My most vivid Steve Webb moment, was not listening to him utter his famous remark, that he didn’t mind people spending their pension pot on a Lamborghini. It was his cold condemnation of the Boots Pension Scheme for offering “sexy-cash” to its members, as an incentive to swap their defined benefits for a cash equivalent in a personal pension.
I wrote a blog about it at the time which you can still read here.
Steve Webb is a pensions legend, not least for his shameless re-writing of his own part in its history! I can forgive him that, he sees the greater good – or at least he is guided by a greater good – who thankfully has a sense of humour! So I come to praise Webb not to bury him!
Right now, Royal London are embarking on round 2 of their great IFA survey. You know it’s important because you get an email from Steve Webb himself.
You can take the survey if you are an IFA (or even if- like me – if you are not but help with transfers). The link is here
Transfers are important to Steve Webb and Royal London because a good proportion of the £34.25bn the Office for National Statistics estimate was transferred out of DB schemes last year, ended up in Royal London policies. Not only was this sexy to the marketing department, it was risky to the risk managers.
The last time insurers had this kind of a windfall from DB was back in the late eighties and early nineties. It took a decade (and a few billion pounds in reparations) to clean up. The sex industry is like that.
Another thing that Steve Webb said
Steve Webb is very good at saying things. One of the things he said – before he lost his seat was this.
The best guarantee of a pension scheme keeping its promises is to make sure that the sponsoring employer prospers. This new objective for the Pensions Regulator will help ensure that trustees and employers have the flexibility to come up with plans which deal with pension scheme deficits and benefit both scheme members and firms.
He was talking about a third statutory objective that he had helped introduce which would
“ensure an employer’s need for sustainable growth is considered during scheme funding negotiations and is properly reflected in trustees’ dealings with the employer”
This all went on in March 2013, back in the days of the “sexy cash” speech and around the time Philip Green was paying his wife a big fat dividend and Carillion were beginning to ramp up their disastrous strategy of getting bigger without a thought for their pension schemes.
I expect that Steve is saying a few prayers for his mortal soul right now and flagellating himself (metaphorically) for inciting tPR to take a lax stance during the next few years. Of course he (now at Royal London), and George Osborne (now at BlackRock) and the then CEO of tPR (now CEO of USS) and the then head of DB at tPR (now at PWC- advising TATA), are safely off message. The person left holding their baby is Lesley Titcomb, who very sensibly (for her sanity), has decided to pack it in next year after 4 years of seal-clubbing from the Work and Pensions Select and many others.
Steve has had the goodness to stand up for Lesley, though perhaps he could go a bit further and remind Frank Field that it was parliament that gave the Pensions Regulator the order to go easy on employers.
Has anything really changed?
The Pensions Regulator was also bequeathed something called “integrated risk management” by its past Executive Director DB (now at PWC advising TATA). This looks at meeting the strategic objectives of the Regulator by focussing on the strength of the employer (covenant), the funding of the scheme and the cash from the employer to ensure the pension scheme doesn’t go under and jettison members into the lifeboat (the PPF).
So obsessed has tPR become with all this, that it seems to have forgotten that there are two original strategic objectives , one of which is protecting the PPF and the other “protecting scheme members”.
Nothing has really changed in the past 5 years (since the days Steve Webb lambasted Boots). The PPF remains protected – now through the use of RAAs, the employer is now looked after (a good proportion of the improved funding position of our DB pensions is because of the removal of £34.25 bn of assets – and a good deal more in terms of booked liabilities).
And the members are still not being protected. Back in the early days of the coalition, members were being enticed out of DB into schemes like ARK and Fast Pensions. Now they are being put into fractional scams – as practiced in Port Talbot. Same problem and – unbelievably – same scammers!
The insurance companies and SIPP providers have found ways to legitimise the transfer, primarily by sitting behind the FCA and paying advisers contingent fees. But it’s the same old same old.
Meanwhile, old Rev Webb, has stopped railing about incentives and started preaching from his new testament, the gospel according to St George, where we are free to spend our sexy cash as we please.
Meanwhile – a few of us old fogies, who sat and listened to Steve demanding that pensions are paid as pensions, haven’t moved on. We’re still old testament! And – now I come to think of it – wasn’t it Steve Webb who advocated CDC as one of the 1000 flowers blooming in his DA garden. I wonder where he is on that now?