I still want to be paid when I retire!

you work


Have you been watching the DWP’s recent television articles – the ones that ask you to get to know your workplace pension?

I want to know what bit of my workplace pension is the “pension”! The dictionary describes a workplace pension as a “regular payment made during someone’s retirement from an investment fund to which that person or employer has contributed during their working life”.

Until April 2015, a workplace pension had to be exchanged for an annuity unless you were pension rich (or very brave). Now there is no such requirement, I can find nothing in my workplace pension booklet that suggests I’m in line for a pension!

Could this be the biggest pension mis-sale of the lot? I’ve a good mind to write to Guy Opperman, the current pensions minister and ask him for some “guidance”!


For some time, I’ve been worrying about how I will manage my pension pot into a regular payment for the rest of my days. I really want to upgrade my pot for a pension but I don’t want to buy an annuity – which like everybody else, I see as poor value, inflexible and bad news if I die early!

Ideally, I’d like to give my pot to someone who can pay me a pension and – if I really needed it – give me a pot back.

Until recently, I thought that just a pipedream, but now I’m not so sure. It now looks likely that the 142,000 postal workers who have settled their differences and agreed a pension solution, will get the right to upgrade their DC plan so that they get a pot and a pension.

We’ve always been able to get a quarter of our savings as a tax-free cash sum (pot) but Royal Mail’s plan is to collect all the rest of the workplace pension savings and pay out pensions to people in fair shares.

That means that those who have saved hardest and longest will get pensions that are bigger than those who haven’t. But the pension people will get will be based on the size of the great big pot and not on a guarantee from Royal Mail. BTW this is known as CDC.

If it’s possible for 142,000 postal workers to club together and have a pension scheme rather than a lot of little pots, couldn’t it be possible for the rest of us?


By the “rest of us”, I mean nearly all of us. Apart from those of us working in the public sector, almost everyone has a workplace pension and everyone has some kind of “non-workplace pension”! The FCA published a paper early in February asking what we should be doing about the £400,000.000,000 knocking about in SIPPs, stakeholder pensions, retirement annuity contracts and personal pensions – none of which has anything to do with work.

And the DWP and the pensions regulator continue to fret about the security of our workplace pensions, not least because freedom and choice could lead them being over or underspent in retirement and not doing what they were given tax-relief to do – provide people with a wage on top of the state pension.

The rest of us could do with a default way to spend our pots. Which brings me to the title of this piece. If we really believe that tax-relief is granted so that workplace pensions can provide “deferred pay”, we should accept that the tax-relief is being wasted. It is being wasted by the rich who are using SIPPs as wealth preservation vehicles (e.g. inheritance tax avoidance) and by the poor who are cashing out their savings and buying second hand Lamborghinis.

If we are serious about upgrading our pension system, we should start with our workplace and workplace tax-incentivised savings and think how we can turn them back into a “wage for life”.

I hope that the payroll industry, which has a good commercial reason for seeing this happen, will prominent in calling for this to happen. Payroll has the capacity to regulate the way in which we spend our savings – it has been operating pensioner payrolls for decades and been doing a very good job of doing so.

The rest of us have need of getting onto a pension payroll and I hope that once the Royal Mail has got its new scheme up and running, other large companies will look to upgrade their DC schemes so that they pay a pension not a pot. And I hope that organisations, whether for profit or not for profit, will start thinking of ways to organise multi-employer, or even retail schemes – which will allow SMEs and private individuals to upgrade their DC pots to a wage for life scheme!

Meanwhile, work on getting the Royal Mail scheme up and running continues apace. For those with an interest in these things, this is how it looks from a technical point of view.


All of which will sound remarkably familiar, to those used to paying pensions!


you work

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in CDC, pensions and tagged , , , , . Bookmark the permalink.

4 Responses to I still want to be paid when I retire!

  1. Henry, please refrain from using expressions such as “like everybody else”. Unlike you I am a fan of the certainty of annuities. Like everything in in life there are always times and places but we surely have to value guarantees?

    We have now developed a savings and protection market place where the risk has been removed from the institutions and placed girly into the hands of the individual. Your comments merely perpetuate and encourage that transfer.

    Annuities not only have a place in Financial planning the provide a much needed certainty when population rather than cohort mathematics is correctly applied.

    Liked by 1 person

  2. girly should read firmly (iny response)

    Liked by 1 person

  3. henry tapper says:

    You placed “girly into the hands of individuals” eh! Reckon there’s a law against that!!
    Seriously, you are not alone in liking annuities, John Ralfe does too!

    Liked by 1 person

  4. Thank goodness I am not alone. There are too many fund managers and not enough insurance based minds and particularly voices lobbying for common sense and ‘sharing the risks among the many’ advocates involved in the discourse.
    There is a profound argument against the current leanings towards the “what if I die too soon brigade”.
    That is the very nature of pooled funding. How sad that the principal has been undermined by large finance house that feel that they alone can provide the necessary returns and then, to the individual cohorts of ‘smokers’, heart defect individual, ad nauseum only to witness, as I have, profound changes in the mortality statistics to the disadvantage of the 20 year old select life on standard mortality who has their eventual annuity cut down in payment value to somehow “be fair” (or is it fare [a tariff]) to some special case at retirement.
    We should return to basics and hopefully, when we leave the EU even female annuitants will have to acknowledge, once again, that their annuity rate cannot, and should not, be identical to a same age male.
    I can only hope that John Ralfe agrees with that also.

    Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s