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A proposed shake-up of the UK’s pension market to offer tens of millions of staff the suitable to decide on a retirement “pot for all times” dangers leaving savers worse off, {industry} leaders and unions have warned.

In final yr’s Autumn Assertion financial plan, the federal government issued a name for proof on a “lifetime supplier” mannequin, which might permit customers to stay with one pension pot all through their profession.

At present employers are obliged to select a pension scheme for the workforce and put staff into it, with authorized minimal ranges of contributions. Employers aren’t obliged to pay right into a pension plan chosen by their staff.

The federal government argues that current preparations, in place since 2012, have led to tens of millions of small pension pots constructing within the system, as staff change jobs over their careers.

Responses to the decision for proof, which closed on Wednesday, largely warned the shake-up may backfire for savers.

“The federal government’s proposal dangers making the scenario worse by inserting extra accountability on savers,” mentioned Paul Waters, head of outlined contribution markets with Hymans Robertson, an expert companies agency.

“Many outlined contribution scheme members lack the monetary training and confidence to decide on their very own pension supplier. The pot for all times mannequin dangers members making poor selections primarily based on the most affordable or finest marketed options, quite than these providing the very best worth for cash.”

In its response, the Society of Pensions Professionals, an {industry} physique, raised “grave” issues concerning the lifetime supplier mannequin.

“Severing the employer hyperlink and placing all of the decision-making burden on savers may result in suboptimal selections, in addition to lowering market innovation and competitors,” it mentioned. 

The federal government has mentioned a lifetime supplier mannequin may see British savers undertake a system like that in Australia, the place the pension pot follows the member once they change jobs.

The Trades Union Congress, the umbrella physique for unions representing 5mn staff, branded the proposal a “harmful gimmick” that might “expose staff to increased prices and decrease pensions, with low earners the most definitely to finish up worse off in retirement”.

PensionBee, a pension consolidator, was one of many few pension suppliers to precise public help for a system shake-up.

“There are clear shopper and {industry} benefits to having one pension pot that staff can select for themselves,” mentioned Becky O’Connor, director of public affairs at PensionBee.

“The good thing about not having a number of pensions littered via somebody’s work historical past is that there’s much less likelihood of dropping useful sources of retirement earnings, which is a big and rising downside.”

Pension specialist Tom McPhail, of Lang Cat, a public affairs consultancy, acknowledged supporters of the proposal have been “undoubtedly a minority”, however he urged the federal government to “press on” with its work on the lifetime supplier mannequin as an answer to the construct up of small pension pots within the system.

“This downside has been kicked down the street for too lengthy already,” mentioned McPhail.

The federal government has not set a timetable for introducing a lifetime supplier mannequin.

The “pot for all times” proposals come alongside a broader push by the federal government to extend pension fund funding into areas that might assist the economic system, reminiscent of early-stage corporations and infrastructure. 

The federal government believes extra non-public capital in so-called productive finance areas may ship higher returns for the economic system, in addition to retirement savers.

Mick McAteer, a former board member of the Monetary Conduct Authority, mentioned if the authorities needs to fulfill twin objectives of “pot for all times” and bettering retirement outcomes, the very best mannequin would have been to determine industry-wide pension schemes that labored throughout industries and professions.

“Whichever mannequin is adopted, the vital factor is to guard independence of schemes in order that schemes aren’t used as direct brokers of presidency coverage on so referred to as productive finance,” mentioned McAteer.

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