When chosen, I can only speculate that such schemes assumed that the scheme sponsor, the employer and the scheme members would be interested enough in the details of the scheme to never let it become uncompetitive and high-charging. So what we see as we look back is quite possibly a failure of engagement.
For the member, this is an important failing as ultimately the proceeds from the scheme are what will provide an income in retirement, and even more if part of it is made up of personal contributions.
For an employer, this is a more difficult point to address as employers are very keen to get on with what they do, particularly small employers, and for many the administration and cost of a pension scheme will be seen as an immediate cost in time and money that they do not wish to incur.
Larger employers with good human resources departments and even pension departments are perhaps used to promoting a scheme and engaging the membership (early low opt-out rates perhaps reflect this) where a smaller scheme may well tell a different story.
Anything that can be done to assist employers I am sure will be welcome, and guidance as to what makes a good scheme and causes the “good outcomes” for scheme members will be very useful. In the end, however, the more an employer identifies with the scheme and the members understand and value the scheme, then the real pressure for good governance and competitive charging will come from within.
Mike Morrison is head of platform marketing of AJ Bell
Key points
- The OFT has produced a study of the DC pension market and whether competition alone could produce value for money.
- As the auto-enrolment procedure continues, the situation could get worse.
- Anything that can be done to assist employers and guidance as to what makes a good scheme and causes the “good outcomes” for scheme members will be very useful.
