The Pension Play Pen London Lunch Group met for the 62nd consecutive month to establish a Pension Risk Register for the UK in 2015.
This might be considered ambitious for an hour long session, not least as our conversation competed with the consumption of Mrs Miggins’ famous range of pies and a glass of Pride.
However we had a select group of thought leaders around our table, plucked from the 5800 members of the eponymous linked in Group.
Bob Campion- former journo with Engaged Investor- now Charles Stanley
David Rowley- former ed – Pensions Week- now transported to Australia
Bob Ward- bearded maestro of Friendly Pension
Ralph Frank- acerbic commentator at Charlton Frank (South African)
Henry Tapper of First Actuarial and Founder of http://www.pensionplaypen.com
Stella Eastwood- Group Pension Director- LBG
Mark Scantlebury- bearded guru of the Quietroom
Mark Yeates- Axa Investment Managers
Stephanie Condra- Axa Investment Managers (Canadian)
The discussion drew upon the considerable diversity of the group to garner global perspectives on the potential predicaments that the UK could find itself in.
In no particular order, the five risks that were alighted upon were
Political -regime change
With a General Election around the corner, the potential for disruption was high. David Rowley evidenced Australia as exemplary of a political culture where Pensions has become a football hoofed between industrialists and unions, right and left wing politicians.
The group noted that the advances made in this electoral term were down to strong leadership and a strong opposition. It was noted that both Steve Webb and Gregg McClymont , generally accepted as forces for good, could not be guaranteed seats in the next parliament and it was hoped that the voters of Thornbury and Yate and Cumbernauld would set aside local differences and re-elect the lads. Failing that, the Group wished both a speedy elevation to the House of Lords to continue their good works.
With the alternative appearing to be decision making by Candy Crush, the group considered the potential threat to UK Pensions from regime change considerable and this policical risk was accorded an amber warning.
Pension Freedoms – unmet expectations
There was considerable concern about the potential for the much vaunted pension freedoms to arrive with no train in the platform and with confusing announcements from the station master.
Absence of developed product together with a less than compelling solution to the Guidance Guarantee was considered a potential banana skin for pensions.
Concern was voiced by Stella Eastwood that the Freedoms could turn out illusory and that unless a mass market solution arrived to meet the needs of those need a retirement income but worried about annuities, disillusionment among the UK population could follow 2014’s pension euphoria.
Concern was raised by Mark Scantlebury , inter-alia, that the Guidance process simply led to the existing answer (take advice) though there was no indication that the population were any more ready to pay for this advice than in the past.
In view of the hype surrounding Pension Freedoms, and the lack of progress towards a solution, this risk was accorded red status.
DB Funding – the widening gap between assets and liabilities
Ralph Frank eloquently laid out the risks attaching to 2014 valuations published in 2015 which would show higher than expected liabilities resulting from continued depressed yields.
Bob Campion spoke about the discomfort of employers being asked to agree new deficit plans in the light of the failure of previous plans. The words “running out of patience” were uttered several times.
The concern seemed focus on the potential for a deteriation of trust between employers and trustees over the ongoing struggle to keep DB schemes solvent.
To the question from the chair “does this really matter” , it was unanimously agreed that with £1.5tr of remaining liabilities, UK Defined Benefit plans continued to pose a considerable risk that they would not pay out in full to members, would become an increasing burden on employers and on UK economic growth, on which the success of our pension wealth is predicated.
Deficet funding remained a red-rated risk
It was noted by Stella Eastwood that while we have scotch’d the devolution snake, we have not killed it (clever Scottish link there). The promises dished out to the Scottish Nationalists to avert devolution may still come back to bite UK pensions in a nasty way.
Despite passionate articulation, Stella was alone in her protests and this risk, while recognised, was assigned a green status
Workplace pensions and auto-enrolment
Bob Ward ably explained the potential for a capacity crunch, Henry Tapper wittered on about the need for better buying by employers and there was general concern about both a crunch on advice and a crunch on capacity as we move towards the end of 2015.
With 100,000 employers due to stage in October 2015, the risk of non-compliance with AE regulations and the failure to install and manage the pensions for so many companies was considered scary.
There appeared to be a Mr Micawber like optimism in the room that something would turn up, so much to the frustration of Henry and Bob, this risk was not considered critical and was awarded an amber risk rating
Two red- Deficit funding and a failure to deliver the Pension Freedoms
Two Amber– Regime Change and the failure of Auto-enrolment
One Green– the risk of Scotland coming back to bit us from behind
If you aren’t one of the Pension Play Pen risk committee but want to add to the discussion, please append your comments and suggestions below.
The next Pension Play Pen lunch will be on Monday February 2nd- same time (12.30) -same place (Counting House pub). Put it in your diary!