I don’t know how to phrase this but….perhaps the Royal Mail’s advert to its staff does.
Thanks to those at Royal Mail that blazed a trail so that we can have CDC not just for one company but for thousands. So why the opposition?
There is a kind of cockiness from Arun Muralidhar that I like, it get’s things done and boy do the 45% of adults who aren’t doing anything to supplement their state pension in the UK need what he is selling.
Last Friday I had lunch under an arch in Southwark with a couple of ladies from Pension Bee, we discussed those who need to make their own way , having no boss to pay contributions or workplace pension scheme to join (not quite true the self-employed can join Nest).
We discussed the work being done by Pension Bee in the USA. Their aim is to offer a range of IRAs in 52 jurisdictions that together are the United States. As I listened, I thought of the Americans I know and in particular Arun who I like very much but who needs to shut the f*”k! up.
He cites two systems we have in the UK to supplement state pensions through workplace saving. DB was ruined a quarter of a century when it stopped being entrepreneurial and “best endeavours” and ran into a brick wall. It is now being dismantled by insurers , mostly with American money. Please do not preach me Defined Benefit Arun.
The other system is that of defined contribution (DC) savings which has been around properly since we started having GPPS in the late 1980s. The first one I sold was with Guy Bateman-Davies in 1988. DC pensions were a deferred annuity product until 2014 when they became a retirement savings product and lost all pretence of being a pension.
People thought that the freedom was good fun at first but in the decade that has followed , we are finding that the retirement guidelines offered to us savers are mystifying.
CDC is getting back to the DB we had before we made it a guaranteed product and a way forward for DC since it stopped being a guaranteed product. In truth, guaranteeing is not a way forward for the private sector, we might have given up and handed our contributions to the Government with enhanced SERPS/S2P. My friend Andy thinks that we should have a state CDC scheme as the private sector cannot be trusted to deliver!
A third option that I do support
What Arun tells us he went to the DWP and got high-level approval is called “SeLFIES” and it is a strip of payments made back to you by the Government , in return of payment (s) over the counter, or digitally. I know it makes sense to loads of us who grew up saving by handing over pocket money for national savings. I know many people who pay money to the Government to get premium bonds and am absolutely sure that there are many people who would convert pots to pensions the way that Arun suggests. Many of them will do them as additional voluntary contributions to what they are doing in the workplace, they may end up being AVCs to CDC but here’s the thing, they are retail products for you and me and not for all of us collectively.
CDC is collective and is not a retail product (yet).
At an Aon event a couple of weeks ago when the DWP launched a multi-employer whole of life CDC product and a consultation on an at retirement CDC product, I asked the final question.
I don’t think I was supposed to ask the question and I got a look from the DWP as I wasn’t on the list, but thanks to the Pension Minister, I got to ask
If I fancy my pot paying a CDC retirement pension , will I be able to swap it?
There is no answer yet, because CDC is not retail yet, that’s yet to come, as is the discussion of SeLFIES. The old world of guarantees has by and large gone in the private sector. It started going in 1995 and it ended up washed up 30 years later (in the private sector). DC ended as a pension in 2014 when it stopped being a means to an annuity.
I don’t know why an American called Arun is trying to sell us a version of a third system, a limited retirement income product called SeLFIE and I don’t know why he thinks that DB and DC are the way forward for the private sector. Maybe he’s spent too much time in American Investment Banks.
He seems insistent to the crazy world that Pension Bee talked to me about. It’s a retail world of IRAs and 401Ks and a proliferation of tax systems and it’s precisely what collective DC is looking to get away from. I love Pension Bee who are taking on this world and putting savers at the centre of a marketing frenzy of statistics, I wish them good luck as I do Arun. We agreed , having eaten some African food to stay in touch. Arun should do too – but remember Arun we are not America or Brazil and you are selling retail as we provide collectively!
