A feature of this year’s PLSA conference is the increasing attention being paid to the decumulation (spending) of pension pots built up through auto-enrolment and elsewhere.
Sessions on how to spend the pot have been popular
Full house for a session on ‘should members have a default retirement pathway #plsaannual24 #wow this should be a plenary! @agewage #pensionsuperhaven pic.twitter.com/cSJMWlnuz1
— Henry Tapper (@henryhtapper) October 16, 2024
It’s a multi-faceted problem for savers, many of whom have a “portfolio of pots” from various employments and private initiatives to save. Finding the pots is a dashboard matter for the industry but the dashboard isn’t of much help to people wanting to get their money today.
NOW pensions presented the saver’s dilemma in a rather bizarre way with its commercial director telling us what savers “really really wanted”.
A bizarre but memorable presentation from @nowpensions #plsaannual24 pic.twitter.com/PglKr5hotx
— Henry Tapper (@henryhtapper) October 17, 2024
David Bird & colleagues were clear we did not want what the pension industry wanted to give them but it was less clear what NOW’s millions of savers would get from NOW to get their money back.
Meantime, in another room, Legal & General were rolling out their new app to help people understand their choices. I have this app but I can’t use it
The L&G app to help me draw down my pension isn’t available because I have started drawing down my pension. It may also be unavailable because it is in the wrong kind of pension. Naughty me for not being in the L&G master trust.
The audience in my vicinity at the L&G presentation may have seen steam coming out of my ears and heard my muffled groans at being told I could use functionality to spend my pot, denied to me because I’d started spending my pot.
I had a cracking conversation with a senior L&G spokesperson and can see how urgent they see the roll-out of the functionality, but there’s a bit of a crisis for savers right now, a lot of us are worried about tax-free cash,
Other providers are well advanced in their thinking on how we can access out pot. Aviva are telling me of their flex then fix plans. There are conversations going on about guard rails and low-volatile investment funds and a general agreement that whatever solution is put in place, needs to be able to operate without advice.
And yet we are still struggling with the central problem that there is no legislation in place that allows product providers – whether the proposition is an occupational or personal pension scheme, to offer a default retirement option.
And so the nastiest hardest problem in finance continues to sit with savers and in making their choice, there is precious little support – unless they are able to afford advice.
Wendy Davies of Sainsburys told her audience that even though her staff were offered independent free financial advice at retirement, staff didn’t take the offer up.
Interestingly, I have not heard the words “Pension Wise” mentioned once during this conference, MaPS and MoneyHelper are hardly mentioned either.
People do not seem to really really want advice, I suspect they want to be told what to do (with the option to opt-out). People really really want to have a default course of action.
While we have notice of a Pensions Bill to be published shortly that does make mention of a default retirement option, we still do not understand how the regulatory landscape will change to allow providers to choose such an option.
We are not alone here, other countries with a culture of DC pensions are similarly exploring the retirement income covenant. But where I think Britain is different is in having an occupational pension scheme legacy that permeates our thinking around what a pension is.
Which is why I think we should not lose the pension from the workplace pension. It’s why I suspect that whatever product or service prevails in the fight for this default, will need to correspond to what the public really really want – which is a wage for life that provides consistent income for as long as needed – till death do us part!