UK - Widespread opting out of personal accounts "cannot be ruled out" given the current economic conditions, president of the Pensions Management Institute (PMI) has warned.

In a presentation to delegates at the Pension Plan Financial Risk conference, Stephen Delo pointed out at this point in the economic cycle households are "fully committed" with their finances, so even a small contribution to a pension through auto-enrolment could "hurt".

He said the pensions industry "has to give personal accounts a chance", but although Delo highlighted the new regime "might work" with auto-enrolment, he warned "it's by no means a shoe-in".

Delo said: "I don't think you can rule out widespread opting-out, nor can you rule out levelling down. We've got a scenario where there is a major economic tension between a consumption culture and pension saving. We can't have both, this is a mismatch of expectations and reality."

In addition, Delo told delegates the industry needs to be "creative" and devise "effective methods of pension saving" which can provide good retirement income without requiring too much input from the member.

He warned "individual investment behaviour is difficult to change and lay investors in particular tend to invest at the top of the market and sell at the bottom," so stressed his "fear" was all generic financial advice, or money guidance, would do is "exacerbate this behaviour".

Delo, who is also chief executive of Pan Governance, also suggested while a lot of the focus of trustees is risk, there is not enough attention to what sort of risk it is, as he warned, "if you take one risk off the table another one appears".

"Risk management tends to focus on the cliché risks, and the associated risk reduction exercises introduce new, and probably invisible, risks and they are the ones we will have to worry about in the future," he added.

Meanwhile, Logan Anderson, head of customer relations at The Pension Trust, told delegates he expected the buyout market continue to grow and suggested the increase in providers could allow trustees and employers to make a profit.

He pointed out a buyout would previously have been a natural option for mature schemes, but given the increase in suppliers - from two to 15 - it is now "something of a supply and demand" situation.

Anderson revealed one of its clients had been considering a buyout option and after receiving quotes form various companies, he said he was "astonished" at how close the buyout cost was to the actuarial value of the scheme's liabilities.

He said: "In some cases you could probably get a better price. This means you could get rid of longevity and investment risk and at the same time make a valuation profit. These are long-term risks, but there is a short-term opportunity here, and we don't know how long it will last.

"I think it could be very beneficial for trustees and employers, and we at The Pension Trust are thinking about encouraging employers to look at this option," added Anderson.

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