Monday, August 06, 2012

"Pensions people can trust"

This post is just a little bit late but I was away when the Labour Party and Ed Miliband launched its policy review document on pensions last
month and I am still catching up on things.

I thought the review was pretty good and was pleased that the Party recognise that not only are pension policy holders being ripped off in charges but one of the most obvious solutions is that all pension schemes should be "Trustee based". 

This would mean that schemes are looked after by representatives of the beneficiaries who have a financial stake in their scheme and therefore a real fiduciary duty to their fellow pension scheme members. Most company defined contribution schemes are run by pension or insurance companies and have no trustee representation at all. These schemes tend to be run in the interests of private companies and their shareholders, not pension policy holders. No wonder in so many cases they get such a rotten deal.

The review was not perfect. I was disappointed that the review did not mention any positive measures to protect and encourage defined benefit schemes. It did put its finger on the major pension challenge. The complete and utter lack of trust by the British public in our financial institutions.  Who would blame them for this? Since all the evidence is that for at least the last 30 years most have at best ripped off and at worse defrauded savers. The latest loan protection mis-selling scandals and LIBOR fixing shows it is still going on. Things need to change. 


NewhamSue said...

Went to a great Young Fabians discussion on pensions last week, where a very honest conversation between around 6 Fabians (some younger than others) with Labour MP, Gregg Mclymont; Huw Evans from the Association of British Insurers (amusingly somewhat nearer his pension than the somewhat fresh-faced pic on his association's website might suggest) and Fabian President, Andrew Harrop.
Great to be able to share my absolute lack of trust of the private sector - the high admin charges of my early private pensions and the irrelevance of a BBC contract/ Prudential private pension that requires people to be contracted for 6 months at a time to qualify for employer contributions at a time when typical TV freelance contracts (where they materialise) are generally 3/4 months tops (the typical length of a series production period).
Most depressing part was learning that Ken Livingstone's dream of funding social housing developments with pension funds probably wouldn't have been workable (with private pension funds at least) as regulators dub such schemes 'high risk'. Higher it would seem than investing in bonds etc (in their eyes).
Also depressing to see that home ownership stlil seen to be so key to personal old age provision at a time when lending so restricted, the future of housing market feels so uncertain and coalition are powering ahead with new wave of sell-offs without seemingly starting on any new programmes of construction.
The one thing everyone seemed agreed on was that we are all headed for very tough times.

John Gray said...

Hi NewhamSue

Pity I missed that meeting. The "self employed" (real or not) also get a rough deal from the pension industry. They need access to a low cost well run collective scheme that you find in other countries (such as Denmark and Australia). We've "talked" online about access to the LGPS before. I'm still keen on this but it is early days.

Very interesting in the view about private investment funds investing in social housing. I've not come across the “regulators” argument before? Yes, of course such investments would be higher risk than some bonds but so will be the potential return? The risk should be less than equities? You would only put a very small percentage of the total fund in such investments. So what's the problem?

Instead of being the regulators fault it is I'm afraid the case of lazy thinking by fund managers who would rather invest in office blocks and warehouses rather than social housing. Which is seen as being "just too difficult". Strange attitude from people who try and justify their often huge salaries on the basis that they are doing difficult and complex things.