Tuesday, November 27, 2012

TUC Pension Trustee Conference 2012: Making Pensions Work For People

Picture is of Pension minister, Steve Webb MP, address the opening of the 2012 TUC Trustee conference at Congress House.

Steve spoke about his recent discussion paper on "Reinvigorating Workplace Pensions" which I will post upon another time.

He thought that auto enrolment had been a success so far with far less "opt outs" than feared (Great news).

He wants reform to allow people who build up small "pension pots" with a number of different employers to have the "pots follow the member" and consolidate into big fat pots (Good idea).

The new state pension scheme must be above the means tested income support level or people will not have the confidence to save for their pensions in case it is all eaten up by reductions in benefit (yep).

He tried to explain what his big pension idea "defined ambition" will mean in practise. While he would prefer pensions to be guaranteed and salary related, what can be done if employers don't want to offer such schemes? (you can force them Steve thought I).

In Q&A my question was about his comments in Pensions press in June this year, that accounting standards in defined benefit schemes were "a complete nightmareand "killerfor pension schemesWhile he also promised to "not stand idly by" and do something. Yet today schemes such as the Pension Trust are still using these completely artificial standards, to justify kicking employers out of schemes and forcing the closure of decent pensions for no good reason. These so called pension "deficits" do not exist.

Steve answered by saying that he wouldn't quite agree that the deficits did not exist, he had not forgotten his words but he cannot say anymore at the moment except that he hasn't forgotten what he has said. He also said that he had met with a number of big charities recently to talk about their difficulties with the Pension Trust.

Well, wait and see I think. I am told that it is Vince Cable as Secretary of State for Work and Pensions who is responsible for addressing such accountancy standards ("Mark to Market" and "Smoothing").  I don't know and frankly don't care who does what as long as something is done. Perfectly good pension schemes are going to wall every week in this country, while those responsible appear to wring their hands as ordinary workers are being cheated out of a decent retirement!

You can check my twitter posts of the whole conference here  It was probably one of the best TUC ones I have attended. I will try and post more during the next few days. Its a busy time for pensions. 


Phildog said...


Employers can't afford DB schemes. People are living much longer than anticipated and successive governments have placed a huge burden on employers by changing the rules. Mark to market is becoming more important because schemes will ultimately be wound up and it is the cost of securing those pensions with an insurer that drives the cost, which in turn is dependent on gilt yields. That is the problem.

John Gray said...

Hi Phildog
Modern DB schemes are affordable. There are means of offsetting longevity risk such as changes to normal retirement age and “cap, shares and collars”.

The issue is poverty in retirement. If you want an employee to be able to retire on any sort of decent income an employer would actually have to put more money in a DC than a DB. Pensions are expensive whatever way you look at it. Yes, government has messed up with changing the rules however well meaning they were at the time.
Mark to Market is one such rule change which is destroying perfectly good pension schemes.

Winding up viable schemes makes no financial sense whatsoever and is just the latest in a long line of cons to rip off companies and pensioners by the industry.