However, tradition dictates that this is our currency.
The big work in progress that has encompassed 2013 is auto-enrolment, which has already passed its first anniversary.
Early reports speak of relatively low opt-out rates, but the companies involved so far have been the larger ones and those with HR and pension departments that are used to engaging with the workforce.
Indeed, it has not been the ‘customers’ who have been the focus in 2013, but rather the suppliers. There has been talk of capacity in the market, and particular scrutiny of the charges being levied by auto-enrolment schemes. There have also been calls (and ongoing consultation) for a charges cap.
The Office of Fair Trading produced a report that criticised many aspects of the governance of defined contribution pension schemes, particularly the complexity of pensions in general and the failure of employers to offer the best arrangements to their clients. There will be changes initiated by the report, but it is important to remember that workplace pensions need the goodwill of the employer and this could well be eroded in the future.
We have had papers on defined ambition and discussions on collective DC, all with a view to improving retirement outcomes for members of existing schemes. I cannot help but think that this could be left until after auto-enrolment has been done.
During the year there have been research papers and reports telling us lots of stuff about our savings and spending habits, most of which we know already. It is no secret, for example, that we are living longer, that we are not saving enough and that membership of pension schemes is at an all-time low. We do not know how much we will need in retirement and, even if we did, it would not matter as we are not saving enough anyway. Oh, and if you are a woman, all of the above will be a bit worse than if you are a man.
Retirement is always news. In March 2013 we got the restoration of the 20 per cent uplift in Government Actuary’s Department rates for drawdown to help combat the falling gilt yields. Indeed, with a little bit of an upturn in gilt yields, the extra 20 per cent and some positive investment markets, a drawdown review today would probably look a whole lot more positive than it would have a year ago.
If last year was the ‘annus horribilis’ for drawdown, then this year the focus has been on annuities: the cost of annuities, how they are sold and how much profit is made by providers. This is annuities having their ‘with profits’ moment, when the focus is the black box that contains the actuarial assumptions and pricing details.
Annuities do what they do – offer a degree of insurance against living too long. Rates have been at an all-time low, seemingly with little chance of improvement, which is a problem for a product that is invariably bought by consumers for whom the level of income is vital. As they say in the press, this one will run.