Looking to the future: greater member security and rebalancing risk – PLSA response to the Call for Evidence

Following the Chancellor’s Autumn Statement in November 2023, the Department for Work and Pensions released a Call for Evidence document which proposed that the UK should move to a more individualised form of pension provision, here called the “lifetime provider” model. 

What is a lifetime provider model?

A lifetime provider model would be a significant departure from the current Automatic Enrolment model. It would allow a new employee to have the right to direct their own, and importantly, their employer’s pension contributions to a scheme of their choice. When employees change jobs, they would be able to request that their new employer’s contributions go into their existing selected pot. 

The PLSA's view

We are very concerned at the proposal that the UK should move to a more individualised form of pension provision. Workplace pensions form the vast majority of private pension provision in the UK and our system of automatic enrolment is widely admired around the world. We are not aware of any evidence that moving to a “lifetime provider” model would deliver better outcomes for members, but it might undermine the essential link between employers and workplace pensions and introduce higher costs and worse outcomes for some savers.

Moving from a whole workplace to a more individualised system will disproportionately effect less wealthy and less informed savers that are currently benefiting from the bargaining power and good governance of their employer. A Lifetime Provider model is – for example - likely to disadvantage the low paid and women as compared with the current model of Automatic Enrolment. This effect could be exacerbated by the loss of the benefits of collectivisation and cross subsidy for small pots, and the comparative weighing of retail-like charging structures which currently tend to be more expensive, and notably even more so for smaller pots.  

The PLSA, in coordination with members that sit on our Policy Board and Committees, has submitted a response to DWP. As evidence surrounding this topic is limited, owing to it being uncommon model across the global pension landscape, we will be working to provide DWP with more research to support their future consideration of the model.