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.

Osborne's Plan for Pension Poverty

George Osborne is in danger of single-handedly destroying the pensions industry.

First, the so called pension freedoms. I’m not sure his opposite numbers in the DWP knew it was coming. Definitely his initiative- and with unforeseen (or seen and discarded) consequences. By copying the Australian model, we are in danger of opening up the nation to ‘double dippers’ as Australia calls them. People that take their cash, miss-use it, or miss-calculate and end up dependent on the State to survive.

And now a consultation document considering scrapping tax relief on pensions. Throughout my 38 years in the pension industry, alongside company contributions, the one thing that ‘sells’ pensions to youngsters is the tax relief. If pensions get treated the same way as ISA’s, then ‘goodbye pensions’. The industry becomes a savings industry, and over time (with unforeseen consequences and/or an uncaring Government), people will find that they didn’t save enough and can’t live on what’s there in retirement.

Short term treasury gains are in danger of sending the next generation into retirement poverty.

NAPMI?

The announcement that the NAPF and PMI are likely to merge is an interesting one.

Both are citing improvements in management, pooling of resources and greater influence in the industry. But I guess it also reflects a decrease in DB schemes, traditionally the ‘bread and butter’ for the NAPF. They came to embrace DC rather late in the day and I’m guessing not so many DC schemes are interested in being part of (and paying a fee for) membership of the NAPF.

Of course, the NAPF gets a lot of support and income from consultants and providers as well, but if they can’t claim to be speaking for company pension schemes as well, there’s a problem.

As for the PMI, they came out of the Chartered Insurance Institute originally and have kept close to their original remit of maintaining and promoting pensions excellence through professional exams. I’m not so sure what’s in a merger for the PMI –unless of course they are low on volunteers which would be pretty essential for their continuation.

All in all, it’s a reflection of a decreasing profile for employer sponsored pension plans. And with auto-enrolment and the new proposed tax changes, that decrease will pick up pace as companies embrace standard industry products.

Not the happiest of backgrounds for the NAPF conference which starts today.

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.

Laughing All The Way FROM The Bank?

A survey from Fidelity, recorded in the Sunday Times, interviewing 500 people due to retire or planning to retire next year makes interesting reading. It suggests most are going to turn their backs on annuities and take all the cash they can. But how wise is this? Cash now, but poverty later?

Unless they are cautious with their new found wealth, they may well find it runs out a long time before they run out. Then what? In Australia, it’s called ‘double dipping’ – ie taking your pension as cash now and then relying on the State when you run out of money.

Is this what we can expect in the UK? Has the government relaxed the laws around pensions too much?

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!)

Pensions in Unexpected Places

When you talk about pensions, certain pictures come to mind. Stock pictures used by many a journalist. An older couple walking along a sea shore. A piggy bank, preferably pink with a smiley face. Coins in a jar.

They're not bad images. At least it breaks up the text.

But how about pensions in unexpected places? One of the aims of pension awareness day on 15th September  is to try and get the pension wrist band into unexpected places! Maybe you can help? Order your wrist band. Take a photo of you with the wrist band in an unexpected place. Send your 'pensions selfie' to Pension Geeks. The best pictures will be on the site.

And the message? All of us in the pensions industry need to try harder to get pensions out there. And even the unexpected places (and people) need a pension.

Two Million Reasons to be Cheerful, One Country's Reason to be Careful

NEST has recently announced a landmark, as they passed one million members. Add to that approximately another million from other master trusts such as People’s Pension, NOW and L&G and you have two million reasons to be cheerful. Ian Dury and the Blockheads would be proud.

And it is a cheerful message. A majority of these members may well be new to pensions, thanks to Auto-Enrolment. Pensions that would not have existed had the legislation not changed.

A good start. But not enough.

Figures from Towers Watson Australia highlight the story over there:

 

So why is this relevant? The new announcements in the Budget means we are following the Australia example. Legislated savings but the ability to take cash at retirement.  So this means increased savings for sure, as the chart shows.  But not enough. Nowhere near enough.

And one other worrying slant on the Australia example. Double dipping. The ability to take cash and spend it has been too alluring to many. They spend it and then rely on the State to survive. Double dipping is more likely in the UK than a new Lamborghini. Or maybe it's both.

EIOPA - Blind or Just Short Sighted?

Dear Pensions Industry

We here at the European Insurance and Occupational Pensions Authority really love you guys. We want to work more closely. So please willyou pay us some money so we can help you? We’ve given you Solvency II. That went well. And now we want to do more for you. More regulations! More directives! You’ll love it!

So pay up. Please.

Love, EIOPA

That’s the latest story to come out of this myopically challenged EU quango. Really?! Do they not get it? They have totally messed up on Solvency II. It cost us an amazing amount in time and energy just to pushback on over 500 pages of short sighted proposals. If they had been enacted, it would more than likely have destroyed UK pensions.

And now they want us to pay them to bully us some more. Hmmm.

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.

Outsourcing, in-housing, deleting, replacing

First written 9 February 2012

The Daily Mail says goodbye to their long serving Pensions Director soon, as Geoffrey Staines retires (Professional Pensions 9/2/12).

Geoffrey cost me a lot of money. I used to work for a media firm and was part of an industry group along with Geoffrey. Each year he provided tickets for the Ideal Home Exhibition, sponsored by the Daily Mail. I couldn’t go but my wife did…. Geoffrey cost me a lot of money!

Geoffrey’s retirement has allowed the Daily Mail to change things around. They are appointing a Group Reward Director instead of a Pensions Director. There is a trend here. Over the years, there has been a pretty constant move to outsourcing pension administration. As this happens, pension departments have been closed or merged with other HR related activities. And Pension Managers have been replaced with Benefits Managers, Reward Directors etc. (As one ex Pensions Manager announced, ‘I’ve been deleted!’)

Against this trend, I’ve heard of a couple of companies recently, contemplating bringing their pension administration back in house. This is due to auto-enrolment and the number of zero’s on the end of the charges from third party administrators for managing the new regime. Are we seeing a reversal of the outsourcing trend? Or will we continue to see Pension Managers replaced by Reward Directors?