I took pleasure in watching a balanced positive program on the Pension Revolution last night. Well done ITV.
Three of pensions best spokespeople, Tom McPhail, Ros Altmann and Katie Morley talked to people of an age to do something positive with their pension savings and talked “options”.
What came out of the program was how pleased people were to have their choices laid out in front of them- this will come as welcome news to Pension Wise. In my experience, people like to be presented with choice though they don’t want to be left with options, they want one of them to magically turn into a solution.
In 30 minutes, you can only provide the equivalent of a brochure, though an example of scamming was included by way of balance.
If Katie, Tom and Ros had been with me at 8 am in the morning, I could have shown them a group of civil servants who are dedicating the next three years to making sure there is a third choice for people winding down in later years.
I’m talking about the DWP Pension Strategy Team who have listened and- contrary to some trigger happy reporting in the pensions press – are now turning the collective aspects of the Pension Scheme Act into the detailed law we need to help.
By help, I mean real help. Not a means to line the pockets of the financial services industry with product that seems to benefit everyone but the people who invest in it, but a simple system of pension spending that allows people to convert their pension pot into a regular income stream.
The new emphasis within the DWP on focussing CDC as an option for those with pension freedoms marks a substantial shift of emphasis in how CDC will be targeted.
The DWP team we met with cannot of course make this happen on their own. They will need the support of the politicians who will govern the DWP when a new Government is formed. I expect that whatever new configuration of parties , there will be scrutiny of the work on collectives.
But this new found focus on providing a solution to the people who do not want to be trapped in an annuity or to manage their own pension , will , I am sure, see CDC through.
I also found a realism about the delivery of the new CDC regulations. As I had suspected, it will not be as simple as allowing schemes to be set on an actuarial whim. Allowing a third way between DC and DB will mean not just writing the legislation for this new way, but re-writing the legislation for DC and DB. This will be a major task that is unlikely to be completed in a year.
It took a few minutes to open Pandora’s Box and let the pension freedoms fly. But it may take a few years to get the solutions people need to move past drawdown and annuity.
When I watched the Pensions Revolution I was struck by the honesty and decency of our society. There followed the grilling of Cameron and Milliband by Jeremy Paxman and a studio audience. The democratic process that enables programs like these to be made and allows people like me to write as I please, is something we can be very proud of.
If part of the price we pay for this freedom is a fiendishly long and tortuous legislative process, well that seems a price worth paying.
So I will continue to support the development of CDC throughout the next parliamentary term. Even if it takes most of that five years to get the CDC up and running, that is no great hardship, if what we get is a robust and long-lasting improvement to our choices in retirement. If CDC ultimately proves successful, it may be an alternative to our DC products in accumulation, maybe even to those areas of DB which are most troublesome.
There are international models such as New Brunswick which we can follow as we get further down the line, but for now, I am focussing on how we spend our DC pots. The good news is that help is on its way!