SPP: Shelve pot for life
Pardon the Interruption
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The Society of Pension Professionals says the requirement for a lifetime provider model as proposed by the government is made “largely redundant” by other initiatives that are already in motion, such as dashboards and value for money rules.
In a new paper published on Tuesday, the society also stressed that there are several potential downsides to a lifetime provider model. It cites the removal of employer direction and weakening of employee engagement, as well as structural concerns. In addition, it warns the model would create providers that are ‘too big to fail’ and could need taxpayer bailouts in future, similar to banks.
The SPP says the model proposed would be complex and costly, arguing that alternatives such as the government’s pension dashboards project could more effectively solve the small pension pots problem.
The SPP says the model proposed would be complex and costly, arguing that alternatives such as the government’s pension dashboards project could more effectively solve the small pension pots problem.
“The SPP’s latest discussion paper has clearly set out a number of sizeable challenges and downsides to a lifetime provider model. In our view, there are more effective alternatives, most notably a fully operational pensions dashboard system, that would be a far better use of resources,” said SPP president Steve Hitchiner.
"As well as making any requirement for an LPM largely redundant, concentrating on other pensions policies that are already in motion increases the chances of those policies succeeding; a genuine win-win solution,” Hitchiner added.
The SPP paper notes that it remains unclear how committed the government is to bringing in lifetime pensions. Other political parties have not said where they stand on pot for life.
The ‘pot for life’ model was announced by chancellor Jeremy Hunt in his Autumn Statement last November. It would give employees a legal right to require a new employer to pay into an existing pension account, mirroring the Australian system.
The ‘pot for life’ model was announced by chancellor Jeremy Hunt in his Autumn Statement last November. It would give employees a legal right to require a new employer to pay into an existing pension account, mirroring the Australian system.
Pension professionals have been sceptical. While many see some benefit to giving people choice, they tend to point out several risks, such as a lack of switching and employers becoming disengaged. The Pensions and Lifetime Savings Association previously said it was not aware of any evidence that moving to a ‘pot for life’ model would lead to better member outcomes and warned the opposite might be true.
Do you think the lifetime provider model would lead to better or worse outcomes for members?
