Representatives from the defined contribution pension industry have advised politicians to not worry about people being disengaged from their pension savings after they were asked whether they were doing enough to help them.
In a hearing with the Work and Pensions committee today (January 23), senior members of DC pension providers said they did not expect the millions of people who had been auto-enrolled into schemes over the past six years to feel an attachment to their savings.
To date more than one million employers have enrolled about 10 million members into a workplace pensions.
But Heidi Allen, Conservative MP for South Cambridgeshire, asked whether pensions still felt like something that was being "done to" members, rather than them actively engaging with the process of saving and investing.
Zoe Alexander, director of strategy for Nest, the scheme set up for auto-enrolment, said in-house research had shown a "normalisation" effect was happening in DC membership.
But "that does not mean that people are engaging and starting to make active choices," she added.
She said rather than looking at a range of investment options, DC members were just becoming comfortable with the level of contributions they were making.
But she added that advancements in technology would be vital for consumer protection when these members began to make asset allocation choices.
Ms Alexander said the government's pensions dashboard, which is due to be phased in from this year, should be a "single, strong public entity" that could provide that protection.
Under current plans, announced in December, there will be multiple dashboards in operation, with the first one launching this year.
However, it is yet unclear to what extent state pension data will be included on this dashboard or whether legislation for compulsion to force providers to reveal the size of pots will be introduced at this point.
Nigel Mills, Conservative MP for Amber Valley, picked on The People’s Pension, in particular its website.
He highlighted there were no claims of high investment returns on its website, which might tempt more people to engage with their retirement savings.
But Gregg McClymont, director for policy and external affairs at The People’s Pension, defended the master trust’s website and explained that the features listed by Mr Mills were aimed at showing the employer, who would be responsible for picking and contracting with the master trust, how simple working with it could be.
He said: "Auto-enrolment only began in 2012 and the fundamental thing was to get those contributions processed efficiently.
"Getting that right was a critical first step."
He referred to the Australian superannuation market, which is 25 years ahead of that in the UK and in which, he said, members’ savings had accumulated substantially.
Mr McClymont said in the seventh year after auto-enrolment in the UK it was encouraging such a discussion on DC pensions was happening at all and doubted it would have done when he was shadow pensions minister in the early part of the decade.
He questioned whether it was either feasible or desirable for people to become their own chief investment officers.
"We need to be realistic about it," he said.
Adrian Boulding, director of policy at Now Pensions, pointed out the last cohort of employers had only been brought on to enrolment in 2018.
He said the average pot size on the Now pension was £500 per member.
"They have not yet got a huge sum of money on which they feel they want to start making investment decisions, but over time, we will see the levels of engagement with investment go up," he said.
