Responsibility comes in operating a pension scheme for employees in supporting them through the options and decisions for better outcomes.
Changes to pension rules in April were billed as the biggest for over a century. For some pension scheme members, that has produced a bewildering landscape of options and decisions. I believe it is the responsibility of those who operate pension schemes to support scheme members – both current and former employees – through the process. Like it or not, help and guidance from employers and scheme trustees is crucial at this time.
Part of the difficulty in getting sufficient help and guidance is that no two pension schemes are alike. Additionally, as current generations of membership approaching retirement are likely to have a mixture of material defined benefit (DB) and defined contributions (DC) benefits, members face additional complexity and need for support.
On one level, you might be sympathetic to the view that government put these changes in and therefore they should have to deal with the consequences. Indeed government has set up Pensions Wise to provide guidance (not advice) to individuals with DC pots.
I agree government should bear some of the burden in ensuring minimum standards and regulation. But taxpayers should not have to bear the costs of helping a minority of the population with material pension benefits work out how to spend their wealth.
Moreover, central government is typically not that well placed to provide the more tailored approach likely to be necessary when taking into account differences in schemes and individual circumstances.
A standard legal viewpoint might be that there is less risk in going beyond statutory requirements and providing only minimal levels of support to members in this new age. On the contrary, I believe this is a disservice to members, many of whom are making life-altering, irreversible decisions about their futures.
Over time, future generations may become better equipped to take greater responsibility for their retirement savings and decisions. However, the current generation of members approaching retirement will have to deal with a much greater range of choice and options for the first time.
Therefore, in the short-term, employers should be responsible for providing financial education and support to help their workforces understand the retirement and savings options available to them and make better decisions. After all, employers understand their workforces and the intricacies of their own schemes best, not the individual, nor the government. They also have the financial firepower and economies of scale to provide support or at least outsource to a specialist third party as appropriate.
Perhaps future generations will be in a different place: more aware about saving and able to access a market with more mature products. This should make members less reliant on their schemes and employers for financial education. However, they will still need the assurance that they can call on employers for more bespoke support and guidance.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.
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