Around a fortnight ago, the new chairman of the National Association of Pension Funds, Peter Thompson, grabbed the national media's attention by warning of a bleak future for company pension schemes.
The Daily Mail's headline, Company pensions run out of cash, was exaggerated, to put it mildly. But the story stood.
Long-term factors such as lower long-term interest rates and longer lifespans are already putting a strain on pension funds because they make it much more expensive to pay a pension from retirement to death.
The subtext was that short-term factors – such as a dep-ressed stockmarket and the withdrawal of tax credits on dividends – have turned that strain into a squeeze.
No doubt, BT, which is shutting its final-salary pension to new members, would agree. The country's biggest pension fund has known for years that its members are living longer.
It has also used the surplus on its pension fund indirectly to fund voluntary early retirements (some would call them redundancies).
But most of all, BT's fund has suffered just like any other scheme from one crucial factor – lower inflation.
Company pensions have this in common with endowments – inflation made both of them easier to sell. While final-salary schemes have been around for decades, their sales really took off in the 1980s, just like endowments. The basic arithmetical principle was similar. So long as inflation was high, then, all else being equal, interest rates and investment returns (ultimately the same thing) would also be high. As indeed they had been.
With the stockmarket roaring away, it seemed only to require a modest expectation of investment returns to meet a certain target. For endowments, this target was the value of the mortgage. For final-salary schemes, enough assets to pay the benefits.
What made them both so easy to sell was that if you were not quite so modest in your expectations – in fact, if you merely projected forward from what had gone before – than you would end up with a massive surplus. And what the legendary “nest-egg” was to endowment holders, the “surplus” was to employers with final-salary schemes.
A great incentive. While the endowment holder plan-ned an extension to his house on maturity, the employer could look forward to a contribution holiday under which he would offer his staff a benefit that was costing him precisely nothing. And the pension surplus could even, perhaps, be used for other purposes…
But that incentive relied on a certain amount of inflation – a lot more than we have at present. Perhaps in the 1980s no one expected politicians and central bankers to succeed in their aim of killing inflation.
But, through determination and a willingness to sacrifice numerous jobs and livelihoods to that end, it does seem right now as if they have. Of course, inflation might take off again in the coming years. But suppose it does not?
And here is where it gets really frightening. I've got one of the actuarial profession's most senior figures to thank for this particular little nightmare. It will become obvious why he told me “off the record”.
It is hardly startling to say that stakeholder pensions – and every other development in personal finance – are forcing people to rely for their future welfare on investing in the stock market rather than paying tax and national insurance to the state.
As investors push more and more money into private stockmarket investments, the demand for shares is growing faster than the value in those shares. Demand for share investments, in other words, is outstripping supply. With-out going too far into economic modelling, you could argue that it is this – more and more money chasing shares – that is artificially boosting share prices.
Now, at some point in the future, that is going to change. If everyone invests the most they can to provide for their retirement, then eventually that flow of money into shares will stop growing.
Those people investing now will begin to retire and start drawing out money. And instead of a net inflow of money into share investments, there will be a net outflow. Result? Share prices instead of continually growing continually falling.
Let's hope we are all ret-ired by then and safely locked into a level annuity.
Andrew Verity is personal finance correspondent for the BBC