Michael Klimes examines whether flexibility can take auto-enrolment to the next level Making auto-enrolment more flexible is key to getting more advisers involved in workplace planning, experts are arguing, but fears remain over the impact of removing default funds. Auto-enrolment is based on the idea that people are apathetic about pensions so employers and government must step into help them.
If people are not going to decide where they invest savings, then the decisions others make for them gain greater weight. Discussions about auto-enrolment tend to focus on the importance of default funds in determining retirement outcomes, given the limited choice over where a member can put their contributions once enrolled in a workplace scheme.
Currently a member can either opt out of their workplace scheme and lose valuable employer contributions, or ask for their money to be put into a different scheme entirely, but this is at the discretion of the employer. Some are arguing such defaults stop people taking more active decisions like seeking advice.
Govt should consider ‘opt-down’ option for auto-enrolment Hargreaves Lansdown senior pensions analyst Nathan Long says auto-enrolment reform could spark better access to IFAs and improve buy-in. Long identifies three related problems with the current AE system: lack of member engagement; lackluster efforts by workplace pension providers to engage with members; and the conservative management of default funds.
He says: “A way to solve all the above is to allow members to choose where their contributions go and this would happen if members had to actively choose their provider. “People in the 40 to 50 age bracket could really benefit from this and it would force workplace providers to up their investment proposition as they would have to compete for pension contributions. Read more from moneymarketing.co.uk…
thumbnail courtesy of moneymarketing.co.uk