It’s been a learning experience but something I’ve enjoyed. After 18 months you have a pretty fair grasp of the pensions architecture. I’ve found pensions very, very interesting so far.
A prerequisite for building a pension system that works for everyone is full disclosure and all costs and charges to be bundled into a single figure. But I wouldn’t want to suggest that in itself is all you need.
We have to be honest, the annuities market needs radical reform. The open market option is a move in the right direction but I’m unconvinced at this stage that it will produce the outcomes that we need.
Pensions will never function in that consumer/provider manner in the way it does when you do your shopping. There is an inherent complexity even when we simplify it. It’s utopian to think we’ll get to a situation where everyone saving for a pension is wholly engaged in that process on a week-to-week basis.
You go to the supermarket every week and you look at things and make choices correspondingly. In pensions, it’s a one-shot game.
You take out a pension and 40 years later it matures. I think we have to be aware that getting the alignment right between savers and providers and those in the investment chain is important because the consumer is not going to be able to respond to price signals.
Bluntly put, there is a part of pensions which involves getting old. And there will always be people that don’t want to think about getting old. We have to consider that.
I said a year ago the Nest restrictions should be lifted. You have a pretty competitive auto-enrolment market with one provider unable to operate effectively because of limits on transfers in and the cap.
There was a case for the restrictions when they were placed because it was unclear how the auto-enrolment market would develop. But if we believe in a competitive market, there seems to be no reason for not setting Nest free.
I’m critical of some of the shifts on staging dates and the lifting of the threshold because a lot of lower paid workers are taken out of auto-enrolment. Caveats aside, we have to support auto-enrolment and make sure it works.
Financial education is a good thing. I welcome that it is now to be taken into schools but it’s no panacea, not even for future generations.
There must be good defaults. The Danes, who have the best pension system in the world, say you need good defaults.