When people get to their sixties, they are faced with some big choices. There are life-style choices as they face up to their bodies not being able to do what they once did and their brains not being quite as quick as they used to be. There are family issues relating to the generation above and the generation(s) below . Then there are work choices.
While some lucky people can make choices as to whether and how they extend their working lives, many find themselves with choices limited by their skill set and because they are too darned knackered to want to carry on with the toad (Larkin’s word for work).
The term the silent majority is rather unfashionable at the moment but it still exists and from what I can see as a man in his fifties (well give or take a week or two) the silent majority currently approaching retirement are doing so with more than a little concern.
As Steve Webb pointed out in Manchester last week, they want certainty. I suspect that much of the Government‘s QE policy is designed to prop up house prices because if the UK’s residential property stock started dumping in value and the certainty of domestic equity went with it, “concern” would be too weak a word.
But concern there is.The old certainties don’t seem to be in operation. Houses have fallen in value and so have shares. Cash is not keeping pace with inflation and there seems no obvious safe harbour for the ageing investor.
Then there is the gathering realisation that buying a pension is an extremely difficult business at the moment, a business made worse by the impact of the Government’s QE policy. Unsurprisingly there is a view among the silent majority that pensions are not a valuable investment. At today’s depressed rate , you can understand that.
For those who have the choice to delay buying their pension from their pension savings (that’s what DC is), there is the possibility that things will improve. Whether things do or not is to a large extent dependent on whether Steve Webb’s new “risk-sharing” initiative gets off the ground. I and my colleagues are going to try our hardest to make sure it does both through supporting it in my blogs and through organising people to sit down with the Minister and get things sorted.
For those who feel they have no choice but to take what they can today and worry about the consequences later. I fear that a very big chunk of the silent majority fall into this category. I fear that most of this chunk will not take any advice and those who do will take advice which is weak or wrong or ignored. They will end up taking whatever cash is on offer at the cost of pension. Whether this applies to pension increase exchanges, enhanced transfer values , the cash for pension options advertised by the DWP (see this brilliant blog by Alan Higham), people will go for immediate bunts and not longer term security. Who can blame them?
People take cash incentives because they are do not understand the present value of the future benefits they are giving up, Nor are they encouraged to trust the future pension promise. When people get only 30p in the £ today compared with 100p by waiting, you have to build a pretty strong “business case” for cashing out future pensions.
Phrases like “bird in the hand” “jam today” and “don’t trust the Government” are not the basis of a business case, they are the articulation of a can’t be bothered mentality that has really given up on financial prudence . It’s all very well the Pension Minister getting exasperated with the private sector for encouraging irresponsible short-termism but if his own Department are up to the same tricks it’s hardly surprising short-termism abounds!
Steve Webb’s optimism is based on a belief that given a chance, people will behave in a sensible way. That “given a chance” is not a gimme!
When people get to their sixties they get stressed by the thought of old age and at a time when they should be winding down – they get wound up. The DWP isn’t helping. The DWP should be ashamed of themselves for allowing people to take rubbish short-term choices with their state benefits and they should be ashamed of themselves for not accepting the help that Alan Higham offered them to simplify the pre-retirement information sent to those about to buy pensions.
If there is a Big Society then let me call on it to get behind Alan in his one man crusade to get the DWP to see sense.
If there is a big society then I call upon its clever people who understand the advantages of collective DC to get together and do something about providing a proper pension option for those with small pots and those who have no access to or will to take advice.
The enemies of change are those with vested interest in the maintenance of the status quo. These include the bad insurers who do not encourage the use of the OMO but offer poor annuity rates as a default option. These include the mandarins in the DWP who block the use of clear language in communications and Alan’s sensible reforms in communication. They include the actuaries behind the cases highlighted in Alan’s recent blogs.
But the broader “obstructors” of change are the silent majority of people in the pensions industry who know that see the mugging but choose to walk on by on the other side of the road.
Saying to yourself, “none of my business” is not good enough. Failing to take your share in the collective solution is not good enough. You don’t have to get a placard and parade up and down Tothill Street but you can and are helping just by reading this blog!
This is a consciousness thing!
There does seem greater consciousness among the pensions cognoscenti and among the general public. This does seem to be on the minister’s radar (despite the behaviour of some in his department) . Good people seem to be looking at this issue with genuine concern for the fate of the 40.000 people a month buying annuities. The issue is getting to the top of the agenda, a big push and we may get something done about it.
- Mrs Higham’s letter (henrytapper.com)
- Extending a hand to the Regulator (henrytapper.com)
- PPF II -opening the door for a better DC (henrytapper.com)
- NEST LIVE “Their hands in our pockets” (henrytapper.com)
- Sexy cash for pensions – Politician nearly loses his patience (henrytapper.com)
- MANCHESTER – (that’s where the answers are) – NAPF2011 (henrytapper.com)
- The right to screw up your pension (henrytapper.com)
- The ACA have spoken – the DWP ought to listen (henrytapper.com)
- IFEs not IFAs (henrytapper.com)
- Le Pension Crisis Est Arrive (henrytapper.com)
- New national pension scheme gets the go-ahead (confused.com)
- Lib Dem conference 2011: Steve Webb, pensions minister – speech in full (telegraph.co.uk)
- Small businesses wanting to avoid small pensions (henrytapper.com)
- When we make company pensions compulsory.. (henrytapper.com)