- Our Work
- The Reformer Blog
11 February 2015
The Coalition’s move towards freedom and choice in the pensions sector is welcome. But whether savers will be sufficiently equipped to navigate an increasingly complex market remains a concern.
A basic – yet significant – obstacle is the ability of savers to form a comprehensive picture of their financial position. The shift away from final salary pensions is the principal cause of this, as defined contribution schemes can only ever give savers an indication of what their retirement income will be. But as the UK labour market becomes more mobile, pension pots are also fragmenting. The Department for Work and Pensions forecasts the average UK worker will have 11 jobs in their career. With the introduction of auto-enrolment, savers will therefore have to keep track of numerous pension pots.
This was the context of a recent roundtable on “RetirementSaversService”, a report authored by former Financial Secretary to the Treasury Mark Hoban MP on behalf of Reform. The discussion focused on the report’s core recommendation – to establish an online platform which aggregates an individual’s savings data into a single view of their assets, and provides savers with the tools to design a retirement plan.
Attendees initially raised concerns about the regulatory challenges posed by such a model, but these were deemed to be manageable given the Financial Conduct Authority’s steps towards providing clarity on the distinction between advice and guidance. Participants also agreed that the technical capability for such a service exists. Through the Pension Tracing Service, savers can track down lost pension pots, while Lovemoney already offers a platform on which individuals can build a single view of their assets.
A far more significant challenge concerns data. Participants noted the RetirementSaverService could expose less competitive pension schemes. Meanwhile the increasing prevalence of cyber-crime prompted some to question whether it was sensible to aggregate financial data at all.
However these problems may be overstated. Data protection is a sensitive issue for good reason, but the RetirementSaverService would not act as a ‘big brother’ database for every citizen’s assets. Attendees also noted data is owned by the consumer and not the service provider. With individuals funnelling a significant proportion of their income into pension pots, it is important that they get a quality service in return.
Of course, the RetirementSaverService can only ever be part of the solution to the UK’s savings gap – we need a wholesale shift in the way in which we view retirement. However, by giving savers a comprehensive view of their assets and helping them build a retirement plan, the RetirementSaverService could fulfil a valuable function in bridging the gap between financial education and the realities of planning for life after work.