After a night at my old college reminiscing with Huw Davies about rugby 40 years ago, I admit to having a slightly jaundiced view of the world this morning! (Huw played a few games for my college team when up at Cambridge).
But reading this response to my blog on giving people with SIPPs the chance to turn their pot into a pension I have gone from groggy to groaning! But it’s helpful to have comments which show how little common ground there can be in pensions.
I’m confused why you’d be in a SIPP, but operate it like a DC pension (which are all allocated similarly if you go with passive defaults), and then complain when the value goes up and down.
Let’s get our terminology in sync. SIPPs are DC pensions, they are of the same genus as personal pensions, group personal pensions , stakeholder pensions, they are all types of savings plans which promise a pension but deliver no such thing. SIPPs go up and down in value based on the investment valuation, just like any other kind of savings plan (including ISAs and General Accounts. I can understand why you are confused as some SIPPs are converted into workplace pensions (GSIPPs) which are then required to come under the rules governing workplace pensions (defaults , charge caps etc.). The point is that none of this matters very much other than to pension experts, the problem’s the same – there’s no pension – e.g. income for life with these DC plans – any of them!
You’re no worse off than almost everyone else who is now in DC.
Absolutely right, as far as the fundamental problem of getting paid a pension from a pot, we’re all in the same boat (and all need the same lifeboat.
Even if you self-invest in your SIPP, then I hope you’ll accept your choices can give good returns and bad returns.
Of course I’m with you , Dave C! I think you mean by “self-invest”, by-pass fund management and manage your assets directly. Of course this leads to a range of returns depending on how well you choose and transact.
If they’ve been mis-sold then that’s a problem. But what does that have to do with SIPPs?
SIPPs just happen to be – for the most part, independent of the workplace “non-workplace pensions” as the FCA clumsily call them. SIPPs aren’t generally to blame for the problems a lot of people have with having money invested in the markets. The problem I’m talking about, Dave C, is not market risk but the insurance risk of money running out before we do!
The miss-selling problem (e.g. people not realising they are investing in a SIPP is not really a problem. Generally people differentiate between savings and investments, investments go down as well as up, savings go up (but too slowly to keep place with inflation). See Video on this blog
CDC sounds too good to be true. If pensions can’t work as DB promises, or individual DC pots, how does bundling DC into combined pots make them work?
Let’s forget about CDC – it’s confusing the issue. What I’m talking about is a lifeboat fund for people who want greater certainty than they get from drawing money down from their pot, without the costs of buying an annuity which result in poor rates of income. Pensions can and do work as DB promises. The State Pension provides a defined benefit as do public sector pensions, millions of people in the UK are enjoying DB pensions guaranteed by employers in the private sector. DB works around the world because it provides a pension – a lifetime income!
Shuffling and rearranging deckchairs to increase seating capacity? There are only so many chairs! And using more chairs up for regulatory and policy bottoms is likely to just take away more seats, than provide more,
Dave C, you’re better than this. The reason I have written all these blogs is not to give jobs to regulators and policy holders. It is to return people to a former state where, when you were offered a pension , you got a pension. The £80bn wealth transfer from DB pensions to SIPPs that occurred between 2016 and 2021 has given people pension pots they had no idea they could have had – “unimaginable wealth”. But these pots are not what is needed to pay a replacement income after a steel worker or postal worker stops working. What they need is a wage for life, paid to them as a pension.
So forgive me if I am a little testy with you Dave C, but it really is time that we started taking this problem a little bit more seriously.
Now where’s the aspirin to be found?