Things are pretty grim in DB land just now.
The 3% hike in personal contributions to public sector pensions is likely to accelerate the trend for individuals to opt-out of DB leaving these schemes derelict.
The anticipated abolition of contracting out from as early as 2012 will give ammunition (if ammunition was needed) for corporates to pull the plug on the sponsorship of future accrual.
There seems absolutely no appetite from Government, corporates or insurers to provide collective solutions to DC decumulation.
As one old boss of mine would say “we are in the dark hour of the innovator”. I didn’t like that phrase as it was usually followed by an announcement that Eagle Star was about to scythe a load of jobs, the necessary pain for it to rise from its ashes.
Here is the hope. Eagle Star did arise from its ashes and I’m happy to say that in its new livery (Zurich Assurance) is enjoying considerable success. It took a bold man to stand by a pile of ashes and summon up a Phoenix (Phil Hodgkinson) and it takes a bold man or woman to predict that we may be witnessing the DB nadir.
Nadir– a wonderful word!
To spot a nadir as it happens requires a degree of prescience and I’m not suggesting that things ain’t going to get worse before they get better but let me reason out an argument that suggests that we are reaching the nadir of DB’s fortunes.
- DB has been so emasculated that it no longer poses a serious threat to the corporate balance sheet
- DC is failing to replace the expectations created by DB
- There is a realisation that there is no “Pensions Endgame” – people continue to need proper pensions
- We have pensions ministers who understand these things and are more interested in outcomes than dogma
- People are worried enough to want to engage in these things.
Now you might consider that a pretty fluffy list and I’m not pretending that I have empirical evidence for any of these points. My good friend Con Keating can probably provide an empirical justification but I’ll stick with my hunch!
My reasoned argument is underpinned by that blind optimism that underpins the human spirit in adversity, As Ezra Pound put it
In the gloom the gold gathers the light about it
and as he says elsewhere
But to have done instead of not doing
this is not vanity
To have gathered from the air a live tradition
or from a fine old eye the unconquered flame
This is not vanity.
Here error is all in the not done,
all in the diffidence that faltered.
- #Budget11; a budget about #pensions (henrytapper.com)
- What we can and cannot do (to provide our staff with better DC pension outcomes) (henrytapper.com)
- Tell them the truth (a ridiculous notion) (henrytapper.com)
- What really matters -DC outcomes (henrytapper.com)
- Giving pensions a bad name (henrytapper.com)
- Has the DB model failed or just fallen out of favour:? (comprehensivepensiongovernancegwahl.wordpress.com)
- Texas DB Williams taps into his NFL resources (sportingnews.com)
- It’s not just about costs (economist.com)
- The State can take longevity risk. (henrytapper.com)
- How to fix the public sector pension system (telegraph.co.uk)