Call In the Consultants
The wait is almost over. After all of the excitement and preparation it is almost here. I am not talking about Euro 2012 – although I am excited as any football lover (my money is on the Germans in case you were wondering) - I am referring to auto-enrolment in the UK.
The UK’s preparedness for the change, or more pertinently lack of it, greatly worries me. A recent poll by Jelf Benefits shows just one in three employers is prepared for auto-enrolment.
I have just returned from PLANSPONSOR’s National Conference in Chicago. It was a conference that really brought home just how far behind the UK lags the US in DC pensions provision.
The worst part is the US beats itself up about its perceived lack of investment knowledge among its citizens. It has had DC 401k plans since the 1970s and has lived with auto-enrolment since 1998.
The conference contained speeches by the superstars of the US pensions industry. Mark Iwry, the top pensions man in US government and reader of PLANSPONSOR magazine no less, gave the opening address and detailed the journey the US has been on in its DC provision over the past three decades or so. There has been a lot of navel gazing and quite frankly this is an industry that is beating itself up over the country’s lack of investment knowledge and regret that it did not involve consultants to provide investment advice right from the get-go to improve pension pots.
In the UK, we face the introduction of auto-enrolment where investment knowledge is pretty much non-existent among the people expected to enrol into DC schemes, where people are charged if they want to consolidate their DC pension pots and where most people are likely to opt for the default fund option.
Rather than do anything about this, we throw our hands up into the air and say that we should just improve the default fund option rather than offer proper investment advice or enlist consultancies to help ensure people on DC schemes make informed investment options and do what is right for their future retirement.
One of the speakers at the Chicago conference gave the example of Kodak’s discovery of digital photography in the 1970s and how this idea was buried as it would harm the company’s huge camera film sales. It was a reminder that the whole point of any pension plan is that it should be run in the interests of the people paying money into pension pots not the industry that seeks to serve it.
To quote one John Lennon: “You may say I’m a dreamer, but I’m not the only one.” I hope one day you’ll join us and we’ll all have an adequate pension to retire on.