Andy Pettit: We'd like to see a wide-ranging and considered review
Labour’s pledged pension review must avoid ‘hurried piecemeal change’ and go further to be ‘more wide-ranging and considered’, Morningstar says.
In its manifesto, the Labour Party pledged to undertake a review of the pensions landscape to consider the "further steps" needed to improve member outcomes and increase the level of investments in UK.
It said its planned review for the pensions landscape, which it first announced in January, would also consider the further steps which are needed to "improve security" in retirement.
Morningstar director of policy research Andy Pettit said he believed the review could and should go further.
He said: "Should Labour win, the manifesto-pledged review holds promise. We'd call for it to be wide-ranging and considered; inclusive of views from industry and consumer groups; and avoid hurried piecemeal changes."
In addition to the macro issues of tax, contribution limits, lifetime savings, investment in UK plc, and infrastructure, Pettit said he would like to see the review include other factors such as:
- How to get fiduciary advice to workers and retirees cost-effectively. He said DC plans put investment risk squarely on individuals, so getting unconflicted advice or guidance is vital to improved outcomes.
- How to opitimise workplace pension investment choices. Pettit said that, while choice is good, too much is counter-productive.
- How the default fund market is working. Is the risk-level right? Is the de-risking approach and timeline optimal?
- What additional steps can regulators and the wider industry take to make retirement saving more understandable and engaging to workers.
- Early access to savings. Are there measures that incentivise more people to save by allowing some level of carefully controlled early access and reducing the fear of all contributions being locked away until they reach 55?
- Pot follows member. Pettit said this model's success in increasing Australia's engagement with retirement savings and avoiding the accrual of multiple small pension pots justifies a closer look at the practicalities and trade-offs of introducing a similar approach to the very established UK environment.
Pettit concluded: "Whoever prevails, we'd like to see existing commitments delivered in the areas of the pension's dashboard and auto-enrolment. The former will play a vital part in getting more people engaged with their retirement savings. The latter will get more people saving for retirement, from an earlier point in their careers and with higher contributions."
This article was published as part of Professional Pensions' PP Pensions Commission – which is looking to bring together industry opinion and ideas on the future of pensions ahead of the general election on 4 July.
Send your thoughts and ideas to the PP Pensions Commission via email to [email protected].
