I do apologise to my readers for annoying them. They had been asked to engage with Pension Insurance Corporation’s survey of 1,000 of their members who it seems, enjoy PIC’s willingness to keep them paid
However, I had misread my reader’s reaction to PIC’s poll. Here is jnamdoc kicking off.
LOL if it wasn’t so sad. Its a scandalous attempt at the worst type of vox-pop by PIC.
Perhaps, to balance, PIC should have asked the DB members are they happy for their fund surpluses built-up over 30 years to be siphoned off as super-profit to insurers, leaving the residue of the fund to be invested in low return low productivity low growth investments and all part of a system-wide malaise that is literally draining the lifeblood out of the UK economy. And if that continues do the members think the likelihood of getting their pensions in full will increase or decrease under a failing economy? Oh, and by the way, they’ve very little chance of getting any meaningful protection against high inflation once the Trustees hand over the scheme
What this attempted PR spin really SHOUTS OUT is that the game is just about up for this money making whiz. And all it took was the simple illumination of the facts and to take one step back from the vested interests.
Sorry, but insurers were not created or structured to be the dominant stewards of our economy. On a system wide basis, there is no economy that can survive the transfer of £50bn per annum out of the potentially productive economy into the (by definition) low risk low return insurer eco-system. Scale that over 10 years and we’re talking about more that £half-a-trillion of the UK economic firepower, basically firing blanks.
The £650bn losses from the LDI experiment was truly tragic enough. We do not need round 2, and we need to stop scoring these own goals, now. The rest of the World is playing a different game, and they are killing us.
But after this came Paul Brine – at least I know who he is, but I bet PIC didn’t.
“Our view is that it is fundamentally right that members’ benefits are fully secured before the sponsoring employer gets any cash back” I think the implication here is that only an insurer can “fully secure”. So, accepting this edit, the statement now reads “Our view is that it is fundamentally right that members’ benefits are fully INSURED before the sponsoring employer gets any cash back.” Sounds a little self-serving, at best.
But worse, in structured finance terms (of which an insurance contract is a good example), “security” has a specific, precise meaning where the liability (policy) is collateralised in favour of the creditor/policyholder. There is one thing that an annuity policyholder is not: collateralised by the assets. So in actual fact, moving from a position where the member “owned” the assets (collateralised) in the DB scheme to an uncollateralised insurance policy, the member/policyholder actually gives security away! Insurance contracts do not increase security, they actually reduce it.
How insurers and their advocates have been allowed to get away with the misappropriation of the the term “security” in this context is a mystery. So many chairs of trustees have announced they have “secured” their members benefits when they have done precisely the opposite. Perhaps they do not understand finance….
The insurers fully understand this: why is funded reinsurance (where the insurers are the “policyholder”) fully collateralised…..even if not quite collateralised appropriately for the PRA’s approval.
Agreed. If I was a young lawyer, I’d be preparing for the raft of truly enormous class actions coming. Having more than the hitherto cursory ( or self justifying ) TAS300 analysis will become a critical first line of defense for the IPT, the Trustees and the advising (scheme? ) actuary….