/ 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?

Tricia says:
4 November 2017

My husband and I are self-employed, and the private pension funds that we previously paid into were stolen by companies that kept changing hands and added extortionate fees, which whittled away our pension savings. I believe that there is not enough adequate protection for pension plans for the self-employed and we no longer trust paying into a pension fund. If the Government could guarantee and protect pension funds for the self-employed, then we would willingly pay into them.

Philip Hague says:
4 November 2017

The state pension is a disgrace. Don’t forget that we paid for it throughout our working life. How can anyone live on this pittance?
Some politicians even begrudge our annual increments of 2%. What is 2% of nothing!
This country should be ashamed.

As a US tax payer (with US and UK dual nationality and residence) I was required to report my total contributions to all of my several (quite small) pensions . Only then did I discover that, proportionately, my British OAP cost me the most for the least reward. My Ohio State retirement pension was the best value for money, by far. Since then, Sterling devaluation following Brexit has made the situation even worse.

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All is not rosy in the US of A according to this.
Unfunded pension liabilities at the state and local have swollen to roughly $4–$6 trillion in the United States. And that may be understating the severity of the problem.

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The NHS that I have worked for over 40 years have changed the scheme 3 times and I am paying more each year than what I accumulate! I had worked a lot of it part time to bring up a family.Also state pension is now 66 and I have already paid over 35 years of nat ins contributions!Due to a back injury in my 2nd year of training as a nurse which I had no redress from the NHS and arthritis I am now in a lot of pain and I will not make 66. So when I stop work next year my income will not cover my overheads!!

I work for the local council, i just found out that i have paid reduced N I, and i will only get £74 aweek instead of the £156 they promised, i don’t know how i will manage when i retire.

I think it’s a backword step to now have to worry about retirement and I don’t trust the present rotten government at all!

Andrew says:
4 November 2017

There is this misconception that in some way paying national insurance funds the state pension. This not the case as it funds many other state benefits as well – many used extensively by Pensioners. There is no huge stash of money called the “state pension” rather it is funded from all revenues collected. One issue is the cost of the gold plated Civil Service scheme and pensions for other government servants – MP’s etc, who often have other jobs with pensions. The government should look in it’s own back yard and get these schemes of better value to tax payers. The savings could then be used to fund higher state pensions for all.

The State Retirement Pension and the ” in work benefits” are funded from the NI Contributions on a pay as you go system and is accounted for separately from general taxation. The surplus – currently around £23 billion – is deposited with the DMO.

Lynda Harper says:
4 November 2017

Totally agree with auto-enrolment but it should be into a state fund -ie increased NI contributions from both employee and employer – which gives a guaranteed state pension that someone could decently live on. This would offset some of the state deficit but most importantly stop the problems of paying into private companies – paying substantial fees even for mis-management/having to keep track across your working life/uncertainty of the pension payment. I looked into paying AVCs and was given a 48 page booklet with over 50 funds to chose from and advised to “speak to my financial adviser”. This should not be necessary and it’s little wonder so many people are opting out of auto-enrolment.

There is a disinformation campaign to imply that the state pension is a benefit. It is a paid for right through weekly contributions from a working life. The government tells us what they are paying (“the cost”) but do not tell you what is being collected (billions) and this amount can often be transferred to other plans (Tony Blair spent £14 billion on the Iraq War.) yet had had announced – one year earlier – that the government could not afford a decent pension increase.
Read the analysis in “The Spirit Level” which researched – two PhDs – this area some 10 years ago. Its general claim was that state benefits were worse than others in Western Europe

G Prior says:
4 November 2017

Yes, we should improve the pensions system to make it accessible to all and flexible for the future.

We should also make much greater efforts to force pension providers to keep in touch with staff who have left employment mid-career. A recent personal contact with the pensions tracing service (HMRC) revealed that this area is an absolute minefield.

First of all, this service only covers workplace pensions, not private ones. And even then, many people’s pension providers have been taken over by other companies / disappeared, taking the funds with them. And not all workplace pensions, in the past, were actually registered with the appropriate authority.

So there are many people coming up to pension age who have paid into one or more pension schemes, but find it impossible to actually claim their pensions.

I would advise anyone to keep complete records of their employment over the full course of their career, to assist in making a claim. Payslips, the lot.

Never going to happen. Neoliberal dogma requires the return of cash in the form of dividends to [already mostly wealthy} stockholders, rather than payment into employee pension funds. That’s one of the big changes of the last 30 years. Corporations seek to increase short-term profits (the only type ‘the markets’ are interested in) by depressing employee wages. Therefore the vast majority don;t have anything to pay into any type of private scheme. Some pensioners currently get by only on the state pension – but that is only achievable when you own your own home, debt-free. That facility has also been taken away by neoliberalism and the obsession with cheap credit (ie usury). Many people are going to reach pensionable age still having to pay rent, or only having paid the interest on their enormous IO mortgage. Put succinctly – massive problems coming down the line.

while I can understand some of your points, please bear in mind that the largest shareholders in these corporations are often the pension funds, their dividends are what pension schemes rely on.

Diane says:
4 November 2017

I agree, we have paid on a weekly basis and so should reap what we have invested for our future. I am one of the ladies who were ‘trapped’ when the pension age was moved and no time to address this. They say everyone knew, we didn’t and that was a stealth tactic. On the news this week on the BBC they chose to air someone who said the pension was a ‘freebie’ an erroneous point of view, and this adds to the ever growing divide of the rich and poor and a perception which i think is a dangerous situation if not checked.

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All public employees from judges to porters and cleaners in the NHS should be given the same basic livable state pension. Those on higher incomes such as senior civil servants should take out their own separate private pensions if they want more retirement income. Many of these higher paid individuals could easily afford to fund their own pensions and many make no contributions at all.

As I was born in the 50s the government are robbing me of 6 years of my pension as I have worked solid since leaving school at 15 and was told back then I would be able to retire at 60 at get a pension I’ve paid into all my working life and now can’t have till I’m 66 is ùnfair when my husband as just retired at 65 it’s not fair and not equality. Why at which are you not campaigning about this pensions should not be based on dob li should be a choice on wether you want to work longer or not just because we are living longer ( so the government says ) dosent mean you will be fit enough to work till your 70 nearly it’s wrong not fair ànd not equality. Should be 65 max for both men and women after that the choice should be yours.

The present pension system is very unfair. The basic state pension should be increased to a reasonable level, as not everyone has a private pension.
In the workplace,we should all have the opportunity to contribute to a fairly run pension scheme. It should be worthwhile ,with everyone encouraged to join. Higher earners should not be allowed to milk the pension schemes, as at present.Tax relief should be the same percentage for everyone. There should be a maximum limit on contributions, low enough for workers to afford.
The present system rewards the rich and penalizes the poor.

I agree the current system is not fit. It used to be much better for most people – public sector pensions and private sector pensions. Until just when all the private schemes were struggling to increase contributions because of people living longer and regulations that required short term view of their financial viability, along came Gordon Brown at a stroke and shafted them with the withdrawal of tax incentives. It used to be a public private contract and he blew it and sent the message to all private schemes that they were on their own. The result is most schemes have closed and companies have changed their attitudes.
It needs the government to make auto enrolment compulsory (no back out option) and gradually increase the contributions particularly of employers.
And if small businesses are going to be exempt its tough on their employees. Give those businesses some incentive to provide as good as everyone else

lawrence says:
4 November 2017

The Call is to save more for your pension ,this may be possible for highly paid people
BUT the people who are on low incomes do have eat and provide a home for their families and having done this all my life, I can tell you that every day has been a struggle but I have succeeded to manage that ,now before people jump on the band waggon ,I have never wasted my income on drink, gambling ,or smoking ,but working in the food trade ,incomes are not large buying my house and feeding my family was my priority ,and I am glade that I did not waste my money paying in to private pensions to be ripped of by insurance company’s and the Philip greens of this world but at eighty I own my own house some thing to pass on to my kids if I am not ripped of by the government in death duty’s

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Well finanly at least some one has put the right cap on let’s watch and see

gerald mac mahon says:
5 November 2017

I agree with all the comments made and with Whichs attempts to get the government to make things easier for people to comprehend all the options.Luckily for me ,but not others,i have a great financial adviser who makes life easier by explaining all options to me.Lets hope the government listens and acts.

The government needs to respect the generation who has payed there taxes and worked hard to keep the British values .