Who are these pension delinquents?

Pension delinquents

The weekend has seen a fair bit of interest in pension saving. This morning’s Wake up to Money featured Ros Altmann celebrating 10m new savers auto-enrolled into workplace pensions.

Sunday’s lead story was Amber Rudd’s threat that she and the DWP were coming for future Philip Greens.

As I was finishing yesterday’s blog damning Rudd’s sensationalism, the phone rang asking me to come over to Broadcasting House. Within an hour, I’d done a three minute spot for television and snippets of what I said were reported on stations as diverse as Radio 2 and 6.

I focussed on the balance that needs to be kept between the needs of employers to keep going and the needs of the pension scheme to meet its obligations. I also called on ordinary people to pay more attention to the defined benefits pensions they are lucky enough to be in.

It is really not helpful to scaremonger and Rudd’s “coming for you” comments were also criticised by Wake Up to Money’s Louise Cooper who questioned whether this kind of employer delinquency was top of the pensions agenda.

Sadly, it seems it is the easy target for politicians seeking to make political capital. The wrong focus means that bigger problems – such as the net-pay scandal and pot-proliferation in auto-enrolment are swept under the carpet.

The success of auto-enrolment has been about employers behaving responsibly. A shame that the big message of the weekend was about the existential threat to pensions from sponsors unknown


The 10m figure hit – a pensions good news story

Ros Altmann’s contribution was eloquent on the need to protect defined benefit members, though she ran out of time to say much on auto-enrolment.

Sadly she had to spend more time calming the waters stirred up yesterday than celebrating the 10m milestone.

One person (not me) had emailed Wake up to Money , complaining that he/she had already built up several pots under auto-enrolment but had no way of merging them. The issue could not be discussed for lack of time.

Instead Ros chose to stay “on message”, celebrating the 10 million “new savers” milestone. Considering over  a million of the new savers may not be getting promised savings incentives (owing to their being low-paid and in the wrong kind of scheme), I’d half- expected the great campaigner to seize her chance.

But perhaps Ros was right. 5.30 am is perhaps not the time to get inside people’s heads with more pension issues. 10m new savers are about to experience their big contribution hikes in just over a month’s time. They need all the encouragement they can get.

We need a lot more of Ros’ positivity and a little less employer bashing from our Secretary of State.


Delinquency from opting-out?

I usually listen to Wake Up to Money because I’ll hear something new and Ros had been billed as talking of ways to get those not saving to save into something. This conversation didn’t happen.

But it should! If people don’t save into a pension in the workplace, it’s either because they’re not eligible for auto-enrolment or because they’ve opted-out. Those who aren’t eligible include those not on PAYE – the self-employed , those who are too old – too young and those who don’t earn enough to hit the auto-enrolment threshold (£10,000 pa).

We hear very little from those who opt-out. I hope that we will hear more. Some opt-out for good reason – they may be protecting their Lifetime Allowance. Some opt-out because they simply can’t afford to pay anything into pensions , but most opt-out because they do not see the need to save. We don’t know the splits or whether there are delinquents who choose to rely on the state rather than their own efforts.


Prioritising the real delinquents

It seems odd to use the same word to describe bosses who underfund pensions and employees who ignore them. But “delinquent” is a good word as it describes both minor crimes and – in a more legal context – a  breach of duty.

Where employers are in breach of duty , we have a Pensions Regulator with the powers to enforce compliance.  Will giving them extended powers to mount criminal prosecutions against miscreants choosing to invest recklessly, or saddle pensions with debt (presumably Rudd meant “liabilities” rather than “bonds”), make any difference?

Will any prosecution ever be successfully brought which relies on the basis of Rudd’s definitions? I think it very unlikely.

Where prosecutions can and are being made (both criminal and civil) is in the areas of pension fraud and deliberate non-compliance with auto-enrolment. Here pensions delinquency is under the scrutiny of the Pensions Regulator (with varying degrees of success).

Unlike the cases of BHS and Carillon – which the DWP cite as provoking this new round of sabre-rattling, the frauds against individuals from scams and from the non-payment of auto-enrolment contributions, are very real.

As I hinted at in my comments to the BBC, the non-payment of the promised incentive to those not qualifying for pensions relief at source, may be the most real fraud to future savers and one the Government do not want to talk about.


Policing the problem we can solve

Opting-out is another form of pensions delinquency – where it is done recklessly and with intent that the saver relies on someone else (usually the tax-payer) to make things up in later life.

We should not sanction this kind of delinquency, we should try to understand it and deal with it where we can. But surely this is no more the priority than chasing after delinquent sponsors of defined benefit schemes.

Instead, we should be focussing on the areas where the Pensions Regulator can make a difference, protecting savers from scams and the non-payment of promised contributions.

And we should be focussing on the matter not discussed today – how we encourage those outside of auto-enrolment to save for their retirement.

Once again, the good work of a million new employers is being undermined by silly-talk about bosses playing fast and loose with DB pension liabilities (and assets).

The real shame about Rudd’s comments this weekend are that they deflect from the good news story of improved pension coverage and focus on the wrong problems. 

We have the pension policemen, politicians need to focus their attention on the real problems and not grandstand for votes.

Pensions Regulator

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Who are these pension delinquents?

  1. Gerry Flynn says:

    Well it keeps the likes of Nigel Farage, Jacob Rees-Mogg, Boris Johnson et al off the front pages of national newspapers if only for 24 hrs!

  2. Terence P.O'Halloran says:

    Amber Rudd is , as you state, out of order.

    However whilst congratulations are the order of the day perhaps acknowledgement should be given to the originators of the auto enrollment initiative, the Federation for Small Businesses (FSB) and their paper from 1999/2002 ‘STEPS’ The Second Tier Employee Pension Scheme, originally designed to replace SERPS and given freely to the government actuary at that time. Employers DO care about their workforce and the welfare of their employees in work and in retirement.

    History shows us quite clearly that it is politicians and vested interest constantly ‘righting perceived wrongs’ and changing the rules that create the disharmonious chaos that often follows their actions. Amber Rudd is no exception.

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