Good-bye Ros

I wasn’t a fan of the Ros Altmann appointment as Pension Minister and am not unhappy to see her go. She has been a good champion of pension’s miss-selling and other inadequacies in our present system, but she has also been a champion of her own profile. A bit of self-promotion is okay so long as you get the right things done. But in her time as Pension Minister, frankly, she didn’t.

She appeared to put on hold Steve Webb’s Defined Ambition agenda but didn’t push through anything else in its place. She was caught out, seemingly, by Treasury initiatives around lifetime ISAs, and her most publicised comments during her tenure were not on the subject of pensions but her critical observations relating to her then-boss Iain Duncan-Smith.

As she continues to speak for pensions from her seat in the House of Lords, it is likely to be as a populist voice for change, but without the detailed knowledge of how to do it- something else that exposed her during her time as minister.

And I expect we will see a return to the OTT headlines in the Daily Express with Ros Altmann quoted as the expert. I suspect that many of these headlines in the past were her own creations and necessarily lessened whilst she was Pension Minister.

The more junior appointments that follow her tenure suggest a greater hold of pension policy at the Treasury as well as reflecting a perceived government view that pensions doesn’t need high profile ministers.

Instant Society

Yesterday was Pension Awareness Day. The BBC ran a pensions programme called Inside Out, looking at the pension cheats and the need to save. It even had a cameo performance from Steve Webb, chatting to pensioners on a bus.

Joan is 93. In the programme she comments on the cultural shift towards spending now.

'Nowadays, young people don't know how to save - because they've never had to save. It's a throwaway society. They've never had to make do and mend like we had to.'

There's something in that. In our instant, 40,000 googles-a-second society, everything is instant. Saving isn't.

From Ford Model T to Lamborghini

It’s nearly six months since Steve Webb made his controversial Lamborghini comment - that people should be able to use their pension savings to buy a Lamborghini if they want to. 

And it was the extent of the pension changes announced by George Osborne at that time that took us all by surprise. But six months on, with a lot of reflection, and considerable hard work from the pensions industry, we’re getting used to the idea, the flexibility. And to some extent, the increased simplicity and reasonableness of the changes. Annuities will still exist, but gone is the need for an annuity and with it, the effect of the fluctuations in annuity rates from month to month that created a lottery for the approaching retiree.

In its place is a need to communicate like never before. The trustees need to decide how to respond to changes that affect their plans (the Taxation of Pensions Bill is just out). And then they need to act. Members will need that oft-spoken of information that Steve Webb speaks of like never before.

We’ve come a long way from a prescribed defined benefit pension plan (the Ford Model T of pensions) to the Lamborghini type choice that awaits today’s pensioners. I think that’s good. But trustees need to start reviewing the changes early, and then to shout loud those changes to a workforce that still has a mental block the moment you mention the word ‘pension’.

Grey Gap Years

'.....the idea that people have one job that they do all of their lives is “history” and second careers will become increasingly common for the over fifties.' Here says the Pensions Minister Steve Webb in the Daily Telegraph.

He's right.

The retirement 'cliff' - in work one day, out of work for good the next day - is increasingly uncommon. And a good thing too. The shock of retirement has led to many an early death, due, I think, to a sudden lack of purpose and lack of appreciation.

With the recent pension changes, we are moving towards a Lifetime Savings Account (something I've championed before) and considerably more flexibility in how we take our tax advantaged savings.

It will also allow for the Grey Gap Year, another suggestion from our Pensions Minister. I'm not sure it will look like a student gap year. Shorter and possibly with more purpose to it (!), but a good time to step back from work, assess, prepare and move back in to part time work, or even a different career.

All possible thanks to these changes. And thanks to the internet revolution. So much can be done from home now. Whole careers can be built around access to the World Wide Web (he says, writing this from the local pub due to BTs complete inability to provide broadband at our new house so far!)

House Moves and Pension Moves

Just recovering from moving house, so therefore catching up a bit with all that has been happening in the world of pensions.

(Incidentally, well done to all the various third parties, institutions and providers –and especially the Post Office- for responding so well to our house move. All except BT that is. Did you know you can’t order broadband if there is no recognised house phone? Actually there is a house phone- but it’s been offline with the house being empty. Anyway, BT rant over....)

The main pension move of course has bee CDC’s. Not new, but a new energy for the idea post Queen’s Speech. And Steve Webb linking it to his Defined Ambition project. Is it really DC+ (to use a Webb phrase)? Sort of.

Plus in terms of increased certainty by way of volume. Plus in terms of lower costs, again due to volume. But not plus in terms of additional guarantees. The pot can still go down as well as up. There’s no protection even on pensions in payment.

I remember managing a Dutch CDC for a large international company. The news was not good one year. There were going to have to be reductions in pensions in payment. It was a hard one for the local Dutch company to manage in terms of a news story that could get out to the press. No one wants their pensioners to suffer. The US parent company didn't like it one bit. How did we get to this, they were asking? It was a communications nightmare.

What looks good on paper and works logically for pension professionals is still hard to explain to a member. Especially a pensioner who’s just found out they are getting less in their bank account each week.

Nevertheless, I think it’s a good step forward so long as we can manage the message with the members.

In (Modest) Praise of Pensions

We don’t always get it right. And it’s in our psyche to be critical of ourselves; disparaging even. But, actually, we’ve not done such a bad job with pensions.

We have a State system that works, that despite the recent changes, meets the needs of the poorer in society, and gives the rest of us a ‘not too bad result’ for our time in the workplace.

And we have an occupational pension system that is the envy of many. The Italians have had governments fall because of attempted pension reform. The French are in trouble- surely it is only a matter of time before their system collapses with the emphasis on PAYG and such low retirement ages? And the Greeks… Well, the Greeks.

We’ve made mistakes for sure. The day the accountants beat the actuaries at their own game and insisted on present market values. That was, to my mind, the death knell for Defined Benefits. But our Defined Contribution system works well if the employer is willing to put in a decent amount.

And the new Auto-Enrolment legislation is working. Lots more people in pension plans. A greater awareness of pensions. Less stress on the State as a result. I know… it’s only a start, not enough going in, etc, etc. But don’t be so hard on yourself! It’s a success!

Not only that, we have the longest standing Pensions Minister in history- and he actually understands his brief!

I do wish we would be more careful with the headlines we feed to the press (especially to the Express and Mail!) If we can get into the habit of presenting challenges in a more positive way, we may get a more positive slant on the problems we face in pensions.

Since Samuel Pepys had to pay a pension to his predecessor as Clerk of the Navy Board, we’ve done alright. Not great. Not fantastically. But just about alright.

Politics in Pensions

Roger Mattingly, chair at the Society of Pension Consultants commented in the press that if Auto-Enrolment did not work, it would be the end to the careers of Steve Webb, the Pensions Minister, and his other pension colleagues. I think Roger has got it wrong. (Professional Pensions 11 March).

Steve Webb is a Liberal Democrat. He has no political ambition! It’s a surprise to him that he’s in power at all! His boss Iain Duncan Smith has been to the top of the party and back again- so he is a rare thing, an altruistic Tory!

It is to the pension industry’s advantage that we have two ministers involved in pensions policy  that are able for the most part to keep the politics on the side lines and do what’s right.

As for Roger’s comments, who’s the real one being political then?

When the 'P' in Pensions stands for 'Politics'

David Cameron is falling into the same trap as Gordon Brown. He’s worried about votes and is threatening to change pensions because of it.

The laudable ideas from Cameron’s work and pensions secretary Iain Duncan Smith and his able pensions man Steve Webb are in danger of coming to nothing, having travelled so far.

It’s not the first time pensions has become political- Gordon Brown was renowned for this- but at this stage in a new process, it is particularly disappointing. The idea of a flat rate State pension looks like it may be kicked into the long grass and not considered further before the next election.

I suspect that the real motivator here is George Osborne, the Chancellor, and he is ‘using’ the Prime Minister to push home his points. I know the newspaper reports say otherwise, but the reform can be shown to be costly financially and not just costly in terms of the voters who may lose out. Why is Cameron bowing to the views of his Chancellor? Maybe it is the votes. More likely it’s the cost of the changes that the Opposition can latch on to before the election- so votes again, albeit one step removed.

Shame on you Mr Cameron. You could have saved the future of pensions in the UK, simplified the system and added a long term confidence in the system that is currently lacking. Instead, you have bowed to the ballot box.

Happy Hugs Day

First written 14 December 2011

Today is ‘Happy Hug Day’. It started as an annual event in Korea but thanks to social media it’s going worldwide.

So in the interests of promoting those feel-good moments, here’s a  few happy hugs for the pension industry….

• A modestly genuine hug for Steve Webb, the Pensions Minister for knowing his subject and being honest despite the politics.
• Some really big genuine bear hugs for the little guys –in terms of company size-  in the pension industry that punch well above their weight… Avgi Gregory at Muse, John Watson of John Watson Design, Helen Boylett-Smith at Lorica, Fred Jaffe and Trevor Cook at MPPF….. and so many more, not forgetting my wonderful friends at Anthony Hodges Consulting.
•  And finally a pretend hug or two for the lady who keeps getting on the news and creating pensions panic, and those very nice union chaps who use pensions as an excuse to strike about all sorts of other stuff.

And if you’re reading this, consider yourself hugged.

Professional Pensions Show 2011

First written 20 September 2011

Another year. Another show.

And pension concerns show no signs of easing, or of moving off the front page of the newspapers. The fact that the Pensions Minister was willing to share his views (albeit by video) and the heads of the Regulator and PPF were there in person says much for the current climate. It’s one of admitting we know the problems but we don’t have all the answers.

The coalition government have, in my view, done a good job so far on pensions and the fact we have a Pensions Minister who knows his stuff is welcome- and unusual!

I enjoyed the initial debate on pension reform. Kevin Le Grand of Bucks is right to say we need a grand idea (he’s got the right surname for a start!) And, as the debate identified, one of the keys to this is to review how we communicate pensions.

Investment got a good airing throughout the two days, not least with the backdrop of Greece, the Euro and all things heading south. I particularly enjoyed the presentation from the senior economist at HSBC- but as that session was Chatham House rules, I can’t say more!

Well done to David Hutchins of Alliance Bernstein for making sense of asset allocation, and to Naomi Cook of the GMB for a spirited fight back to the Hutton review on local authority pensions. Not sure I agreed with Naomi but it was thought through and delivered with a good deal of passion.

Pensions and passion. There’s a thought. Not sure the two words would usually go together but the timing of this particular pensions show ensured there was plenty of both.