I tread carefully as I have never published Andy Young’s responses to my blogs before. We have an agreement which I am trying out this morning , that I become his editor. I pray I am doing the right thing in publishing, there is such vigour in his writing that it terrifies me!
This arrived a few minutes ago following my publication of USS’ “conditional indexation” proposals, I also published statements earlier this year from Nest which now have significance for 14m members (it was then 13m). Here is what Andy sent me.
NEST AND USS
Both want stability of contributions.
Both want some stability of pensions.
Both want CDC.
We are beginning to talk sense if only we could actually dare talk it.
D.C. was a mistake for the government required second tranche of pension provision. It is fine for the next tier where people and employers can choose whether they want to target “comfortable” or “minimum” or something in between or more or less (or earlier or later). Which latter decisions could benefit from more guidance.
But Nest and to an extent USS are focused on the first tranche of top up to Basic State Pension. That should be a form of CDC. It should be in principle what has been discussed for ages now for Multi Employer CDC to ensure fairness. Not Royal Mail type CDC.
The real question is whether we should be delivering that via the about to be consolidated U.K. system of market and employer provided schemes or set up a single state run system as in Canada and some other sensible countries ( but designed a bit differently from them).
We should be designing a different fully funded second tier state pension. We made a gross blunder in abolishing SERPS and abandoning pensions for AE illiquid savings and the current blunder is that the debate rarely if ever sees never mind admits tat was what we did.
The policy debate is largely publicised via providers and those policymakers with a vested interest in praising the success of AE (which was an admin success). They seem blind to the blunder it was, compounded by the later one of total pension freedom.
Sadly pensions policy had been beset with blunders from which we rarely learn. It is worth keeping The Blunders of our Governments by King and Crewe open at the Pensions chapter. An update would also be welcome.
We need a funded CDC top up based on age related pension points. See various countries.
Thanks to Andy Young and to all the contributors to this blog that make it so much fun, thanks to the very many people who, like Andy, want to see pensions deliver more to people than they do today.
Andy Young is, almost by definition, right. We might have sleight disagreements about the detail of the second tranche, but the necessary pensions architecture is clear. The only question is how do we get there? Let’s hope the government’s second stage pension review will show the way.
The King & Crewe book is for me a book for politicos, however.
It offers absolutely nothing on private sector DB pensions.
“The Blunders of Our Governments” by Anthony King and Ivor Crewe was updated in 2014 to include a postscript about the performance of the government up to 2010, by which time most of the damage to DB pensions had been done, or at least set in motion.
The authors talk of “regulatory blindness”
and say “government devolved responsibility for regulation to regulators.”
We’ve had enough devolution without proper accountability in this country of ours …