MSE News: Workplace pensions face shake-up - with a crackdown on duff schemes

"Your workplace pension could be better value in future after the Office of Fair Trading announced a crackdown on providers which let down savers with poor-value schemes...."
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Workplace pensions face shake-up - with a crackdown on duff schemes

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  • Blackbeard_of_PerranporthBlackbeard_of_Perranporth Forumite
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    I take the advice proffered on the shop floor at Findus in October 1978 to apprentices.

    'The company has a subsidised shop, a social club, but as you lot are under 18 this will cost just 5 pence a week, but you are not allowed to use the bar. A staff canteen, which serves brilliant food, Fish Fingers! We also have a company pension scheme, which if I were any of you lot, I would not put a penny into it, because when you retire, there will be nothing left in the bucket'

    Any other advice since then has been met with the derision it deserves.
  • edited 19 September 2013 at 3:54PM
    jamesdjamesd Forumite
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    edited 19 September 2013 at 3:54PM
    The Office of Fair Trading summary pages is here and the full market study report is linked from a more detailed summary here. Some the potentially more significant items are:

    1. 9.31 A proposed ban on using schemes with adviser commission for new auto-enrolment of employees. It became unlawful to set up new schemes doing this at the start of 2013 but existing schemes can still be used until this change happens.
    2. 9.31 A proposed ban on higher charges for former employees and scheme members than paid by current members.
    3. For ABI members only, an audit of old schemes and exisiting schemes where charges exceed 1%. Vendors like Hargreaves Lansdown who are not members of the ABI would apparently not be included in this.
    4. 9.37 "Simplicity and switching: in the interests of promoting switching ,policy should look to promote simpler products, with transparent charges. It should also look to ease the process for employees and trustees of switching between different pension products." In my view it is particularly important that individual scheme members should find it easy to transfer their money out of schemes while still being a member, since they have the financial incentive to minimise charges and maximise investment flexibility appropriate for them, while employers, advisers and scheme providers do not have that incentive.

    I'm somewhat fortunate: when my employer was setting up a new scheme I asked for a transfer out capability like 4 and that means my detriment for 1 and 2 that also affect me is limited by my ability to transfer money out.
  • PincherPincher
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    They say that Catholic priests were celibate so that they will not have heirs, and so will not be tempted to build up a fortune for passing it onto their offspring.

    So we need to create a religious order that is dedicated to preserving share/fund holder value. Obviously they should have nice working and living conditions, but transgression will be punishable by flagellation and excruciating lingering deaths. To show dedication and commitment, they should be castrated before siring heirs. Hopefully this will discourage cowboys from becoming fund managers.
  • dunstonhdunstonh Forumite
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    'The company has a subsidised shop, a social club, but as you lot are under 18 this will cost just 5 pence a week, but you are not allowed to use the bar. A staff canteen, which serves brilliant food, Fish Fingers! We also have a company pension scheme, which if I were any of you lot, I would not put a penny into it, because when you retire, there will be nothing left in the bucket'

    That or similar can be reflected across the land in many companies. Shame that so many people are too short sighted and gullible to believe it.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • mystic_trevmystic_trev Forumite
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    I find it strange that such an important subject which is making the Headlines, is being virtually ignored on this Forum. It's almost as if people aren't interested in what's happening with their Pensions!
  • edited 20 September 2013 at 9:18AM
    jamesdjamesd Forumite
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    edited 20 September 2013 at 9:18AM
    Not interested is one of the challenges. Employers make most of the decisions, without much competitive pressure since employees tend to be locked in - the employer will only pay into the pension they pick - and that discourages employees from paying much attention or treating it as their own money, even though it is theirs.

    Personally, going beyond just ease of transfer, I'd want to see mandatory requirements to pay pension contributions into an account designated by the employee, just as the main part of pay gets put into whatever bank account the employee specifies. Then the employer can offer an option but it's easy for employees to get and keep one pension pot that they can stay interested in and involved with throughout their working life. Much easier to feel a sense of ownership and responsibility then.

    As the OFT puts it (portions edited out for space, my bold):

    "1.9 The buyer side of the DC workplace pensions market is one of the weakest that the OFT has analysed in recent years.
    1.10 Part of the reason for this is that most employees do not engage with or understand their pensions.
    1.11 Furthermore, while the person who takes the risks and rewards of a DC workplace pension is the scheme member, they are not responsible for choosing key elements of the product. Instead, the choice of a DC workplace pension rests largely with the employer
    1.12 However, the evidence we have gathered suggests that many employers may not have the capability or the
    incentive to drive competition on the key elements of value for money in the interests of scheme members

    It also appears that many employers do not always prioritise all the elements which we consider to be key to assessing
    value for money (see below) when they select a scheme. Whilst some employers appear likely to prioritise ensuring that the charges that their employees face are as low as they can be, there is little evidence that many employers prioritise the key elements of scheme quality, such as investment design and performance, or scheme governance. Instead, OFT research suggests that many employers that are automatically enrolling employees into pensions for the first time are likely to prioritise minimising the costs to themselves of setting up and administering the scheme.
    "

    Hardly surprising that employers picking a scheme will put their interests ahead of that of their employees and not pay great attention to value for money.
  • gadgetmindgadgetmind Forumite
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    We also have a company pension scheme, which if I were any of you lot, I would not put a penny into it, because when you retire, there will be nothing left in the bucket'

    Such rubbish advice from under-informed and politically motivated union types cases a lot of people a lot of issues.

    How often do we see people coming here asking if they should leave their generous DB schemes just because they have heard such advice? How many don't ask and just do it, which will cause them serious hardship later in life?
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • The first £71.80 of a workplace pension can become worthless. If you are made redundant you can draw workplace pension from the age of 55. As you cannot get state pension for another 10 years plus you will probarbly sign on as unemployed while looking for a job. The workplace pension will be means tested and anyone without a pension and having NI stamps up to date will get job seekers allowance but you won't. you will have actually saved for your own unemployment benefit. It takes a long time to acrue a meagre pension of £71 a week as well. Think about it???
  • grey_gym_sockgrey_gym_sock Forumite
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    there's something in that. a small pension can end up replacing means-tested benefits which you'd otherwise get.

    however ... when it's a pension, it's your money - you don't have to worry about the benefit rules being changed, or having to jump however high the DWP says. also, you might get another job, and then you have the pension + the money from the new job. also, you don't have to start drawing the pension at 55 (and delaying drawing it will mean it's worth more when you do draw it). also, you keep on drawing it when you do reach state pension age, on top of the state pension.
  • edited 26 September 2013 at 8:26AM
    seven-day-weekendseven-day-weekend Forumite
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    edited 26 September 2013 at 8:26AM
    there's something in that. a small pension can end up replacing means-tested benefits which you'd otherwise get.

    however ... when it's a pension, it's your money - you don't have to worry about the benefit rules being changed, or having to jump however high the DWP says. also, you might get another job, and then you have the pension + the money from the new job. also, you don't have to start drawing the pension at 55 (and delaying drawing it will mean it's worth more when you do draw it). also, you keep on drawing it when you do reach state pension age, on top of the state pension.

    I agree with this absolutely. I would much rather make my own provision, even if it's no more than means-tested Benefits, (which can be withdrawn at any time), than have to account to the Government for any savings I have, anything I spend, where I want to live or who I have living with me. I don't understand the mentality that says 'don't have a Pension because the State will make the money up anyway'. Short-sighted, in my view (as well as slightly immoral).
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
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