Savers to lose in new opt-out pension plan, lobbyists argue
THE MANAGEMENT of opt-out pensions schemes could be their Achilles’ heel, as no one involved will have the expertise or the incentive to cater to savers’ best interests, says a report released today by FairPensions.
Millions of people will be automatically enrolled into defined contribution (DC) pensions schemes over the next few years, as new rules requiring employees to opt out comes into action.
In DC pension plans, employees’ benefits are tied explicitly to the value of their contribution, which means they bear the risk involved in their investment.
But FairPensions complains that neither employers – who will choose schemes for employees – nor insurance companies, who provide them, will be tasked with working in the best interest of the employee.
The solution it puts forward is a trust-like scheme, where trustees have strict duties to act in the best interests of beneficiaries, and can be held to account through the legal system.