Contributions. Contributions. Contributions.

Neil Copeland

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Following the horrendous suffering of WWI the French were determined never again to be invaded by Germany. There was a tremendous focus on fortifying the Franco-German border. A tremendous focus on building a line of concrete fortifications, obstacles, and weapons installations between themselves and the Germans. A tremendous focus on building the impregnable Maginot Line. In 1940 the German Army simply drove around it in their tanks and conquered France in about 6 weeks. Via Belgium.

Such is the folly of focusing on the wrong thing.

There has been a lot of worthy stuff going on around DC pensions of late. Regulatory guidance, upping governance, capping charges, auto-enrolment and, especially,  pension freedom. Master trusts have a lovely new, shiny, impregnable assurance framework. You don’t have to hand your money to an insurance company any more.

The new mantra is that it’s all about improving member outcomes.

All of the above are great, they really are. Seriously, top marks for effort, everyone. I’m not going to argue that these things aren’t important, but no-one seems to be addressing the single biggest factor preventing member outcomes from improving – poor levels of contributions.

Paying 1% of salary into a pension pot, as currently required by auto-enrolment is pointless. Even when we get up to the 8% of salary required by full auto-enrolment it is still going to be about delivering disappointing outcomes. The Pension “Quality” Mark standard? 10%. Seriously. 10% is the pensions equivalent of Belgium.

We need to be telling people that to have any prospect of a decent retirement they need to be putting away 20% of salary each year, minimum, for that purpose, and from an early age. And keep things pro-actively under review.

Not a very popular message. Maybe not a very practical message. But an honest message.

Neil Copeland

Post by Neil Copeland

Director, pensions consultant and adviser to trustees and employers on all aspects of work based pension schemes.