I get some feedback on my blogs from people I know who don’t want to or aren’t allowed to go public. Here’s an example from a formidable figure and a personal friend (who I know/hope has the skin or a rhino and a great sense of humour!)
Just read your blog. I think I disagree a lot with your assessment. I need to check facts (and want to critique Dutch pensions for another reason so will) but I think the position is Mitch (sic) worse than you say.
Basically, members had been led to expect indexed pensions. No doubt they were not GUARANTEED them, but I bet they thought they had been.
So the nominal reductions are on top of a varying number of years of no indexation. So real cuts.
The bottom line is that in most cases they are DC as employers do not have to make good deficits. So like all with profits, bonuses are a fine judgment and easy to under or over distribute. Or depending on the premiums, the promise might be simply unaffordable
And I think the comparison with UK is misleading. I think the argument was that Dutch pensions provide 40% more that UK DC pensions rather than UK guarantees DB pensions. The reason being charges and investment post retirement. The Dutch are I fear finding that the assumed extra return from investing longer in risky assets ignores the downside risk.
That is all without considering whether the Dutch regulatory framework is fit for dealing with inter generational fairness
A very interesting area for study.
(My correspondent was kind enough not to point out that my maths was a little out and that the 1.9% cut reduced the advantage to below 37% (but plenty of wonky actuaries had got there first!).)
It’s absolutely true that the Dutch are getting nominal pension cuts (eg the pensions actually go down, it’s not just that they don’t keep up with inflation). My correspondent is used to pensions that go up with inflation (being a civil servant), the rest of us will be getting pensions that remain flat – and I argue that most of us can’t afford indexation.
I don’t want to sound over-chippy , but I’m tired of being reminded how crap our DC pensions are by people who are benefiting from the gilt-edged pensions my tax bill is paying for!
The first question is whether we can boost our DC pensions by improving efficiencies, pooling mortality risk and ridding ourselves of spurious guarantees.
The second question is whether there is some white knight out there who is going to insure the promises (a bit like I’m doing for my friend and the Pensions Minister who’s pension is similarly underwritten by my taxes!).
The answer to the first question (judging by how things are going so far) is that we are unlikely to see these efficiencies anytime soon (I live in hope).
As for the second question, I see no interest from Government in them extending the tax-payers largesse to the public sector to helping out private sector DC pensioners.
This is the DC triple lock
NO help with annuities – despite the Govt having in the PPF a perfectly viable vehicle for providing funded scheme pensions for those in DC poverty
NO support for the Dutch system – preventing real innovation in workplace pension scheme design
NO new incentives for large employers to offer any form of pension risk-sharing
UK DC pensions are pinned to the floor by over-regulation and the Government is failing to get the DA debate beyond the narrow corridors of Brighton and Whitehall. I said earlier this week that Steve Webb has the opportunity to use the new technologies to get the views of the UK public and this is where he should start.
It’s time we , as tax-payers were invited to decide just how important these regulations are to us and whether some easements that allowed us to operate more like the Dutch, would be acceptable to us.
By us, I do not mean the civil servants, I mean the people who pay the civil servants pensions and get crap pensions back
- Those Dutch pension cuts in full! (henrytapper.com)
- “What’s expensive for a pension these days?” (henrytapper.com)
- Everybody need standards (henrytapper.com)
- Working for the clampdown? (henrytapper.com)
- Pot noodles member (henrytapper.com)
- Cometh the hour;- the Regulator gets its man (henrytapper.com)
- No learning without doing! (henrytapper.com)
- Can social media play a part in pension scheme governance? (henrytapper.com)
- Pensions; holy grail or wholly fail? (henrytapper.com)
- Give a straight red to active member discounts (henrytapper.com)