The use of the word “guaranteed” in relation to pensions has caused problems in the past – particularly when quoted by ministers or appearing in government-sponsored leaflets, reports, press releases and the like.
In common parlance, a guarantee suggests a definite commitment to do something or provide something the person, or persons, on the receiving end has every right to expect to be delivered with no strings attached.
But that has often not proved to be the case in our industry. Guaranteed Minimum Pensions have, in various situations, fallen short of what their title has suggested.
I recall vividly, when the campaign was in full flow to secure compensation for those workers that had lost their pensions when their companies had collapsed, it was claimed an FSA leaflet had described final salary schemes as “guaranteed pensions”. Workers had relied on this to feel secure in expectation of a full pension come what may.
The then head of the FSA did not help much when he explained “when we said guaranteed, we didn’t mean guaranteed in every situation”. The remark did not seem to impress the Parliamentary Ombudsman overmuch at the time. Say what you mean and mean what you say was the message that came across loud and clear on that occasion.
And so to the present day. With the benefit of hindsight the Treasury may now be starting to regret the Chancellor’s very ambitious statement that all new retirees when the pension freedoms come in will be guaranteed independent expert guidance, face-to-face if required, as well as via the telephone or on a website.
How to deliver this is the question and is clearly a major challenge.
It is totally impracticable for Citizens Advice to provide blanket coverage for the entire population regardless of where they live without offering a home visiting service or being prepared to refund all the customer’s travelling expenses for coming to it. Neither option, as far as I am aware, is one it is considering or can realistically afford to do.
Similarly, it cannot reasonably claim to be providing an “expert” service given the salaries on offer and its declared policy not to require pensions knowledge or a qualification for its newly-appointed guides.
There is also the question of capacity. Economic secretary Andrea Leadsom said on Money Box recently it did not want to overstaff the Pension Wise service. At this point in time there does not seem much danger of that, with as few as 300 staff to deal with the 300,000 a year that could potentially attempt to access it – particularly in the early days. The chaotic launch of pensioner bonds should have sounded warning bells in that respect.
In fact, those bells may be ringing loudly in Whitehall at the moment. The late, late announcement of the introduction of a second line of defence – or “additional protection” as the FCA is describing it – could be a sign of real concern about how the new freedoms could backfire right on the cusp of the general election.
It is difficult to believe that directly, or indirectly at least, the Treasury or perhaps even Number 10 itself were not involved in what many are seeing as a clear policy U-turn. Pensions and politics these days are never far apart and sometimes can be a major factor in hasty policy decisions that have to be substantially modified or even fully withdrawn at a later date. There is certainly a feeling in some quarters that the Budget reforms, while welcome overall, had not been fully thought through as to their impact and operation at a more grass roots level, and could have benefited from wider consultation and a longer timescale for introduction.
We shall no doubt find out the truth or otherwise of that in due course but, if nothing else, I would urge George Osborne – and indeed any other like-minded politicians or senior representatives – to think very carefully before using the word “guarantee” in future.
It may be the wrong word at the wrong time. Wrong words and phrases can and do come back to bite you on occasions and that can be very painful for all concerned.
Malcolm McLean is senior consultant at Barnett Waddingham