A common solution to the “retirement savings challenge”.


collective scheme

I recently published Con Keating’s thoughts on why the “at retirement” decision is to complex. It is indeed the nastiest, hardest problem in finance.

The blog prompted my old friend Sandy Trust to point us to the paper he and Grant Thornton produced warning insurers to get their act together. The threat Sandy saw was from a recovering banking sector, he may have missed the unlikely threat posed by a resurgence of collectivisation from occupational pensions – through CDC.

Here is the argument that Grant Thornton used two years ago. The argument is that consumers will rise to the challenge , aided and abetted by financial services companies , giving them the tools.

It is broadly the argument put to us by Aon, – that individuals will be able to select individual glide paths to retirement.

I am far from convinced by the neo-liberal argument that if Government creates the right tax-incentives, people will become more financially aware, better financially educated and more adept at financial planning.

Time to stop kidding ourselves

“Nudge” works through inertia, it does not encourage proactive behaviours. All auto-enrolment is doing, is exploiting Government’s power to make good things happen by making it easier for us to behave well than behave badly.

We should not think that because we are saving better, that we are better savers, investors or planners. Auto-enrolment has got the Government out of making funded retirement saving compulsory , it has not solved the problem with pensions.

The problem with pensions is graphically explained both in Con’s article and in the Grant Thornton report.  The difference between the two is just one of confidence. Grant Thornton has every confidence that the retail financial services industry will be able to sort the nastiest hardest problem – so does Aon and so do most of the hopeful recipients of our nation’s retirement wealth.

While the apron is held open, most consumers are however underwhelmed by the prospect of handing over their financial futures to the management of drawdown by financial advisers (only 6% of us take financial advice) or to do all this ourselves.

We are kidding ourselves if we think that individual solutions can be found to collective problems!

The neo-liberal hangover

Those of us who rely on common sense will do well to read this article in the Guardian. It charts the progress of neo-liberal economics from Fred Hayek, through Milton Friedman into popular politics. The seductive power of personal financial empowerment persist to this day – evident in the destruction of our private sector collective pensions and the fierce opposition to their recovery (through CDC).

Like the last stages of a destructive hurricane, neo-liberalism flattens  those attempting to rebuild a pension apparatus. But collective pensions will re-emerge , because neo-liberal economics is not the answer to the nastiest hardest problem in finance

Neo-liberalism seeks pseudo-scientific justification by adopting the term “financial economics” (it’s all based on FE). But financial economics is hitting the buffers. It hit the buffers at the Royal Mail and it has hit the buffers at USS and soon enough it will hit the buffers with the 500,000 or so of us reaching the age to exercise our “pension freedoms”.

For all the talk, there is no capacity in the market to meet the needs of today’s pension savers and the problem will get worse until capacity is found.

I am happy to see a proportion of the mass affluent , finding ways to the Aon/Grant Thornton solutions, but I and Con and the Friends of CDC will continue to advance CDC as an open collective solution to the retirement savings challenge!




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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