The research report – How do you solve a problem like DC pensions? – published today (13 February) by the Lang Cat and commissioned by People’s Partnership, conducted a series of interviews with industry figures to establish a consensus view on what the future of the pensions industry may look like.

The report found the government and the pensions industry are collaborating to provide retirement income for workers in the UK which is undertaken in a largely “consultative” and supportive manner. However it also noted there was a clear “disconnect” between the government and the industry, with a “sense of frustration” among industry that the government’s approach is on the immediate short-term challenges and would like to see a strategic plan for the government’s long-term objectives.

On the lifetime provider model unveiled at the Autumn Statement, the report noted research undertaken by the Department for Work and Pensions which revealed savers accumulate ten pension pots across their working lives and also pointed to research undertaken by the Pensions Policy Institute which found without government action, the number of small pots could reach 27m by 2035.

The paper found despite a need to tackle the small pots issue, a majority of the industry has queried how the workable the lifetime provider model will be, but noted there were a lack of alternatives to address the issue.

The reported noted the government has set out its vision for the long-term with the introduction of the Mansion House reforms and the proposals unveiled in the Autumn Statement which outline consolidation proposals for “fewer” and “better run” schemes to deliver “healthier” returns for members.

However, the paper noted these proposals “do not address the whole picture”, as the industry feared these proposals would be slow and would make it make it difficult for members to keep track of their savings as research found three-quarters of UK adults do not know how much money is in their pension and a third do not know who their pension provider is, with the government is taking a risk of leaving some savers behind.

The paper noted while the government has “high” hopes for the development of collective defined contribution (CDC) and the capacity of the industry to deliver CDC, the industry cited concerns over a lack of a commitment towards a roadmap for the expansion of CDC will result in action.

Similarly, the report noted while the government has outlined plans for members with small pension pots being automatically consolidated into a small number of authorised schemes, the industry said the proposed government solution was “complex” and expressed concerns about the lack of urgency and a roadmap from the government to ensure the policy was successfully implemented.

The report concludes the introduction of a long-term savings commission, which could sit outside the government, regulators and industry, would help savers to achieve their retirement goals in a more “mutually supportive” way with guaranteed continuity, irrespective of any prospective changes in government.

‘Lack consensus’

Lang Cat director of public affairs Tom McPhail said despite major reforms across the last 15 years, the UK has a pensions system which lacks “a coherent strategic purpose” and initiatives to tackle individual aspects of the system have been “fragmented” and “lack consensus”.

He said: “People aren’t saving enough and they’re not able to engage effectively with the key decisions they need to take as we have a proliferation of small pension pots that many people don’t even realise they have. We have a peculiar workplace savings system that causes admin headaches when people move jobs and that’s before we even start looking at the horrendous complexities of the pension tax system.

“These are major issues that are not being addressed.  The only realistic way we can tackle them is by setting up an independent long-term savings commission that can make recommendations for all savers, and that will enjoy cross-party support. We owe it to future generations to work together.”

People’s Partnership director of policy Phil Brown added: “This research gives us the clearest picture yet of how the pensions industry is contemplating some of its biggest long-term challenges.

“It’s vital that politicians from all parties, the pensions industry, employers, and unions reach a consensus on how we build on the success of automatic enrolment. While a new commission would be an important and welcome step, long term strategic change in pensions will only be possible with the full support from the government of the day.

“Pensions are crucial to building stronger financial foundations for millions of people, meaning they must be viewed as a political priority.”