One of the old lags contacted this morning with this thought.
As you know I start from a different angle and premise – that most employers have never provided pensions for their employees.
Even in the hay day of DB provision around 1970 (yes), I expect only about 1-2% of employers provided pensions. Those were the days when repeated governments pondered over how to encourage occupational provision and eventually all accepted that for most employers it was unrealistic and opted for a state run add on.
SERPS did carry on to 2016 when it was finally snuffed out but it had gradually been eroded. The great Labour experiment of the 1970s and years that followed was not a success, it did not grab the heart strings of the working population not in large occupational pension plans paying pensions – subbed by employers.
I am just about old enough to remember when SERPS was getting in the way of insurance companies wanting to offer personal pensions – a means to annuities. SERPS was taken our of the equation by large employers offering contracted out money purchase plans and DB schemes took on SERPS responsibilities.
My friend would like to bring back a second pension provided by the Government and replacing SERPS (which has been put to bed for the past 1o years)
Canada did the same more recently, increasing the CPP benefits and contributions rather than introduce AE type DC.
Hence my new step is a wedge of CDC, state run (or can be a bit more local but compulsory).
That eases the position of low – median earners and provided a sounded base for the next in line in income levels.
It leaves plenty of scope for more on top to deal with higher earners and also those wanting more flexibility when they stop work (or not).
Both of these area of pensions need serious attention from government and industry.
His view is that providing DB or CDC pensions to those who work for all but a few sophisticated and well-heeled employers is far too ambitious.
I do not agree with him, I think that in the fifty years since SERPS was introduced (1978) , our capacity to administer , invest and communicate to workers and those leaving the workforce has increased. Nobody thought you could do auto-enrolment until it was done. Nobody thought it would deliver as it is. Nobody had thought we’d have the problem now – making the money pay pensions. My friend is a grump and I love him for it!
I am very pleased that my friend has put up his hand and said the insurance and pensions industries are not sufficiently competent to be awarded this job.
He/she remains nameless and I’m quite sure that the majority of us who know and respect will feel challenged by his idea. I think this is why we have Nest , he/she may have other ideas on delivery and if there is a PPF angle in this, let PPF play its hand.
What has not been understood by commentators (including bloggers) is that the Kings Speech suggestion that savers should be diluted into pensions, is more radical than we supposed.
Agreed with the sentiment.
On the delivery, its bleedingly obvious that the [86] LGPS’s should be used to kickstart nationwide CDC arrangements. And now. Not another SERPS – that just taxation, and none of it will go into growth.
The LGPSs are ideally positioned geographically, they are skilled in collecting contributions, investing, and paying pensions. If we didn’t have it, we’d wish we did. Oh, and they are over-funded.
LGPS sponsored CDC on a geographical basis is also really the only way to bring the millions of self-employed (and gig-economy, multiple job careers folks) into meaningful pension arrangements. And very importantly, LGPS governance can provides some barrier against the State (please) – we are really ‘good’ at big State (but the outcomes are really awful, that is why we are in this mess).
But we get stuck in the gloop of Policy embarrassment and short term egos that stops Policy changing track to do the right thing. Having been sold the mantra that bigger is the solution, Gov’t and the Minister (who is big-Stated biased) feel they can’t backtrack from their consolidation quests (which btw will have no meaningful impact on growth, and not for many years if at all).
It really is quite dis-heartening these last 20 years witnessing and living through one policy mistake after another, each digging us all deeper and deeper into a bigger and bigger hole! This industry is truly only for the resilient !!!
The compliance and regulatory wars and the scarrings from TPR de-risking cult and the zealous application by storm-trooper case officers had a lasting impact on mindsets, and did deliver a ‘near’ fatal blow to our nation’s attitude and ability to engage in commerce (possibly be design). Now we have to watch what could be the killer blow as £50bn pa of our economic firepower, built up and vested in the stewardship of business supported pension schemes, is shovelled over to low risk low investment mandated insurers. Sir John Kay will need to be writing another paper soon on the worst Policy Disaster over the last 100 years, only 2 years after his last paper.
And now witnessing the attempted land-grab in the guise of LGPS’s consolidation for efficiency / scale. Bah. Everyone knows that once sufficiently under control, the LGPS’s too will be coerced into holding Gilts on the false altar of making pensions “safer”.
All the while, no tangible progress for working people to get a pension.
Thanks Jnamdoc! I am not sure I agree with you either! We do not need a second tier national pension either along the lines of my correspondent (who has written to me saying I can reveal him as Andrew Young).
I don’t think it is a bad idea to have CDC administered by LGPS and for pension payments to be taken away from workplace pensions,
I’d get excited if we did not have an existing workplace framework in place. We do have an existing workplace system and though a lot of it is not providing pensions , it can either be tripped into doing so or given partnerships with those who do.
We should not be throwing out the good with the bad! If LGPS admin units want to get stuck into a competitive environment let’s see it happen.
As regards your view of the waste of DB assets – I quite agree but let’s not look back at the last 20 years, let’s try and get something going for the next 20 years. I remember bad times (2000-2025) and good times (1980 -2000), Many – including Andrew Young can remember back a lot longer than 1980.
We do have to remember that these things are cyclical and we are only perhaps 75 years into the first 120 year cycle of funded pension! Pension Oldie, Derek Scott, you are all from the north of the border, I swear it.
According to the Pensions Archive, in 1970, the percentage of employees in the UK covered by company pension schemes varied by job type.
78% of non-manual workers, 50% of manual workers, and 38% of unskilled manual workers were members of such schemes.
The huge concentration of non-manual workers in a few companies that chose to pay (via trust) a retirement income, distorts the picture. Most companies did not set up a pension scheme for non-manual, manual or skilled members – they paid higher national insurance which paid their staff a second state pension.
We continue to live with the problem that those who work in small companies do not have the right to a second state pension, as was the case before 1978. The problem is being addressed by the Government in a different way. Andrew Young agues that funded CDC could be a replacement for the unfunded second state pension.
The self-employed are an extension of the problem that has never been properly addressed.
My point is that while you are right to point to collectives working for Britain last century, we have different conditions and available solutions (since AE)
We can all play games with numbers.
Andrew Young may well be right that only one-in-fifty or one-in-a-hundred among employers provided pensions or similar at the back end of the 1960s. But even then some of the savvier self-employed also had “section 226 retirement annuities” and its earlier forms.
Section 226 came from the Income and Corporation Tax Act of that year (1970).
More obvious to people living north of London was the fact that small businesses, start ups and new self-employment were never able fully to replace large scale redundancies at major employers, some of whom offered quite decent pensions previously.
O2 of all people commissioned from SQW Consulting a rather obscure report in 2010 called “Not So Little Britain”, which claimed that Britain’s small businesses would generate over 200,000 jobs a year.
By 2023, small and medium-sized enterprises (SMEs) provided 16.7 million jobs, representing 61% of the country’s private sector employment
Downturns were said to improve small businesses’ chances of recruiting high flying employees made redundant by large corporations, helping them to overcome what is so often a barrier to their growth: the ability to attract skilled labour.
It was estimated that 25 per cent of small business recruitment was now from larger businesses and one in ten SMEs planned to increase expenditure on training and upskilling their workforce.
Small businesses were also becoming ever more important for domestic employment as they recruited within the UK, while many larger companies sent jobs overseas – two thirds of large businesses were actively outsourcing abroad.
Accounting for 99.9 per cent of workplaces and two-thirds of the workforce in the UK [SQW play the numbers game too!] the success of small business in the economic cycle was considered crucial to growth of the economy.
I remain sceptical, however, of any claims that small business has taken up all of the slack caused by large business downsizing.
Ask people in Port Talbot or Grangemouth or Aberdeen or even Scunthorpe whether promised Government funding ever comes close to replace what went before.
And when thinking about pensions, let’s not diminish regional LGPS, agencies like the SPPA and even the few surviving “industry-wide” pensions providers like USS and Railpen, all or at least some of whom with some leadership and imagination are capable of helping provide new CDC or old-fashioned CARE schemes while still running on some very old-fashioned DB too.
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