Glass half empty
Imagine you are heading the motor industry’s trade body and you put out a statement telling the public that small cars are unsafe. It would be true in as much as tanks rarely come off worse in road crashes, but it would be pretty tough on small cars and their manufacturers.
This week, the PLSA put out a statement that was supposed to tell us that pension schemes with weak covenants weren’t safe. This is not what the public is hearing, they are hearing that defined benefit pension schemes aren’t safe, in fact they are hearing that giving your money to someone else for 40 or more years, isn’t a safe thing to do.
What the PLSA has done, amounts to a public relations disaster, that it did it to promote a solution which has no obvious advantages will make it a commercial disaster, the PLSA have alienated still further a large part of its membership. If I had a weak pension covenant , I would not be weakening it further sponsoring such talk.
Glass half full
I don’t sponsor a DB scheme but I know if I did, I would want my scheme to actively invest in making Britain more competitive, more productive and more secure.
The current DB regulatory regime, with its emphasis on integrated risk management, encourages a depressing downward spiral that encourages closure. Schemes have generally closed to new members, for future accrual to existing members and soon many will cease to invest, handing over their obligations to insurers or the PPF, the PLSA hope to jump the queue and accelerate the process.
This is not what the employers who I do business with want, nor is it want ordinary people want, the Labour party – who seem rather more in touch with ordinary people – want something quite different.
What do ordinary people want?
I am reading a very well written paper by the Canadian Public Pension Leadership Council. It was published earlier this year and is called “The Pensions that People Want”, it is the result of a national survey. I don’t know how different Canadians are from the British but I suspect “not much”. These are the key findings of the survey.
The survey results give rise to a number of key findings:
- The features of pension and retirement income programs that are valued by respondents coincide with features of defined benefit (DB) plans and, within limits, respondents are prepared to pay more to improve the quality of their pension/ retirement savings plans.
- There is a great deal of variation among respondents in terms of the confidence they have in meeting their targets for retirement income and retirement age, with members of workplace pension plans and especially members of DB plans being more confident than others.
- Canadians are finding ways to deal with inadequate retirement savings, including retiring later and working after retirement.
- There is broad agreement among respondents that maintaining living standards in retirement is a key objective, but this objective is interpreted broadly to include income to deal with various contingencies over and above the regular consumption of goods and services.
- The results cast doubt on retirement savings solutions based on individual choice of investments as they reveal little time is spent on retirement planning and self-assessed knowledge of retirement savings products is limited, as is confidence in managing retirement savings.
This is pretty much my view of the world and – if we take off our professional hats, I doubt that many of us really could argue against these findings.
Half full or half empty
We have a simple choice in this country, either we take the PLSA’s view which leads to the ultimate closure of the plans people want, or we take another view, perhaps the Labour Party view, which is looking for ways to keep DB plans open, perhaps on a different promise going forward, but with the emphasis on investment for the future.
It strikes me reading the Canadian study that younger people favour the Labour Party approach while older people favour locking everything down and pulling up the draw-bridge.
The young people I deal with – and I was with a room full of them yesterday morning (Share Action), consider pensions a matter of investment while the older people with whom I was with yesterday evening (CSFI) consider pensions a matter of banking and insurance. We need to keep the elderly comfortable but we need to invest for the future.
I believe we can do this using the kind of pension structures the Labour Party are advocating, and I work with much cleverer people than me , who can show that such structures are resilient and sustainable.
I am against the nihilistic determinism of the PLSA whose messages play well to the lucky few but offer no hope to those who come behind.
I am a man with his glass half full and I intend to fill that glass before too long. I do not support the PLSA, I do support the Labour Party’s pension policies and I intend to tell everyone I see in Manchester next week just that.