The golden age of defined benefit company pension schemes is over. The golden generations of pensioners it spawned, in the private sector at least, have gone off into the sunset with their generous pots.
Towards the end of the last century, many of the largest employers in the UK used their pension schemes as the ultimate business management tool, able to pay off unwanted sectors of their workforces with offers no sane person could refuse.
We will all have examples of people from our own circle of family and friends who were given both redundancy payments and unreduced pensions in their early-50s as their employers set about restructuring and modernising their businesses.
These are the people the traditional pensioner television ads appear to be aimed at, travelling the world on cruise ships when they are not busy playing golf.
But that image of retirement is one we should discard of as we come to grips with the realities of what it will be like to grow old in the UK in the 21st century.
It is unlikely anybody now embarking on their career will have pension benefits equivalent to a lottery win showered on them in their early-50s. Indeed, our current legislation does not allow anybody to build up anything like the pension assets previous generations have been able to accrue. Nothing like it, in fact.
And no employers are ever likely to saddle themselves again with the pension liabilities common just two decades ago. Liabilities that seemed like nothing in a booming economy but can be business threatening in the cold light of today’s reality.
From here on in, while pensions will be more widely held, they will be less generous.
Our occupational pensions industry has been of great use to half the workforce in the UK – those working for the largest employers – but of little or no use to the other half who work for smaller firms.
We have always had pensions haves and have-nots, broadly defined by the sector they are employed in. We have never had a pension system that created pension wealth for all.
For many in the neglected half of the population, the state pension has been the light at the end of the employment tunnel. But this light has grown dimmer in recent years, as the state pension age has increased and its real value has fallen. We do not have a particularly generous state pension in the UK. No one retiring on it alone is likely to spend their last decades cruising the planet’s oceans with fellow golfers and bon viveurs.
It would be good for us to carefully consider just what it is we want from a 21st century pension system and whether it is possible to build one that will be capable of creating a realistic level of pension wealth for all. It would be better still if we could build such a system.
Steve Bee is director at Jargonfree Benefits