Imagine a parallel world in which you want to buy a flat. You walk into an estate agent’s office. The estate agent is talking to another customer who is interested in a house and praising the long-term benefits of house ownership.  

 

When it’s your turn, you ask if a flat would be a good idea, but they say they can’t discuss that with you, they can only give you factual information about what a flat is for. Why? In this parallel world, it falls under different regulations to houses since if you buy it, the leaseholder would benefit and they would be advertising the leaseholder. 

 

This is more or less the situation that pension scheme members find themselves in if you substitute ‘house’ for ‘trust-based scheme’ and ‘flat’ for ‘contract-based scheme’. Members in the latter are left to navigate the pensions world with little to no help from employers or the scheme – even though their need to save for retirement is identical – through the sheer absurdity of there being different regulations for schemes that ultimately do the same thing.  

 

Yet there is little to no appetite for change; in fact, UK pension professionals themselves tend to accept the division as an immutable fact, almost a law of nature itself, often reacting with surprise when the negative effects of this are pointed out to them. Even those that see the problem resign at the might of the Treasury, which is seen as immovable in its desire to keep as much ground as possible under the FCA’s, and therefore its own, jurisdiction. 

 

The FCA is considered to act prudently by stressing the limits around GPPs. After all, scams are plaguing the pensions world like never before. However, the issue could be turned on its head, as one might ask if these scams were also happening if schemes were regulated by a single entity focused entirely on the risks to pension savers; or indeed, if pensions were entirely removed from the grip of the Treasury, considering how pension freedoms were introduced. Comments welcome... 

 

What should happen, is probably what happens in every risk assessment: regulators should weigh up the risks to the saver, call them ‘patient’ if you like, from different courses of action. In that sense, is the risk to savers from ending up in a poor quality or scam GPP greater than the risk of savers not contributing enough to their pension? I’m interested in opinions – please post below. 

 

 

Another systemic issue that has been going around in my head for some time is that of public and private sector pensions. I expect a future where contented teachers, firefighters and health workers go on a well-deserved world tour, but where the majority of pensioners will have to do any work they can find to make ends meet. If you think I’m exaggerating, ask your friends and family in the public sector what their scheme calculator says, and then ask those in the private sector. 

 

It's not a talked-about issue at the moment of course, because most people are oblivious about the financial inequality bomb that will explode in their faces in a few decades. But this will inevitably become a policy hot potato. What is more, it might never get eaten, as turkeys, as we know, are unlikely to vote for Christmas. 

 

 

Another issue, which is manifesting much more quickly than the public/private divide and is therefore in the early stages of being addressed, is the small pots headache.  

 

The idea that people should build up pension pots all over the place and keep track of them or have the drive and time to try and consolidate these themselves – and I know pensions lawyers who have tried and admitted they couldn’t do it – was always ludicrous.  

 

I’m writing this from a non-UK perspective; although the system where I am from is far from perfect – I will readily admit and expand on if anyone is interested – there does seem logic in the fact that employees there need to transfer their pension pots to a new employer, and if left behind, the pots get consolidated into a centrally administered fund. It always felt strange that pot follows member was dismissed (lobbyists at work?) particularly as, with auto-enrolment building on inertia, it is counter-intuitive to suddenly expect members to take the initiative. Do shout if you disagree!