Frank Field

Having the courage of your conviction is something we look for in politicians. It is not something that we have seen much in evidence recently. Had the current Government fulfilled on its many promises to the country, not least to transform pensions, then it would have maintained the handsome majority it carried into 2020 and could well have built on it. Putting aside the in-fighting that led to the aberration of Sept/Oct, Britain could now have had a world-class pension system.

But we have frittered away our advantage from pre-funding our pensions. The collateral calls triggered by the unnecessary spike in gilt yields at the height of the LDI crisis , cost us £166bn – effectively money given away to the banking system. In 2022 , we lost between £500 and £600bn (PPF v ONS) of our pension’s asset base, primarily because we hung on  and didn’t de-lever our gilts-gearing.

Just how badly we performed can be adjudged from this preliminary numbers from  the ONS which show that between the end of 2021 and the start of 2023, Britain’s pension stock was reduced by 29.1% over a time when the US and Canadian pensions fell by 4% and Australia rose by 4%. These are aggregate figures from all DB and suggest that – to a large degree because of the failed policy of “de-risking” our DB and DC plans, Britain lost nearly a trillion pounds of our national wealth.

This astonishing number , dwarfs the numbers bandied by politicians. Even at their most extreme, Reform’s proposals would cost the tax- payer “only” £120bn, for the most time, we are debating promises that cost a few billion here and there.

To a large degree, it has been successive government’s failure to get to grips with what Frank Field once called our “great economic miracle” that has been the opportunity cost of the first quarter of this century. We have  blown up the goose that laid the golden egg and are left with the nest and a few feathers. Thankfully, there is scope to reboot, reset or whatever other cliche you want to throw at the problem.

I was sent yesterday by Paul Brine, formerly of Dalriada, that Trustee firm’s submission to the DWP – published at the end of last year. It ends

We believe there is an incredibly exciting opportunity for DB schemes to contribute substantively to funding UK plc whilst at the same time supporting their members. It requires a positive mindset to adopt principles from life insurance market but that means stepping up the DB scheme’s own capabilities and processes.

Whilst this approach may not work for all DB schemes, creating an environment where those able and willing are supported in doing so can create a ‘win win’ for both members and UK plc.

You can read the written evidence below or from this link.

Pensions have been too hard a topic for the politicians to weave into their narrative over the past five weeks.

Last night we got more arguments about the non-event which is “triple-lock plus”. The real information that matters people, what happened to their DB pension fund , their DC pension pot and their future rights to turn pots to pensions is beyond the limits of public debate.

But those of us who are involved in the business of funding our pensions know damn well that we have blown the opportunity to put our house in order and are now swapping what’s left of our funded pensions for insurance policies that invest in little more than corporate debt.

I do not agree with all in Dalriada’s submission but I do agree with its main thrust

In short, we suggest that many (but not all) DB schemes, with the appropriate checks and safeguards, could safely increase their portfolio yield risk and thereby make available £-billions for the benefit of members and UK plc.

This conclusion seems self-evidently proven by what happened to the UK economy when our pensions still supported growth in the UK economy. The great advances in British social and economic welfare from the days of my childhood in the 1970s through to the early years of this century were fuelled by the availability of capital from the UK capital markets which was made available by pension schemes willing to invest for growth over time.

We had the courage and the conviction that our gross domestic product would grow to the point that pension schemes could cover the retirement needs , not just of those in schemes at the time but of future generations of savers who would still be saving twenty and fifty years hence. We are now twenty and fifty years hence and those savers are now seeing their pensions insured. Having lost a trillion to the markets, we are content to give away what is left, as a premium so that companies can rid pension schemes from their balance sheets. Individuals are being left in the limbo of lifestyle with no clear pathway back to a pension.

We have lost our courage and our conviction and it is time we got it back. I am hoping that we will do – as a result of the Pension Review being promised by the forthcoming Labour Government.