'The current pensions system is not fit for purpose'

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'The current pensions system is not fit for purpose'
Most of the 5,000 surviving defined benefit schemes will close within 5.3 years. (FT Montage)

The death knell for defined benefit pension provision has been tolled many times, even if the final 'coffin nail’ has not quite yet been hammered into its lid. 

Millions of ordinary workers, from journalists, railway workers to shop assistants in WH Smith, enjoyed DB pensions without appreciating just how good a perk they were, until it was almost too late. What a failure in communications.

Sadly, we have almost reached a tipping point when there will be no return from the DB pensions underworld. Most of the 5,000 surviving schemes will close within 5.3 years, according to Barnett Waddingham’s DB End Gauge index.

Is retirement roulette the best we can offer our children and grandchildren? 

By then the average DB scheme will be able to buyout their liabilities, predicts Rob Hammond, director at BWD (and author of the "Ask the Actuary" blog), in FTAdviser’s sister magazine Pensions Expert.

The golden generation 

I am one of the post-war baby boomer cohorts (born between 1946 and 1964). With the benefit of hindsight, we were so lucky – although it didn’t feel like it at the time, with roaring inflation, high interest rate and foreign travel restricted to only the wealthiest in society.

There were also tough constraints on foreign currency: £50 was the maximum you could take out of the UK. At 17, and an impoverished student at Paris-Sorbonne University, I wrote begging letters to my parents to send extra cash to support me in expensive Paris – an occasional £10 note stuffed in an Air Mail letter kept me afloat. 

As an industry we cannot do much about job security, but we can and should safeguard pension provision.

Exchange controls were not abolished until 1979, perhaps their suspension was one of the most successful financial reforms of my lifetime. 

Most UK working adults today have no experience of sterling as ‘a basket case’ currency with frequent crises dominating daily newspaper headlines.

Mobile phones too were the stuff of science fiction – each personal handset today has more computing power than NASA had at its disposal to aid astronauts to conquer the moon in 1969.

Even with black and white television until 1967; I remember going to a rich friend’s house that year to watch Wimbledon tennis broadcast in colour, for the first time – what a revelation and what a difference from the all-pervading grey hues.

Most people then had 'jobs for life' with affordable housing including plenty of council stock, as well as decent pensions. The 'gig economy' meant a Beatles performance, rather than casual Deliveroo or Uber work.

DC pensions are, for the most part, totally unsuited as the main retirement vehicles for millions of today’s ordinary workers.

As an industry, we cannot do much about job security or indeed build more homes – but we can and should safeguard pension provision.