Sting in the Tale - Downright dangerous
I guess many of you are as horrified as I am about the prospect of a National Pension Savings Scheme being introduced with automatic enrolment as its engine.
I don't know whether we'll ever get to the position where pensions will be suitable investments for all of the people at work in this country of ours, but I rather doubt it. It's a shame, as it doesn't seem much to ask, but there we are.
I'm not happy having to say it, but while pensions are not only not suitable for all, but downright dangerous investments for many, we really do have to be careful when encouraging people to save these days; particularly if we don't, or can't, know their individual circumstances and financial histories. There have been some good examples of how bad an investment a pension can turn out to be for some people in the blogging exchanges I have had recently with James Purnell, the minister for pension reform at the Department for Work and Pensions. That online skirmish was dubbed 'the battle of the blogs' by one of our national papers. The hypothetical lady that the minister and I were discussing during the latest exchanges of fire was in the unfortunate position of having saved over GBP25,000 in a pension, only to find she didn't get one penny's worth of value out of it. The minister and I don't see eye- to-eye on that as you may be aware, but at the very least I think people should go into such dangerous investments with their eyes open and I hope we don't disagree on that.
But that does raise the question of just how we're going to get people to decide whether or not pension savings will work for them or against them, if everyone is going to be auto-enrolled into saving with the advent of this new national scheme the ministers are putting together in this latest white paper.
Just how is it envisaged that some people will be warned about the dangers of saving in a pension, while at the same time sold the undoubted benefits pension savings will bring to others? How will people know whether pension saving will be suitable for them as individuals? That's a real dilemma, and one that those of us with years of experience in the tricky business of distributing pensions in such a ridiculous environment as our political masters have created for us, know only too well.
Unfortunately we're used to these difficulties. I guess we've also given up on anyone in a position of power ever fixing it so that pension saving is a no-brainer for everyone.
But what's about to happen in this latest round of legislation is a bit different. Following this the government ministers themselves will be looking to see how they can do what we've been unable to do in this difficult environment; they are going to try to distribute pensions to the millions of people who are not saving for a pension. What I'm interested to see is how they will tackle this central and important issue of where pensions are highly suitable for some people, while at the same time highly unsuitable for others.
First published in Pensions Week, 11 December 2006