Reviving Britain with pensions
I don’t often plug my blogs Once they are written I have moved on. But yesterday afternoon I had reason to talk with a friend who runs a way of helping defined benefits to stay running on and as we talked, I thought of how he and pension superfunds are as one with what CDC does – we all work towards paying people pensions as deferred pay.
Then , like magic, when I opened linked in this morning I found my blog being plugged for me by people I little know – such is the delight of social media – I had a look and found it was me proposing pension superfunds and capital backed journey plans as an effective way to keep getting paid pensions from invested funds.
I do wonder if this Government wants superfunds to work. The people I was talking to last night seemed resigned to constantly being knocked back in efforts to support DB schemes to run on.
But we got on well and at the end of our meeting we agreed to do what we can to keep people focussed on the advantages of getting pension money flowing back into the British economy.
Here is an opportunity for me to link the message of CDC , pension superfunds and capital backed journey plans in the heads of those who make the decisions within large pensions with a pensions culture – I am talking strategy here. These people are of course the finance officers (CFOs) for whom pensions have turned from a company’s delight to a disaster and now are returning to the good step. That’s because 75% of private DB pensions are (according to TPR) in surplus to the money needed to pay legacy pensions.
It strikes me that if CFOs were to be convinced to run such pensions on, through a pension superfund or with the help of external capital or another sponsor, then the upside of sponsoring a pension (for the staff) could come with little risk and strain upon cashflow.
And this – to CFOs – is a similar message than offered by CDC where a higher pension can be attained by switching to CDC rather than taking the risks to members of a DC plan. The key message to the CFO is that the benefit to staff (up to 60% higher pension) can be achieved with little risk and strain upon the cashflow.
I put these words in bold because to a CFO doing his or her job, the idea that better pensions can be paid both from legacy investment and from future investment at little risk and strain on the cashflow is an idea that appeals !
The conclusion that we reached in our conversation last night was that what pension superfunds and CBJPs were likely going to do, was what CDC was likely going to do, when the Government had the primary and secondary legislation and the regulatory codes in place to make all this happen.
I had worked with the Pensions Superfund for a couple of years, providing what I could in a hopeless situation and I’m sorry to have seen so much good work go nowhere. But that is not to give in. The job is to return to the principle of better pensions with no risk and cashflow strain on the sponsor.
Here it is pension superfunds that can help ease past pain and CDC that can offer ways past present pain from failing DC plans. Here is the basis of an alliance that I intend to pursue. Because if you believe that
Then why wouldn’t you?