Are workplace pensions worth it?
Are workplace pensions any good? Ask a room full of people and there will be some that say yes, some that disagree but mostly people will have no idea.
If you think pensions are a good idea then you'll save into one, but if you don't you'll make the effort (hopefully) to save in another way. Having no idea about whether pension are good or not is the most dangerous camp to be in because ignorance breeds apathy.
The government is trying to capitalise on that apathy with the introduction of auto-enrolment and that people will be too apathetic to leave their pension scheme after being automatically opted in.
For those whose interest in pensions is sparked by auto-enrolment, they may have some help in deciding whether the scheme they have been opted into is worth it or not.
The Office of Fair Trading (OFT) has decided to launch a study to determine whether company pensions are good value and how much workers can expect to retire on.
It has decided to look at workplace pensions because of auto-enrolment, which will see the numbers of people saving into pensions swell from four million to between six and nine million. The OFT expects the new savers to save an extra £11 billion a year into pensions in five years' time.
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It's going to look at a number of factors, including how the market develops competitively, whether there is enough pressure on pension providers to keep charges low, how much information about charges is available, and whether smaller firms are making the right decisions for their employees.
This is all very worthy, and all these questions need answering. Of course you can only make a judgement on the market once it's up and running but surely some of these concerns should have been pre-empted.
Why hasn't the OFT looked into pension charges already? Surely it's always been important for pensions to be good value and to deliver enough to pensioners in retirement no matter how they save, not just through auto-enrolment.
The OFT plans to finish its consultation in August 2013, by then hundreds of thousands of people will be auto-enrolled. If their schemes are found wanting, what happens then? Will they be removed from schemes or will the schemes be forced to change their charging structure?
Competition is important but the OFT knew auto-enrolment was coming, it should have laid out to consumers, employers and most importantly the pensions industry, what it expects.