Encouraging the general populace to think more carefully about their retirement savings is a worthy goal. But there is a fine line between giving too little attention to pensions and doing the opposite.
Auto-enrolment has given workers a helping hand in their bids to safeguard their financial futures. It is rightly seen as merely a first step; saving for retirement – and saving enough – requires a much deeper engagement with pensions than is currently the case.
Hence the planned arrival of the pensions dashboard, as well as initiatives such as that reported on the front page of last week’s Financial Adviser: Lloyds Bank’s attempts to further integrate Scottish Widows pensions with customers’ bank accounts is very much in keeping with current trends.
A pension, however, is not a bank account. The consequences of adding pensions details to apps that customers check on a daily basis must be carefully considered. Yes, greater awareness of a paltry pension might encourage top-ups, or more considerate personal financial planning. But it might also foster the retail investor predilection for chopping and changing funds in a bid to boost returns. Needless to say, that tendency could end up doing more harm than good.
For now, there is no denying that the problem is skewed in the other direction. The number of people who do not, or cannot, give enough attention to their retirement savings far outstrips those who are prone to tinkering. So encouraging engagement remains the right strategy.
Nonetheless, the idea of pensions as inviolate is already being challenged at a wider level. Housing minister James Brokenshire’s proposal that first-time buyers be allowed to dip into their retirement savings to fund deposits – a measure supported by some pensions providers – would increase the likelihood that a long-term savings mechanism turns into a short-term means to an end.
dan.jones@ft.com
