PensionBee, a leading online pension provider favours the introduction of a ‘Lifetime Provider’ solution and makes the following recommendations in the government’s consultation, to support its successful implementation.
Tackle a possible lack of awareness among employees and employers
It is already technically possible to ask an employer to pay into a personal pension of choice. However, employees rarely ask to do this and few employers agree.
To tackle a lack of awareness among employees and larger employers of both the ability to do this and the possible advantages of doing so, PensionBee believes a national awareness and education campaign would be required. This could run alongside the introduction of the lifetime provider model and support engagement and uptake to enable people to make a choice when starting a new job.
Support employers with changes to the administrative process
PensionBee believes the greatest challenge would be for employers to manage the new administrative processes required to facilitate potentially thousands of employees receiving contributions into different pensions.
A central clearing house could combat the additional time and cost burden for employers and ensure there is no room for error in, for instance, processing the tax relief for different types of schemes.
Support consumers in choosing a suitable pension
Consumers are currently placed in an auto-enrolled scheme by their employer and typically a default fund is offered. This could continue to be the preferred choice for the majority of savers. However, to ensure that defaults continue to be the most suitable option for the majority, PensionBee suggests a comparison service could be a step in the user journey to enable people to make more informed decisions between providers and plans.
Provide clarity for Defined Benefit pension holders
As this option would not be available for public or private sector employees with Defined Benefit schemes, there is potential for confusion for those in a Defined Benefit scheme or those with a mixture of Defined Benefit or Defined Contribution pensions. To avoid uncertainty about their options, PensionBee recommends that it’s clear this is only for Defined Contribution savers.
Set careful eligibility criteria
PensionBee recommends that the criteria for eligible lifetime pension providers be set with care, to avoid stifling competition and making the market for lifetime providers overly restrictive for savers.
Implement a more reliable switching service
Pension transfer times continue to vary considerably and the current pension transfer process is being stifled by some of the wording in the Department of Work and Pensions anti-scam legislation.
Creating an efficient and competitive market that enables savers to take advantage of their right to choose a lifetime provider model requires the support of a reliable transfer process at a more reasonable timescale.
PensionBee calls for the implementation of a 10-day pension switch guarantee, in line with the Current Account Switch Guarantee, to remove a barrier of frustration for those choosing to move to a new lifetime provider.
Becky O’Connor, Director of Public Affairs at PensionBee, commented: “There are clear consumer and industry advantages to having one pension pot that workers can choose for themselves if they wish, that new employers can pay into.
The benefit of not having multiple pensions littered through someone’s work history is that there is less chance of losing valuable sources of retirement income, which is a significant and growing problem. Having the whole of a retirement fund in one place is also beneficial for planning purposes and convenience.
There is demand for consolidation currently among the general population, which is evidence that many people are already taking matters into their own hands to bring different pensions together.
More competition among providers should ultimately benefit pension savers, by driving choice, value for money and better service.”
