The pension savings sector is offended , here is the report of the pension savings industry to Rachel Reeve’s change in priorities. I am pleased that this Government is taking a pace back. We need to consider what is happening to pension savings and the support we are giving (or not giving) to turning pots to pensions.
I got a wonderful mail this morning which has put a smile on my face.
I woke up with this piece from David Orford, an Australian with an eye to providing support to those looking ahead to a solid retirement founded on good income as limbs and braincells decline in potency!
Here is his message to me.
Happy Holidays Henry!
Those who know me, know one of the things that I am passionate about is helping Australians enjoy a comfortable retirement through the use of lifetime income streams. I fund Optimum Pensions to support this goal.
You may enjoy the end of year wrap email and articles we are sending to Optimum Pensions email subscribers. If you understand and embrace these articles then you might be $1,000s of a year better off – or maybe worse off.
2024 has been a year of resilience and ongoing commitment to supporting retirement security. We’ve seen more significant strides in retirement income products, continuing to evolve and meet the changing needs of Australians.
As we reflect on the past year, we are deeply grateful for the trust and support of our colleagues, partners, and clients. In a world facing too many challenges, we remain committed to our mission of helping Australians achieve financial security and peace in their later years. Our hope equally extends beyond financial well-being to broader global understanding and compassion to each other.
Looking forward to 2025, we are filled with hope and enthusiasm. Our team remains dedicated to educating and advocating for the benefits of lifetime income products, ensuring stability and comfort for retirees across the nation. We extend our heartfelt appreciation to everyone who has been part of our journey.
Wishing you all continued success, health, prosperity and peace in the year ahead.
Best Regards.
David Orford
and the Optimum Pensions team.
Ok. I haven’t got Australian in my limbs or braincells, but ~I think the assistance that I get talking with David and his teams is constructive to my thinking. I am looking forward to 2025 as a year where we focus on what to do with DC pension saving. Currently it is not focussed on pension income. I am in Shaftesbury in Dorset and was talking yesterday about this with people in their fifties. The conversation was about how much you need to have saved. No-one knew how to turn cash into pensions , they just worried about drawdown, tax (income and inheritance) and what interest acco0unt they should use to house their pension capital.
Being an elderly man with a dicky brain and a promise not to get into a battle. I stayed outside the discussion. But it became clear to me that the majority of thinking is being inspired by the financial services industry and is being primed to maximise the value of elder people’s savings for the pension savings industry.
My question is why these people were not thinking about pension saving as potential pension payments for the rest of their lives. I have a 92 year mother who meets the bills from the widow’s pensions from her husbands lifetime work – AND SAVING. Her monthly payments are from first and second pensions. She knows about pension benefits and explains them to here peers , many of whom are benefiting from the extra assistance because of inadequate pensions. People are ignorant of their rights to pensions because they get so little help from the private sector.
Instead of talking to customers as David Orford does , the pensions savings industry moans about not being fed more fish from the payrolls of companies that pay staff. This is precisely what got Australia into trouble and its what is happening in the USA. I am determined to help people planning to wind down from work to have a planned income that lasts as long as their and their dependents need that income.
Drawdown is a dangerous and difficult means of managing financial income as we get going. Alright, my immediate links were told in November that I was a gonna due to a cycling accident. It made them wonder about my affairs. They now know I am a pensioner . will become a state pensioner in four years (if I survive) and that I have a consolidated pot of money I want to boost my pension when I put my feet up. I am fighting hard to retrieve the mental and body capacity but I am much relieved that I could choose an annuity from an insurer or better still. a pension from a DB plan what will allow me a bigger pension which benefits from investment.
So you can see that I will be following David Orford and his team and improving the capacity of those approaching and entering retirement. I think we are letting down a large proportion of the population who aren’t doing right with their “pension savings” and I don’t think we are encouraging younger people to put more of their available capital and income into pension plans.
Please keep reading me more in 2025 as I recover my wits.
On the day of my release from 35 days of recovery – thanks NHS and thanks for making it properly funded.
In the meantime, thanks for reading my blog in 2024 and in years before! I am simply an amplifier of views by good people like Orford and the many contributors around the world who help write my pieces. Thanks most of all to God and the NHS for keeping me smiling!
Amen!
More from David Orford here:
https://media.fssuper.com.au/prod/media/library/FS_Super/Volume_12/Issue_03/FS_Super_Thoughts_behind_the_real_lifetime_pension.pdf
and
https://www.firstlinks.com.au/solvency-risk-with-lifetime-annuity-providers
But the jury has to be out until we have longer time periods of performanx
Thanks for posting this Byron. I think we’ve been funding pensions systematically since the second world war. Can we ask ourselves questions against an 80 year data set?
Thanks to you and your family Jim. I wanted to go to Wincanton on Boxing Day to watch the racing. But I am not well enough and the weather was too misty. I thought of Frome and you when I was sitting in Shaftesbury. My mother is 92 and shows that the older generation continue to beat mine!
Unless the income you lock into is indexed linked then your are selling the client into assured poverty. Just look at some of the history of income in the UK below.
Targeting multiples of the living wage using the template I copied you in on some time ago would be a good graphical illistration of the issues If you are to capture 95%+ of the population then funding will neeed to sustain 40 years of income. I am sure there are people on the blog could be more precise.
Salaries
In 1980, the average salary was £6,000, while in 2023 it was £29,600. In 1999, the average full-time salary was £17,803, and in 2024 it was £37,430.
Pensioners’ incomes
In 1995, the average weekly income for pensioners was £195, and in 2023 it was £387.
Median weekly pay
In April 2024, the median weekly pay for full-time employees was £728, which is 2% lower than in 2010 when adjusted for inflation.
Income inequality
The Gini coefficient, an international indicator of income inequality, has increased.
Percentage of people in relative low income
The percentage of people in relative low income has increased by 1 percentage point to 17%.
Percentage of pensioners receiving income-related benefits
In 2023, 21% of pensioners received income-related benefits, down from 37% in 1995.
John, I conclude that things are improving for the older generations and I hope that this will not stop. We have changed a lot since the 1950s when you arrived and the 1960s when I did!
These Austrian School economists, as you might expect, argue for deregulation of DC investments to allow more innovation and performance.
https://pearl.plymouth.ac.uk/cgi/viewcontent.cgi?params=/context/pbs-research/article/1327/
They conclude that “By impairing market competition, regulation results in diminished investment performance, and ultimately, a less prosperous retirement.”
[A]nalysis in another recent paper highlighted by Emeritus Professor Dennis Leech in a later blog reveals that four-fifths of the inefficiency of DC plans occurs post-retirement.
https://www.nirsonline.org/wp-content/uploads/2022/01/Better-Bang-for-the-Buck-3.0-F11.pdf
I note one of the summary points is that DB plans are still more cost effective.
If only we had pension policy and resulting regulation that was based on what’s the most cost effective, good for the economy, and delivers better pensions for working people!!??
Instead we have an ill-equipped Regulatory enthralled to the financial service sector, and hence a 20 year transition of risk and any accountability away from the FS sector and onto working people. I’m not sure we could have designed a worse model. And the looming pension inadequacy aligned with anemic growth lays bare the evidence of a failed approach that is 20 years of de-risking.
Jnamdoc. I hope that you watch the video posted by Derek Scott most recently. I think it will encourage you to want to make things better in 2025 as you have these many years! Happy new year!
Thanks Byron. I am going to spend the unwanted but inevitable time on my hands reading this and other papers.
https://www.nirsonline.org/wp-content/uploads/2022/01/Better-Bang-for-the-Buck-3.0-F11.pdf
i am trying to read this paper but can’t at the moment as my brain isn’t functioning. I think that the DC system operates to fund people with a pot or at best than an annuity. We need to look beyond and even death and invest for a future for people retiring in the next century. I think that collective schemes, whether DB or CDC can run on and offer income generations ahead. We can confine the contributions but we should recommend that what matters is not what goes in but what it does. I think releasing DC schemes to get on with a wider vision is what these economists are on about. Is that right?
No, first and foremost they are saying DB schemes are superior on g
On DC they comment “The move from a workplace [DB] plan to managing funds on one’s own [DC] is a move from a wholesale to a retail experience—with associated higher fees.”
They can see some improvement in post-retirement DC – and you have given some exposure to certain views from
Australia by David Orford and others – but unlikely to close the gap with DB.
Dennis Leech suggests this topic (the superiority of DB) merits further discussion somewhere soon.
Professor Leech may not have given up on DB, but I think it’s fairly obvious that many of the professional advisers gave up on DB a long time ago and are not up for turning back.
That first paragraph should end “… on grounds of cost and ‘efficiency’.”