Tomorrow's Investor
Pensions for the people: addressing the savings and investment crisis in Britain
The Government will fail to protect millions of Britons from poverty in old age unless it makes vital changes to the way in which it plans to introduce personal accounts.
In this report, 'Pensions for the people: addressing the investment crisis in Britain', the RSA concludes that although the Government’s policy of auto-enrolment and personal accounts represents a big opportunity for UK savers, the scheme must be extended to cover pension payments above £3,600 if it’s going to have a major impact. By limiting pension payments to £3,600 many savers across the UK will be forced to open private pensions that often charge exorbitant costs (often up to 40 percent of the value of their pension).
Written by David Pitt-Watson, a leading pension fund manager and founder of Hermes Equity Ownership Service, this report argues that this simple step would not require employers to match higher levels of saving; merely that higher savings can be placed in, and invested through, the same pension pot.
The RSA proposes that the infrastructure of the personal accounts system should be made available to a wide range of approved providers that conform to the basic principles of responsibility and low cost.
This report also makes the case for the development of a new type of pension fund that would cut costs by two thirds, increase returns on pension savings by up to 50 percent, and work to ensure companies are run in the interest of long-term owners.
Download 'Pensions for the people: addressing the investment crisis in Britain' report (PDF, 328KB)
Previous reports and findings
Survey findings: Urgent need for accountable, trustworthy and transparent investments
Tomorrow’s investor launched the 'Pension Initiative' survey to establish an understanding of the critical behavioural change being witnessed in the financial industry. It identified current problems as well as high expectations for the future of fund management.
Paper: Producing decent returns for pensioners in turbulent times
A paper by Sir John Banham, 'Producing decent returns for pensioners in turbulent times', blames the poor performance of the UK fund management industry on Britons’ propensity for risk avoidance, ‘little Englander’ attitudes to investment fund allocation, and ineffective regulation for. The paper urges institutions to put themselves in the shoes of their ultimate client: people saving for retirement.
Tomorrow's Investor report and expert papers
The final report of the RSA’s Tomorrow’s Investor project combines the findings of its research with analysis of the pensions industry. The report concerns itself in particular with costs and charges levied on pension plan members. These are the most important element of a pension plan, because they are potentially avoidable. Yet most pension funds charge much more than they should because selling and set-up fees are so high. Fund management costs could also be reduced by more long-term strategies.
The report also looks at methods of improving transparency and accountability and at improving investor engagement. It suggests a new way of reporting costs and charges. And it argues that pension funds should take more advantage of the resources at their disposal by utilising new methods of social engagement. Google uses prediction markets, so why can’t Norwich Union?
Tomorrow’s Investor interim report
Twenty-five ordinary investors took part in the Tomorrow’s Investor deliberative forum in July 2008. They took part in discussions and listened to presentations from experts in the field.
The results show increasing levels of concern about indirect investments, pensions in particular. They also show how disengaged investors are from the management of their own money.
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