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Whitepapers·29th April 2024·3 min read

Pot-for-life: new research by Social Market Foundation and Cushon reveals support for member choice

There is a structural challenge at the heart of defined contribution (DC) workplace pensions. The buyer of pensions (the employer) and the end consumer (the employee) are not the same.

The outcome is pension companies are forced to compete for the attention of employers and not the consumer, which has resulted in a reductive product offering based primarily on cost – which of us can offer a pension at the cheapest price right now.

The problem with this approach is that the end consumer – the employee – is getting a raw deal. Cost is an important factor, but it should not be the primary factor. Far more important is value – which pension will provide the best outcomes for someone’s savings when they retire.

The workplace pension industry has forgotten who the real customer is – the employee, not the employer. Cushon is leading the charge in changing this, so that in the future pension companies compete on retirement outcomes for savers – and we are seeing movement in the right direction.

At the heart of the conversation is whether employees should have the right to one pension pot of their choosing that follows them throughout their career – a pension pot-for-life – rather than the current situation where every new job comes with a brand new pension pot.

It’s not without its critics, and there are legitimate questions that must be addressed and challenges that must be solved to make it a reality. After all the status quo of auto-enrolment has seen an additional 11 million people save for retirement without ever having to engage with the process.

This inertia has had unintended consequences though. Millions more people are saving, but they are not saving enough and are too often losing track of pension pots as they change jobs.

The pot-for-life should go a long way to improve engagement by giving people a greater sense of ownership over one of their biggest financial assets. With all their money in one place, this larger, single pot should retain the attention of savers, and in turn encourage them to actively manage their pension and contribute more.

A pension pot-for-life and member choice represents a huge change in how pensions operate – where pension companies compete on outcomes for savers.

It’s important then that thoughts and concerns from all sides are properly considered and addressed, and that the required foundations are put in place to minimise any unintended consequences and ensure the concept succeeds.

That's why Cushon has partnered with the Social Market Foundation to understand public attitudes and perceptions about a pot-for-life, and engaged industry peers, policymakers and employers in a series of roundtables this year to hear perspectives from across the board.

This process has culminated in a new report from the Social Market Foundation: 'Up for grabs? Public attitudes on the pension ‘pot-for-life’ proposal’ which has been published today, revealing broad public support for the pot-for-life but identifying the challenges that need to be addressed and the industry and policy infrastructure that must be in place first for it to succeed.

Read the full report on the Social Market Foundation’s website at https://www.smf.co.uk/publications/public-opinion-member-choice/

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NatWest Cushon