Why we shouldn’t give up on pensions.

Many people now see their company pension as a cause of concern not of comfort.

Take this person who wrote to us last week…

Prior to the meeting, I was a little apprehensive ,as I had an assorted portfolio of previous pensions ,which I didn’t really understand.

But there’s good news here as well…

Your colleague provided an informative overview and interpretation ,as well as covering my options with the xyz pension. I left the meeting feeling enlightened and no longer feel that pensions fall into the Black Art category.

This isn’t an isolated piece of feedback, whether verbally or in writing, we have a pile of recent evidence that where people can get a proper explanation about how their pensions work, they feel better about their pensions and better about their futures.

No bones about it, this person had the majority of benefits in a secure and well run scheme. With very few exceptions, those of us lucky enough to have participated in defined benefit arrangements, have been privileged to enjoy the most astonishing fiduciary care from our trustees, their advisers and most of all from the sponsors of these plans.

But it is no easy matter understanding your pension, not because a pension is complicated – it is after all only a string of payments to you from one point in your life till death. The difficulty comes from calculating the amount of these payments and the way they will be paid.

When we took on the work from which this feedback derived, the 60 or so advisers we assigned to talk to the members of this company scheme were presented with over 500 pages of information they needed to digest and explain.

The complexity derives from the size of the company and the many different circumstances of its workforce over the years. It is driven by changes over the years in taxation, in social security and in pensions legislation.

For the person who wrote to us, there was further complexity arising from other pensions in the past. Fortunately there are people , not just in our company but in many others who are qualified ann capable of providing the help that is needed.

I wrote recently about how proud our advisers were that they could help people understand and could make them happier about their pensions.

Unfortunately, only a few thousand of the millions who need the kind of help this person got, will get it. Many people will seek independent advice and be sold a product, many will talk to advisers who have not the information or the skill to use that information and will get poor advice. Most will get to help at all.

And here is the commercial point. The sponsors of these great pension plans which will feather us in retirement are getting little thanks for funding the schemes and paying for them to be maintained. Those 500 pages of rules were created not to protect the company but to protect member interests. They were written by fine lawyers and the advice did not come cheap.

The enormous expenditure from commercial organisations and from the taxpayer has all too often done nothing but create “apprehension”. Yet that money has not been wasted, that money will mean that people’s pensions get paid at the right amount at the right time.

Turning the current disillusionment with company pensions into a realisation of their incredible legacy is not impossible. As this one example shows, when people receive genuine information, from skilled people, the latent value of this legacy can be released.

When companies understand the value of properly explaining the value of their pensions legacy, they have no difficulty in giving people help and time to understand it .

It is  true that we are unlikely to see pensions build so securely in future years but that is not a reason to forget the past, nor is it necessary that people give up on the future. We will have to work harder as individuals and will receive less support from our companies. But that is not a reason to dismiss the past nor to give up on the future.

I firmly believe that we will find a way to win people’s trust back in pensions. The willingness of large companies to pay for  the work we are doing as Independent Financial Educators informs that view. The support for better forms of pension accrual than the current version of DC also informs the view.

But most of all, the feedback we get after the group sessions and individual meetings we do with all types of pension scheme members, suggests that there is a willingness to move forward. 

If we aren’t to give up on pensions we individually need to understand the value of this pensions legacy and better engage with the challenge of a less certain future.

This is no easy task and will need considerable energy, skill and resource if it is to be achieved. However, considering the energy skill and resource which have gone into creating what we have already built , restoring confidence should not be beyond us.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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