I’ve received a request from a journalist
I’m working on a programme about pensions that needs to be ‘blue sky’, conceptual and not mention the word pension
- pensions are too expensive (the corollary of “transfer values are fabulous”)
- saving for a pension in a pension plan is a rip off (charges/commissions/hidden fees)
- Buying a pension’s a risk , I might not live long enough to get value.
So Osborne rallied the troops with the populist mantra “no-one ever need buy a pension again. It worked, once we knew we didn’t have to buy a pension retirement savings became real again. For millions of people George gave them back their property rights.
“Conceptually” pensions no longer exist, in a “blue sky world” pensions are clouds. And here we have the problem, blue sky worlds are fine for a holiday but we need clouds and rain and snow to keep the world healthy.
The blue-sky concept is very popular, it even has a pension named after it, but it is not linked to sustainable futures. You may as well burn up all the coal in the world in the hope that you won’t be around to see the devastation! Pensions are a social insurance with a quite different purpose from the management of wealth.
Steve Bee and I had a little contretemps about this on twitter.
Steve got a lot of likes for calling me a pedant but he is wrong. Pensions are not lifetime savings, they are what lifetime savings turn into with the help of skilled financial craftsmen. To design an annuity and properly price it takes skill – you are guaranteeing something. The same goes for other defined benefits – like scheme pensions, it is hard work to make sure people get their pensions paid in full without bankrupting employers and future savers.
Most famously, we run a state pension system which most definitely has nothing to do with lifetime savings at all. The trouble is that we are forgetting all about the craft and skill and focussing on the blue-sky concept – as if we had only just discovered drawdown.
Trust is the answer
It seems to me pensions work best on trust. Pension contracts are all very well but they have not worked very well so far.
I don’t know what I’m going to say to this journalist chap, or how I’m going to say it! Am I supposed to be the person with answers? If so , my answers are to look to the past, when we ran a workable pension system on trust.
That means going back to basics and working out the principles we want to order the financing of older age. If that is what the concept of blue-sky thinking is about – we may have something to discuss.