The Department for Work and Pensions’ (DWP) proposals for a lifetime pension provider could represent a “major distraction” from much more urgent initiatives, LCP has warned.

The Chancellor, Jeremy Hunt, previously launched a call for evidence on plans to offer employees a choice on their workplace pension provider as part of his Autumn Statement, which also looked at whether a lifetime provider model would improve member outcomes.

However, LCP's response raised “major concerns” about the proposals, warning that a lifetime provider model coming on top of the creation of an ‘ecosystem’ for pension dashboards and a ‘clearing house’ for micro pot consolidation would create substantial additional cost which would end up being borne by members, as would the additional marketing costs associated with a choice-based model.

It also argued that there are better ways of tackling the proliferation of small pension pots, which do not involve such fundamental disruption to the existing system and do not risk undermining existing high-quality provision for low and middle earners, such as a form of ‘pot follows member’.

In light of these concerns, the group identified a 'shopping list' of key queries and issues for the government to consider, including how individual savers will be able to evaluate the different pensions on offer to them.

The consultancy also suggested that greater consideration is needed around the risk of adverse outcomes for those who do not exercise choice, especially if more lucrative higher earners leave a scheme, thereby making the remaining scheme less economic for providers.

It also queried whether ‘good’ employers will be willing to continue to offer high quality schemes if there is a risk that past employees may continue to contribute, potentially costing the employer more.

Commenting, LCP partner and head of DC, Laura Myers, said: “The top priority for tackling the under-saving crisis is getting more money going into workplace pensions.

“Yet implementation of legislation that would do just that is currently stalled whilst the government apparently has capacity to do work on a complete restructuring of the whole architecture of automatic enrolment.

"There is already a huge amount of change and reform in the pipeline, taking up the time and money of employers, providers and trustees.

“These various reforms need to see the light of day and then be given time to bed in and their impact to be assessed before moving on to further change of questionable benefit and considerable cost to members”.

The Society of Pension Professionals (SPP) also raised "grave concerns" around the proposals, urging the government to allow recent policy developments and initiatives in the defined contribution (DC) space to bed down before moving forward into “uncharted territory”.

Research from the Pensions and Lifetime Savings Association (PLSA) also raised questions around members' attitudes towards the new proposals, revealing that the majority (69 per cent) of employees would prefer their employer to pick their workplace pension, with many lacking the required confidence and skills to choose for themselves.

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