A delight from the Pensions Regulator!
On my way home from Trafalgar Square I had a chance encounter in Queen Victoria Street with the Chair of TPR.
Pleased to see that excerpts from https://t.co/a3FlbMdD0g are on @TPRgovuk prospective CEOs required reading list. pic.twitter.com/vyCN4y5upB
— Henry Tapper (@henryhtapper) August 1, 2022
Maybe I was a bit weepy after witnessing the Lionesses singing Sweet Caroline, but I became quite emotional when Sarah Smart drew from her bag – excerpts of my blogs, which she claimed were being shared with candidates for the vacant post of CEO.
-
- My blogs
-
- The friendly regulator
I’m looking at the photo above and they are definitely my blogs! Power to the Chair of the Pensions Regulator – thank you for reading and sharing!
A delight for the Pensions Regulator
My regular correspondent and sometime contributor to this blog, Jim Hennington, has drawn my attention to the latest guidance on workplace pensions from the Australian Regulator – APRA.
Inspired by my brief encounter – I’m reposting!
If the Pensions Regulator in the UK, is reading this blog, could it think long and hard about what APRA is doing, I think there are profound lessons for those who govern our DC plans. Jim is commenting on this post from PWC’s Nathan Bonarius.
Here’s what Jim has to say – I hope TPR will read and share this too!
APRA is proposing stronger requirements to quantify and measure member outcomes. It’s vital to note that ‘good investment returns’ are not an ‘outcome’ of super per se, they are just an interim step along the way. IMO the outcome of superannuation/retirement for members is how much gets paid into their bank account every month in retirement. A ‘high balance’ at retirement is also not an ‘outcome’ of superannuation really – as the job of superannuation is only half done. People still have a couple of decades to go….
A bad member outcome in retirement would be for your income to dry up or run out while you’re still alive. Or to end up dying with a huge lump sum that you could have enjoyed as income.
The scope of a super fund’s role has expanded from ‘great investment returns’. It now includes ‘great consumption plan’ (to use super to replace your salary when you stop work – and maximise your retirement income). Luckily actuaries have been working on these techniques for centuries.
A great consumption plan!
This is what DC workplace pension plans in the UK currently lack and very much need! We need to find better ways to spend our savings. Drawdown is too hard, annuities are too expensive, cashing out is only a short term fix and not a long-term solution.
We need some way of turning pot to pension as we can’t take it with us when we go, and we don’t want to run out of income before we run out of breath!
Luckily actuaries have been working on these techniques for centuries.
We spend too much time on a “wage for life” when many people have no interest whatsoever in this. More to that, their possibility to save over their working career is not that great, and the resulting amount is quite small.
More and more people have moved the goal post to have some funds to retire a bit early (57 – 62), especially if their work is hard and physical, and rely mainly on State pension for a “wage for life”. As a result, we shall expect that State pension, like in the U.S., increases in real terms and gives a higher replacement rate, even if it starts a bit late in life (67/68 etc).
The Australian system is probably better, the Old Age pension (OAP) is means tested, and a lot of planning is done around it. The majority of people are spending their Super funds by the time they are 75, and rely mainly on OAP.
We need to honest, low and medium paid workers would not have huge pension pots. As a result, we shall not plan for them for something they cannot be able to achieve!