Working for the clampdown?


Most of us work to standards; for me a standard is a target, and as a sales guy I’ve always seen a target as something that needs to be exceeded, I’m competitive and don’t like doing ordinary.

And that’s why you don’t put sales guys in charge of governance or Government for that matter. If everything becomes a race to the top, then nobody looks out for what’s happening at the bottom.

My friends who believe in the use of DB pensions to “smarten up” Britain , claim that as a nation we can afford such an ambitious standard through an increase in gross domestic product; in economic terms increasing demand to increase supply.

Those who  lobby for “minimum standards” argue  for the floor to be a level of DC contributions no higher than the current AE minima . For them, any kind of intervention is an affront to their free-market sensibilities. This feral capitalism is what leads to some of the abuses referred to in my blogs over Easter. But it also gives the freedom of choice to individuals that we will be celebrating this week as “Mrs Thatcher‘s legacy”.

In America, which differs from the UK in demanding a formal fiduciary duty from employers operating workplace pension schemes, the concept of the “safe harbour” is pre-eminent. Companies who adopt certain strategies cannot be sued by employees if things go wrong provided they have adopted minimum standards of cars,

All the evidence suggests  that the minimum standards lead to a dumbing down of innovation and a depressing trend among employers to regard their 401k plans as a duty not a benefit. I reckon that the US lawyers would suck the juice out of pension provision. They haven’t quite succeeded – as I’ll explain in a moment.

The DWP , and in particular the Pensions Minister Steve Webb, have three big ideas on this

  1. Defined ambition ;- a means to urge employers to smarten up pension provision and return to some degree to the paternalism of defined benefits
  2. Pot- follows-member – a system of DC aggregation that means we can see one pension pot building up over time , rather than a plethora of little pots in different places
  3. Minimum standards – aka the quality test/kitemark/baseline level or whatever phrase you thought of when you got out of bed.

They would like to do all three and I would like them to do all three. All three are hugely difficult.

Defined Ambition will work if we adopt a Dutch model of relaxed mutuality and tell bankers/accountants and lawyers to ease up on guarantees. This will need social change which I think comes from within (and pensions people are not showing great signs of wanting to change organically)

Pot-follows-member requires co-operation, minimum data standards and investment. None of this is in great supply now. I’ve argued that there is probably an “app for it” and that a virtual solution that uses new technology to bring your eyeball around everything that associates with your national insurance number is the best that will happen (in the next ten years).

Which leaves minimum standards and the question in the title. If we impose minimum standards in a heavy weight and just produce another tome on “employer duties” we will see the proverbial “race to the bottom”. If Webb’s strategy for on smartening-up relies on the tPR issueing “best practice” documents, the DWP risks the cynicism of the crowd – (especially the Treasury Crowd muttering “get real”).

The one phrase that seems to bridge the gap between the DB “fantasists” and those in DC clampdown is “enlightened self-interest“. In the USA, employers who go beyond the minima and instigate a standard of corporate and self-provision that can be demonstrated (participation rates, additional voluntary contributions) earn tax breaks for the executives not available to those who disregard workplace pension schemes.

This may be the last card left in the Government’s hand (before full compulsion). We do of course have the honours system which is both cheaper and well-established.

In a world of “total reward” , we need to find a way to reward the bosses for redressing the balance between sucking up to the shareholders (dividends), feathering their nests (executive remuneration) and looking after their “means of production”, their staff.

Establishing a system that aligns total reward (including recognition) with good pension practice, is a trick that the Government hasn’t played, could play and may well have to pay as a means of getting beyond minimum standards into the world I’ve described as variously “the sunny uplands”, “popcorn pensions” , “collective DC” or “defined ambition”.

To smarten up, we cannot just rely on minimum standards.


“what are we going to do now?” Joe Strummer asked in 1979. Are we still working for the Clampdown?

About henry tapper

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