Stretched and leaderless – “pensions” lurch into another crisis

Posted on August 12, 2022 by henry tapper

Do you remember back to January/ February 202? We’d all had another great year in 2019 and we were entering into a new decade with Brexit done, a new Prime Minister and a sense of continued optimism. I booked tickets to the PLSA investment conference in Edinburgh, booked an Air BnB and watched as Italy started going wrong. I went into UCL for a check up and met a doctor who warned me not to travel, not to use the tubes and stay at home. He said we had no idea how bad the coronavirus pandemic was going to get. He wore a mask.

The next great challenge

We went into March 2020 blind to the impact of the Coronavirus, those who knew were not heard and most of us considered that we would get through ok. Within a few days there was panic. I remember Aegon evacuating its entire Edinburgh operation as it found a confirmed case of Covid among its staff, the stock market went into free fall and on March 20th, as delegates from that Conference arrived home, the lights went out and lockdown arrived.

We were blind, we had no data, we had no experience – we could not imagine. Precisely as we are today. The FCA’s Consumer Duty, among other things, asks us to anticipate the needs of consumers , that means thinking ahead.

But we seem paralysed from developing an action plan to combat the next crisis, the cost of living crisis, because we cannot imagine what it is like to be faced with “debts no honest man can pay” (Springsteen). The FT reported yesterday , the anticipated  cost of fuel has escalated yet again…

“Auxilione expected Ofgem to set the price cap at “just over £3,600” when it announces the results of its next review, on August 26. That rise would take effect in October before the cap was expected to exceed £5k in the first half of 2023”

I spoke with Ros Altmann about this yesterday, it was a friendly conversation. I asked her whether the “hysteria” she was referring to , included Martin Lewis’ comments reported in the BBC. She thought Martin hysterical.

Here is Gareth Morgan, responding to her in the comments of yesterday’s blog.

Poverty, absolute poverty is now common. People who just do not have the income to meet their basic needs. Forget the appalling cost of credit for poor people, for many there is no credit available. If you were faced with the choice of no heat, no food or no house, would you still say the pension is fit to be used but only in 20 or 30 years hence?

I expect that I am considered hysterical too, for pointing to the impending crisis like the doctor in UCL, my facemask on.

I totally agree that we need a small pots strategy, just as we needed a pandemic strategy. We do have the data and I’ve been calling on those who were prepared to meet , to develop a cost of living strategy for their organisations

But you can’t create a cost of living strategy in a vacuum. The current political vacuum , with this joke election and a new prime minister arriving pre-discredited by her own campaign, means that there is no certainty.

As Sebastian Payne writes in today’s FT  

The first 100 days of the next administration will be the most challenging faced by a new leader since the second world war. The UK has already endured a summer with its government missing in action. It cannot afford to waste any more time.

Ordinary people can’t bet on getting bailed out. They should be preparing for monthly fuel bills in excess of £400. People need help and leadership and that means focussing on what really matters – getting the right money, in the hands of the right people at the right time.

Which is why the best that this blog can do , is mobilise those in positions of power, to provide support for those able to draw on pension savings at a time of personal financial emergency. Here is the comment of Brian G – a regular commenter on this blog, and someone who does provide support at MaPS (MoneyHelper)

One of the problems with our regulatory regime is it encourages a lack of action whenever something MIGHT be construed as giving advice.

Maps cannot take an initiative in this area unless they are clearly given permission to issue guidance about the use of small pots to cope with the cost of living crisis.

So  when people call the helpline we speak to them and do a mini fact find. We explore potentially relevant ways where they might be able to get by without cashing in pensions and if they are on benefits we make it very clear that they should clarify 100 per cent what effect it will have if they are on means tested benefits by taking some or all of their pensions.

If they have a real small pot we explain how that does NOT affect the amount they can pay into a pension in future. If this is not available we explain how UFPLS And we then explain the different ways of accessing their pensions. We never block people and we are very even handed.

Thanks Brian, we need this amplified as I’ll come on to explain in a moment.

For what it’s worth,  I’m meeting with senior people at MaPS on Monday to brief them of the meeting on cost of living I arranged with the Pensions Minister last month. I will be discussing with them what leadership they can show in the current crisis. One of the ideas I put forward at that meeting , was a coherent policy be created for people likely to use pension credit, with low expectations from their private pensions (e.g. what to say about small pots)

They couldn’t make the meeting on the 18th and they can only make this meeting on Teams, I have no great hopes. I have offered to meet at their offices.

Not quite leaderless

It was good to read Adrian Boulding’s help in the Daily Express (another good initiative from Rebekah Evans).

Adrian is not shy in recommending people use the pension tax free cash lump sum to meet household bills and reminds readers that you can take up to to three small pots (less than £10k each) as cash without knackering yourself with the Money Purchase Annual Allowance (NB Canada Life).

Adrian continues to show leadership and it’s a good thing he does. Where are Nest, Peoples and NOW on this? Where are Cushon and Smart? Where are L&G, Scottish Widows, Royal London, Aegon, Prudential, Aviva and Phoenix/Standard Life?

To return to the beginning. It feels as it felt in the early months of 2020. There’s bad things coming and the people who should be knuckling down and getting a consumer strategy in place to meet the coming crisis.  We need more of this

But this is not just about contributions, it’s about claims and we need strategies in place at all the major providers to ensure that when people come from their money, they get the support that Brian G talk with.

The Un-retirement

There is no consensus about where about one million over 50s , who have left the workforce since 2019 have gone. Dunstan Thomas has done the best research  I have seen ( a summary of which you can read here)

Some went on furlough and found they liked it, some caught Covid and still have long-Covid, some lost their jobs and are struggling to get back into work. There’s no doubt that some who hoped to stay out of the workforce will need to come back to work but we have too little data to know who will, who won’t and in what numbers.

But it’s clear that there are a great number of non-working 50+ adult in the UK who are living on savings. They could not have planned their cash flows for 2022-4 to include fuel bills at over £400 per month. For those who cannot get back to work, Gareth Morgan’s point stands.

Speaking with Baroness Altmann, she was of the view that there are very few people who will be so desperate as will need access to pension cash. She points to the fact that I have no numbers on which to base my “hysteria”.

I have no numbers , because even the Office of National Statistics does not have the numbers. We will know the numbers , as we know the Covid numbers – in retrospect!

Which is why we need leadership now, planning now and action now. The alternative is the kind of mess the pensions industry got into in April and May 2020, a mess it does not like to admit to, but which we remember.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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