Are John and Norma right – are we facing the end of mass-retirement?

The weekend has seen an extended conversation between those looking to “lockdown” pension schemes and those looking to cut them some slack. For pensions, the problem is not just the fear of weakening sponsor covenants but the ongoing cost of Qualitative Easing which has driven interest rates so low they make de-risking an existential  risk to sponsors.

A point made succinctly by Ros Altmann

De-risking works when the risk-free rate is closer to 5% than 0%, right now – de-risking represents a re-risking to employers (a shifting of deckchairs), the market is not offering a solution to the employer’s problem.

Ideological positions need practical solutions

Where John Ralfe’s position is weak, is it does not identify what would happen if it were followed. John seems to disregard all calls for a statement on the consequences of the actions he would have us take.


John’s tweet is a favorite of Paul Lewis but unlike Paul, John does not provide solutions to people’s problems (which may explain him having around 2.5% of Paul’s following on twitter).

The elegance of de-risking flounders when we try to find an alternative once we have closed the tap on open and indeed closed defined pension schemes. Where do we go from there?


The hope for the future is that DC will take the strain. The Pensions Regulator clearly thinks that individual DC will democratize pensions giving DB like pensions to the masses.

But this falls at the first hurdle. Employers are not prepared to fund DC pensions only to see the proceeds scattered on the winds of pension freedoms. If pensions are to be democratized  (through auto-enrolment) it will be at nowhere near the level offered by DB accrual, or even the reduced benefit of the PPF

Add to this , the mess that is presented by tacking on pension freedoms as the tail to the DC donkey and you can see why there is such despondency amongst those who think deeply about pensions (including John Ralfe)

Life after pension lockdown?

It is easier to consider the post DB world through the long-lens offered by Norma Cohen. It presents a dystopian picture of a retreat in the 21st century from the optimism of the last.

This is what is offered by auto-enrolment and the current funding levels for workplace pensions. It is what the Pension Regulator’s recently published strategy document is about.

It is a solution that relies on us working longer with increased reliance on state pensions for those on low incomes and a drawdown on accumulated wealth from the mass affluent.  But as Norma points out, it is not a vision that suggests those in their later years will have much security from a lifetime of work.

Norma presents the logical conclusion of the position laid down by John Ralfe and followed by the Pensions Regulator in its proposed DB funding code. It is a stark lockdown world, far removed from what most of us expect from our pension system.

Should we settle for less?

It was a weekend when many of us realized that for an indeterminate time, we will have to settle for less. We may not return to the freedoms we enjoyed till this spring for some time to come.

There are many, Ros Altmann and Michelle Cracknell are among them, who argue that we must continue to live something close to a normal life, for all the worries of a creaking health system. We must, they argue, find a way to deal with the pandemic that sits within business as usual.

It is right that we have leaders who will not settle for less but strive to hold on to a vision of pre-Covid normality just as it is right that those arguing against the DB funding code, strive to retain the three pillar pension vision that underpins the OECD’s view of retirement funding the developed world over.

That the two discussions happened at once , over the weekend, may not be coincidental. I think they are linked – at least they are for me. It would be interesting to hear the views of others on where they stand on this.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Are John and Norma right – are we facing the end of mass-retirement?

  1. ConKeating says:

    John Ralfe should pose his question as to the relative riskiness of open and closed schemes to the Pensions Regulator. It was their view that closed schemes are riskier which led to this ridiculous proposed code. When I look at closed schemes they are clearly rapidly declining in the amount of accrued promises, and that is a, and arguably the most important risk exposure metric. Indeed I have looked at a few schemes this morning which have closed schemes – for none of them are their liabilities in the last forty years of the accrued scheme promises material to the sponsor employer – and that is with no funding at all. They would not be required to be included in sponsor employer financial statements.
    One thing is close to certain though – if we see this code, as we noted yesterday the cost of future service will simply be too high.
    This all makes enabling of multi-employer CDC all the more urgent.

  2. Bob Compton says:

    Totally concur with Con’s comments. Assuming TPR are hell bent on closing down private sector DB Schemes to protect the PPF (what perverse logic) DC must not be the solution, as it is the most expensive delivery mechanism for pensions. CDC used for pensions in payment is the only realistic way for DC pots to be capable of generating an ongoing retirement income at a reasonable cost in the current climate. So not only should CDC be opened up to multi employer Master Trusts, but should be able to provide age related cohort group pensions with the ability to vary liability by flexibility on the rate on increase paid from year to year (include the potential for a negative increase if conditions required. ( By the way no one seems to object to negative yields on government bonds!).

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