Strong and Direct

Great piece in Professional Pensions. Lee Hollingworth of Hymans Robertson is correct in saying ‘people need a strong, direct approach to tell them what ‘adequate’ is, what they need and how they’re doing against that target’.

The comment comes following analysis by Hymans Robertson via their Guided Outcomes platform which shows only 18% of over one hundred thousand defined contribution members are likely to build an adequate retirement income.

Apathy has done well for us. The new auto-enrolment approach relies on it for getting members into pension plans. But that’s just the start. If the employer stops with the minimum, then pensions at retirement will be inadequate, and as Hollingworth says, poor pension results will lead to ‘workforce management issues’.

We are going the right way with UK pensions. Auto-enrolment was needed. But that’s just the start.

I Hate Bland

An excellent article from Robin Ellison in Pensions World says that ‘rules trying to cap costs are almost certain to have adverse unintended consequences by squeezing out competition from start ups, adding further regulatory and compliance costs, and moving costs to less transparent elements of the system.’

Sad but true.

I’m all for reducing costs, but to start to rule on it simply leads to bland same-as investment choices and large anonymous pension schemes.

Or, as Robin suggests, the costs get hidden, becoming less transparent in an age when we are trying to promote clarity.

There has to be room for alternative approaches. And those alternatives come at a cost. There will be small employers who are happy to carry more cost in order to provide a pension plan that is tailored for their staff. Higher costs to the member may well be outweighed by more generous contributions from the employer than would be the case were he to simply ‘abandon’ his staff to one of the big providers. Big providers can be a recipe not just for low costs but average service. And less interest from the member.

There will also be employers that want to offer genuinely different investment choices for what may be a particularly savvy financial group of employees.

To rule against these things in pursuit of low costs is to limit the market, reduce the choice and promote a generation who remain apathetic about pensions. Regulated low costs will lead to a bland pensions market.

And I hate ‘bland’.

Failover or Fallover?

Another new word has just entered the pensions dictionary. Quoted in Pensions Age, Dixons Retail group pensions manager Gerry Phillips, talking of the new Profund Cloud service said “the automatic ‘failover’ capability within the service provides assurance to clients that service continuity will not be compromised”.

Failover? Does he mean the software security? Or is it a misprint and he’s talking about the new systems ability to ‘fallover’ at any moment?!

Google to the rescue on this one. Apparently it’s a technical term for a computer switching to a standby system if the first one fails.

So what happens when my failover fallsover? Good job I’ve got backup then….