The battle lines have been drawn up between the DWP and the Treasury over the proposed pension charge cap. The debate has become a large political football with all parties kicking it hard to achieve their own ends. Is there an election coming or something?
Against this background of outrageous obfuscation, the remnants of the provider community – decimated over the past 25 years – find themselves in an impossible position. They own most of the contracts that thousands of employers across the UK have signed up to over the past decade, most of which are part of the auto-enrolment tsunami about to hit the industry with 30,000 staging employees during the next six months.
It seems easy, doesn’t it? Wave a magic wand, impose a charge cap, get rid of active member discounts and commission and hey presto! Job done and all members will be better off.
Not so, I fear. There are a myriad of charging structures out there: some mono-charged, some with AMDs, some employers with multiple schemes with different levels of charges, some with advisers, some direct with providers, some on commission and some on fees.
If a charge cap is imposed at 0.75 per cent in 2015, providers will have to rewrite thousands of schemes. As it takes weeks to extract terms from a provider, you can imagine the result with a deluge of requests from advisers seeking new terms. Utter chaos. It will take much longer than the much mooted April 2015 date, for sure.
Of course, there is another scenario. If a new charge cap results in providers stopping commission payments, the good news is that they will not have a problem with advisers wanting quotes because all but a handful will go bust. The bad news is that 30,000 employers will be phoning them directly.
And spare a thought for the poor employer and member, both striving to understand the ridiculous complexities of an over-regulated and over-engineered auto-enrolment process.
Over the past 10 years, pension scheme charges have been driven lower and lower and the quality of schemes higher and higher not by heavy-handed politicians trying to prove a point before an election but by diligent, hard-working providers, advisers and employee benefit consultancies.
Improvements can be made to UK pensions and if there are unfair charges, they should be stripped out. But we need a proper, and full, consultation, not a knee-jerk, six-month sprint to slake the thirst of the political mandarins.
If we really want to help employers own their workplace pensions, improve member outcomes at retirement and engage employees of every generation, there needs to be some quality time for considered reflection.
This must be inclusive – across the political spectrum, across the social divide, across the pensions industry and across a diverse range of employers.
It is time to take the politics out of pensions. If we do not do so right now, we can say goodbye to innovation from the provider community and to thousands of advisers and employee benefit consultants.
Instead we will be left with increased employer confusion, lethargic member disengagement and worse pension outcomes for employees in 30 years’ time.
Michael Whitfield is chief executive at Thomsons Online Benefits