Pension Policy Institute – the NEW pensions landscape

landscape

Back in 2003 when the Pension Policy Institute was born, it produced a report on the pension state of the nation . PPI now means a bung from a bank and any google search for it’s likely to compromise your internet account! Hence the laborious title (above).

Now in 2016, for no immediately obvious reason, PPI’s revisited the old landscape and looked at what’s happened since. You can read the report here

http://www.pensionspolicyinstitute.org.uk/publications/reports/thenewpensionslandscape

It’s 100 pages long, so here’s the Plowman’s ten point summary

  • Today’s pensioners are better off than they’ve ever been
  • Future pensioners are unlikely to get current levels of pension income
  • Auto Enrolment and the triple lock are likely to make things better
  • Increases to the state pension are likely to make things worse
  • Between 2016 and 2046 the amount the Government spends on pensions increases from 5.3% to 7.2% (triple lock and State Pension increases)
  • Pension Inequalities between rich and poor, men and women, have decreased (since 2003)
  • The short term dip we’re about to see in retirement incomes will be reversed by AE
  • 1.6m pensioners are still living in poverty
  • The New Pensions Landscape shows there’s a clear strategy in place for pensions 
  • The new strategy that’s emerged from the Pension Commission has yet to settle in

Things have got better!

What is weird , is that over the period , Britain’s defined benefit pension schemes have been closed first to new entrants and lately for “future accrual” and Britain has slipped down the accursed Mercer index – to general shame.

The PPI point out – quite rightly – that Britain has not collapsed as a pension provider but got on with the rectification of the state pension and put in place a new private savings system. Despite blips (WASPI being the best known), pensions are fairer and pensioner poverty has decreased.

Jeannie Drake, who spoke at the PPI’s “NEW pensions landscape” launch yesterday , suggested that having got to 20 now was not the time to twist in the hope of getting an Ace and 21. We should consolidate the gains we’ve got and not push for a 12% + contribution to people’s pensions. I’m not allowed to say who- but there was a fair amount of support for this from the floor, and of course from me.

HenryTapperLandscape2


Things are going to get worse

Just as we might have got used to things getting better, things are going to get worse as we’ll be seeing less people retiring on good Defined Benefits. Well that’s what the modelling says, but I think the long-term problem is that we’ve failed to convince employers (so far) that they have a commercial and moral responsibility for organising workplace pensions that actually work for staff.

Much of the debate focussed on just this point. The old contract between Government , staff and employers – which prevailed between 1960 to the early years of the new millennium worked – because each party respected the other.

What has gone wrong since then has been that Government has dumped on employers so much pension baggage that the metaphorical camel has collapsed and is refusing to go the extra mile. The Government continues to pile on the agony, only yesterday we saw the publication of a horrendously difficult paper from the DWP on how employers should put right Guaranteed Minimum Pensions for staff – come on -give employers a break.

And instead of inspiring employers to get involved with providing new fluffy workplace pensions so that staff can see work as a means to an end, the Government has sold auto-enrolment with the wonderfully exciting slogan

It’s the law


Things may get better after that

Jeannie Drake, who is for my money, the #1 person in Government for pensions -was spot on yesterday. Until we get employers inspired to really sell this pension saving malarkey to their staff, auto-enrolment will be a compliance exercise which will fail, the moment the Pensions Regulator’s back is turned.

We need bosses to fall in love with pensions as they did in the second half of last century, or at least to see them as a key part of how they reward staff. Simply telling employers they have to have a workplace pension is not going to achieve this.

Some kind of pension evangelism is needed, along the lines of what Ros Altmann was trying to do in the latter days of her reign as Pensions Minister. But the push needs to come from higher up the governmental food chain.

The Treasury has, so far, been far from helpful, encouraging the LISA as a competitor to workplace pensions – undermining the tri-partite consensus between employers, Government and staff before it’s settled in,

It is Hammond time and May time and time we had a proper statement from the CBI and the FSB and the Unions getting behind workplace pensions and auto-enrolment.

Finally, and this is the most important thing of all – for fairness and equality. The rosy picture being painted by the PPI of the NEW pensions landscape, is painted in the light of the triple lock. It assumes that the triple lock remains in place after 2020 and long after at that.

This means a massive hike in GDP spending on pensions from 5.3% to 7.2% (around 40%). We can only do this, if we accept a new contract between generations which assumes we will look after our older people financially through pensions.  I don’t see that contract being discussed at the moment (though we touched upon it yesterday) and at a Westminster and City Conference earlier in the day.

That contract will have to consider more than just income – it will have to consider the capital costs of long term care which is a social problem aligned to pensions and one that is returning to the debate.

My view is that Britain can (despite all the uncertainty) afford proper pensions and we can find a way of funding long term care within the pensions framework. I urge the Government to say this and to continue the direction of travel of the past 13 years.


The Point of Publication – the NEW Pensions Landscape

I like the PPI, they do things for good reasons. As I have been writing this blog, I have been understanding better the point of publishing the NEW Pensions Landscape.

It is to remind us that – in the absence of a NEW Pensions Commission, it is up to those who have an interest in pension policy  (within and without Government) to work out just how seriously we are going to take our promises to future generations.

The decisions we took in 2003 have (surprisingly) been implemented. We now have to make sure that these decisions stick and that the direction of travel we set out on then, is maintained.

This document, which I urge you to read, is an important stopping point along the road.

landscape2

 

About henry tapper

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