Why auto-enrolment pensions are ‘a disaster in the making’

[Duke of Marmalade]

To be fair, a typical global equity fund would have a risk rating of 5 or 6.

We don't want to go too far off topic but below are the PRIIPS risk ratings.
Your typical global equity fund would have a sub 20% volatility which would put it as MRM 4. Bitcoin has 60% volatility which is MRM 6. Though I agree that they will probably fall back on Article 69(6)(b) and use custom and practice which would be in line with your ratings. However, the tax anomaly of this topic do not encourage one to believe they will listen to practitioners. Yes, I agree that there is a lot to be said for one fund from cradle to grave.

 

[Sarenco]

@Colm Fagan

Thanks for the clarification.

However, it strikes me that arrangement is going to be even more complicated to administer that simply providing a suite of TDFs. The age of every single member will have to be monitored in order to trigger the relevant fund switches - I don’t see how that could be automated.

It will be interesting to see if the big fund houses tender for this work and, if so, at what price.

My suspicion is that the cost of establishing and running the scheme as designed is going to be extravagant.

 

[Duke of Marmalade]

The age of every single member will have to be monitored in order to trigger the relevant fund switches - I don’t see how that could be automated.

They will presumably have the DOB of the contributors. Even when I was employed we managed to handle changes in age in our valuations etc., today it should be even easier with AI.
But I do agree that this proposed approach is another blunder. For a start they are hard-coding "precipice" style changes as @Colm Fagan alludes to. Furthermore they are hard-coding today's views on lifestyling into the machinery. The NEST approach can more easily adapt to changes in current thought on this highly controversial approach - our system would need legislation if it was necessary to adapt to current thinking on these matters.