Written Evidence to be reported to the House.
Pensions Bill
2:45 pm
Professor Hills: You have made an important distinction between generic information and detailed advice. The secret of much of this is that the moment we get into anything that suggests that individuals should seek a detailed, financial health check that would be hard and expensive to carry out, all of the advantages that we are trying to achieve of opening up a low-cost system to people would be lost.
You are then into what you can achieve by way of a huge improvement in the level of overall public understanding of financial matters in general, and pensions in particular. The provisions of the Bill will bring to a head something that was, in my view, a national issue anyway. When asked regularly, “How would you describe your knowledge of pensions?”, one of the things that struck me as we at the commission did our work was that the number of people who said in response each year, “little or none” had increased. It is not an area in which many people think themselves expert. Moreover, it is possible that some people who think themselves expert are not. The effect of that has been to reinforce the inertia that has kept people out of making pension provision. There are a lot of other things that people would prefer to think about than the niceties of making pension contributions.
In order not only to set up the scheme, but make it one that is popular and seen as a success, and something that, by and large, the word on the street is that people would be silly not to be part of it, there has to be a significant improvement in people’s understanding of the basics of what happens when they contribute to a pension, such as how they are likely to live and the different resources that are available to them.
I would not underplay the difficulty of the overall task. Such matters would have to be done by the time the scheme starts, but we should have been doing them in any case. Within that, the guidelines of circumstances in which people might want to think carefully about opting out would have to be quite broad. By the time that we start giving people detailed ready-reckoners and asking, “How much do you expect to inherit from Aunt Madge? What are the precise chances of your marriage breaking up?”, we will have lost it. There may be some groups to whom it could be said, “Think very carefully if you are in such a situation” but, going back to my earlier answer, those groups are probably rather restricted.