On the go: Pension providers pay too much attention to short-term fee income rather than long-term product solutions to the pensions gap, a former government pensions minister has warned.
Speaking at FTAdviser’s Later Life Summit, Baroness Ros Altmann said: “We could have much better advice and guidance for people if only the providers were not the barriers sometimes to allowing people to know and understand what is the best thing to do for themselves in the long run.
“If providers are just trying to maximise short-term fee income, this is not necessarily the best for the client.”
Altmann, who was pensions minister from 2015 to 2016, said it was vital for the government and financial services professionals to work together to help close the pensions gap through creative thinking about pension products.
She said the government and pension scheme policies have not caught up with demographic changes, such as people’s desire to retire later or wind down in the workforce much later on in life than traditionally was the case.
“We have learned there can be, and there must be, much more flexibility in the way people live and work and retire,” Altmann said.
“But if you look particularly at the defined contribution pensions — the more ‘modern’ pensions in which the majority of people in the workplace save — these are still using the old types of thinking.
“This is one size fits all... it assumes people will choose an age at which they stop work, and then there is an assumption people will start taking the money out when they reach that age,” she continued.
“The products the industry is still using and offering are not flexible enough to meet people’s individual needs.”
Now an independent pensions consultant, Altmann said the industry needed to think more about people’s “pre-tirement”, a fourth phase of life between a full-time career and a full-time retirement.
She explained: “There are so many potential benefits of helping people work for longer if they want to and if they can. There are benefits to the individual, not just monetary, but also in terms of lifestyle.
“There are also benefits to the economy by having more experienced people staying in the labour force rather than leaving it altogether.”
Altmann also expressed to FTAdviser of her dismay that the pensions and health gaps between minorities, genders and the poorest and most wealthy still persist.
She said: “If we do not worry about the gaps in life expectancy, and the health gaps between the poorest and the wealthiest, then there will be a hit to economic growth from the rising poverty associated with people not having enough pension income, but not being able to keep working.
“This will add to social and political unrest.”
This article first appeared on FTAdviser.com
