Nearly 2 years ago I bought a new mobile phone. At the time, I was very pleased with the deal that I had signed up to – reasonably priced, a sensible allowance for calls, texts and data, and all the features and apps that I wanted, and it looked good too! However, over time the package has started to lose its lustre, as the mobile phone market has evolved with more flexible contracts, competitive deals, speedier apps, larger data storage and more modern-looking handsets. In addition, many new apps are not compatible with my phone. As well as changes in the marketplace, my own priorities and wish list have moved on as well. What was right for me then isn’t right for me now.
Parallels can be drawn with the defined contribution pension market. Many companies set up DC pension schemes a number of years ago on a “set and forget” basis. Frustrated with the onerous governance responsibilities and volatile costs associated with defined benefit, DC was a breath of fresh air – the sponsor could carry out appropriate due diligence, choose the product that was right for them, then hand over all ongoing management responsibilities to the insurance company or trustees. All they then had to do was write a cheque each month to pay for the contributions. Often, an IFA was in place to give ongoing support in exchange for commission and access to the membership (i.e. for no material employer fee). Read more »