Leader: Too much freedom isn’t always a good thing

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

The Government likes change, apparently. That is probably because they are not the ones that have to deliver it.

This week Money Marketing reveals the next pensions evolution being eyed up by the Government. So far we have had pension freedoms themselves, the spin- off changes to taxation of death benefits, and the planned creation of the secondary annuity market.

Lately, the Chancellor has focused its attention at the other end of the savings spectrum with the introduction of the Lifetime Isa. Not content with that daunting package of reforms, policymakers have now set their sights on shaking up auto-enrolment.

The Government is understood to be floating an idea with the pensions industry that would allow employees to choose their own auto-enrolment scheme, thus completing the “freedom and choice” savings cycle George Osborne is so keen to engender.

By extending pension freedoms to the workplace, the argument is this would go some way to alleviating the small pots problem. An employee would be able to keep paying into the same pension regardless of job moves, and would have the freedom to choose which scheme is best for them. The ultimate hope would be it brings in an added layer of competition into the auto enrolment market.

Yet although there is some rationale to these arguments, the question that is more difficult to answer is, “why now”? Is the current market environment really the right time for this particular kite-flying exercise, when pension freedoms have already opened up a Pandora’s box of challenges as it is? The reforms have undoubtedly boosted engagement among savers, but the long-standing issues of insistent clients, unauthorised firms and the ever-present danger of scams all are yet to be addressed.

It strikes me there is a parallel here with the work being carried out by the new guardians for workplace pensions – the independent governance committees.

These are made up of expert members of the pensions industry who take the lofty position of holding providers to account on value for money and punitive exit penalties. These bodies have begun to move the market, and, despite efforts to get at the numbers, one has to assume they are paid handsomely for the privilege.

So is it right we would hand over these same responsibilities of deciding what a good scheme looks like to those that have to be compelled to save in the first place?

Too much freedom and choice is not always a good thing.

Natalie Holt is editor of Money Marketing. Follow her on Twitter here