A great video for those who couldn’t make this Tuesday’s session
It was a good session of the Pension PlayPen Coffee Morning
And it got a thumbs up from our presenter from Exeter University
How good to hear academics from abroad enlightening us. Not since Anna Tilba have I heard such enthusiasm from eastern Europe.
Interesting, but in pension terms it assumes we will continue to live in a DC world.
It looks increasingly likely that the balance will swing back to a collective world with pensions pooled and the individual’s decisions minimised.
For most of the population, the key pension decisions are made by employers.
Which employer is going to continue to contribute to traditional DC (whether GPP or through a mastertrust), when they realise that those same contributions could provide a pension 60% larger if paid into a CDC scheme. Employee or union pressures are very quickly going to call out those employers remaining with DC arrangements. IHT and restrictions on salary sacrifice arrangements are already causing employers to reassess the benefits of their pension contributions accelerating the redirection from a savings vehicle towards retirement income.
While still restricted to a small base, companies with existing DB pension scheme are realising that their asset pool would be more efficiently used running on their pension scheme than paying the profit margin premium to buy out the pension liabilities with an insurance company. Already they are realising that released surpluses are most efficiently used to fund future pension contributions. It is but a small further step to realise that those contributions could be even more efficiently retained in the existing pool to fund DB benefits for its current and future workforce.
At present that will leave the self-employed and non employed using DC saving plans making decisions as how to turn them into pensions. There may well be heterogeneity in risk preferences within this group.
The self employed and micro businesses have for some time been ignored. As has education of the population generally.
If you are a top-tier professional, you will likely see more cash in your bank account as a self-employed individual.
However, unless you are disciplined enough to divert 15–25% of that income into your own pension, you may end up “poorer” in retirement than a mid-level manager in a large corporation with a steady collective scheme.
That discipline is provided by the IFA but with restrictions that prevent appropriate contributions and the new NNTT ( was only one before IHT on pension) faith in pensions will comntinie to be eroded for this group.