My latest revelation has to be credited however, to Scottish Life’s ever popular “elder” statesman and industry personality, Steve Bee. An email arrived a while back with a link to an excellent three-minute broadcast with Steve’s latest thoughts on what appears to be his life’s mission, “the trouble with pensions”.
He quite brilliantly points out that it is no surprise “money- purchase world” is the poor cousin of “final-salary world” because of the huge difference in contributions employers make. I don’t know about you but I kind of missed this point and took the criticism of money purchase plans on the chin, gently moving it aside by explaining final-salary as a bygone era we are unlikely to see again (unlike the grotesque-looking public sector pension liability we are all ignoring).
But Steve’s point is that if we paid as much into group personal pension plans as we do into final-salary schemes, we would all be much better off. Instead, we moan about the death of final-salary and grudgingly make do with, or, as many must these days, even do without personal pension plans.
It is a classic case of dumbing down on a macro scale that has changed the face of pensions we were once proud of. As I have suggested before, make something too difficult and no one will do it – or rather they will, but illegally, badly, or both.
Final-salary schemes are so expensive and the removal of a certain tax relief with the addition of the PPF levy means it has become an inexorable slide into oblivion so the only realistic option is a money-purchase alternative.
It is also, dare I say it, an excellent excuse for employers to massively reduce pension costs in the knowledge there will be scant resistance from a largely ignorant and demoralised workforce.
Of course, some employers simply had to make the move or perish, but others must have relished the chance.
I am often faced with a depressingly blinkered view when people tell me about how “rubbish” their pension is.
If you dig a little deeper into exactly how much they have paid in, lo and behold, it is next to nothing. Contrast this with a deeply skewed view on property as an investment, for example, and you get all sorts of answers that distort the truth.
The fact is that, as an industry, we have failed miserably to educate people on the relative values of various investments. I do not understand why we cannot get the likes of Steve Bee and Standard Life’s John Lawson appearing on the News at Ten grilling our politicians and explaining that if life is not made easier, people will simply give up.
Tom Kean is director of Thameside