Sometimes, it is easy to get swept up in all the pensions doom and gloom swirling around like a heavy winter fog.
Of course, financial journalists are guiltier than most. After all, bad news sells newspapers (well, it did in the good old days when people bought papers on their way to work) and in this technological world of ours it also drives people towards money websites. Guilty, my lord. Lock me up.
Having said that, though, the pensions gloom is not that hard to get caught up in. It is a bit like tramping across the Yorkshire Moors in February – mist is virtually guaranteed.
As the financial adviser community knows all too well, we have all watched from afar as a band of rogue – and despicable – advisers have handed out rotten pension advice to British Steel workers in Port Talbot. In the process, they have brought shame on an industry that is doing its utmost to present itself as a profession underpinned by integrity and an overwhelming duty to clients.
Then there have been the awful events at construction giant Carillion, where the pensions regulator sat idly on the sidelines while the company’s pensions deficit roared higher. The pension trustees, however well-meaning they are, were as ineffective as a lone bouncer at a Metallica concert.
This was a state of affairs that prompted an acerbic Frank Field, chair of the work and pensions select committee, to state: ‘It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years. The purported cash flow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top." The Pensions Regulator, Mr Field said, had questions to answer.
Pension deficits are in a state
Other large listed companies – the likes of AA, Tesco, De La Rue and BT – also have worrying pension deficits, especially when measured against their market capitalisations. Indeed, as Simon McGarry, a senior equity analyst at investment bank Canaccord Genuity, recently commented: "If BT’s pension deficit [£9.1bn] was a company, it would be large enough to be in the FTSE 100 Index." There’s a fact for you to chew on over your morning bowl of Rice Krispies.
Even our state pension, when expressed as a percentage of the country’s average wage, is considered to be the worst in the developed world according to the Organisation for Economic Co-operation and Development. Our percentage is a miserable 29 per cent, compared to 50.5 per cent in Germany and 74.5 per cent in France. Figures that prompted Baroness Ros Altmann to says that the country’s ‘support for the oldest in society is not fit for purpose’.
Enough bad pensions news to sink a battleship, I would say. So is there any good news out there to counter this slurry of pensions misery?
Will AE save the day?
Yes. Auto-enrolment (AE), thank goodness for auto-enrolment. Hallelujah. Rejoice.
Official figures confirm that more than one million employers have now automatically enrolled staff into the company workplace pension. The result of all this is that nine million workers have been enrolled. Between now and June, a further 150,000 employers will also embrace AE. Indeed, this programme, which began in October 2012 will then be complete.
"A remarkable achievement," says Tom McPhail, head of retirement policy, and font of all pensions knowledge, at Hargreaves Lansdown.
"The idea of saving for retirement is slowly becoming the norm across society," explains Tom Selby, senior analyst at AJ Bell. It is a comment backed by research conducted by the Department for Work and Pensions. which indicates that 83 per cent of workers who are eligible for AE now see saving through a workplace pension as the ‘normal thing to do’.
Of course, AE should only be seen as the start of a campaign to get people saving for their retirement, and to build immunity from dependency on a busted state pension. The government acknowledges this. Having dispensed with the ridiculous Workie, a 10 foot tall furry monster ambassador for AE, it is now busy advertising again.
This time the main thrust is on getting workers to invest more time in understanding their work pension. ‘It’s like having another you’ is the catch line. Compared to Workie, whom I detested, the new adverts are actually half decent.
With contribution rates under AE set to rise to 5 per cent in April, and to 8 per cent in April 2019, the message of the adverts is all about the value of staying in rather than opting out. This is sensible pension advice that Workie was incapable of giving.
Yet let’s not be complacent though. Far more needs to be done. Although a widening of the AE net has already been signalled to embrace younger people, lower earners and multiple job holders, any reforms will not see the light of day until the mid-2020s at the earliest. Given the state of political flux in this country, I doubt if they will ever get off the ground.
But then, as you know, I am a pensions doom merchant.
Jeff Prestridge is personal finance editor at the Mail on Sunday
