The key points made by the ACA relate to the “pot for life” initiative. While ACA remains open minded on the potential attractions of such a model, those concerns are:
The new infrastructure required across multiple areas (administration, technology, regulation, protections, and safeguards for members, etc) will be significant. We worry this is a distraction. Given the range of other important initiatives in flight (dashboards, new VFM framework, further development of CDC, small pot consolidation, etc) we believe it would make more sense to focus current attention on making good progress in these areas.
We agree that engagement levels increase when savings pots are larger but have concerns that people may select based on familiarity or using a purely price or short-term performance lens, without thinking more holistically about future outcomes.
A move away from employer sponsored arrangements will reduce employers’ engagement with retirement saving.
How will the regulators ensure that lack of competition and potentially heavy marketing to individuals does not result in poorer outcomes for members.
Tessa Page, ACA DC Committee Chair, commented: There is a risk that “pot for life” prompts employers to view workplace pensions as less important, whilst also bringing a new set of risks around mis-selling and scams. We recognise a need to test the status quo of the workplace pensions framework but given the sheer number of initiatives in flight it feels that policy priorities should lie elsewhere.”
ACA Chair, Steven Taylor, added: “Many savers find pensions complex and difficult to engage with. To move to an approach whereby individuals are making judgements about the merits of different pension products (or perhaps “default” to an existing scheme and fail to consider a new employer’s scheme, through lack of engagement) is a significant ask, and will demand new safeguards and controls to avoid worsening member outcomes at retirement. There are a few alternative ideas and products that could deliver the laudable aims of this initiative, with lower risk.”
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