Some pension experts are worth their weight in gold, shedding light on a key component of our financial lives that so often remains shrouded in thick Channel fog.
Think Tom McPhail of Hargreaves Lansdown, Alan Steel of the eponymous financial adviser firm Alan Steel Asset Management, and the two ‘Steves’, Steve Bee and Royal London’s Sir Steve Webb.
Oh, and of course, Baroness Ros Altmann who fights conscientiously – and admirably – for the financial rights of pensioners. All forces for pensions good. Shining knights and baronesses in gold armour. Clearers of fog.
Other pension gurus are not so glittering although their knowledge of all the pension intricacies known to man and woman is incomparable.
Maybe, because they are so in love with pensions, they see the industry they work for through rose-tinted spectacles. Blind love. They refuse to acknowledge that the pensions system is muddled and too complicated – and occasionally marred by scandal.
The mis-selling of pensions to British Steel workers? A mere blip on the pensions landscape, these defenders argue, an issue hyped by a press in search of bad news stories (tell that to financial adviser Al Rush who spent time down at Port Talbot helping victims of mis-selling – he is still seething at what was done to these people, many of whom he grew up with).
The view of the pension defenders is that we live in a world where pensions are more hunky-dory than broken. And if there are problems swirling around in the pensions fog, they would rather blame other darker, more malevolent forces. Outsiders, not insiders. People like me.
Negative tone
So, it was no shock to the system – mine, not the pensions system – when a leading trade body sent out a missive at the beginning of this month bemoaning the negative tone of much pension journalism. It was the fourth estate, it claimed, that was undermining confidence and trust in pensions. Not the components that make up the pensions jigsaw – namely: sleepy regulators, companies reluctant to address mounting pension deficits, law breaking financial advisers, greedy pension providers and meddling governments (past and present). Ill-fitting jigsaw pieces.
These claims were made by Bob Scott, chairman of the Association of Consulting Actuaries (ACA), a trade body representing the interests of many of the country’s qualified actuaries.
Its members are often actuaries to private sector defined benefit pension (DB) schemes, using complex formulae and mortality tables to assess whether the funds have enough in the pot to pay out all pensions due – now and in the future. They are vital members of the financial community. An integral part of the pensions jigsaw.
Not for one moment do I question Mr Scott’s integrity. Indeed, he is an upstanding pillar of the pensions community who has spent his working life assisting DB pensions in being sustainable.
But it is not right for him to say – as he did at a recent ACA dinner – that the pensions industry is in better shape than portrayed. That there is a “perception problem with pensions all too often being seen as bad news”. That instead of highlighting problems, we (all of us including the press) should blindly be singing the praises of the Pension Protection Fund, The Pensions Regulator and the auto-enrolment regime. More pensions gloss than pensions reality. Dare I say it, fake pensions news?
Of course, the PPF is a force for good, protecting a large chunk of employees’ accrued pension benefits that 15 years ago would have been lost.
And, yes, auto-enrolment has been a resounding success story, drawing some 9.6m workers into the pensions net for the first time and getting them engaged in long-term saving.
Work to be done
But there is so much more that could be done to make pensions truly fit for purpose. For example, greater simplicity and a culling of the rules that make pensions only understandable to members of the ACA would be a good start (Mr Steel is very good on this subject). The tax relief available on pension contributions should be simplified as a matter of urgency (an issue I raised in this column a fortnight ago) and the lifetime allowance abolished.
The Pensions Regulator should be more effective in getting companies to close massive pension deficits. More interventionist than laissez faire. And while auto-enrolment has introduced pensions to a wider audience, it has yet to encourage people to save enough.
Indeed, the latest data from the Office for National Statistics indicates that average workplace pension savings rates are falling to minimum levels – on average, the equivalent of 40 per cent of our working income. The quicker we get minimum auto-enrolment contribution rates into double figures – 12 per cent, rather than the 8 per cent of earnings that applies from April next year – the better.
Until these issues – and more besides – are addressed, the fog will remain. Measures to clear it will be welcomed. Steps to thicken it will be reported in the way it should be – as bad pensions news.
Jeff Prestridge is personal finance editor of the Mail on Sunday
