At this year’s National Association of Pension Funds’ conference, two themes predominated. One was relief, and even self-satisfaction, at the success of auto-enrolment. The other was widespread anxiety ahead of the April deadline for the new defined contribution flexibilities.
One theory doing the rounds at the conference was that the opt-out figures are hiding a dirty secret: by not including those who left after the opt-out window – we are not seeing a true picture.
David Robbins from Towers Watson was among those who doubted whether there was much truth to justify these anxieties. We can only judge on the basis of the facts as we have them.
There was a welcome move towards debating adequacy, with the pensions minister again putting his faith in auto-escalation of contributions, interestingly referring to “default” auto-escalation.
Illustration by Ben Jennings
Such proponents trust that a gradual increase in heat will stop the frog jumping out of the pot. The question is whether this would or can be made mandatory across employers and schemes. Simply trusting some employers to put in place progressive structures will not alter the status quo.
Another big concern at the conference was, unsurprisingly, the timeframe to implement the DC flexibilities announced in the Budget. The AA’s Mike Sullivan was among those concerned about what they can or cannot say to members in the letters they send six months from retirement.
The People’s Pension’s Darren Philp puts it thus: “You can’t flick a switch and turn on new communications. It takes time to develop the systems, introduce new processes and train staff.”
The minister, when this question was put to him following his keynote speech, made it clear that employers cannot be expected to obey a law that doesn’t exist yet.
Still, the concerns are hard to argue with. The timetable for this fundamental reform has more to do with the electoral timeframe than the needs of pension scheme savers.
The market has not been given time to innovate past some basic drawdown structures and income producing investments, and employers have not been given enough clarity to communicate. Much unlike auto-enrolment, this reform is being rushed out the door.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.