing that in the absence of a credible performance metric, the only differentiator for VFM is charges. People’s Partnership is an insurance company, would it be prepared to put its money where its mouth is and provide some certainty about what its outcomes should be.

• Pension market reform. Building scale pension schemes should be a priority. Large, well governed schemes will offer economies of scale. They should offer better value to savers and be able to invest in a wider range of asset classes, helping deliver politicians’ ambition for pension schemes to invest more in UK illiquid assets. Larger schemes, held to a new quality standard should be enabled to sweep up the small pots that have proliferated as a result of automatic enrolment. These schemes should be the core of a more consumer-oriented market.

This does at least make sense in terms of pure self interest on the part of the People’s Partnership. If the People’s Pension is to be allowed to define “quality”, it will  fit  the bill on all counts. The problem with having 6.7m pots with only £25bn of assets is that the average pot is only £3,500 (likely to provide an annuity of around £150pm). While the scheme has scale, most pots don’t. That’s the Scheme’s problem and not the Government’s.  There is no obvious reason for the Government to intervene on savers’ behalf to improve the scale of their savings pots. Perhaps People’s Partnership consider that the quid per quo for a large scheme investing the Mansion House way is that the Government helps out on small pots. This looks fanciful.

The Government does not need to provide further accreditation to the large schemes by way of a new “quality standard” master trusts  are already accredited under the master trust assurance framework. People’s Partnership look like they want a moat around them but this sits ill with a competitive market.

• Economic role of pension funds. Politicians of all parties are right to focus on the role of pension funds as investors in the UK economy. This focus should not come at the expense of savers, who need the best possible return from their invested pension savings. Any policy to increase UK pension funds’ domestic investment should place the interests of savers at its heart.

Is this a veiled threat against a future Government that unless its demands are met, it will put member interests first. Is it not likely that the interests of savers and the scheme should be aligned around investing in productive assets.

In commenting on the press release, People’s Partnership’s CEO, Patrick Heath concludes

Although workplace pension saving has come a long way in the past 12 years, the system still doesn’t work in the very best interest of savers.

We believe that, if implemented by decision makers, our four-point plan would go a long way to improving workplace pension saving for millions of people.”

It is very hard to work out what this plan would do to improve workplace pension saving. It’s hard to work out why this got written. We really do need something better from our second biggest DC pension scheme.