When in Kings College Hospital I cornered myself into thinking what I was actually doing for a job, I was remanded by my nurses and wider support team to not think about “pensions” but consider that in due course , I would be making things better for older people- “more fun” one Ghanaian explained how she saw pensions working for her.
But my Rehabilitation Presentation does not include anything on pensions or on my writing about it. It would seem that we should avoid contemplating our futures as “pensioners”. I have started reading the backlog of articles which were published on the importance of pension schemes keeping going and I discover that the consensus is that the financial press consider pensions is a means to keep the Treasury happy – by reinvesting pensions into infrastructure, keeping the DWP happy by giving them a function (rather than a cheer-leader for the insurance industry) and the various consultants and fund managers in cash rather than see their revenue sources (pension schemes) being digested by non revenue payers.
Occasionally I read that some sponsors are hoping to see DB schemes continue because they are “paternalistic”. Paternalistic is a word that is linked with uncommercial and out of date. The possibility that “paternalistic” companies actually see the happiness that a pension prospect presents, are indulging in an affluence of “p”.
This worries me. I do not see the prospect of a lump sum at retirement as a means to relieve tension when at work. I do see the prospect of a clear pension and one that looks like providing rather more than chucking the money in the bank as what I expected in 1983 when I made my first pension contribution. At the time I was told that by locking away some of my pay, I would get better pay at retirement. I don’t remember being told that I would need to employ a financial advisor, a wealth manager or give back any value my investment company had made me, to get an annuity by an insurer.
Reading the articles that appeared in the financial press while I was banned from thinking about pensions by my nurses, it is clear that the chief beneficiaries of not shunting pension schemes into the hands of insurers are employers, consultants and investment managers – who can keep on making money from pensions. This is not about making retirement better for people in retirement or those still working. This is not “paternalistic”.
Here are the three articles I am referring to
The first appeared earlier this morning by Mary McDougall and includes some important views by Jos Vermeulen – boss at Insight and Owen McCrossan , head of investment at Abrdn. These views are based on economic advantage to employers of keeping money with them.
The next is the work of Charlotte Moore and is a lengthy piece in Professional Pensions
It would seem that by changing minds and not handing money to insurers, sponsors (and their advisers) can get a share on schemes’ surpluses.
Finally we have Pensions Expert
This article focusses on improving that value of pensions to trustees and surpluses by removing risks and allowing money trapped in pensions to be distributed – foremost to employers.
What one reads in all these articles is a corporate approach to pension management which has no interest in the members having a fun retirement after finishing work. In none of these articles is the voice of members or former members. Even Trustees are having to couch their arguments in terms of the value their work brings those who pay their bills.
So here is my view. In 2025 we should bring back the view that was there when these pension schemes were set up, when the PPF was set up to bale out schemes that failed and the view of people who entered into pensions to have a stress less retirement. It is time we heard from Trade Unions, from those who are in the Local Government and unfunded DB plans backed by the state about the advantages of DB pensions.
For my part, I can report back the secretly discussed matter of pensions with those who saved my life. The nurses and other supporters wanted to know how pensions worked and how they could put more into them. They talked to me about how they were looking forward to retiring and how much they liked working to stop working!
Can we stop this plethora of articles about the need for reinvestment of DB pension schemes rather than off-loading them to insurers and explain that DB schemes have been working for decades and will continue to do so? Can we explain that they can buy back people’s DC “pots” and allow them better pensions than annuities? Can we return pensions to those who have been expecting them to be paid by trustees as part of the working deal and can we encourage those who are in DC pensions to find a way to swap their pensions for a trust based DB pension promise.
Can we start talking about pensions as benefiting pensioners rather than the people who run pension schemes?
I’m very glad that you’re getting better Henry and I’m glad you’re continuing to improve. Have a jolly good and thankful Christmas.
It’s interesting to read the more philosophical musings that the experience, and time, have let you think about.
You are picking up more strongly on the fact that the pensions industry, like most finance, is really all about money and not about people, except when they are money people.
Money is like gravity; it attracts. The more that it attracts, the stronger it’s attraction gets and the less anything outside it’s sphere of attraction matters. If you’re ‘in the money’ it’s great and keeps getting greater. If you’re outside ….
That attraction is self-reinforcing, the attraction becomes stronger, because lots of bright, capable people are attracted to the rewards, and spend their time making bright, capable decisions and devising bright, capable schemes that pay bright, capable people more salary and bonuses because they’re making bright, capable people better off.
Dangerousy, because everybody in their world is bright, capable and better off, they don’t really believe that there is any other sort of world.
But there is.
There’s a world that doesn’t have enough bright, capable people working to make it better for the people who live in it and aren’t bright and capable. A world where people are getting worse off, and, perhaps, because some of what they need is falling into the money gravity pit. How many people working in the pensions industry would like a full time job paying £24,299 per annum as a welfare rights advisor? It’s not an easy job, it needs ‘experience of tribunal representation and an expert knowledge of benefits law and practice’. It needs bright, capable people.
Fortunately, there are people who do that work, many of them as unpaid volunteers, because they can see the need. There aren’t enough of them and the money that’s needed to pay more of them, and pay them more isn’t there; it’s somewhere else.
But imagine the different world we might have if welfare rights advisors were paid what pensions professionals are, and the pensions jobs paid £24,299 per annum?
Then where would the bright capable people be?
Glad you are getting better, Henry.
Excellent blog post. It would be good if the minister were to talk positively about DB pensions as a practical efficient way of providing much needed support in the future, rather than DC as the way forward.
Even if we disregard the fact that a ‘pot’ and a pension are very different things for the reasons you describe so well, DC and DB are not equivalents in terms of value for money.
What is needed is more awareness that the cost of providing the same benefits in DC is much greater than DB, as this recent comparison of the US evidence shows:
https://www.nirsonline.org/reports/betterbang3/
It would be nice to have a discussion about this work in a suitable forum.