It has certainly been a busy start to the year when it comes to pension policy. Of course, the Spring Budget has dominated recent headlines with several changes to pension policy – most notably, the abolishment of the Lifetime Allowance.
Behind the scenes, however, even more work within the pension policy arena is underway. In January, the Department for Work and Pensions (DWP) launched a series of consultations and calls to evidence relating to various aspects of pension policy.
At My Pension Expert, we believe UK savers should be placed at the heart of any pension policies that are being drawn up – after all, the main ambition of these policies is to help savers better engage with their retirement savings and place themselves in a strong financial position at retirement.
It is only natural, then, that we felt compelled to share our insights and views on the policies and, by doing so, ensure the voices of pension planners are being heard.
So, what exactly are the policies up for discussion? And why should people care about our contributions?
Below is an overview of each consultation, our contribution, and, most importantly, what they mean for pension savers across the UK.
Addressing the challenge of deferred small pots
The first submission My Pension Expert made was for the DWP’s call for evidence on the issue of deferred small pots.
Each year in the UK over two million small deferred pension pots are created as people move from one job to another. An accumulation of small pots can result in losing track of pension savings, and it is this issue the call for evidence hopes to address.
The government requested views on two suggested models. The first one being the pot follows member (PFM) model. This would mean that a person’s workplace pension would follow them with every career change so that they would not lose track of their savings.
The second was default consolidation – whenever a person’s pot remained dormant (i.e. had not had contributions for a set amount of time), it would automatically be moved into a consolidation pot, allowing the pot to grow over time as more pots are added to it.
At My Pension Expert, we applaud the government’s efforts to help savers to keep track of their pension savings. This will mean people can better understand their financial situation, and gain greater control over their financial future. As such, we expressed some support for both models.
That said, we suggested that the PFM model might be the most beneficial for savers. This is due to its potential to provide greater scope to encourage saver engagement with their pension, and will ultimately make it easier for savers to access their pension information, as they ask their current employers rather than undertaking an additional effort to speak to their consolidator schemes.
However, regardless of which model the government chooses, My Pension Expert is adamant that while improved pension engagement is one thing, savers must also have access to the appropriate support and advice. This would help pension planners not only understand their pension information but help them understand their various options to make informed financial decisions and ultimately achieve a better outcome at retirement.
Value for Money Framework
In the second submission, My Pension Expert responded to the government’s consultation on the Value for Money (VFM) Framework.
The VFM Framework intends to build on, and eventually replace, the value for member’s assessments by requiring all workplace pension schemes to report on wider value metrics. This data would then be used to assess the value of their offering against the wider market.
As such, the policy aims to ensure savers are receiving optimum value for money and that the activities of trustees and providers are in the best interests of savers.
Our contribution to the consultation focused on costs and charges, quality of service, and assessing value for money.
My Pension Expert called for clear communication between the pension scheme and the clients. We feel this is the most effective method to democratise pension information, making sure savers understand exactly where their money is and the price they are paying.
Further, we agreed that clear assessment criteria and metrics need to be introduced by regulatory bodies so that the sector understands exactly what is expected of them, as well as the most appropriate methods of reporting. We believe that providers should be held accountable for the outcomes of their clients, and in doing so, we can better ensure all providers are offering clients the best value for money.
Savers’ voices must be heard
Given that the financial services industry has a reputation for prioritising its own needs, rather than customers, it is crucial that the needs of pension savers are central to policy development. My Pension Expert will always fight for consumers’ voices to be heard throughout the entire process.
Our contributions to these consultations demonstrate My Pension Expert’s commitment to improving outcomes for pension savers in the UK. By promoting a focus on transparency, and access to information and support, we believe savers will be empowered to better engage with, and understand their pension. And ultimately, they will be able to make more informed decisions and consequently strengthen their financial future.
At My Pension Expert, we will not stop until all Britons have access to the appropriate support mechanisms to achieve the best possible retirement outcome – and we look forward to positively contributing to the political agenda in the months and years to come.