Ros Altmann is right.
— Ros Altmann (@rosaltmann) January 7, 2022
Both Ros and Steve Webb are quoted in a weekend article in the FT , calling on Chancellor Rishi Sunak to review the decision to only uprate the state pension by 3.1% in April.
This is from Steve Webb
“The government needs to accept that a 3.1 per cent increase doesn’t even deliver its own stated objective of protecting pensioners against increased living costs and think again about the April increase”.
“Energy costs in particular form a larger part of the budgets of older people and they will find it extremely difficult to absorb these costs without cutting back on heating or other vital expenditure.”
The Government clings to its existing measures, hoping to increase take up of Pension Credit and rely on the energy price cap, winter fuel payments and a £500m household support fund which would help low income households through the winter.
But the Government’s position on protecting the consumer is weak. Chris Flood’s article in the FT makes it clear that the current energy crisis was avoidable had the problems of the energy industry been addressed over the past twenty years. Flood’s conclusion is damning.
Ofgem’s failure to address this lack of resilience in the industry it regulates is identical to financial services regulatory failure before 2008-09. That it has happened so soon after the financial crisis should be a national scandal. Had ministers acted on the market reviews they commissioned, such as Sir Dieter Helm’s 2017 cost of energy review, many of these problems could have been avoided. But his report, like so many others, was shelved.
It is within the Government’s capacity to protect pensioners who are most vulnerable to this failure. The moral case for Rishi Sunak to review his decision is founded on this.
How should the pension community react?
We are in the business of helping people fund adequate retirements for those in later age. For the past sixty years, a sizeable proportion of our population did not participate in the pensions we have managed. this is graphically depicted by the charts below.
The UK pensions industry provides less than one pound in five of income paid to pensioners. The remainder comes from investments , earnings and dwarfing all else- the state pension.
Those great grey edges in the pie-charts tell us how dependent the nation is on the state pension and its top-up, the pension credit.
If we regard ourselves as pension professionals, our duty is to call for pensioners to be protected, whether they are in the schemes we manage or not.
It should not be left to Steve Webb, Ros Altmann, Age UK and other charities and NGOs to argue against pensioner poverty.
The insurers , asset managers, financial advisers, benefit consultants, lawyers, accountants, custodians and trustees that constitute our industry, should consider their positions.
Are we an industry that serves the wealthy or the wider constituency of pensioners?
I do not suppose that individual organizations will lobby the Treasury and DWP for the payment of a better increase in April. But I do think this is what our professional bodies should be doing. The ABI, PLSA, PMI and IA do not represent pensioners, but the commercial organizations they represent serve the orange and pink segments of the pie charts from which these organizations generate their profits.
We cannot have a Pensions and Lifetime Savings Organization that does not put the interests of pensioners first and foremost. We cannot have the Association of British Insurers, not concerned with the physical and mental wellbeing of the elderly. If we wish to profit from pensions, we must consider the interests of pensioners.
Our individual duty of care
For those of us who do not have “policy” written into our job descriptions, the issue is still important. It behooves us to be concerned for current pensioners, even if our customers are affluent.
If our focus does not include the outcomes of what we are doing, why do we call ourselves professionals?