I
am
increasingly
sympathetic
to
the
government’s
strategic
agenda
on
pensions,
which
can
be
summed
up
as:
fewer,
bigger,
better-run
schemes
investing
more
in
UK
economic
growth.
This
is
the
right
strategy
for
a
whole
host
of
reasons,
including
the
fact
it
is
in
everyone’s
interests
to
stimulate
more
economic
growth,
and
the
potential
for
pension
schemes
to
play
a
pivotal
role
in
that
ambition.
There’s
also
the
fact
the
UK
pension
system
is
fragmented
and
could
be
more
efficient
in
how
it
helps
people
save
for
retirement.
Why
Would
Anyone
Oppose
This?
On
the
specific
policy
of
a
lifetime
pension
provider,
or
Pot
For
Life,
there
are
compelling
reasons
why
it
makes
sense
to
evolve
auto-enrolment
and
build
on
its
success.
Auto-enrolment
is
built
on
defaults
and
inertia,
but
this
has
significant
drawbacks:
the
current
system
is
creating
millions
of
dormant
pension
pots;
every
time
someone
changes
jobs
they
are
forced
to
take
out
a
new
pension.
Given
the
widespread
recognition
we
need
to
encourage
people
to
engage
more
with
their
retirement
saving,
I
can’t
think
of
a
more
counter-productive
approach. It
is
peculiarly
unsympathetic.
So
individuals
end
up
with
multiple
pension
pots,
which
leads
to
disengagement,
poor
decision-making,
and
confusion.
Meanwhile
the
pensions
industry
wastes
vast
sums
of
customer
money
administering
small
pots
from
which
they
can’t
recoup
their
costs.
No
one
wins
from
this.
In
theory
you
can
partially
solve
this
problem
by
transferring
an
old
pension
to
a
new
employer’s
scheme
every
time
you
change
jobs.
But
this
is
still
massively
inefficient
and
doesn’t
help
with
the
engagement
challenge.
The
only
way
you
can
fix
all
these
problems
caused
by
auto-enrolment
is
to
move
to
a
system
where
individuals
carry
their
pension
from
one
job
to
the
next,
getting
each
successive
employer
to
pay
into
it
for
them.
This
is
such
an
obvious
development
it
is
surprising
anyone
would
oppose
it.
Concerns
Assuaged
That
said,
there
are
four
legitimate
concerns
about
the
lifetime
provider
solution.
Firstly,
that
it
will
be
disruptive
for
employers,
who
will
be
forced
to
deal
with
multiple
pension
providers
instead
of
just
one.
The
solution
to
this
is
to
introduce
a
clearing
house
to
act
as
a
middle-man.
This
single
counter-party
for
employers
would
mean
they
could
make
one
payment
to
the
clearing
house
every
month,
with
the
clearing
house
then
sending
on
employees’
contributions
to
chosen
pension
providers.
Secondly,
that
it
would
undermine
the
cross-subsidies
in
the
pension
system;
that
pension
providers
would
cherry-pick
the
lucrative,
high-paid
employees
and
offer
them
good
value
pensions,
leaving
the
lower-paid
to
languish
in
higher-charging
schemes.
This
isn’t
borne
out
by
the
reality
of
the
existing
pension
system,
though,
where
charges
are
already
well
below
the
0.75%
charge
cap
and
mass-market
providers
like
Nest
still
manage
to
give
all
their
customers
a
competitive
deal
on
charges.
Thirdly,
there
are
concerns
lifetime
providers
would
offer
poorer
pensions
than
the
current
auto-enrolment
providers.
However,
it
is
already
clear
from
the
Department
For
Work
&
Pensions
that
lifetime
providers
will
be
subject
to
the
same
regulatory
controls
that
exist
today
for
workplace
schemes.
A
Logical
Next
Step
Finally,
some
are
concerned
this
move
to
a
relationship
focused
on
the
member
and
the
pension
provider
would
undermine
the
good
work
employers
do
in
communicating
and
engaging
on
pensions
in
the
workplace.
This
is
a
failure
of
imagination.
Most
employers
don’t
do
this
today.
For
the
minority
of
employers
who
do
it
and
want
to
continue
to
give
their
employees
the
benefit
of
workplace
financial
engagement,
there
is
nothing
to
stop
them
contracting
with
employee
benefit
providers
or
financial
coaches
who
can
provide
a
similar
service.
The
lifetime
provider
development
offers
the
best
of
both
worlds:
effective
defaults
where
they
are
needed
and
individual
choice
to
promote
persona
agency
and
engagement.
It
is
the
logical
next
step
in
the
UK’s
pension
system.
Tom
McPhail
is
director
of
public
affairs
at
The
Lang
Cat
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