Maybe consumer cynicism about pensions is right..

Paul Weller (album)

Paul Weller (album) (Photo credit: Wikipedia)

I want to restore faith in a pensions system we were once proud of. Yesterday I wrote about the Plumbing and Mechanical Services Pension Scheme – which you can read about here.

Today I am praising a brilliant pamphlet published by the Royal Society of the Arts and written by David Pitt-Watson. It is called “Collective Pensions in the UK” and you can download it here.

Many regard David as a crank, but if you read what he is saying you will quickly understand what he is getting at. He is saying something so simple and radical that he is regarded as a fanatic – much in the way that Wordsworth and Coleridge were when they published “lyrical ballads” or Darwin was when he published “The origin of species“.

What David is saying, and he said it brilliantly to those at the UK Leadership of Pensions Summit 2012, is that if we wanted to, we could increase the amount of pension we received from our defined contributions to workplace savings by a staggering 37%.

There is nothing particularly radical about his reasoning it is no more than the Government Actuary is saying, in fact in Holland people are getting 50% more pension per euro invested than we are – pound for pound – in the UK.

I have many conversations with people bemoaning the attitude of the British public towards pensions saving. The “recieved idea” isthat the public needs financial education. So much for our acknowledging the “wisdom of the crowd” – presumably the “crowd” that collectively show wisdom are the financial elite who will educate the public about the error of their ways.

Well perhaps we should turn the argument around.

If there really is an opportunity to earn ourselves a 37% pay rise for the rest of our lives, why are we not taking it?

Who is stopping us from organising collective pensions in the UK?

Well apparently the Government or at least the Government Actuary’s Department who issued a now infamous block on collective pensions in 2009 and are now busy convincing the politicians that anything but a gilt-edged guarantee on people’s pensions will not be enough.

It is true that in order to get a pension of between 35 and 50% more than what can be fully guaranteed , you need to accept that what was 50% more might be 35% more a couple of years later. If I asked you

Would you prefer £5 or between £8 and £10, I don’t think you’d prefer the certainty of £5. But that  is what the politicians are hearing we do want. We’d rather have £5 than something between £8 and £10 because we cannot stand the uncertainty of a fluctuating outcome.

Maybe consumer cynicism about pensions is right! Maybe, people are looking at this Big Society through Paul Weller‘s lens

And the public gets what the public wants
But I want nothing this society’s got –

What I notice about consumerism is that it is not a public thing. The public have gone underground and they certainly do not want to be told that they would prefer £5 to between £8 and £10. If they find out that their Dutch friends are getting £8 to £10 (or Euros) to their £5 (or Euros), they have every right to say “TOLD YOU SO”.

We think that the key to getting people to buy into pension saving is to educate them. But rather than preaching the need to save, perhaps we should listen to the claims that UK (DC) pensions are a rip-off, because if you read David Pitt-Watson’s paper, that is the only conclusion you can draw.

If we want to restore faith in pensions, then we’d better make our pensions worthy of that faith. That is going to mean doing something rather more radical than NEST or auto-enrolment or an ABI Code of Conduct. It’s going to mean stripping down pensions of all unnecessary costs and building them to the design that is and will work in Holland.

This will mean  pain, pain for people like me who will have to accept  changes, to our remuneration, our working practices and to the focus of our jobs. It will mean accepting that that blighter Pitt-Watson was and is right and maybe worst of all, it will mean accepting that all those things they said about pensions were right too!

About henry tapper

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