The PPI, encouraged to do so by the PPF, have brought to the pension industry’s attention the failings of pension freedoms in helping people get pensions.

You can download a copy here.

As always with the PPI, data is researched solidly and conclusions reached about what is happening with simple statements

That this work is sponsored by the Pensions Regulator is encouraging as we need TPR to take an interest in the outcome of all this saving and ensure that research like this is done

The second part of the report gets to grips with ways forward to improve the terrible mess uncovered in the first.

But rather than consider the solutions being considered by Nest and Pension SuperHaven of providing a basic Defined Benefit pension with upside from investment or the more market driven Collective Defined Contribution (CDC) approach to paying pensions, the report looks at various individual solutions based around “float and fix” , targeted support and other variants on drawdown.

It hangs the analysis on value for money. But only explores retail options that have dominated member choice for the past ten years.

Yet we are told that this is initial work done by the PPI, more will follow. It is as if the PPI and TPR are waking up to a problem that no-one has known about.

Clearly we are not! This blog has been complaining about the mess that those in their fifties, sixties and seventies find themselves in, working out what to do with their money. The PPI report points out that the “default” position for savers finding they can get their money is to cash their pot , pay the tax and keep the money in bank or ISA (typically cash ISA if recent reports from HMT are to go on). A secondary default is from people who have no need of the money but keep their money in their pot. This may be advantageous if you are leaving an inheritance tax bill but it is certainly what the Government granted tax-relief on savings and investment growth.

The answer that comes from the pension providers is greater investment in support for those who have freedom but no idea what to do

It is true that people taking pensions don’t take advice. The state pension is paid from a certain age at a certain rate and while you can defer or make up lost years, the vast majority of people take what they are offered. The same goes for defined benefit pensions (though poor administration can make this harder than it should be).

The idea that you need to take decisions to deal with “pension freedom” has not caught on. I very much doubt that most savers consider it “value for money” paying for advice as to how to pay to spend money. Which is why taking the money into an easy place to spend it (the bank) is so popular.

We really need to focus on how we can pay people a pension without advice , without targeted support but with help on the key questions that people have on pensions

1. How much to pay in?
2. Whether to take cash at retirement?
3. Whether to provide a pension to a dependent?

These assume that people get a pension for their saving which is what they have been promised in all their literature at work. We offer people “workplace pensions” but leave them with the freedom of not being offered a pension.

Sadly, meritorious as PPI’s work is, it is stuck in the industry’s rut of advice and support.

There is a definite gap which we think targeted support, if it’s designed correctly, could fill.

Because people want reassurance on that decision and what they should do at that time. They’re not necessarily looking for full advice, with someone to manage their investment. They’re just wanting to say, am I doing the right thing by buying an annuity? Or am I doing the right thing by choosing drawdown? What’s safe to do? (MT Representative).

I am sorry but this report massively over-estimates the capacity of individuals reaching the point where they want their money back. To suppose that they can find their way to making these kind of choices , let alone get drawdown or annuity right once they have chosen one, is over ambitious. That is nothing like what they understand “getting a pension” is about.

The answer for the PPI and TPR is to step outside and smell the air. People want to have a simple pension with the toughest choices along the way as outlined above.

So long as PPI and TPR are stuck in this rut, the delivery of income in retirement will remain a chimera. The default cannot be to do nothing or to transfer everything to the bank.

We have to provide what both the Pension Policy Institute and the Pension Regulator have in their names – “pensions“.