The decision of the High Court to overturn the Pension Ombudsman’s ruling that Ms Hughes could take benefits into an occupational pension scheme set up expressly to invest in overseas property may have wider ramifications than outlined in my recent blog.
For Ms Hughes’ earnings were not connected with any occupation related to the occupational scheme she wished her pension credits to be transferred to. The judge broke the link between work and the pension, confirming that Ms Jones could choose her occupational scheme so long as she was occupied!
Ms Jones is now free to take her savings for a dip in the sea!
Weakening the link between work and pensions
So if the scheme rules permit, I could join the Unilever of HSBC or even a Local Government Pension Scheme and transfer my benefits there, whether I worked for those organisations or not.
Of course, the trustees of those schemes can restrict entry to employees of the sponsor (and do), but there’s nothing to stop me applying to the HMRC for an occupational pension scheme number and setting up a scheme like the one Ms Hughes joined and suggesting that those employed at Unilever, HSBC or even a Local Government Scheme, transfer benefits as pension credits so I can invest them in Cape Verde beach-huts.
Good news for the “vertically integrated master-trust”!
All of which will come as good news to those at Willis Towers Watson, Mercer, Aon, Goddard Perry and Capita, all of whom have set up occupational pension schemes to accept transfers of benefits from other occupational pension schemes whether the individual beneficiaries have worked at these consultancies or not.
Indeed, the distinction between transferring an occupational pension benefit or rights under a personal pension is now no more. I don’t know what Royal London arrangement Ms Hughes transferred from, that appears to be irrelevant.
So if you are in the business of advising on money and want to be paid for it from the money you advise on, the way is now open for you to set up your own occupational scheme and invite everyone to the party.
There is nothing that the Trustees of the Scheme you built your retirement pot can do if you choose to take your money away from them and invest in another occupational scheme and there’s nothing that Royal London or any other personal pension provider can do to stop people doing as they please- provided there’s an HMRC pension number attaching to where the money’s going.
This is the law, it’s every bit as much the law as Auto-Enrolment is the law. The law is not protecting people from the consequences of their own action , and trustees who stand in the way of people transferring benefits for the purpose of buying parking lots in Dubai or beach huts in Cape Verde are breaking the law.
Remember when companies were proud to offer staff a pension?
There was a time, and it wasn’t that long ago, when companies like Unilever and HSBC ran occupational pensions to attract, retain and dismiss staff when they retired. Now the Oxleas NHS Foundation Trust can suggest to prospective staff they might be better off out of the NHS pension (and on a higher wage).
We may mourn for the time when being a member of the company’s pension scheme was something to aspire to, a perk of the job. But people are now being taught that all pensions are much of a muchness. Of course it doesn’t matter what pension the 1.8m small employers staging auto-enrolment sign up to- because pensions are not the employer’s responsibility.
Breaking the link between an employer and the workplace pension would be disastrous.If employers were allowed to think, as Oxleas clearly does, that it has no responsibility for the long-term financial welfare of the staff it employs then pensions will be no more than a compliance requirement.
If employers are no more interested in the outcomes of there workplace pensions than to let Ms Hughes blow her savings on a parking lot in Dubai or a beach hut in Cape Verde, then why bother?
The long-term success of workplace pensions does not depend on auto-enrolment (which gets the ball rolling and keeps people saving), the long-term success depends on the outcomes of the saving. Whether all this enrolling and re-enrolling and careful monitoring of contributions is worth doing depends on the investment of Ms Jones money.
Pride in the job and the job’s pension?
I am very worried that occupational pensions are no more. What we have instead is workplace pensions where the employer has no ownership of the choice of the pension, no interest in the performance of the pension and is unable to control the outcomes of the pension. In short we have employers who are being treated as if they were no more than collection agencies for the DWP.
What is missing is any form of Pride in the Job. Every day I hear employers and their advisers discussing workplace pensions as if they were an encumbrance to the smooth operation of the payroll and HR functions. I don’t hear discussions about managing the auto-enrolment opt-out rates because most of the time i am speaking to employers and their advisers, the Pensions Regulator is sitting beside me!
But there is too little pride in providing a workplace pension these days and part of the reason for that rests with the High Court and its dilution of the value in the phrase “Occupational Pension “.
If you would like to invest your pension in Cape Verde Property or similar, here is the link to bespoke pension services who will happy to liberate