This is good
Stuart McDonald and Steve Webb are on my pod – it’s early on a cold Sunday morning.
What are the demographic trends that impact our pension thinking?
I want to blog my thoughts on what I’m hearing – especially as there’s ….
A challenge by a third bright bloke
Andy Young has this to say; it’s on linked in
“A great series Stuart McDonald MBE Sadly demographic change is like climate change and other long term issues. Too hard to grapple with so too easy to ignore for now. We should have had a demographic change Commission before a New Pensions Commission and Social Care one. We need a holistic approach to long term change rather than silo by silo.”
A reprise from two smart people, a commentary from the third
I thought I’d listen to “Stuart and Steven” again and have Andy’s point as the unspoken commendatory on Stuart and Steve’s subject..
Andy had a part in designing that 2016 changes to our state pension and few people know like him what the DWP struggled with in design and in delivering a new state pension.
The demographic of pensions
“A pension should have relation to the pay it replaces”
says Webb who jumps in on the thorny issue of the triple lock.
“You have to set a target for what the state pension should replace and stick to it.”
Webb continues
“set the triple lock to get the state pension to a point where it replaced some or all of the lost income when someone stopped working”
- nicely put. He put it in in 2010 and is proud it’s still around – nudging the state pension up – 15 years later.
Can a pod replace a Pension Commission?
Is this too glib? Does it disregard holistic issues? I don’t think so – I think he got changes to the state pension in and it’s stuck..
I wonder if a podcast can capture the tough task of the demographics of growing old. I took a long breath to consider what Andrew Young meant.
Steve wants to talk about private pensions and Stuart wants to keep him talking about the issues that stem from people living longer. How do we deal with the issues arising?
For Webb, one answer is keeping more people working. There’s more we can do on that but from my experience , the people who drop out of work as they get old are the ones who don’t have something to fall back. The people who have a decent retirement wage want to carry on working.
Webb is not for “means testing“, but he also wants to deal fairly of the people who don’t live long (living in Blackpool or Glasgow apparently).
Demographics , the Pension Commission and urgency
For Webb, going back to demographic studies is the way for the Pensions Commission (he sounds like he is happy not to be on that committee.) But I think he’s worked out that there’s an urgency – we can’t wait ten years for a holistic solution ( we’ve done that with the 2017 increase in auto-enrolment rates).
For Steve , urgent means getting on with it , we’ve got to get on with saving and I suspect he’s hinting that the problem is saving more (which is a tax increase if you’re a politician, but not if you’re a retired politician). You can sense the frustration..
“Now is never the right time”
It’s always the response but never the solution and he wants employers to pay more into people’s pensions or pensions with sidecars so they have money to get at as well as long term retirement savings. He sees part of the solution in the product. Perhaps a few years at Royal London and now at LCP have made saving more into better products a “holistic solution”.
McDonald sees the above as a classic “actuarial” solution for the “youngsters” but doesn’t get how that is going to help out those for whom pension saving is too late. For Macdonald there is the generation he’s a member of; those in their late forties who think their pot size is their pension stream and they’ll be getting the bad news when the SMPI pension is the only projection they get when they gets pension promises on their phone (the dashboard).
Getting products into use
Webb is keen to get what he tried to put in as “Defined Ambition” or CDC as people call it these days. Here it’s not a benefit being promised but an ambition to pay a proper pension. Webb is for levelling up not levelling down.
Can we afford it?
asks McDonald. I think the conversation finds itself in a cul-de- sac at this point. It needs a new topic and Steve has another problem he wants to discuss,
Public sector pensions – let them settle down
Steve gets his bugbear off his chest. He, as a minister, made a lot of changes to public sector pensions to keep them going and these changes were agreed to last a long time- sometimes to be set in cement for 25 years.
The achievement of his time would happily be undone by those who would like to change pensions. We have had Bryn Davies making this point at the Pension PlayPen; we don’t have the window to change much of our pension system because of written deals with unions and other stakeholders made this century and yet to run their period
Changes are to be left alone.. even if you’re the commission.
and while on bugbears…
What Steve is also concerned ab0ut is the cost of paying mortgages and even more about renting (especially the unsubsidised private renting). He would like inadequate pensions to meet the cost of moving away from private renting (even if it means smaller pension).
And Steve is also concerned about widower’s pensions. A woman marrying to a man with a decent pension could cope with his dying in the old days but now there is no pension. I think he’s referring to men who were supporting the wife with a pension that went to the wife when he died. There aren’t many of those type of men retiring.
Older married women who lose their husbands without much pension of their own are vulnerable says Steve. “There isn’t enough by way of a holistic solution“.
“Holistic” that horrible word of Andy’s Young.
Not much of this holistic stuff is being discussed by the private pension industry – is it? Pensions are not about protecting elderly women any more.
But Steve Webb reckons there is a predictability about the state pension which is keeping it intact. It’s unreformed in the 10 years since he finished off in charge and the 9 years the state pension he reformed has been in place.
Biting the bullet by putting in more money is the big holistic answer to the question and I’m pretty sure why that ‘s why Andy Young tears his hair out when people have their big holistic solutions!
And other things that get on Steve’s wick
And multiple-default consolidators (the small-pot carousel) is Steve’s nightmare of a “missed opportunity“.
Steve goes into violent disagreement with Stuart when Stuart puts forward a premise that things will be ok when we have people engaged enough to know what is going on . Stuart backs down when Steven goes into rant mode about not needing everyone to be engaged (he’s right of course).
Steve wants some holistic things getting done with the Pension Commission 2 but I am a little suspicious. The current Pension Minister, just like the previous ministers – will find holistic discussions on pensions easy to have but harder to implement. And pension ministers, even the long lasting ones – never get to see the holistic solutions in.
A demographic change commission!
Maybe Andy Young is right , maybe we need a demographic change commission to deal with the wider issues that Steve wants to hone down on. Andy Young was despairing of a Pension Commission when it was announced and I am still despairing that it will be anything but 15 more months of deliberation – a very long version of this document.
Anything from you Pension Plowman?
My solution is to focus on getting the stuff we agree from the Pension Schemes Act in place (including things we promised ourselves some time again – CDC, superfunds and dashboards being the big three). They won’t change the big holistic problems which will hang about.
But heh – at least we aren’t stuck as we have been since 2012 when we set out and 2018 when we completed “auto-enrolment“.
