Thursday, 17 April 2014

The Daily Mail Does It Again

Proof if ever it was needed that the Daily Mail can turn the most encouraging news into something negative. Something it has successfully done with pensions for years.

The ONS have just released their report which shows that life expectancy between the rich and poor is narrowing in the UK. Something to celebrate. We do care for everyone. We are a genuine democracy. We do have the best health service in the world. I could go on.... the message is we have a lot to be thankful for and a lot we are getting right.

So the report is good news, as reflected in the Financial Times headline 'Life Expectancy Gap Between the Rich and Poor Shrinks'. Not the catchiest of headlines- but it is the Financial Times!

Now read the headline in the Daily Mail, covering the same report: 'A fifth of baby boys living in the UK's poorest areas won't live to state pension age - official figures'. I guess they kept looking until they found the suitably negative statistic. I'm sure it's true. I'm sure we can do more. But the overall message is positive. Shame on them (once more) for the ability to whinge louder than the rest of us.

Wednesday, 16 April 2014

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.

Thursday, 27 March 2014

REPOST: The Pig Has It


In honour of the appalling cover to Professional Pensions, 27 March 2014, here's a repost of an earlier blog:
Go onto Google Images, type in ‘pension’ and then see what comes up. Actually, I can tell you what comes up. Ignoring news stories, in the first 100 or so images there were 10 pictures of cash in a jar, 19 ‘beautiful couples’, 12 eggs in and out of baskets, 4 moneyboxes, 6 road signs and a few deckchairs. And twenty-three piggybanks. That's right. Twenty-three pigs.


Is that the best we can do?! Is that a good summary of our ability to convey ‘pensions’ in pictures? You see, if you go behind the picture on Google, to the sites, they almost all lead to providers, consultants and clients pension funds.


Surely we can be more imaginative than a piggy bank? If a picture paints a thousand words, aren’t we falling a bit short with coins in a jar? So come on AHC, Likeminds, Shilling, Ferrier Pearce and all you other pension communication companies…..not to mention the internal departments in actuarial firms…. where are the new ideas? What can we convey that doesn’t include a piggy bank held in the hands of a beautiful couple in a deckchair under a road sign?!

Thursday, 20 March 2014

Pensions Poverty

I welcome the budget changes to pensions. I really do. But the truth is, it’s benefits for the privileged offered by the privileged (to misquote Ed Milliband). Here’s a Facebook message that was posted today by Monika, a lady in my church:

Dear George Osborne,

I'm glad that future pensioners will be able to draw down their annuities and that people with the money to spare can put more of it into ISA's and that, probably those same pensioners can save via a Pensioner's Bond.

But please explain where those pensioners with little, or no, spare cash will be better off.

Personally, when I was a single working mother, I saved what I could in an annuity, only to find out when I retired, that, as it did not amount to £23,000 I was not allowed to withdraw it and had to receive an annuity of, wait for it, £12 a year (!). Even if I live to 100+ I'll never be able to draw out what I put in and now, because I've already retired, it's still locked away.


It seems to me that many pensioners will still not be any better off, despite the media's proclamations, so don't be surprised if you don't get my vote in the next general Election.

Her comments are pretty typical of the real issues we face. Pensions poverty is real.

And what’s worse, according to the Institute of Economic Affairs, we can’t do much about it either. They advise that promises made by successive governments have not been honoured from the existing tax base. So we can’t afford to pay what we’ve promised to pay, and according to IEA’s Philip Booth, ‘it is quite possible that we will not find our way through without serious social breakdown’.

That’s the sobering message behind the mild euphoria in the pensions industry provoked by yesterday’s budget announcements.

Wednesday, 19 February 2014

Don't Tick the Box, Run the Scheme


Reading Steve Delo’s comments in Professional Pensions Magazine almost brought out an audible shout of ‘yes’ from me. Slightly embarrassing when you’re in the quiet carriage on the East Coast line. But it deserves a ‘shout out’ for its plain common sense.
Delo is saying trustees are getting too caught up in form filling and box ticking so as to lose sight of the bigger picture and the need to concentrate on the really important stuff.
In my experience, the box ticking/compliance led/admin and member gripe led trustee meetings are far too common. In the same article, Richard Butcher suggests some consultants use the box ticking items in the meeting to hide behind. Yes, I’ve seen that too on occasion. Although, in defence of the consultants, it’s often a risk-averse company that insists on discussing the business plan details at every meeting and recording every minutiae in the minutes. Maybe I just worked for some overly detail obsessive employers.
More time is needed on reviewing investments and understanding investment alternatives. Governance reviews and membership analysis needs more of a look in.
What we don’t need (in my humble opinion) is more box ticking initiatives such as the ones proposed by the Pensions Administration Standards Association (PASA), where we are about to get new admin codes of conduct. And they have the temerity to say they are going to release different codes of conduct every year! (Audible groan in the Quiet Coach for that bright idea).
Yes, Mr Delo, I fully agree. Trustees spend far too long on documentation and box ticking. And it’s not helped by well-meaning industry pension types suggesting even more codes and directives.
Don’t tick the box; run the scheme.

Friday, 31 January 2014

Strong and Direct

Great piece in Professional Pensions. Lee Hollingworth of Hymans Robertson is correct in saying ‘people need a strong, direct approach to tell them what ‘adequate’ is, what they need and how they’re doing against that target’.

The comment comes following analysis by Hymans Robertson via their Guided Outcomes platform which shows only 18% of over one hundred thousand defined contribution members are likely to build an adequate retirement income.

Apathy has done well for us. The new auto-enrolment approach relies on it for getting members into pension plans. But that’s just the start. If the employer stops with the minimum, then pensions at retirement will be inadequate, and as Hollingworth says, poor pension results will lead to ‘workforce management issues’.

We are going the right way with UK pensions. Auto-enrolment was needed. But that’s just the start.

Wednesday, 22 January 2014

I Hate Bland

An excellent article from Robin Ellison in Pensions World says that ‘rules trying to cap costs are almost certain to have adverse unintended consequences by squeezing out competition from start ups, adding further regulatory and compliance costs, and moving costs to less transparent elements of the system.’

Sad but true.

I’m all for reducing costs, but to start to rule on it simply leads to bland same-as investment choices and large anonymous pension schemes.

Or, as Robin suggests, the costs get hidden, becoming less transparent in an age when we are trying to promote clarity.

There has to be room for alternative approaches. And those alternatives come at a cost. There will be small employers who are happy to carry more cost in order to provide a pension plan that is tailored for their staff. Higher costs to the member may well be outweighed by more generous contributions from the employer than would be the case were he to simply ‘abandon’ his staff to one of the big providers. Big providers can be a recipe not just for low costs but average service. And less interest from the member.

There will also be employers that want to offer genuinely different investment choices for what may be a particularly savvy financial group of employees.

To rule against these things in pursuit of low costs is to limit the market, reduce the choice and promote a generation who remain apathetic about pensions. Regulated low costs will lead to a bland pensions market.

And I hate ‘bland’.