Encouraging people to save more for their retirement is an example of the kind of ‘wicked problem’ that I argue requires a clumsy solution incorporating elements of hierarchical authority, social solidarity and individualism. Today comes news that the RSA has made its own contribution to such a solution.
There is no question that we have a problem, with a Government minister recently stating that eleven million people are not saving as much as they should. There is no mystery to the mix we need to make progress but there are many barriers to getting all the ingredients together.
The role of Government is to make the public case for saving and to provide the right framework of incentives, regulation and guarantees. The role of the individual lies on both the provider side in offering the right products at the right prices and on the purchaser's side with people pursuing the ambition of independence and security in retirement. Finally, the solidaristic element lies in society providing for those for whom saving is difficult or not rational, in public acceptance of a gradually rising pension entitlement age as part of intergenerational fairness, and in a strong social norm for the rest of us to put enough by so that we aren’t a burden on others.
The most important reform on the near horizon is auto-enrollment, which starts to be implemented in just two months (although, as various RSA reports have argued, some relatively small changes to the current plans could make the system work much better). But because of restrictions on the amount that can be saved through auto-enrolment, and also the scope to opt-out of the default system, the offer made by the private pension industry is still an important part of the picture and one of the reasons we collectively aren’t saving enough.
Not only has RSA research consistently highlighted the punitive level of fees levied by many providers (for stewardship services of highly questionable value), but a few months ago we exposed the failure of the overwhelming majority of providers to be open and honest about these fees.
It was then great news yesterday to hear that the private pension providers’ trade organisation, the Association of British Insurers, has pledged the industry to clean up its act on disclosure (something which the Daily Telegraph directly attributes to the RSA's work and the minister's response to it). To say that the RSA and ABI have not seen eye to eye on private pension charges and regulation something of an understatement, so let’s hope this is a real sign of a change of heart and that the ABI and its members can in future be part of building that clumsy solution rather than being a barrier to it.
PS While I’m in RSA boasting mode can I give a bank holiday plug for a great album produced by the Society’s very own web supremo Sharliza Jelita. If you like your music clever and funny as well as catchy and danceable (think early Talking Heads, XTC, Rezillos; and, yes, I know these references date me!) you’ll love it.
Fabian Wallace-Stephens (Foresight Lead)
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