Mr anonymous
I posted a defence of private pensions yesterday from Gordon Aitken. It explains that the current lucky boomers have no reason to worry about the state pension as they are adequately looked after by defined benefit pensions which are now paying out a retirement wage.
Gordon normally writes about insurance companies dismantling DB schemes using bulk purchase annuities but I suspect he’s got questions about how DB sits with insurers.
They have benefited from workplace pensions first from with profit AVCs and early DC schemes, from GPPs and from insured platforms for occupational unit linked DC schemes. most recently they’ve enjoyed the pick of workplace schemes through the master trusts which have by and large avoided uneconomic employer offerings through underwriting.
Most recently insurers have been there to pick off DB schemes ready to be harvested for bulk purchase annuities.
It is hard not to congratulate insurers for their takeover of the profitable parts of workplace pensions since the demise of private DB schemes around the turn of last century and ever since.
I have enjoyed some extraordinary comment on this by an anonymous reader – well the reader was anonymous till he declared himself with a comment!
It is important to remember that even in the halcyon days of DB well under half the working population ever stood to benefit. It was SERPS/S2P that started to fill the gap, before they suffered a death of a thousand cuts.
This first comment is a prelude to the second which is one of the finest comments this blog has ever seen.
Workers liked and benefitted from DB pensions. Employers supported and liked the costs. But the financial service companies, as they once explained to me, hated DB because it wasn’t a product they could replicate. They preferred to provide pots, taking a fee for AUM, leaving all the risk on the working man/woman.
The 2000’s suffered from a total absence of Policy or Ministerial direction, and into that vacuum the insurers stepped and took control. Their good, our bad.
The result was Policy geared around ‘de-risking’ of DB resulting in colossal overfunding, and then the transfer of de-risked overfunded pension schemes to Insurers.
No one wins apart from insurers.
But, eventually Policy buffs have realised you cannot de-risk an economy to growth. The converse happens.
Policy buffs also appreciate now that if you cap pension inflation via annuities, then a cycle of high inflation will erode the spending power of those annuities (the fomerly DB pensions) casting more strain back onto the State.
If you hang around long enough, you see that everything comes in cycles, and the cycle is quickly by necessity veering ( at long last) to growth and pensions that keep pace with prices.
Let’s get behind this and put our shoulders to the wheel.
I would like to thank who we now know is Bryn Davies, the Lord of Brixton.
