Two and a half cheers for UK pensions

The Royal Society of Arts in London.

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The other man’s grass is always greener

or so it would seem if you work in the UK pension industry.

Over the years we have got used to a succession of overseas dignitaries visiting our shores, speaking at our conferences and extolling the virtues of the Chilean, American, New Zealand or australian pension systems. All have been welcomed and have provided input into strategic thinking in the UK but have any of these models been adopted?

Chilean pensions certainly had an impact on far-right pension thinking in the 90s, encouraging a move towards personal accounts and influencing some aspects of personal pension development. The American 401K system, touted as the model of corporately sponsored DC some years ago had a similar tangential impact. The systems developed in the Antipodes have similarly influenced the debate on compulsion in recent years.

But with the perspective of time, we can see that for differing reasons, none of these pension models has or is delivering the outcomes that we would expect from 21st century pensions in the UK.

We should be proud that we are moving towards an excellent DC model without having abandoned our legacy of DB in the way it has been discarded in countries such as South Africa and the USA. The mass disintegration of guarantees has not happened and we have established first through the Financial Assistance Scheme and latterly through the Pension Protection Fund an effective and well run safety net to cushion the fall of schemes that fail while encouraging the continuation of defined benefit in the public sector and to a lesser degree solvent corporates.

Our system of regulation has evolved from the fractured regulation of the 90s into a blossoming dual regulator in the FSA/tPR. While Regulators, like football referees, remain the object of derision, few would deny that we have a workable regulatory climate in the UK and one that is the envy of many of our competitors.

Being proud of our achievements is not the same as being complacent. The Recent report by the Royal Society of the Arts comparing the UK and Dutch DC systems, clearly demonstrates that we are less advanced in developing collective DC structures to deliver positive outcomes in decumulation and work needs to be done urgently to improve this aspect of our pension system.

I believe that the outward focus of our pensions industry that is willing to learn from others without slavishly following inappropriate models, is a great strength of our. It is a demonstration of the maturity of our approach.

Similarly, the capacity of our system to embrace new ideas from within, from thought leaders as diverse as Redington and First Actuarial, from providers such as FNZ. from individuals such as David Harris and Trevor Matthews and from old institutions invigorated by new technology such as the Institute of Actuaries and the NAPF, we are demonstrating our capacity to remake pensions which can deliver the outcomes our and future generations require.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Two and a half cheers for UK pensions

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