No evidence savers selecting own workplace pension fund would improve retirement outcomes

Allowing savers to choose their own workplace pension fund would be a radical departure from the current pension savings system, says the PLSA's Director of Policy & Advocacy, Nigel Peaple.

Today’s Autumn Statement focussed heavily on pensions. There were some positives and some negatives.

We were pleased to see the Chancellor confirm he would increase the State Pension in line with the Triple Lock, that the British Business Bank would set up a Growth Fund suitable for pension fund investment, and that the pension surplus tax rate would be reduced. We also welcome Government support for many aspects of our recommendations to help those approaching retirement navigate the complex pension choices they face. While we do not think a public sector consolidator is necessary – we think private sector solutions like DB Master Trusts and DB Superfunds would be better – we are pleased the Government is proposing a consultation to look at the issue in more detail before taking action.

However, we are very concerned at the proposal that the UK should move to a more individualised form of pension provision, here called the “lifetime provider” model. Workplace pensions form the vast majority of private pension provision in the UK and our system of automatic enrolment is widely admired around the world. We are not aware of any evidence that moving to a “lifetime provider” model would deliver better outcomes for members, but it might undermine the essential link between employers and workplace pensions and introduce higher costs and worst outcomes for some savers.

We are also concerned that the Government is standing by its current rapid timeline for the transfer of assets from pension funds to the asset pools in the LGPS, although it is potentially helpful that this will go forward on a comply or explain basis.?

We were also disappointed the Government didn’t use today’s statement to announce how automatic enrolment contributions would be applied from the first pound of earnings and from age 18, in line with Government policy. Higher workplace pension contributions would help increase investment in UK growth and result in higher pensions for people in retirement.

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