It seems that the asset management and insurance industry are by-passing the questions posed to them by the Pension Schemes Bill in favour of the debate they want to happen.
JP Morgan asset management has found that young people are relying on the state to provide them with pension, which is not good news to asset managers who want their money for the next few generations. Here’s the FT going along with the scaremongering.
If I were young, I’d be pretty annoyed by this opinion from those who think they know. When I was young I was told that there would be no state pension when I got to 65 (when I was told I would retire), I was told to take out a retirement annuity plan (a precursor to the personal pension). I did;it was rubbish and is now part of a personal pension which is still not providing me with a pension, 40 years later. So much for the people having a go at young people for telling them to pay money into workplace pensions (same thing).
Private pensions were then the luxury item, we had a weak state pension and a second pension known as SERPS which offered a back up for those who didn’t have a private pension – then there were those who didn’t have private pensions and they got a savings plan with an annuity at the end, I was self-employed as a youngster, I got my first employee contract when I was 30 when I joined Gissings (a consultancy and advisory firm).
Young people do workplace pensions now through auto-enrolment but they don’t really think about them them. Nowadays the standing order/direct debit has been replaced by a payroll deduction but it’s the same thing . A lot of young people are confident that the state will step up to the board and throw a 9 darter when they retire but this is apparently not good enough..
The results of the survey suggested that 40 per cent of young savers, amounting to millions, had a false sense of security about the future state pension, a finding which alarmed some sector experts.
This encouraging belief that the state will be around in a few decades time is like the feeling my generation had in the 1980s, the majority of us thought the state would retreat and the minority who simply trusted the State Pension were right in one sense (the State Pension has grown) but at the expense of the second state pension, which those who swapped it for personal pensions are now left with a pot, while those who trusted SERPS, got shafted by a single pension introduced in 2016.
Actually no one knows, optimists believe that Britain will grow and afford to pay them to retire and the pessimists see the state a failure for them, that’s behavioural economics for you.
The 40/60 split between the trusting and the distrusting remains the same, as do the demographics. About 60% of people have been a little disappointed by the state, 40% are happy to have a top up or relieved to have pension credit. The 60% who aren’t ready to take the state as guarantor of financial happiness were around 40 years ago. The story is nothing new
The reality for most people is that they do what they are told and muddle through which is why defaults are so powerful. The certainty of those who have commented to the FT that people must take saving seriously have a point but it is not today’s point
Helen Morrissey, head of retirement policy at Hargreaves Lansdown, added that it was “hugely important that people understand that they do have to make their own provision for retirement”.
Today’s problem is that despite 40 years of saving, people like me are getting to the point when we want to stop and have no pension to come from the pot.
If we are serious about getting younger people to take private pensions seriously, we need to stop promoting wealth management through advice and start giving ordinary people income for life through pensions – as the default!
That is what forms stage one of the Pension Plan of the Government, can we please focus on that rather than rooting about for scare mongering about “adequacy”.
The cruel irony is that radical solutions become politically possible only after crises hit – but by then it’s too late to prevent the suffering. The poor will endure years of hardship while politicians debate incremental fixes.
Perhaps the most honest approach is acknowledging that we’re choosing between controlled restructuring now (which hurts some people in predictable ways) versus uncontrolled collapse later (which devastates the most vulnerable unpredictably).
A willingness to consider politically difficult solutions reflects this reality – sometimes avoiding catastrophe requires accepting short-term unpopularity to prevent long-term tragedy.
The concept of a range of Treasury issued indexed annuities has merit from a public finance perspective. The Treasury would benefit from:
• Immediate cash inflow from annuity purchases, providing upfront debt reduction
• Elimination of insurance company profits and distribution costs, making annuities more attractive to buyers
• Mortality credits – the statistical advantage gained when some annuitants die earlier than their life expectancy
• Captured inheritance value that would otherwise pass to families
The indexed nature would protect against inflation while the government’s superior creditworthiness could allow more competitive rates than private insurers.
I recognise there are political hurdles but the present government has the majority to carry this and the reason to pat for £5 billion of welfare.
The cruel irony is that radical solutions become politically possible only after crises hit – but by then it’s too late to prevent the suffering. The poor will endure years of hardship while politicians debate incremental fixes.
Perhaps the most honest approach is acknowledging that we’re choosing between controlled restructuring now (which hurts some people in predictable ways) versus uncontrolled collapse later (which devastates the most vulnerable unpredictably).
A willingness to consider politically difficult solutions reflects this reality – sometimes avoiding catastrophe requires accepting short-term unpopularity to prevent long-term tragedy.
The DC “genie” is out of the bottle – not yet clear whether CDC will rein it back in. The UK “psyche” sits somewhere between the “solidarité” of the French and capitalism of the Americans – until we come off the fence, we will remain in no-man’s-land.
Don’t know where this blog is, I’d like to think it’s somewhere around London and sometimes Scotland and sometimes, Manchester. But right now it’s in Glastonbury and so long as we’ve got that- bringing us together – I think there’s hope for us! Listening to a bloke in a band called Pulp – that’ll do , but some great bands I’ve not heard before and a few I’m glad I’ve forgotten – from capitalist America and solid France!!
YouTube NZjKT7PTU-U
La solidarité ne signifie pas solide ; elle signifie fait d’être solidaire, relation entre personnes qui entraîne une obligation morale d’assistance mutuelle.
Pour lire ce lien YouTube, vous devez placer youtu.be/ avant le code alphanumérique.