Mark Futcher, Partner and Head of DC at independent consultancy Barnett Waddingham, comments: “Looking at the successes of the Australian pension scheme, it’s easy to see why Mr Hunt might be tempted to let employees choose their own pension fund. But the context in the UK is wildly different; we already have a mature employer-based pension system, in which the employer is partly responsible for ensuring members get good value. A sudden shift to a ‘pot for life’ risks people choosing a suboptimal pension plan, being swayed by marketing over value, and ultimately exacerbating the UK’s retirement crisis. What’s more, the rumoured shift to a nominated scheme wouldn’t necessarily solve the problem of savers having multiple pots, or solve the Government’s desire for big schemes investing in high-growth UK assets – this seems to be a lose, lose, lose policy.
“Pension saving is, by its nature, a long-term problem. The Government must not be allowed to play fast and loose with the rules simply because it has an eye to an election in a year. There is plenty of room for change in the UK’s pension system, but it will only succeed if adequate time, resource, and effort is put into building it. For a ‘pot for life’ to work, there must be a robust central clearing house, a working pension dashboard, and a faultless administration system which directs contributions and amplifies the employers’ critical role in ensuring value and good governance. Twenty-four hours’ notice to a system overhaul can only result in one thing; chaos.”
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