I’m going to Holland next week to talk to European Fund Managers about how they engage with the UK DC market, it could be a short presentation.

Ironically, the Dutch  pension system is delivering 50% more pension – per pound invested- than its British equivalent. This figure, first touted nearly two years ago by David Pitt-Watson has not been seriously challenged.

If we want the kind of pensions that the Dutch have – eg 50% higher, we are going to have to take three major decisions;

1. Decide to abandon personal pensions and individual annuities and with it the financial engagement agenda that has dominated the regulatory landscape since the mid 80’s
2. Decide to take on the fund managers, platform managers and the insurers to drive out ruinous costs and ensure smooth aggregation to new , cheaper,  accumulation plans.
3. Decide to accept some risk that the pensions we receive in retirement can go down as well as up.

If we want better pensions, the onus is on us, the consumers. Change will occur when the general grievance with pensions builds to such a crescendo that change has to happen. Over the next five years, we are going to see millions of people who have never before saved into a pension taking the decision whether to continue to participate or to opt-out. This will be  no more or less than a referendum on our confidence in UK pension plc.

But most of these decision are some way off and most of the people taking them , will not be considering pensions as those handful of readers of this blog will do. The readers of this blog are a self-selected group of hardcore pension specialists, the majority of whom, I hope, share my view that some leadership is required.

As I see it, Steve Webb, the pension minister, has sent out the message to people like us , to consult with him on how we can get some ambition back into our DC plans. The word “ambition” is telling.

We have decided that we will withdraw from the difficult decisions. We have adopted the personal pension as our accumulation plan of choice, given the service providers free limit to charge us what they like and retained the system of guarantees that ruined defined benefit plans in our DC system.

Because we have not challenged the received wisdom of the Thatcher years – individual empowerment, market economics and the protection of the Treasury‘s balance sheet, we have got to where we are today.

In my view the train is not about to hit the buffers, it has hit the buffers. For the million or so people who have bought an annuity over the past 24 months and for the 500,000 who will do so in the year to come, the long-term damage to their pensions cannot be unwound.

Because these people have their cash and do not have to fall back on their meagre annuities, we are not seeing the impact of the financial disaster – that will come in two or three years when inflation eats into the level pensions they’ve purchased and the tax-free cash runs out.

The clock is ticking – the attention is beginning to turn in our direction. The gauntlet has been thrown down by the Pension Minister

“you want better pensions?”

Let’s put aside all the arguments about minutiae, let’s leave the legal minutiae behind. Do we want better pensions? The tsunami of consumer-disapproval overhangs the beach. It is not too late for those who organise the large DC plans operating in this country to organise themselves , consult with the DWP and find ways to move towards the efficiencies achieved by the Dutch.

The challenge is to find the leadership that is prepared to challenge the sacred cow of financial empowerment, the entrenched self-interest of those who make money from our pensions and the “received wisdom” that a pension in payment can never go down.

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