A lot of what we have been discussing with regards pensions this year has been “policy dependent”. We need Government to adopt a policy and then legislate for it and we hope that some of the good ideas that the Government has had will find their way into a Pensions Bill to be announced in the King’s Speech on November 7th.
But it took the Pension Schemes Bill nearly 3 years to get Royal Assent and even if we get a Pensions Bill , it is unlikely to result in enacted legislation before 2025. Add to this the inevitable regulatory guidance that we seem to need before we can lift a finger and we are unlikely to see change implemented until well into the second half of the decade.
I will be 67 in 2028 and do not intend to wait around till then to get better value for my money, consolidate my pots, swap my pot for a pension and to make my money matter.
So I cannot wait for CDC 3.0 (decumulation only), a pension dashboard to find lost pensions, a superfund to save my DB plan from buy-out or VFM tests that actually make sense. I am sure these things will come, but not in time.
I need to make the most of what we have rather than wait for others to decide what I can do. That goes as much for my professional work as my private pension planning.
Failing innovation- let’s repurpose what we’ve got
The pension landscape is strewn with the shards of unfinished business. Everywhere I look on my computer, I find consultation responses to pension initiatives that are going somewhere slowly. I wish Government well:- but right now I’m going to focus on what we’ve got and try to make the most of it.
We have a number of notable success stories in pensions
- A working state pension that is increasingly giving dignity to those in retirement . It provides a common purpose to pensions – a wage for life.
- A developing DC retirement savings system through the workplace
- A still functioning DB system which works for the public sector , offers DB accrual to over 10m people and pays pensions to as many more
The State Pension – at the heart of what we do
By far and away the most efficient means we have of putting the right money in the hands of the right people is the state pension, our common purpose as pension people should be to support the Government to make the most of what it is and retain the Triple Lock
Those who want to find another way to get the state pension to a level that it provides dignity in retirement , should explain.
A developing retirement savings system
Auto-enrolment is working and so are workplace pensions. They may not have reached peak VFM and may not yet make our money matter as it could, but we have a success story on our hands, our large master trusts could become the envy of other nations.
We now have to turn them from schemes that save for pensions, to schemes that offer pensions. In time I expect to see that process see many turn towards CDC but that will take time.
Right now – we can repurpose DC savings schemes by offering people better retirement options using simple choice architecture that steers people towards purchasing a wage for life.
Whether that wage is provided by an insurer or by a pension scheme is an open question for people to decide, but I see scheme pensions developing as the obvious choice offered by fiduciaries.
An ongoing role for DB pensions
Defined Benefit pensions are far from dead. If the DB funding code is retained in its current draft form, it may be balls-achingly difficult for most DB schemes to get further than they’ve got – requiring them to hand over the keys to insurers or the PPF.
However, there is sufficient momentum from the Mansion House Reforms (supported by both Treasury and DWP) for me to feel confident that DB schemes will be able to maintain current levels of risk (with the sponsor’s consent) or indeed take on more risk (if there is commercial reason to do so).
Many in pensions agree. It is not just the weight of money in DB schemes but the weight of legislation that supports the system, the depth of understanding of advisers and trustees and the wealth of support services from lawyers, accountants and actuaries.
Repurposing what we have in the interests of ordinary people who share a common purpose of wanting a wage for life to give them a dignified retirement, is a worthwhile aim for those who want to make a difference. I suspect I have 5-10 years to make a difference and I cannot afford to wait till the end of this decade to start!
So I am turning my focus from shaping policy, legislation and regulation, to a more practical way of going about things. I want to help get things done and you will be hearing a lot more from me in the coming months about how we can make the best of what we’ve got, without waiting for what might never happen.