/ 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?


I don’t even think I have a pension I have had many either part time or very low paid jobs as I spent a long time after leaving college working for an agency as well as opting out of SERPs before I reached my thirties- which in hindsight was a bad decision as I already knew I had a bad contributions record because of earnings being below the tax and NI threshold – of course being unemployed for long periods and getting no benefit because of it won’t have helped either apparently a few employers enrolled me in their company pensions too however I was told I lost that because of leaving on or before the end of my trial periods- now I have found that I am one of the women who need to work longer before retiring – if we can get work that is as many employers don’t want to train someone in their ways who is not going to be there five or six years down the line

gordon says:
2 November 2017

Pension? I spent 15 years in the RAF, 1957 to 1972, age 15 to 30 and receive not a penny.
I repeat not a single penny in pension for it.
I was thirty four before I joined a scheme.
I have four pensions outside the state pension.
One pays £1500 pa.
One £84 pa.
One £105 pa and one £53 pa.
I worked till a few months short of my 68th birthday to try and mitigate it.
The author of this blog assumes everyone earns as he does.
They do not sunshine.
Its a pity you never lived and worked in the real world like most of the rest of us do or did?
Sorry, have or had to.

The problem for people saving for a pension is that there is no third person to ensure that the money be saved and invested is secure. I was before retirement a Trade Union member, that union were party to the investment and savings including how any surpluses were spent. It is essential that a third party is involved wherever pensions are being collected, a good example of this need was Robert Maxwell and the number of his employees he stole from.

A pension is not a gift from the state or an employer; it is the result of a contract made between a citizen/employee and the state/employer. A government cannot rightly suddenly decide to lower or do away with what has thus been agreed. An employer who, like Maxwell or Green, absconds with pension funds, is a criminal who must be brought to trial. The state must not freeze a pension at a derisory level because the person who has earned it moves abroad. And a newspaper which aims to attract young readers by stirring up misunderstanding about older people and their pensions must be forced to print an apology, and to pay compensation into the state pension funds. It really is time that pensions are honoured and treated properly.

wclark says:
2 November 2017

Im sorry but too many people do not think or want to think about retirement, even when told to do so in younger years, therefore a head in the sand attitude is what they have and they end up with nothing.
I saved into a pension for years and had to scrimp to do so.
many people have only their own selves to blame.

I am still in a 2 & 1/2 year dispute over my occupational pension payments and the dispute continues with the insurance company I worked for for nearly all my working life. The dispute has been in the hands of the Ombudsman for 9 months. The Ombudsman has delivered his initial conclusions but these are clearly following the company arguments and have not taken account of the pension scheme rules which clearly state that the calculation should not have been made as it was. There were years of underpayment. The problem is that pensions are made to be far too complicated and open to interpretation. You do not want to rely for your whole working life on an assumption that you will receive x when it transpires that you receive a lower amount. You need to plan for your retirement and know that your plans will materialise as you expected. The pension provider is usually in an unfair dominant position and able to bamboozle the pension recipient. There needs to be better protection in law.

When you consider the government regards the state pension as a benefit and the UK state pension is the lowest in the EU by some distance, The backers of the Tory’s would also be the parties donor’s. Ros Altman used to be the BBC’s pensions guru but once she joined the Tory party and was made Baroness Altman her view was then that we, the public, should take a more active part in preparing for our retirement as we couldn’t expect the taxpayer to foot the bill. When you think the UK is the fifth richest country and we have the lowest state pensions in Europe somethings doesn’t add up does it.

S Rowlings says:
2 November 2017

There are many challenges in the pensions industry not least the very large difference between projections of expected annual income provided by pensions providers. My wife has a pot that is roughly one third the size of a pot I manage in a SIPP, yet the projections of annual income from those pots is roughly the same. This is patently incorrect and highly misleading yet both are using ‘similar’ assumptions, differences based on gender and life expectancy accepted, but not the answer to the unrealistic expectation being set for the smaller pot!
All firms should apply the same simple ‘standard’ assumptions, enabling realistic understanding of the income each individual might reasonably expect and enable them to plan contributions ‘or not’ accordingly.

I feel for Gordon; I served 15 years in the RN from 1961 to 1976 and did get a pension for this service. A pension for serving 12 years was brought in by the MoD in April 1975 so Gordon was unlucky whereas I was very fortunate. Becoming eligible for this pension focused my mind on pensions and from early in my career I took the trouble to understand pensions. Which magazine was a great help (I’ve been a member since 1968) and read the various articles on pensions over the years. During my working life (and I know I worked in the ‘real’ world with no big salary), I always paid a little extra into either AVC’s or Stakeholder schemes alongside my employers final salary scheme. While I haven’t always got it right with these investments by and large it has worked out quite well for me.
However I worry for my children as it doesn’t look as if they will be as fortunate as me. Employers final salary schemes have mostly been phased out, house prices are astronomical and they have student debt to pay off (which at the moment is increasing more than they are paying off). I have started them both off with a SIPP and encourage them to increase the amount they pay in annually which I hope will enhance their retirement. But like most youngsters there is somewhat of a ‘glazed’ look in their eyes when I talk to them about it.
My advice to anyone is to really understand the world of personal finance; understand the different types of pension and what you can do to improve your retirement prospects. Understand investing; the risks, how much to invest and where to invest. It does involve quite a bit of time and effort but it needn’t cost any money (apart from perhaps a subscription to Which); there is a lot of free information available. Once you have acquired that knowledge it becomes relatively easy and it can be very rewarding.

So many people must have been caught in this trap – something for ‘Which’ to tackle?
I started off in the Civil Service, and part of my salary package was the so-called ‘non-contributory’ pension scheme … in effect deferred salary. Well, it would have been, if I’d ever received a pension. But, like so many married women at the time, after four years’ service, moved to follow my husband’s career. And because of the rules applying at the time, discovered on retirement that I was entitled to NOTHING.
No-one explained the implications of my decision at the time, so I was blissfully unaware of this hole in my pension provision until too late to do anything about it.
Seriously, ‘Which’, this anomaly faced by both ex-Service & Civil Service personnel should be remedied.

The Pension system is broken. A pension is an absolute right that guarantees all citizens a home and a decent standard of living through an income from retirement to death and not something to be pludered by bankers, politicians and “advisers”.
This is the 21st century not the 19th

This comment was removed at the request of the user

I wholly agree with WHICH comments and campaign about pensions provisions. Private companies have been shown to be untrustworthy, unreliable and expensive. The average person will have to scrimp for the whole of their working life with little prospect of having a comfortable or adequate pension.

Planet butterfly says:
2 November 2017

Limit annual pension contributions but scrap lifetime allowance

Back in the days of idealism, the goal of compassionate governments was that every employee would eventually achieve a final salary pension with a basic state pension for everyone. Now already retired people, after a lifetime of payments, are finding that government is changing the rules to defraud them. The directors of any company which tried to do this would be jailed, full stop. Apart from the effect on individuals, no-one has calculated the massive effect on the economy when they eventually leave pensioners with little or no spending power – at present a large percentage of the retail sector. Rather than beg our MPs to raise the standard of the pension system (as other countries have done), there is one simple measure which would bring about proper and fast reform. Demand that MPs’ pensions are made equal to the present average annual citizen’s pension rather than the gold-plated bloated pensions that they receive at present which go against everything they preach to us. Let democracy work, start a government petition!

I retired in 2011, in 2006 I was making enquiries as to how much pension I would receive upon retirement I could not find out anything from private pensions I was in and also the government.
I kept getting fobbed off by people saying it’s too soon. So how are you supposed to plan for retirement with pension companies and the government treating people like that . I was made to
think that I was digging into secrets some of them could not even give me rough figures and the only time they wanted to talk to me was after 11 months before retirement by which time it was too late.

My thoughts are that it is a nightmare with the door left wide open for insurance company’s to sell you a pension that makes them wealthy and leaving you with a paltry sum that is hardly worth having. I believe they have bought and paid for enough mp’s to make it hard to do anything about it, but if Which really get on the case they may be able to shame them in to giving a better deal.

The Labour Government back in the 1940’s had the right idea about setting up the National Insurance Fund to cover a vast range of Social Security benefits.

The big mistake they made was to include the provision of State Pension at retirement within the fund package.

They should have created a separate Contributory Superannuation Fund run and managed along the lines of the best private superannuation schemes that then existed. In that way all without a private Contributory Superannuation Scheme membership could be entered into the public scheme and employers and employees would pay realistic sums into the scheme. At retirement age the employee would have available a viable realistic pension reflecting their working life status. Those on low earnings would have their contribution topped up by the state as part of the benefits package.

It would have been far better than the so called Stake Holders Schemes which now exist where the level of contributions of both employee and employer it appears are at such a low level that it is improbable with the costs and charges on the individual savings pot that they will achieve a level of pension that will enable them to continue their working life style into retirement.

I agree that firm action needs to be taken to protect pension savings. The extortionate charges made by companies must be stopped.
In the 1980s as a divorced mother of three children in a then non-pensionable job I started saving for a private pension but stopped the payments after a few years.
I now receive less than £70 a month from all the capital I paid into the scheme – because charges had eaten so substantially into the lump sum – unbeknown to me.

Howard says:
2 November 2017

With the introduction of the new basic pension, a person reaching retirement age gets £150 plus per week for 30 years contributions. A person on the old system gets £140 plus per week for 44 years contributions. where ‘s the equality in this?.

Would like to see blue chip companies actually educating their staff with seminars and promotions much much earlier than they currently do. Currently it is all left far to late nearer retirement times much better to have the key info much earlier in the career path.

Derek Maule says:
3 November 2017

There should also be more publicity to the fact that 4% of British Pensioners have their State Pension “frozen” if they decide to retire to certain overseas countries. Most of those countries are members of the Commonwealth (Australia, Canada, South Africa etc..) . The British Government will not annually uprate the State Pension from the day the pensioner leaves the UK to live in one of those countries. This should be taken into account when planning for retirement.

I speak as someone who has retired and I am in a fortunate position financially. I did not have the opportunity to join a company pension scheme until I was 50, when I paid 15% (including AVC’s). Prior to this there was no company scheme but I took out a private pension scheme and paid a substantial proportion of my income into this. Every time I had a salary increase I used part to fund increased pension payments. ie I forfeited current income to provide for my future. To make these financial commitments we had to do without fancy cars, holidays, etc. I hasten to add that I was not rich but had to make conscious spending decisions to achieve my position.