Democratic Pragmatism

Diageo’s pension plan has been in the news recently.

Praised in the press for enlisting pensioners in order to find the current whereabouts of deferred pensioners, they are in the press again for a change they are making to their trustee appointments.

It appears that Diageo have had to replace their Member Nominated Trustees every three years. Just as they were getting useful, I would think. It must take that long just to understand the intricacies of a Defined Benefit plan.

Now, they will no longer have to replace the trustee automatically and can have them on board for a second term and longer. Slightly less democratic maybe, but infinitely more useful for everyone.

My only concern would be the possibility of ‘Chairperson Control’. By that I mean the fact that trustees will inevitably get set in their ways to a degree. The Chair will have a considerable say in how things are managed. Having someone new in the mix that is not afraid to ask ‘daft’ questions can help improve the way a trustee group operates.

Well done Diageo, but watch for complacency.

Faceless Corporates or a Real Pension Plan?

The latest pontifications from the Pensions Regulator encourages employers to consider moving away from small-scale schemes on the basis that they are less likely to deliver good member outcomes. This is too broad a generalisation. Many (most?) small schemes are run well. They often have the touch and feel of the company to which they belong. They have been nurtured and promoted by local management and relate to the company, carrying something of the company ethos.

So to say ‘move to NEST or NOW or the L&G’ etc (which is what the Pension Regulator seems to imply) is effectively saying to the employer ‘wash your hands of your own scheme’ and let some faceless corporate entity take over.

A move may make some cost savings and reduce investment charges, but at what cost to genuine buy-in from the employees?

Pensions Gone by 2050....

That’s the prediction of Michael Johnson from the Centre for Policy Studies. If that’s what the Centre would do, I’d retire them now!

Pensions get a lot of bad press and Johnson seems to be saying that not only will this continue (seemingly helped by his headlines in the Daly Telegraph: “Pensions will not exist by 2050”) but that youngsters will not invest in something so far into the future.

So far so old hat. It’s been the problem for as long as there has been a pension plan to join- we don’t think we will get old. We don’t think we can afford it, so put off the day. I remember presenting to some DJ’s at Kiss FM- talk about not accepting they were going to get old!

Johnson says that young people today should only invest in workplace pensions if their employer is making “sizeable” contributions and if they are 40 per cent taxpayers, meaning they get more tax relief. He says that if this is not the case then it is “almost certainly not worthwhile” for young people to save into a pension scheme. In the meantime, Johnson points to ISAs as the preferred investment.

With friends like Michael Johnson, who needs enemies? What a load of old…. retirement talk. The Auto-Enrolment of members of pension plans is good news. It means more will invest and more people will have more in old age. Of course there are problems to solve (annuities for example). And the pension may not be at levels akin to previous defined benefit plans, but it’s still a pension; an income in later years with tax benefits along the way, including tax free cash.

Longer term than ISAs and ensuring there is something there to make the final years good years, pensions are here to stay.

The term ‘retirement’ may fade away as people take part time jobs, live healthier longer and manage their life balance – but that’s another discussion entirely.