A recent consumer survey undertaken by Friends Provident found that two-thirds of Brits have little or no faith in the Government when it comes to pensions. This sentiment comes as no real surprise in the current climate and echoes similar findings from Defaqto’s Retirement Savings & Income Report 2007.

Defaqto asked¹ 1,065 UK consumers which political party they trusted to solve the pensions problem. Although at the time Labour (25%) were more trusted than the Conservatives (12%) and Liberal Democrats (4%), the resounding result was that 57% trusted none of the political parties to solve the pensions problem. 

Although a particular stance on pension policy could be seen as a vote winner for an individual party it would seem that it is high time for all parties to work together towards improving trust in Government and its prescribed pensions system. Particularly when the long-term commitment required to deliver consistent pension policy is taken into account.

When asked how they would solve the problem of people having inadequate savings for their retirement and relying solely on the basic state pension, one-third of the consumers in Defaqto’s sample felt that it should be compulsory for everyone who works to contribute to a personal pension plan.

This is a sign that consumers have a growing awareness of the fact that serious action needs to be taken, even in the form of compulsory pension contributions which may previously have been viewed as an unpalatable solution.

Perhaps auto-enrolment into Personal Accounts is a stepping stone but the Government will still be under pressure to deliver this initiative on time and provide proof positive to the general public that it is better to save for retirement via this national scheme than rely on state benefits. By working together and putting out consistent messages the parties may have more chance of meeting these objectives.   

¹Research carried out for Defaqto by GfK NOP from 30^th August to 4^th September 2007

News of the recent adoption of a Group SIPP proposition by one of the larger employers in the UK, GlaxoSmithKline, will have been music to the ears for providers of these money purchase pension solutions. We predict that this will spark more activity with regards to the inclusion of these schemes within employee benefit packages, especially as the decline in final salary schemes continues. Similarly providers buoyed by the appeal and success of individual SIPP products will be keen to ‘spread the love’ into the group market. 

Although Group SIPP is being touted by some to be the new heir to the throne in the group pension market we think that due to the array of investment solutions available it is more likely to suit the needs of a small percentage of the workforce such as key personnel and directors.  As such it may very well emerge as a successful top-up scheme solution which can be run in tandem with a Group Stakeholder or Group Personal pension scheme. 

The major decision point for the employer when appraising money purchase scheme options will be around getting access to manageable and sound investment propositions and hence this is where development focus in the market is likely to be. It is a well known fact that employees will often not want or be able to make a decision on which funds to utilise, especially where no advice or guidance is available, meaning that default funds are regularly used. Therefore the discussion around the number of funds or asset types available can often be a futile one.

As far as Group SIPPs are concerned if the employee struggled to select investment funds from a choice of 30 to 40 funds previously, how will they choose from a platform of over 1,000 funds? 

In light of these issues an interesting development which may occur, mirroring its success in the individual SIPP market, will be for providers to offer access to specialist Discretionary Fund Management links through the Group SIPP. This could provide a ‘win-win’ situation where the employer will be comforted by the fact that they are de-risking themselves from investment decision making, the employee will not be inclined to pick from a list of funds and the DFM will be able to professionally design and run large portfolios which can be linked to employee goal targeting and attitude to risk.