Right now it is hard to know if the reception given to Andrew Smith's Pensions Bill by the industry is justified.
There is a widespread view that something more will have to be done to reform state pensions and the issue of compulsory private pensions will not go away just because Adair Turner has been put in charge of a review. But is the industry right to attack the Government over the positive measures it is taking?
The consultants that deal constantly with the big employers, represented by the Association of Consulting Actuaries, complain predictably about the extra cost of chipping in to the new pension protection fund. The likes of Mercers have also created howls of protest about the measures, already in effect but not yet defined, to prevent solvent employers winding up their pension schemes while they still have big holes in them. They make the usual doom-laden predictions that the pension protection fund will load yet another cost on employers that will make them less inclined to maintain their schemes.
Similar criticisms are made by big companies and their consultants almost every time they face a new regulation that entails any effort on their part. Just as a string of big companies will typically threaten to leave the UK if they face extra labour regulations, so a similar number will threaten to ditch their pension schemes if further obligations are imposed on them.
A layman outside financial services could be forgiven for thinking that far from the regulations being an unwarranted imposition, what on earth were we doing operating final-salary pensions without them?
A final-salary pension is only as good as the employer that backs it. Actually, even that is going too far. Far from promising this level of pension as long as they are solvent and capable of paying it, most employers have been doing nothing of the sort. Instead, most final-salary schemes have a clause inserted at inception which makes it clear that an employer can walk away from the scheme without coming anywhere near to funding the benefits promised.
In the pension industry, there was supposedly much shock when former employees of Sealand, the container shipping group owned by Danish transport giant Maersk, discovered this fact to their cost. It became clear that the only legal requirement on solvent employers winding up schemes was to meet the minimum funding requirement, which might leave savers with as little as a third of their “promised” benefits. (Maersk has now backed down on this and impoverished staff have their pensions back).
The big firms of pension consultants know this very well and rely on it for their advice. Ultimately, it is down to the employer's willingness. Other consultants tell me that, years ago, the lack of obligation to fund a scheme properly was a crucial argument in favour of setting it up. The employer asked: “What if something goes very wrong with the stockmarket?” The consultant replied: “Don't worry. Ultimately, you can walk away from it.”
What will particularly annoy IFAs is what the benefit consulting industry has got away with. Has it given its ultimate clients – the members of pension schemes – best advice?
Employees of Dexion, a packaging group which went bust with a big hole in its pension scheme, point out that advice in leaflets from the National Association of Pension Funds and, to a lesser extent, the Government, has conveyed the impression that finalsalary schemes are almost always a better bet or at least more secure than personal pensions. If that advice had been given under the Financial Services Act 1986, the FSA would now be crawling all over it.
A final-salary pension, as the Dexion employees now know all too well, is only as secure as the employer that sponsors it. That is a crucial extra risk that no one spelt out to them. After all, there were no reasons-why letters. That is a big failure of communication on the part of consultants and employers as a whole.
By defending the status quo before the Smith reforms, pension consultants sound very much as if they are also defending their right to dress up as a proper employee benefit what in fact has been little more than a tentative promise.
Consultants should thank Smith for trying to transform final-salary schemes, not complain about the extra cost of the pension protection fund.
By claiming that these measures to protect the security of final-salary schemes will make the schemes unviable, consulting actuaries are really saying that the only way employers can afford pension schemes is if they are inherently insecure. Smith's reforms will prevent final-salary schemes being an empty promise that looks like a commitment but has no legal or contractual obligation to back it up.
Andrew Verity is personal finance correspondent at the BBC