/ Money

Update: it’s time to future-proof pensions

Pensions savings

What should be done to ensure pensions really do support a comfortable retirement?

I have given evidence to the Work and Pensions Select Committee as part of its inquiry on the pension freedoms. Drawing on Which? research and insight looking at the impact of the reforms, I’ll be making the case for greater safeguards for consumers who haven’t engaged with their pensions, improved services to help consumers make informed choices and the need for better value pension products.

Pension problems

For too long the complexity of pensions, high (and often opaque) fees and charges and low engagement levels across the sector have meant that people are often not financially prepared for a comfortable retirement.

We know that while the pension freedoms have given savers more control over how they access their pension, but more choice can also mean greater risk for individuals. The sheer scale of potential harm that consumers face if they make a bad retirement decision or fall victim to a pension scam underlines the urgency of the problem.

That’s why we are launching our new pensions campaign. We want the government and regulator to ensure we have a system that gives savers the right tools, products and information to help them make the right decisions for their retirement.

The pensions dashboard

The government has already committed to the delivery of the pensions dashboard, but it remains unclear exactly how we are going to get there by the 2019 deadline while making sure it works for savers.

A fully functioning dashboard needs to provide consumers with transparent, consistent information about all of their pension pots in one place. Savers should be able to see charges, projections of values, services offered and benefits associated with each pension pot to help them make informed decisions and comparisons.

If the average consumer is expected to have 11 pension pots in their lifetime, a dashboard is only useful if all 11 are visible via the dashboard. The government needs to mandate participation of all pension schemes and recommend that the Financial Conduct Authority consults on regulating pensions dashboard providers.

Better products

However, getting the right outcomes for savers is not just about the pensions dashboard. As well as help when planning for the future, savers need to have access to better products when it comes to making those key decisions at retirement.

Part of the FCA’s review of retirement outcomes is looking at the costs and charges associated with income drawdown products. That’s why we want the FCA to introduce measures to protect savers when they take money out of their pension this way.

In a sector that already suffers from low engagement and trust, it is especially important that we address these high fees now, particularly for those who have not made an active choice in the matter. That’s why we want the FCA to introduce better safeguards for disengaged consumers at the point of retirement.

Update: 21 November 2017

Ahead of the Autumn Budget (22 November), we have called on the Chancellor Philip Hammond to set out a clear timetable for the delivery of the new pension dashboard by 2019.

How do you feel about your pension? Do you have all the information you need to save for a comfortable retirement?

Comments

The whole problem with pensions is the ridiculous outmoded assertion that the tax relief is valuable, in theory yes, in practice, the rules inhibit the pensioner from keeping the concession at maturity. There are rules and rules exploited by the vultures who will advise you [Regarding your entitelment which is your right without paying the financial parasites] it used to be worse before the embarrassing annuities were curtailed, these used to take the growth of a good investment, benefit from the growth, and guarantee a monthly payment for life to the grateful but hapless punter. The solution is obvious stick your tax relief where the sun doesn’t shine ,and make ALL pensions tax free at maturity

Chris W says:
2 November 2017

I fully support Which? campaign on this subject. A single dashboard for one’s finances is an obvious place to start. But like much else to do with finance and investments, it’s a mess in Britain – consumers have been thrown to the private wolves, and the state has abdicated responsibility. Figuring out pensions is FAR too complex – and I’m no idiot. It ought to be much simpler to figure out what to contribute today to live on tomorrow. Obviously the state pension is not enough to live on for anybody, so that needs a total rethink (the government could start by looking at excellent models overseas – but that requires courage and vision, both in short supply in modern politics). The business and private pensions industry needs better regulation and bringing to task – it is absurd that the individual consumer has to do all the leg-work and has insufficient clarity or protection from the market or those abusing the market. Lastly, regardless of what salary people are on, they need to be encouraged – or forced by law – to contribute into a pension pot from employment day 1, the longer you save the better your chance of something to live on!

Penny SIMPSON says:
2 November 2017

I think the new regulations & changes over the past few years have all been drawn up by government nabobs who have had delishus gravy train pensions in the making & secure jobs for many years, & no doubt plenty of luscious investments too & paying in continuously & ending up with Huge Pension Pots. So they came up with these new ways of dealing with them (perhaps partly out of guilt) but mostly because they are completely out of touch with how it is for ordinary people who often have switched jobs many times over the years and had a varied history of job security, & if they were lucky, had some pension payments made on their behalf; It’s ONLY SINCE 2008/09 that the NEST scheme has been obligatory for employers(& not fully rolled out until 2013/14 tax year) so now we all ending up with ‘Pension Pot Options’ as if we are rich people who don’t know what to do with our presumed vast resources and supposed to consult Financial Experts about our miserable little watery gravy pots. There would be nothing wrong with a good solid state pension system if jobs and taxation were fairer and if there was also better fiscal policy in government in the first place – governments seem to rely on annual deficits as ‘normal’ economic policy – no wonder people who rely on credit-cards don’t worry, they see it at the top level. Perhaps these nabobs started to panic when they saw the projected deficit figures for next 20-30 years, and thought it might be a good policy if we all treated like rich people.

Any company pension should be ring fenced and have precedence over any claim on the companies assets.

Any company pension should be ring fenced and take precedence, if the company crashes, over all other claimants.

When the government introduced the idea that almost everyone should join a pension scheme, that seemed to me to be a good idea. But when they then allowed people to have access to their pension funds way before retirement, that seemed a bad idea. Some may invest wisely, but some may spend it unwisely and leave themselves short of pension income, and maybe reliant on state benefits – not a good idea.

Its time that pensions are given a much higher priority by the government. It is really necessary that it is a legal requirement that all wage earners including self employed have an adequate pension for their retirement. The government should be offering enhanced pensions to guarantee an income of at least half of an individuals career average. The funding should be ring fenced, protected and enshrined in law such that no future government can abandon. Today’s young people are not going to have the option of home ownership to bail them out when they reach pensionable age

I wish we were told more by our personal pension suppier. I received my government pension and it was very slightly higher then expected so I contacted HMRC who confirmed I was collecting the right pension. I then sorted out my private pension which was not a fantastic each month. Being a council tenent I was entitled to housing benefits which when sorted out between the rent and council tax meant that I was having to use my private pension plus a few pound from my state pension to cover the cost of rent and council tax after the benefits were paid. I don’t begrudge helping to pay my way gut where was the point of taking out a private pension if I was going to lose it all,I could have managed to spend that money while I was still working and have something to show for it or put it into savings for my grand children to help them as they grow up.

As a housewife for many years, with caring responsibilities and a husband who has never been in pensionable employment, the thought of his imminent retirement is frightening. We have saved all our lives, but we have no idea how long the money needs to last, what will happen to inflation etc. A future government could regard us as rich and levy wealth taxes, because they don’t take into account wealth compared to income. Someone with a guaranteed income that they can live off, even if they haven’t managed to save, is in many way much better off and can sleep easier. Our savings could have to last 40 years and once gone cannot be replaced. We have made contributions to ISAs and SIPPs, and have other cash and investments, but financial advisors though the years have given conflicting advice and the money hasn’t grown much. There is no way we can get a sensible guaranteed income. Annuity rates are so low that I cannot work out how they can possibly be fa. It seems that much of the cash pot must be eaten up by charges. I would really like to know what proportion of people even get back what they paid in, let alone what they paid in in real terms, allowing for inflation each year. What are people in our position meant to do?

Why don’t the government tax the money going into your pension, I would rather have paid the tax on my pension contributions when I was working and could afford to pay the tax, instead of being taxed on my private pension now I am retired, what the government don’t tell you is although they say they cannot tax your state pension they do add this sum to your private pension payments when they calculate your income at the end of the financial year and then present you with a tax bill. Surely the state pension should nor be taken into account, but this is the catch no one tells you about.
I was never explained this by my financial advisor, if I had been I would have found other ways to save for my old age, and now my pension provider will not allow me to cash in my pension pot, it is tied in for as long or short as I live and if I die what would be left in the pot does not go to my children, they keep the money I struggled so hard to put in. I am now 67 and have been a single person for over 20 years and I am self employed so am also taxed on any profit the business makes as some of it is classed as income even though I do not take a wage out of the business.
I was told I could defer my state pension to get a better pension later but if I had done this and died say at 61 as I am single all the money I had paid into state pension pot would go back to the government, everything is stacked in favour of government or private pension provider, I don’t think fairness comes into pensions, and would not advise anyone to pay into a private pension, put it where you have control over what you do with the money you have managed to save for your old age. What government never tells is the amount of people who never live long enough to claim their state pension, or the ones who don’t live very long after reaching pensionable age, and if single none of their children benefit from what they have contributed over the years.

As hard as it is, it’s vital working people save for their retirement from an early age, often when your earnings are lower than you’d wish, and are struggling. It means going without any extras, e.g. a cup of coffee in the local cafe, the take-away this week, or a pint of beer. Collect those ‘bits’ together and put them into a GOOD pension pot, preferably from your employers scheme, but certainly taking independent advice, e.g. through Which or Independent Advisor if it can be afforded, but not the Bank!
Taking your pension early might seem good, or using your house as collateral, but that needs careful consideration because of the sharks in the water waiting to grab your leg! Much must depend on your personal circumstances, e.g . whether you have family you wish to help our later in life, or not. It can be really hard to start saving for a pension early because of your commitments now and wanting to enjoy the current time, but life is a balance which is not always easily achieved.

Final salary schemes are part of a decent pay and conditions package offered by companies who valued their workforce, they are not to be given up lightly. Too many companies who are making good profits have jumped on the change to DC bandwagon , to the detriment of their workforce and to the gain of directors and shareholders. That said, if people wont fight for them , then they are left with lower standard DC schemes that have a lot of room for improvement. What about the companies that have done this then giving those savings back to the workforce in the form of better DC pensions, after all the main excuse for changing from DB to DC was to save on future cost risk.
Yes pensions should be compulsory and contributions be set at a minimum of 15% and rising in increments of 0.5% thereafter to give decent pensions at retirement. With costs shared between Employer and Employee.
With all these new savers, pension providing companies will be able to make savings on scale and put this towards improved benefits for those who save with them. For instance- Life Insurance , Sickness and Disability Insurance and yearly health checks.

As i work with victims of Pension Fraud who have had monies taken by deception , false documents , lies to sell ,, facing 55% taxes these victims are not financial advisers and trusted advise given , http://www.dailymail.co.uk/news/article-2268929/Revealed-The-200m-pension-pot-raiders-target-needy–make-million-nuisance-calls-MONTH.html the system needs a comlete overhaul ,

There are more area’s of concern, like many of my fellow employees, I lost a large chunk of my pension when the company I worked for became French owned and its UK pension fund fell into a European pension fund Black Hole. UK pension funds should be protected (Ring Fenced), and not be accessible to Organisations outside of the UK.

Susan Burton says:
2 November 2017

What about those females, like myself, that now have to work until we are 66 years old before we retire. We loose 6 years worth of state pension as well as working a further 6 years – how fair is that? It isn’t. I have worked since I was 16 years old without a break, no maternity leave, and I still have to work. Isn’t it about time that some sort of enhanced pension is made available for those in my age group as we were not given enough notice to make any alternative arrangements. I appreciate that personal pensions can usually be taken from age 55 onwards, but not if you don’t have enough money to live on. Had I been given more notice then I would have been able to make an informed decision about the best way to prepare for my retirement whilst waiting to received my State Pension.

Barbara says:
2 November 2017

ano one has mentioned the state pension. I am divorced with no share of a pension. I keep heaaring how generous my pension is and how much it will increase. £5?? Its an insult for a lifetime contributing.

jackie barton says:
2 November 2017

Oh, I would love a pension! Unfortunately I’m one of the unlucky group of women in their 60’s who have been told we no longer have a pension. Personally I have to wait an extra 6 years until I can claim mine! It may save a few quid for the government, but I expect local authorities to bear the brunt of extra claims as we struggle.

Jimbo says:
2 November 2017

Saving for a pension is a thirty to forty year investment. So much can change in that time that the difficulty is to know what will still be valid all that time ahead. It has always been like that in the UK, so it is a bit of a lottery. Many have been caught in recent decades with pension providers going bust. It does require government to govern in such areas like this, but in the laissez-faire culture of a free market economy it is unlikely to happen. Short term rules OK ……… but that is no good for pensions.

> “Short term rules OK…. but that is no good for pensions”.

So, that’s all right then? Nobody can get a decent pension or else it’s the luck of the short-term draw? Why do other people in other better-run European countries manage to get better pensions (exception maybe for the poor Greeks and a few Eastern Europeans). We need more and more frequent comparisons with the European Union, not less.

HoboBob says:
2 November 2017

Hewlett Packard is not given its Digital (aquired by HP some years ago) employee’s pay rises any where near to inflation, Therefore their pensions are eroding away. This may spread to all HP pensioners if this practice is NOT halted by govenment. Additionally, a more few global companies are beginning to do this.

Apparently I have a pension pot they are investing for me. I rang a number and they talked me through it.TOO MUCH TO RETAIN! Now I have to pay someone to look after my interests or trust them-I don`t by the way- that`s not an improvement on anything and gives me no more choice than I had before except now I can worry in case it runs out or `they` invest it badly for me and it crashes around my heels . What then-no one said. For me that`s no improvement-I can`t get my head round the big figures and the complex systems.