According to campaign group FairPensions’ report Whose Duty the next few years will see millions of people automatically enrolled into workplace pension schemes.
The vast majority of these will be defined contribution (DC), meaning the saver bears the risk and their retirement income depends on the performance of their investment.
Moreover the report claims auto-enrolment is predicated on savers’ inertia: most will neither make active choices about their pension, nor be in a position to evaluate the choices made on their behalf by employers, advisors and providers.
As a result savers will be heavily reliant on those who manage their money, ensuring these entities are well-governed and act in savers’ long-term best interests will be critical to the success of auto-enrolment – both in terms of building trust in the system, and in terms of delivering decent retirement incomes.
Yet to date, the report claims, this imperative has received surprisingly little attention from policymakers and regulators.
Christine Berry policy officer at FairPensions said: “Asking savers to remain opted in to pension schemes they know little or nothing about demands an act of trust. Both industry and government must act to ensure that this trust is earned.”
Speaking last week pensions minister Steve Webb claimed auto-enrolment will “reverse the slump” in pension saving.
According to the minister just a quarter of private sector employees are active members of their employers’ pension scheme in Britain today (26%), down from a third in 2007 (31%) representing a 15% drop in employees’ pension saving overall.
Only 31% of private sector organisations currently offer any pension provision for their staff, down from 41% in 2007.
Webb said: “Automatic enrolment into workplace pensions will start the monumental shift we need to get millions more people in Britain saving for their retirement.
“It’s a major change for business too, especially for firms that don’t currently offer pension schemes for staff and it is good news.”