I’m sorry to disappoint the headline writers at the BBC, but pensions are not about to change very much, are not in crisis and aren’t really worth the headlines they are getting.
Those were the stunning findings of a group of pension experts holed up in windy Worcester on a stormy January evening.
Here are the four great non-stories your headline-writers will not print (but we discussed last night).
- Defined benefit schemes are finally getting their shit together and recognising that integrated risk management means managing your pension with a mind to the risk to the sponsor, to scheme assets and to scheme liabilities.
- Defined contribution schemes are waking up to their being savings plans not pension plans.
- Ordinary people are taking their money away from workplace pension schemes, because they can.
- There is no obvious way to convert a self-owned pension pot into a pension.
This does not add up to a crisis, it is just a stage on a circular journey which hopefully will take us back to where we started in 1950 or whenever. Because, despite all the tra-la-la, for the ordinary person, nothing has changed or is likely to change anytime soon.
We learn, we work, we stop working and put our feet up. Pensions are our way of putting our feet up, or at least doing what we want to do , rather than what our bosses or customers want us to do.
In place of a wage from employment , we expect a wage from investments. This is incredibly boring as it isn’t contentious and it tells us that in basic human needs, the world hasn’t changed any since the second world war (or as long as most of us can remember).
Crisis what crisis?
There is no story at Carillion, at least no story that spells that pensions are on the brink.
It was not pensions that brought Carillion down. Carillion brought its pension scheme down (as the FT reports).
Mr Rubenstein said that if banks and governments had thrown Carillion a financial lifeline last week there might have been an opportunity for Carillion to restructure its pension debt.
“What brought down Carillion in my view was they simply ran out of funding,”
This is not a pensions crisis, it is a local problem – in the grand scheme of things we will be able to put our current troubles in a wider historical context and be amazed at current hysteria.
In the 80s and 90s, defined benefit pensions were worried about being in surplus and in the last twenty years, they are worrying about being in deficit.
Over the last five years, the way we are building up pensions has changed, fewer people are building up pensions at a fast rate and more people are building them up at a slower rate. The overall picture is one of more people saving for a pension but with shallower resources.
If there is a potential crisis, it’s that – as yet- we haven’t got a way to turn these savings into the retirement income that people think they’re getting – “workplace pension”, the clue’s in the title.
We have abandoned the idea of guaranteeing people a wage for life by forcing them to buy an annuity, but we haven’t given them a better alternative. Or at least Government’s call for innovation have fallen on deaf ears. At the moment we are in the hands of the wealth management industry who are showing conspicuously little interest in finding a solution to the hardest, nastiest problem in finance.
Instead of looking to solve these problems, we take each corporate failure , as indicating pensions are on the brink. This is the BBC headline which prompted this article. Some 28,000 pensions at Carillion are on the brink of going into the PPF and of being paid out at a marginally lower rate than had they been paid by the now defunct employer. This is unfortunate but it is not a crisis.
The PLSA warn that up to 3m of those lucky enough to have a defined benefit pension , could find themselves with someone else paying the pension at a slightly lower rate. This is taken to mean the wholesale dismantlement of the system of workplace pensions we built up since the second world war.
I am very glad that Mr John Ralfe has stood up and said something sensible about this. As he has said a lot of silly things recently, I am going to quote him – with approval- for this.
The PLSA said there was a “real possibility” of a collapse for more high-profile pension schemes, and that one solution could be the pooling of resources into “super-funds”, which would then have bigger investment opportunities.
Pensions consultant John Ralfe has described the super-fund plan as “outrageous”.
He said there was “no crisis in defined benefit pensions, so there is no need for crisis measures”.
His confidence is based on the existence of the pensions “lifeboat” – the Pension Protection Fund (PPF).
I’m sorry to sign off with yet another “non-story” but when John Ralfe is right, he is very right indeed!
FAKE NEWS is just that
Our pension system is changing, but our need for pensions is not. By faraway the most significant thing to happen in the past twelve months – and this is not fake news – is that 87% of Royal Mail workers agreed they would rather go out on strike than be left without a wage for life when they got to retirement.
For the vast majority of ordinary British people, the best bit of pension news – is no news at all;
just get the bloody things paid and leave me to read about something else over my corn flakes.
Consequently, the needs of ordinary people for boring predictability, and the needs of the press for “disruption” are fundamentally at odds.
The continued reporting of fake news about pensions being on the brink, not least by the PLSA, is driving a substantial proportion of the 11m people in this country with defined benefits, to swap pensions for wealth in what is likely to be (for most) a very unsatisfactory long-term deal.
Earlier this week, somebody – I’m pretty sure it was the Pensions Regulator got Google to drop an advert that pumped out FAKE NEWS on Carillion’s pension situation, on current options and (if you clicked through) on the loss of pension rights.
It is absolutely the responsibility of those of us who get pensions, to put our foot down and stop this kind or rubbish being pumped out. Whether it be sensationalist reporting on the BBC (to be fair to David Peachey, his article belies the headline) or in the Daily Mail (this FAKE NEWS has caused a lot of heartache) or indeed in Google, people are being bombarded with stories which are ill-researched and sensationalist.
Work is boring, pensions are boring – there’s a synergy there.
Sorry guys, this blog is not giving in to the “quel horreur!” school of comic-strip journalism that sees pensions tinkering on the brink of an undefined abyss.
Pensions are rebuilding – they are more inclusive but shallower. We save for a pension but have no good way to exchange our pensions for a wage for life, these are the facts of life in 2018. Let’s get on with making pensions better rather than throwing rocks at them