50 Up

Phew. We've made it to 50 editions of Grumpy Old Pension Men. Who would have thought?! When Brian and I started out a year ago, it was just a test programme, to try and prove it could be done.

A year later and the 50th edition is on line.

Favourite moments? Brian forgetting what he's talking about (common), Henry Tapper's larger than life appearances, presenting a pensions top 10 to the Top of the Pops music. And all the lovely comments.

Will we get beyond 50. Certainly! 51 is already recorded. And after that? As always, it's a week by week decision related to readership, time taken and pensions news worth discussing. Never any lack of the latter though!

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.

Second Rate and More Expensive?

There was an interesting article in Investment and Pensions Europe magazine the other day. Reporting on an OECD review of pensions in Ireland, the OECD recommended pensions compulsion. They indicated that their view of Auto-Enrolment was that it was second rate and more expensive.

My initial reaction was one of scorn. After all, aren't these OECD bods from Europe somewhere, clearly not British. But having set aside my Britannia prejudices, further thought on their comment suggests they may be right.

Let's deal with the easier one first. Yes, Auto-Enrolment is bound to be more expensive than mandatory plans. All the opting in and opting out results in complex administration and, I would suggest (well and truly wearing my Grumpy Old Pension Men hat), it produces a good income to a lot of providers and administrators. One compulsory system is definitely cheaper.

Now the more difficult argument. Compulsion or Auto-Enrolment? In the end, I think it is more to do with politics than pensions, as is often the case. Thatcher destroyed compulsion. Blair put Frank Field out to grass when Field 'thought the unthinkable' - and it proved to be just that!

Australia, New Zealand and Chile were the countries Field looked at. It works there. It could have worked here. But too late now I think. We have Auto-Enrolment for better or for worse. More expensive yes. But second rate? Not necessarily. We have to face up to extended longevity, to the fact that 'pensions' will never be top of a young persons shopping list and push on through. It has to work.

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?

The Price of Paper

The DWP has suggested that companies should be allowed to ditch paper communications on the basis that it may save as much as £74 million a year according to their calculations.

Having worked in the industry for years with over-cautious pension lawyers telling me I was not allowed to just communicate electronically, this may appear to be good news. However, I’m not so sure.

The fact we might be able to ditch some of the ‘grey pages’ -the small print that has to go out to everyone, especially for contract based schemes- would be more than welcome. And to be able to make a decision as to when it makes sense to communicate just electronically would be great.

But if the legislation allowed a less than paternal company to ditch paper communications for cost reasons alone, this would not be right.

If we want people to understand their pension, then we need to communicate in a way that best suits them. And that will vary with each person. If we want to get the message over, we probably need to communicate by various methods –electronically, face to face, pay-slips, newsletters, personal letters, notice boards- you name it, we should do it.

In my view, a well thought out communication strategy will always include paper at some stage. It may cost a tree or two, but if the result is a better pension, a better understanding and a better industry, it’s worth the cost.

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?