Not all prejudice is ill-intentioned, I know the author of this comment on a recent blog. He is not ill-intentioned – just short-sighted.

There is no one interested to have defined benefit pensions in the UK. They are seem as risky, expensive, etc. In a Globalised word there seem notti be a place for these! Hmmm,,,

The author is from South Africa (where DB has been expunged from the retirement system in favour of retail savings). I suspect he was having an off day with his keyboard but he articulates a point of view that I quite understand. The retail savings industry in the UK would rather we saved into retail savings products than invested through collective plans.

Ironically, some of the largest and best funded DB plans are providing secure pensions to the architects of the retail savings environment. That retail savings environment that is the successor to the “risky, expensive” DB plan.

The most remarkable example is those who work in the Treasury, who see a world where retail savings products are the exclusive choice for retirement saving.

Those Treasury folk are looked after by a tax-payer sponsored DB plan.

Interested in good outcomes?

If we look at the average DC pot at claim , we get a number around £36,000. This would buy a comparable DB annuity of around £1000pa.

According to Unison, the average DB pension paid from a Government DB scheme is £4,500 pa. This is four and a half times the average DC pension and – were a transfer available, worth around £150,000 as a DC pension pot.

The State Pension is now worth nearly £8,000 pa, it is a DB pension that is earned from a lifetime of NI contributions or credits. It is worth well over £250,000 to the average person, hence it being called the Lamborghini pension by Paul Lewis.

Anyone who seriously believes that DB pensions aren’t of interest to the UK, should remember that for most of us, DB is going to fund the majority of our retirement spending.

The authority of the expert

Social media makes experts of us all. We can bang out a comment on any device to hand and sound authorative, even if we have no basis of fact. The Treasury infographic we see above, supposes that (for all the freedom the Treasury has granted us) pensions (not just DB pensions) are no longer part of the savings culture.

If you spend your entire time talking to people about dismantling their pensions, liberating them into cash and investing the money in retail savings products, then it is possible to believe that no one wants, believes or participates in DB pensions (any more).

This peculiar blindness is called “myopia” or short-sightedness. It sees only the thing in front of it, the sales target, the bonus cheque, the referral to the next client. The social consequence of the advice given/taken or executed is secondary to the immediate value created. This “cash in hand” mentality is precisely the opposite of the long-term thinking of those who founded the benefits system on which we rely.

Beveridge planted trees which are  giving us shade today. The investment our parents and grandparents made in the NHS, our benefit system and our old age pension are a legacy that we can properly be thankful for.

My generation is enjoying its trees but are we planting trees for those who come behind us? Or are we selling them short with retail “solutions” that cannot hope to match the defined benefits we dismiss as “risky, expensive etc”.

Much is made of the greed of the baby boomers, I do not like the envy that fuels this attitude. But I cannot deny that we are chopping down other people’s trees and not replacing them.

What Beveridge and those around them had, was a big picture for the future which inspired them to build for the long-term. What myopia gives us is quite the opposite.

Building trees for the future

The most remarkable thing has happened in the thirty-three years I’ve been doing this job. We have seen our country recover from being the laughing-stock of Europe and the world to our current elevated state. Despite all the systemic problems we have with debt, we have dramatically reduced poverty in old age over this time but even so

• 1 in 7 pensioners (1.6 million or 14% of pensioners in the UK) live in poverty, defined as having incomes of less than 60% of median income after housing costs.
• A further 1.2 million pensioners have incomes just above the poverty line (more than 60% but less than 70% of median income).  Source ; Age UK.

We cannot let those of us who have neither the opportunity or the means to save, fall behind the wayside. The welfare system, with proper DB pensions at its heart, has delivered great improvements, now it is under threat from myopic Government policies and from the myopic advice of some in the financial services industry.

Alternative facts

I don’t control my readership, people choose to read on this blog what interests them; over time you see trends developing. One of those trends is that people like to read about DB pensions.

Their interest is I hope because there is insuffecient debate on what is happening to our DB pensions and what we can do to make sure that our children and grandchildren have the same quality outcomes that people retiring today – have got.

If we lose sight of the future and focus on today, we lose the impetus to save – to invest – and to secure promises for the generations to follow us. The interest in this blog is evidence that many do not want this to happen.

That is why I told my South African friend, that by claiming there was no interest in DB – he was dealing in “alternative facts”.