I spent a little time reading the immediate thoughts of Martin Wolf after the publication of the Pension Schemes Bill – an economists response to an economist pension minister. Woolf’s initial reaction was that this Bill redefined our second pensions into the lucky public sector lifers who get everything guaranteed and inflation linked. With that was the remains of the private sector pension system, massively over funded and often in surplus, DC for a younger saver with no guarantees and no promise of a pension as a backstop and an awful lot of people who will be poor in retirement and rely on pension credit rather than a pension (or pot). Wolf thinks this unfair and sees the bulk of the Pension Schemes Bill being about making private DB and private DC working a little better (CDC being somewhere in the middle).

The other thing that Wolf (an economist) sees as a shortfall of pensions is that the UK variety does not invest for the public good (although Canada and Australia are busy investing in the UK’s infrastructure and (though this has come to the fore since the Bill) UK pension schemes (via bulk purchase annuities). Actually Wolf is not interested in annuities, he’s interested in pension schemes reviving Britain. By far away the biggest controversy has been around interference in pension investment, and in the three months since the Bill was published, we have had very little interest in the Pension Schemes Bill’s changes to the four states of pension – most particularly the private sector categories (DB + DC with CDC to come).

I am afraid that rather than laying out a way forward for private pensions, it charts a number of secondary legislation forward. We will need fresh legislation to allow capital to back pensions and pensions to be established as Superfunds).  This is not good news for any of the financiers looking to compete against bulk annuities.  CDC is a good idea that still doesn’t have the basic legislation needed for it to be set up other than the Royal Mail way (DB with the guarantees turned off).

A Dutch style with-profits style CDC available for people to spend their DB pots and for adventurous employers to use rather than a master trust is yet to see the light of day and is expected some time next year. Whatever emerges from the default decumulation discussions going on right now looks like it won’t get much further than “deferred annuity”. In short there is a lot of good ideas but very little firm proposals, there are likely to be some complaints in the reading of the Bill in the Committee rooms but not that much as the Bill is a little too vague for MPs to get their teeth into.

What seems remarkable is that rather than getting all the pension experts getting the Bill to work , for us to have decumulation defaults, CDC , more than one capital backed player  and some fairly vague stuff on surpluses, we are setting off in search of adequacy for everyone in the Pension Commission.  I am the black sheep in the Pension PlayPen for not supporting it spending time delivering a submission to the Pension Commission II but I really do want to get on with building solutions to get the Pension Schemes Bill , beyond being an ACT but an enacted ACT. That means surpluses sorted, default funds established, CDC up and running and a better way to finance run off than annuities (capital deployed to back pensions). I would also like the master trusts finding ways to consolidate.

Martin Wolf is sensible

He sees the big picture and ignores the obvious gaps in the delivery of the detail. I fear that what he didn’t see was that the pensions industry are not interested in doing everything to improve Value for Money, they are looking at the balance sheet.

What started out as a “step in the direction” is becoming the discussion about increasing mandatory contributions from employer (and employees if you ignore nudge), 18 months of sitting around with the Pension Commission  would be a tremendous waste of time and a chance for the pension industry to duck the much more immediate priority of getting value back into pension money.

Walking the walk ; we should not be waiting 18 months to do this!

This is the kind of thing we need providers to be doing and everyone to be supporting