Ambitious Enough? The future of workplace pensions

John Gray is UNISON National Executive Council Member for Community & Voluntary sector

On Tuesday morning there was a TUC seminar on workplace pensions Chaired by Assistant General Secretary, Kay Carberry. Keynote speaker was Minister for Pensions, Steve Webb MP.
In his speech he promoted his vision of “Defined Ambition” pensions.  He thinks that Defined Benefit (DB) schemes are finished outside the public sector but wants something better than Defined Contribution (DC). Problem with DB is cost to employer and volatility, while problem with DC is uncertainty and protection against inflation.  He wants something that is not as good as before (DB) but better than the minimum (DC).

 

He suggested that employers may pay an insurance company (as a company perk) to protect the value of a DC scheme so that on retirement you would get at least your contributions back. He also said that what employers want with pensions is a level playing field and they don’t want to pay more than competitors.

 

My question to him was that are we just trying to reinvent the wheel? If workers need certainty and inflation protection then the answer can only be DB. A reformed DB, where you look for example at employer caps in contribution (I forgot to mention smoothing). In Japan nearly 100% of pension provision is still DB, while in South Korea which has amongst the world’s longest life expectancy they are still opening new DB schemes. If companies want a level playing field then introduce compulsion.

 

He replied that he did not know why DB was still so prevalent in Japan. He thought it may be related to inflation? He also said it would be inconceivable to get political consensus in the UK  to agree to DB pension compulsion in the UK.

 

Which I would agree with. It will be impossible to get consensus from right wing Tories. That is why the next Labour Government with a decent Parliamentary majority should just do it, because it is the right (or rather left)  thing to do.

 

You can check out my twitter comments on the rest of the seminar here.  There were some really fascinating contributions from other panel members: Doug Taylor from “Which?”; Professor Orla Gough from Westminster Business School and Craig Berry from the TUC.

 

I had another chance at a question towards the end of the seminar, where I asked the panel that there is a lot of interest currently in “Predistribution” and the concept of a living wage, since the taxpayer should not be spending money subsiding bad employers who pay poverty wages. So should we in the pensions world be also talking about a “living pension” and not allowing bad employers who don’t provide one to subsidised by taxpayers as well?

 

Not sure if I got a full response from Panel. Craig Betty was supportive but  DWP civil servant, Mike le Brun, who took Steve Webb’s place on the panel said that individuals will have to take more responsibility for their own pensions. In DB they were passive but in DC they must be active.

 

Which would seem to contradict his Minister comments about the problem with DC being that individual workers cannot understand the uncertainty and the inflation risk.

 

If the best brains in the Treasury and the City of London cannot accurately predict return and risk then what chance does Joe Public have with their DC pensions?

 

Unions21 is publishing an article on Defined Ambition pensions in the first report from the Fair Work Commission. The report will be launched at the Unions21 Annual Conference on 8 March.

Views sought on new RPI

The First Actuarial monthly Trade Union briefing reports that less than a month now remains to submit views on amending the way that the Retail Price Index (“RPI”) is calculated. The changes up for consultation could result in gradual changes in the RPI, narrowing the difference between the RPI and the Consumer Prices Index (“CPI”).

 

The graph below demonstrates the historic differences between the RPI and CPI over the past 24 years:

 

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Using pensions to incentivise volunteering is barmy

http://www.stockfreeimages.com/LORD Bichard a crossbench peer who retired at the age of 53  and is currently in receipt of a £120,000 a year civil service pension, has come up with some bright suggestions which would ‘encourage’ older people to do ‘voluntary work’ for their pensions.

 

Bichard’s comments at the committee investigating the impact of demographic changes on the public sector merit reading.

 

‘Are there ways in which we could use incentives to encourage older people, if not to be in full time work, to be making a contribution?’ he asks. Apparently, Lord Bichard is in favour of using pensions to ‘incentivise’ retired people to be useful members of society, as he sees it.

 

This, in my respectful view, is one of the barmiest ideas to have been presented to a parliamentary committee for a long time. It betrays seriously worrying attitudes about older people and their value to society. Read More…

Trustees Come Together to Understand Pension Changes

Marion Colverd is General Manager of TU Fund Managers

As market volatility causes worrying fluctuations in funding levels which has left many pension funds facing a challenging investment outlook, trustees, now more than ever, must find ways to protect the interests of their members to provide them with a good income on retirement.

 

The TUC encourages all trade union members who are trustees or pensions panel members to participate in its TUC Trustee Network.  This offers regular updates on regulatory and investment issues, access to training and conferences, as well as the opportunity to meet and talk with fellow member trustees at other funds.

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State pension age – will they dare to raise it again?

Publication

Chris Ball wrote for the Unions21 publication: The Generation Game, Does Age Matter?

At some point during the Conservative conference, the issue of working longer before retirement may come up. (How could it not with George Osborne deciding that £10 billion of additional welfare cuts will have to be found?)

 

There are several reasons to doubt that it would be easy to deal with the debt crisis by pushing up state pension age more quickly however. Yet, as this approach is being followed in several other European countries we should be ready for it. One argument which will be used will be the increasing ageing of society.

 

Sadly, at present the naïve idea that demographic change means we can automatically look forward to years of working longer is going largely unchallenged. Demographic change alone cannot possibly determine our ability to work.

 

Today’s news reports suggest that the burden of further cuts will fall on the working age poor and on the face of it – the young. The Guardian says that first targets are likely to include housing benefits for the under 25s and removing extra benefits from claimant parents who have an additional child.

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Scottish Doctors to Ballot for Action to Protect Pensions

The HeraldScottish doctors will be balloted on further, escalated industrial action over pensions, that could involve a series of days of strike action with emergency cover.

 

The BMA has announced on its website that its council has agreed that Scotland’s hospital and public health doctors would be balloted in November if the Scottish government did not deliver a genuine alternative to the controversial NHS pension changes being pursued in the rest of the UK.

 

GPs in Scotland will not be balloted this time.

 

If doctors decided to strike, the first day of action is planned to take place on December 12, with subsequent strikes scheduled for January 8 and 17.

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