Vested Interest Behind Failure to Solve Pension Pot Consolidation Problem
15 June 2012 (PLANSPONSOREurope.com) - Vested interest has prevented the UK pensions industry from providing a solution to the problem of enabling Defined Contribution Scheme members to consolidate their pension pots, pension analyst Michael Johnson has told PLANSPONSOR Europe.
Johnson is author of a report published today by the Centre for Policy Studies which puts forward 104 recommendations for reform of the pensions industry including an industry-wide DC pension pot consolidation service and an annuities clearing house, in which all annuity providers participate.
The report calls for a “BACs for pensions” clearing house which should facilitate the payment of contributions and transfer values, with a bridge across to NEST and if these facilities are not operative within three years, say, then Government should step in and establish them.
Johnson told PLANSPONSOR Europe that vested interest was the reason behind the UK pension industry dragging its feet in finding a solution to the pension pot consolidation problem.
“Within the industry there is a perception that there will be winners and losers. By consolidating pots some providers will do well at the expense of others and therefore an industry-wide solution has not been forthcoming. I’m suggesting a way to smash through this which would have a 24-hour capability.”
The National Association of Pension Funds conceded that there was still work to do but says it has taken important steps on improving pension systems.
NAPF Policy Director Darren Philp said: “There is a lack of confidence in pensions and this needs to be tackled urgently if we are to address the pensions savings crisis that the UK is experiencing.
“But the pensions industry has recently been doing a lot of work to get people engaged with pensions and to improve trust and confidence.
“In particular, the NAPF is leading work on making charges in Defined Contribution pensions more transparent by producing an industry Code of good practice. We have also worked with other industry leaders to publish a Code of Practice on the incentives that some companies use to persuade staff to quit final salary pensions.
“These are important steps, but it is clear that we need to continue improving the system.”