The UK faces a pension crisis, with state pensions now funded on a pay-as-you-go basis
With the cost-of-living crisis worsening and the average life expectancy in the UK rising, this pressure only increases. As a result, we are now seeing a rise in private pensions. Yet, these pensions can and will not resolve the bigger issue.
Unfortunately, this isn’t even the extent of the existing issues. Current auto-enrolment processes have also created a divide between pension providers and their customers, with the process preventing meaningful customer relationships from forming.
This disconnect means savers are losing track of their pension pots, and the value of lost pots has now reached a shocking £26.6 billion. Despite promising to resolve these issues, the new pension reform announced by the Chancellor in the Autumn Statement will do very little, if anything at all, to alleviate the current pension crisis.
The ‘Pot for Life’ scheme
The proposed ‘Pot for Life’ initiative will allow employees to choose which pension scheme their employers pay into instead of the employer choosing a scheme on the employee’s behalf. This proposal is very ambitious, but the bigger picture needs to be considered.
With studies showing that the average employee will change jobs at least every four years, what will happen to those individuals who change their careers often? And with pension processes often considered an administrative nightmare, can we be sure that our pots will switch from our old employer to our new employer?
Issues within the pension market
These issues have been around for years, and despite the Government’s awareness of them, we are still waiting for tangible changes. The issues in the pensions market have been left unresolved for so long now that they have started to fossilise and will require significant work to resolve.
The new scheme promises to help consumers engage more with their pensions to prevent pots from being lost forever. Unfortunately, it will be another failure to launch, just like the Pensions Dashboard, which has been pushed back to 2026 despite receiving millions in investments.
This scheme is yet another guarantee the Government must fulfil for consumers. These failed schemes have left the general public feeling fatigued and unheard while doing nothing to address the pension crisis. The Government must sit down and take the time to understand what consumers want and need before adding another failed promise to the pile.
How can the government address the pension crisis?
For the Government to make decisions that consumers will truly benefit from, they must place consumers at the centre of all pension decisions and understand no two people are the same. Consumer awareness around the pension crisis could be better despite a strong incentive for individuals to be reunited with their lost pension pots.
Savers across the UK need to be more informed about how they can reunite with their lost pension pots, and many still rely on unsecured and ineffective communication methods such as post. However, there is a middle ground that will allow pension providers, consumers, and the Government to consistently and effectively engage with one another in a way that will benefit all savers across the UK.
Even if the Pensions Dashboard reaches completion, there are other solutions to the problems UK savers currently face. Pensions are the tip of the iceberg for consumers dealing with multiple insurance or utility providers, bank accounts and investment plans.
Creating benefiting toolset’s
We have invested research and funding into a unique toolset that will benefit savers more than anything the Government has suggested so far, all while allowing consumers to regain control of their data.
This toolset will help consumers identify opportunities for better services or rates while offering a consolidated view of all accounts, including pensions. This can be achieved by leveraging optical character services, natural language processing, AI, and brand recognition services.
The Government needs to deliver on more promises. Consumers must be given the power to manage their pension pots, and the Government must ensure that savers are at the forefront of all future initiatives. The tools we need to make this vision a reality are already available, and we must start taking advantage of them to end the pension crisis once and for all.
This piece was written and provided by Paul Holland, CEO, Beyond Encryption
