For a libertarian the concept of choice is fundamental. It means
providing individuals with maximum opportunity to make their own decisions and
pursue their personal dreams.
But does this freedom always produce the best outcome, both for
the individual and for society more widely? And if not, does that matter less
than the ideological integrity of choice at the outset?
The concept of choice is central to many discussions in the
pensions industry at the moment. It was the subject of debate at the recent
pension conference organised by our client, TheCityUK.
There is an argument that too much choice worries and confuses
people – and results in no choice being made at all. This is supported by
recent research from NEST that found almost 6 out of 10 people find
pensions so complicated that they can’t understand the best options available,
while around 1 in 3 are put off thinking about saving for retirement because
they find pensions confusing.
One bold option being pursued is to offer savers no choice
whatsoever. This proposition was put forward at the conference by ex-Pensions
Minister Nigel Waterson. Although it was delicately pointed out to Mr Waterson
by another ex-politician chairing the event, James Purnell, that he had
attacked the then government for not offering enough choice in the new
auto-enrolment pensions scheme!
Putting that gentle political ribbing to one side, in this type of
scheme all savings are invested in one single fund. Diversification may appear
to be a problem but as long as the fund itself is well diversified that can be
overcome.
In communications terms this allows for a simpler message to
consumers. Don’t worry about choosing funds or choosing providers. When
thinking about retirement saving start early, save more and carry on. This kind
of simplicity is the key to good communications with consumers.
Of course, this message relies on consumer trust in the pensions
system, which is a whole other debate.
Tony Cox
Consultant
Posts
1 comment:
'Save more and carry on' is a strong and simple message for savers. It's also right that they shouldn't fret over funds or providers. However, given that 95% of the variability of returns comes from asset allocation, that could well be an area which they want to retain control/choice.
Post a Comment