Frank Field – a great man to the end
At 11.30 am on a Sunday morning, Mark Kleinman of Sky News disturbed the sermon with this news.
The Sky article was quickly followed by one from the FT, with Mary and George Parker referencing Sky’s coverage at 5pm
So what is Reeves bound to say this Wednesday?
Here are Mary and George
A shift in focus to DB schemes comes as the chancellor is gearing up for her growth speech on Wednesday. Pension experts estimate allowing companies to access scheme surpluses could unlock up to £100bn for investment.
If you’ve been reading this blog this past week you will have noticed quite a few pictures or Rachel Reeves and exhortations to take notice of our DB’s capacity to provide the certainty of a pension while investing in a way that an annuity cannot.
The FT also reported
In an interview with the Financial Times in November, former pensions minister Emma Reynolds said she had prioritised reforming DC workplace schemes because that was “where the growth is”.
Fortunately I did not have access to anything in the latter stages of November being in a coma, had I not been, I might have lost my temper and lost what’s left of my brain.
Let’s be clear, DC workplace pension schemes are dismally failing to invest, opting for life-styling into cash and bonds far too early, because they don’t have a pension strategy.
You may be thinking that the annuity is the answer to the pension. It is not – the pension invests you and creates that return over time as surplus. The FT are also spot on in pointing out that this is not the answer to an economy needing growth and a Government wanting investment
Access to scheme surpluses could slow the pace at which pension funds have been offloading their pension obligations to insurance companies, with around £50bn of assets transferred in so-called bulk annuity transactions in each of the past two years, according to pensions consultancy WTW.
Halting this trend could help support UK government bond and equity markets in the longer term because insurance companies typically sell gilts and invest in higher yielding corporate bonds — many of which are overseas — as well as infrastructure to make their profits.
The reality of selling your scheme to an insurer is that you lose the right to invest and they haven’t got the capacity to. The same goes to individuals looking to exchange their pot, they don’t have the certainty of a pension and if they choose an individual annuity they will lose 10-15% against the pension rate you could get if you could transfer your pot into a scheme (as you can if you work for Local Government and have recently joined its DB plan).
A spokesperson for the PLSA told Mary and George of the FT
“Lowering the legislative threshold for allowing returns of surplus could potentially encourage trustees (in conjunction with their employers) to adopt a more ambitious mindset and take on slightly riskier investment strategies for their DB assets, including greater investment in UK assets,”
What is needed is a radical shift in investment strategy (not a slightly riskier investment strategy). You can invest more if you have young people in your scheme for whom you are building rights to a pension.
What is needed is an end to the silly practice of giving surpluses to insurance companies to reward the insurer’s shareholders.
What is needed is DB schemes that young people can join rather than getting stuck in DC pensions (I include myself, a 63 year old, as young).
What is needed, as Sam points out, is that if you don’t want a DB pension on your books, you should give the opportunity to manage it for profit to someone like Edi Truell, who will give your members and you a happier time.
What is needed is a TPR who works out that for 20 years, they have been holding back growth in the British economy and our DB pensions. If we are to get the economic miracle of DB pensions back, we need to help them invest their way forward.
Frank Field when DB schemes were in their prime