There is something wrong about this. Insurers should not gloat that they will be investing what is currently our pension fund money.
The insurance companies expect £550bn of our money to insure and reinsure promises already secured in pension schemes. This time our security will be from insurance and reinsurance contracts. The benefit shareholders of insurance companies receive is not going to pensioners or to sponsors who have overpaid into defined benefit pensions.
This advertisement is for a happy group of insurers and their asset managers, but it is not for ordinary people or even the sponsors and trustees of their pension schemes. They are on the outside of a buy-out that will I fear, leave many of us short-changed.
I am not the only one who finds this attitude of insurers to taking over pension funds wrong. Here is a man who has worked in pensions for the best part of 60 years and should know what is happening to our pension system.
They may be paying out the same amount – but not to the same people. Do you want your pension fund paid to you and your sponsoring employer or the shareholders of insurance companies?
The closure of these schemes was not necessary. The demands on sponsors unnecessary and the surpluses these schemes hold will simply be transferred to insurers and reinsurers to satisfy an end game devised by the insurers, the regulators and the consultants.
Necessarily, the transfer of £550 bn of money put aside by pensioners, to pay pensions is a triumph for the insurance industry, which they are sharing with asset managers. But it shuts out the members and sponsors of the pension schemes.
We have seen in recent cases, pension funds opting to carry on investing for their members and to return money to sponsors. We have seen a pension fund swapping sponsor to improve the scheme’s covenant and ensure money goes to members and sponsors.
We have yet to have the secondary legislation to see pension superfunds take hold but when we do, we can reasonably expect an alternative for employers wishing to walk away from the cost of sponsoring pensions. Here cost savings will be created by consolidation without handing the profits to insurers.
I hope that in the next decade we will , as Andrew Young suggests, see much of the money that would have gone to insurers go to pensioners as pensions and sponsors relieved of obligations as they would with buy-out by swapping sponsors and transferring obligations to pension superfunds.
The money in our pensions is not the insurer’s by right.