People do not stop growing old and needing to stop working.
I ran a blog about the infinite horizons of pensions, I was writing in 2020 when the idea that our pension system would be generally in surplus was ludicrous. I argued that it was and that the PPF would not be eating it over the next 10 years.
The threat is not indeed coming from the failure of sponsors to meet obligations, they have done – magnificently. I can understand why executives and owners of privately owned companies are tired of pensions but like many readers of this blog, I urge them to be patient and to remember the infinite horizons of people growing old and needing pensions.
The short-term outlook of CFOs and the shareholders of sponsors of DB plans makes the offers of insurers to buy-into the pension liabilities and then buy the scheme. How many are taking a ten , twenty or thirty year view of their pension?
I met with a now senior pension director yesterday and we discussed the importance to his company of those who had left – either to work elsewhere or to retire. They had no importance to the company, but huge importance to the pension scheme.
This needs addressing, we did not set up a corporate pension system without regard to the beneficiaries being of no economic importance of the sponsor, there was another reason and unless companies can remember it , then selling pensions to insurers and their private equity owners will continue to be a painless alternative to the pain of the past 20 years.
The grumpiness of my correspondents is that they can see the advantage of pension schemes running on to everyone who has an interest in the members, the sponsor and the scheme’s capacity to do well for the country.
I am pleased that some readers are taking the time to make their feelings known and I re-publish the comments of those who have done on the blog earlier this week on Rolls-Royce and their highly congratulated sale of their pension liabilities to an insurer.
They appeared in this order
I include the statement by Rachel Reeves
What followed was another comment befitting of “for the many”
There are many members of the Rolls Royce scheme who are being asked to accept this arrangement.
The risks of an overseas private equity fund owning UK pension liabilities does not look like insurance to me either. Paul Brine joins in
There have been several financial failures this century and an insurer did go bust for pension promises at the back end of the 20th Century. We are happy enough with the risks until something goes wrong. Thank you Paul, I heard the same complaint from a senior pension director yesterday morning. He is waiting to pack his bags and go into retirement.
Here we come to a hobby horse of the former CEO of a listed British Company, William McGrath, but I suspect that “For the Many” is of the same mind – not the same person.
We are going through the dismantlement of many valuable pension schemes which took many decades to build up. The time it takes to organise the buy-in and then buy-out of these schemes is measured in years not decades.
It is no easy business and the cost of transitioning to insurance has to include the fees of many professionals. It is lucrative but unnecessary work. Most pension scheme would be better run off as pensions.
We are transferring the liabilities that will continue for many decades to come, longer than the CFOs and shareholders or private equity companies care to ponder. But that is the business of pensions and it’s a business that will still matter to people in the 22nd century.