It’s a sobering time for those involved in pensions policy and for those who are trying to advise companies and people in how to organises their finances to meet their retirement income needs. One thing people don’t want to do is guess. They are happy to spend money on retirement if there is a degree of certainty that the money will be returned to them over time but they do not want to throw money at markets that neither perform or even explain why they underperform expectations,
Nearly £43bn of interest savers have lost in interest over the past two years
Intra-day market volatility of 8.99%
Global stock market indices down on the year, down on the decade , down on the millenium
Liabilities continue to increase as interest rates stagnate ; inflation jumps and longevity improves
Small wonder that the Office of National Statistics reveal today that the amount paid into personal pensions has fallen by some £2bnpa (or 10%) since the recession. (sound of stakeholder pensions shuffling off stage in embarassed silence).
France and Germany regards pension savings as a bit of fun – the cream on the hot chocolate. The OECD points to Australia and Chile as countries where “pension savings in the form of defined contribution pension schemes is the basis of the replacement ration.
The OECD was either being polite about Britain or perhaps have been convinced by some body or other (the DWP?) that we have a pension system that still offers a robust defined benefit second tier.
If this is the case then the twenty men and one woman who sat around the table did little to disabuse the man from the OECD, we heard of the damage high charges on savings do to the capacity to buy a pension and were told that our problem is that we perceive our pension plans as a means of investing rather than an insurance against old age.
My guess is that the man from the OECD, like the man from the DWP has got no idea of the problems facing the man on the street. I walked out of the posh City restaurant through the streets of the City and ended on a bus in Brentford. On that bus were tired office cleaners, rowdy youth and the various odds and sods who live in my part of town.
Their guess is that somehow or other they will be looked after but I bet if I asked anyone on that bus whether they had confidence in their savings , saw NEST as their salvation or had any comprehension of the DWP’s plans for auto-enrolment only the tiniest fraction would know what I was talking about.
We are in the midst of a pension crisis. This is the year when the bulge of the baby boomers reaching retirement is at its widest. Our savings are depleted, our annuity market unfit for purpose and financial education levels disastrously low.
Yet the OECD and the DWP and the twenty men (and one woman) in the room will continue to let this situation drift.
What is needed is not bland analysis but a degree of leadership that we have lacked over the twenty years I’ve grappled with the problems of adequacy. I started writing this blog for myself as a form of primal scream.
To my delight people are reading what I have to say, but reading these words means nothing if we cannot improve the situation. We ar beyond the “guess” stage, the statement of problems, the publication of stochastic charts showing theoretical outcomes. We can’t guess anymore.
The dull complacency engendered by the OECD’s 84 powerpoint slides is shocking. The more so to me inn the context of the calamitous state of this nation’s retirment palnning as witnessed by the random news snippets that open this blog.
If as reported the DWP are taking advice from the OECD then it is small wonder that the £200m already spent on NEST and the £400m waiting to be drawndown is having absolutely no impact.
Let’s get on with sorting out the problems, on which note I will close my laptop, get on my bike and return to the fray in the certainty that I’m going to do my bit.
- Structural Unemployment / Active Labor Market Policy / US : Investment in active labor market programs is 4 times lower than OECD’s average (skillsinfo.wordpress.com)
- Pension overkill (opinion.financialpost.com)
- Does hard work pay off? Ask the Mexicans (theglobeandmail.com)
- OECD records weak UK growth (lv.com)
- Pension saving continues to drop (bbc.co.uk)
- Staying Healthy and Planning For Retirement – New Data on Employee Benefits (prweb.com)
- Downturn heightens pension crisis (telegraph.co.uk)
- OECD Education – General Conference 2012 (fspub.wordpress.com)