This blog touches on inter-generational fairness and asks that we look at private pensions as a whole. There are some who consider DB and DB surpluses, some the new stars of the DC world (the Master Trusts) but people did a lot of saving into DC pensions before auto-enrolment came along. We need to renovate personal DC pensions as we need a new Oasis.
I am struck by Steve Hodder of LCP’s article. Clearly the comparison of Oasis coming back 30 years after they did a good album is not going to do much but warm the hearts of the 4o year old’s plus. To suppose that they will be getting anything like the pension that people retiring in the 90s or since are getting is like saying saying that Oasis can revive a 90’s style rock and roll today. We have a much better state pension, pension credit and in stead of SERPS we have auto enrolment into workplace savings schemes.
But for DB schemes funding is indeed locked down as Steve explains…
There has been a lot of talk on this blog about DB pension surpluses being ephemeral. On the VFM podcast, Michael Jones of Eversheds suggests that the trustees, in order to invest surpluses in growth and distribute to sponsors and members, might buy in members with an insurance policy that “guaranteed” the promised pension. Clearly there is a body of thinking from actuaries and lawyers that considers the fiduciary duty of trustees is to provide 100% certainty, despite their being a sponsor , despite there being a PPF.
You can listen to Michael Jones, a “DC pension” lawyer, to do different things with a DB surplus to distribute the surplus to help new joiners to the DC pension (who might not have been born when Oasis starred).
This feels like crumbs that have fallen off the table and are being snapped up family pets at the end of the meal.
Listening to the discussion of “accrual” in the residual of the DB portfolio comes the question from Michael Jones “what does the employer do to match the past for current employers?” – is there a (pension and rock n roll) spirit that existed in the 1990s for today and tomorrow’s working generations.
I quite like Michael Jones of Eversheds, despite his suggestion that schemes should need lock down benefits in annuities! He calls on Matthew Oakley’s recent report from WPI economics and Matthew looks like he still has something of the spirit of the 1990s burning in his heart . The WPI economics report says that with scale comes dynamic opportunities to provide better benefits.
This is the talk so far from the Labour Government and in particular of our Pension Minister. Whether he sticks around to see this through as Pension Minister I doubt , but in a promoted position within Government he can continue to influence Reeves and Starmer to change attitudes in pension.
Jones points out that most large DB pension schemes have adopted a Section 251 clause allowing the payment of surpluses to work for sponsor and member and maybe more (Pension Bill/Act willing). But there is a lot of money in pensions that is not connected with the workplace, as the FCA show in their recent pension section of the Financial Lives Survey (2024).
As Nico Aspinall points out, Aviva have ten times the money in contract based pensions than they have in a master trust. To suppose that the problem is something that can be solved by leaning on large DC schemes is missing the bigger picture. Some of the largest DC plans are the GPPs, Stakeholder Plans and other personal pensions, which look as faded as the Gallaghers.
