On
the
face
of
it,
giving
people
the
right
to
choose
their
own
pension
scheme
sounds
like
a
great
idea.
And
there
is
some
evidence
from
the
adoption
of
this
system
in
Australia
that
it
has
some
benefits.
But
it
has
pitfalls,
too.
The
Australian
system
has
many
admirable
features,
but
member
choice
has
effectively
led
to
a
retail
market
dominated
by
expensive
marketing
and
higher
charges.
Australia
also
has
no
shortage
of
organisations
trying
to
take
advantage
of
people’s
choice
through
high-risk
pension
options,
or
simply
scams.
It
has
created
something
of
a
regulatory
headache.
In
the
UK,
employees
already
have
a
vast
array
of
investment
choices
at
their
disposal,
but
very
few
make
any
active
choice.
That’s
why
we
spend
so
much
time
ensuring
default
funds
are
appropriate
and
well-governed.
If
they
fail
to
meet
these
standards,
schemes
are
moved
to
different
providers.
It’s
a
fiercely
competitive
market.
A
very
small
minority
of
employees,
meanwhile,
actively
want
to
retain
their
existing
private
pension
arrangements,
and
some
employers
already
contribute
to
these.
It’s
not
beyond
the
current
rules.
As
such,
it
seems
this
is,
at
best,
an
extension
of
the
options
available
to
probably
the
higher
paid,
pension-savvier
people
who
are
happy
managing
their
own
retirement
affairs.
For
such
a
seismic
change,
that
is
a
very
small
prize.
Employers
Could
Accidentally
Facilitate
Scams
It
will
add
enormous
complexity
for
employers.
Apart
from
the
obvious
task
of
paying
contributions
to
a
multitude
of
providers,
it
begs
the
question
of
how
they
govern
their
“pension
scheme”
when
it
is
nothing
more
than
a
collection
of
individuals
with
their
own
unique
arrangements.
There
is
also
an
argument
they
don’t
need
to
do
any
governance
in
a
retail
market.
Just
pay
the
contributions.
But
at
some
stage
one
of
their
employees
will
ask
for
their
contributions
to
be
paid
to
a
scheme
that
sounds
a
little
suspect.
If
the
employer
doesn’t
do
the
due
diligence,
then
it
isn’t
clear
who
would.
And
it
raises
the
thorny
question
of
who
is
on
the
hook
if
someone
finds
that
their
contributions
have
all
been
pilfered.
I’ve
yet
to
meet
an
employer
who
wants
to
take
on
that
responsibility.
Have
you?
The
move
away
from
any
sense
of
a
“workplace
pension”
to
a
market
typified
by
employee
choice
runs
the
risk
that
employers
are
completely
disenfranchised
from
the
role
of
providing
pensions.
That
seems
like
a
very
serious
risk,
given
they
have
powered
the
success
of
automatic
enrolment,
and
will
no
doubt
be
asked
to
do
more
in
future.
The
Real
Issue?
Contribution
Levels
If
we
had
no
pensions
system
to
speak
of,
and
we
were
starting
from
scratch,
then
“pot
for
life”
would
merit
serious
debate.
But
we’re
not.
We
have
to
start
from
where
we
are
now,
which
is
a
pensions
system
–
a
very
successful
one
–
built
around
employers
and
workplace
pensions.
To
throw
that
up
in
the
air
at
this
stage
and
hope
that
there
is
a
better
way
will
distract
us
from
the
real
issue
–
the
inadequacy
of
contribution
rates.
If
we
take
anything
from
the
Australian
system,
it’s
that
minimum
employer
contributions
are
approaching
12%
of
salary,
as
opposed
to
3%
of
a
band
of
salary
in
the
UK.
There
is
a
serious
danger
that
we
spend
the
next
decade
redesigning
the
UK
pensions
system
around
a
hypothesis
which
may
or
may
not
improve
people’s
retirement
outcomes,
instead
of
focusing
on
the
real
issues.
That
would
be
a
decade
of
distraction.
Jamie
Jenkins
is
director
of
policy
and
communications
at
Royal
London
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