Having been fairly stuck in driving forwards a pension solution (a collective pension)  for the past few weeks, I took an afternoon with the foot off the accelerator peddle to consider three discussions of the state of pension.

The first happened yesterday morning when LCP’s Steve Taylor and Helen Draper gave a coherent view of pensions as changing from wealth management to the provision of pensions with the emphasis on investment determining the future income people get.

The second happened at lunchtime when I read Brian Henderson’s paper or the “Pension Value Chain” when he spelt out how people could decide whether to use the money due to them from pensions as their wealth to spend as and when they chose or have it paid back to them as an annuity (and I guess as Retirement CDC)

The third is the return of Darren Philp and Nico Aspinall’s  podcast where they take on the latest value for money consultation that was issued when their podcast went on holiday and closes in a few days. The long podcast is mainly concerned about the maths used by TPR/FCA to calculate VFM from DC accumulation, though it does touch on CDC and on the threat that VFM poses to DC schemes who fail one of a variety of tests set by Government.

It is very political and doesn’t pull its punches

What all three of these events in my Tuesday afternoon focussed on was what will happen to the money building  up in workplace pensions. There was very little discussion in any of the three of the state pension and nothing about pension credit. These discussions were from well educated , largely actuarially trained financial service careerists.

In this debate on the financial future of a nation’s money, there was no voice for the unions, nor employer’s decisions (such as the CBI) and no voice for the ordinary person. It was as if we had decided that we knew best.

In all of this there was one section of Darren and Nico’s podcast (a conversation between the two) when Darren asks Nico what he has against CDC and Nico replies that he doesn’t think that DC has had a chance yet, he has pinned his colours to the DC mast and won’t allow them to be taken down without a fight. For the first time, I understood that he stood for the bulk of the financial services industry who now feel threatened by CDC – professionally and philosophically.

There appear to me to be two very discussions taking place and there is very little overlap. My friend Terry Pullinger, tells me that there has had to be a room upgrade for the debate on CDC taking place at the Trades Union Congress later this month. Apparently there has been such demand for places. Meanwhile there is at the Pensions UK Conference the following month, only one session in three days on CDC and that’s on the final day and not a plenary.

Brian Henderson’s excellent article can be read from linked in of from my blog (as this seemed easier). It acknowledges that two versions of how retirement work are in place, one offer no choice but a “regular income to pay the bills” and the other “keeping more savings to use as I choose”.

I had been struck when hosting the session between Steven and Helen how they saw DC schemes that maintain the pots to the tipping point from saving to spending (what is still known as “retirement”) as offering choice. The choice could include doing what someone chose with their pot through transfer to another pot, buying an annuity or having the decision taken by the trustees or personal pension manager.

Here we know that when it comes to retirement planning, most people will do what is suggested and accept the line of least resistance. It looks most likely that the line of least resistance will be a guided retirement where the workplace pension will offer an income increasing with inflation which will be paid till death (s) using some kind of longevity insurance. The alternative looks like being Retirement CDC. It became apparent in discussion that LCP see it as possible that both options where pots are turned to pension could be available.

Here I think there is within the Pension Schemes Act a feeling that if people do not want to take a choice it should be taken for them and that’s what the “default retirement option” means. Brian Henderson wants people to take a strategic decision whether to have a pension or the flexibility of a pot of money. Nico clearly advocates the use of DC as a means of offering freedom and choice while Steve and Helen are what Helen calls “paternal”.

My feeling is not that CDC will happen because employer’s are paternal, but because they see CDC as better business sense. A fourth document that I read and put on my blog last night was originally in the Wall Street Journal

It argues that pensions are return in the USA , set up or reopened by large employers who feel they better keep their staff and satisfy their union’s requirement for deferred pay.

Workplace pensions have so far been a success because large employers have bought into the building up of pots, but I think they are picking up from their unions that if they want productive employees who stay the course, they need to pay them better pensions.

The struggle between the two visions for “workplace pensions” was worked through yesterday. It was for me an online conference that allowed me to see the differing views of people in my little bubble of financial services. The silent majority will be heard through large employers and their unions.