Pensions & Investment

Pensions & Investment
£144 is not enough to realise the benefits of a simple state pension

17th June 2013 — Filed under: Pensions & Investment

Craig Berry

The Pensions Bill will have its second reading in the House of Commons today. I’ve already written about various aspects of the Bill on this blog, but the most important is of course the creation of a ‘single tier’ state pension in 2016. The government is embarking on a radical reform of the state pension system that will merge the basic and second state pensions (BSP and S2P).

Of course, most people who have not yet retired do not understand state pensions, so will hardly notice the difference. In my view, what will matter to them when they reach state pension age, as for pensioners today, is the weekly amount they will receive. On this, the proposed starting rate for single tier, £144 per week in 2012/13 terms, falls significantly short of providing for a decent and sustainable state pension.

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Pensions & Investment
The Pensions Bill’s Beecroft Clause

14th June 2013 — Filed under: Pensions & Investment

Craig Berry

It didn’t get much attention at the time, lost as it was under a hail of dogmatic and poorly conceived recommendations, but one of the main ideas in Adrian Beecroft’s 2011 report advocating a bonfire of employment regulations involved doing away with pensions auto-enrolment for small employers.

Thankfully, we aren’t there yet – but the Pensions Bill, which has its second reading on Monday, contains an explosive clause which could allow a future Conservative majority government to deliver on Beecroft’s disturbing vision.

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Economics
Pensions regulation under pressure from a government failing on the economy

12th June 2013 — Filed under: Economics, Pensions & Investment

Craig Berry

Starved of a genuine strategy for economic growth, the government is again looking for a favour from the world of pensions. The best example is the establishment of the Pensions Infrastructure Platform by several large pension schemes, to direct additional funds into infrastructure investment, at the government’s behest. This is a worthwhile endeavour by the schemes themselves, but the government is desperate that it also makes up for its own failings on capital investment.

We now have another example, with the Pensions Bill likely to compel the Pensions Regulator (TPR) to consider how its defined benefit pension funding regime can ‘minimise any adverse impact on the sustainable growth of an employer’.

This is a hugely controversial measure.

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Pensions & Investment
Can water investors really ‘require’ a 5% return?

3rd June 2013 — Filed under: Pensions & Investment

Peter Kenway

Everybody needs water; there are no substitutes; there is no competition. The financial risks are minimal. So should consumers simply accept the industry’s belief that a 5% rate of return is justified?

With average water bills rising by 50% (in real terms) since 1989, as our recent report on the water industry found, is it right that 30% of annual turnover is regularly siphoned off to profits?

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Pensions & Investment
Making financial products True and Fair

24th May 2013 — Filed under: Pensions & Investment

Gina Miller

Delivering a fair deal for savers and pensioners is something the TUC has long championed and it is also a topic I am determined to focus a spotlight on. I feel particularly passionate because I believe pensioners and savers in the UK are being failed, dare I say those who are acting prudently are being exploited, by many in the sector that I work in, the fund management industry.

While some pension and investment fund managers have delivered excellent growth, for others the profit generated for customers is being significantly eroded by fund fees and charges. Many of these costs are ‘hidden’ and not disclosed to savers, or are so confusing that even those in the industry find it hard to quantify what they are.

Our analysis shows that savers and investors in the UK are paying around £18.5 billion a year in hidden costs and fees. This is completely unacceptable and significantly reduces the opportunity for the majority seeking to build a nest-egg for themselves and their families.

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International
Finally, some good news from Europe

24th May 2013 — Filed under: International, Pensions & Investment

Craig Berry

Pension stakeholders in the UK breathed a collective sigh of relief yesterday when the European Commission abandoned its plans to apply Solvency II-style insurance regulations to defined benefit pension funds.

Trade unions had strongly opposed the Commission’s plans – as had employers, the industry and the government. We opposed the plans in principle, because the Commission had seriously misunderstood the nature of UK pensions provision, and our protection regime, and over-estimated the feasibility of cross-border provision. And we opposed them on practical grounds after an initial impact study by the European Insurance and Occupational Pensions Authority (EIOPA) indicated possible solvency requirement costs of £400 billion for UK pension funds.

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Pensions & Investment
Pensions consensus at a crossroads

15th May 2013 — Filed under: Pensions & Investment

Craig Berry

The introduction of automatic enrolment and the coalition government’s proposals for a single tier state pension appears to have secured the onset of a new era in UK pensions provision. Although some of the details underneath both policies are problematic, we now have a unique opportunity for progressive change that we must grasp.

Auto-enrolment and a single tier state pension are the central tenets of what Nigel Stanley and I call the third consensus in post-war pensions policy in the UK. You can read the argument in full in our Touchstone Extra pamphlet, Third Time Lucky. The third consensus has been spluttering into existence ever since the Pensions Commission, chaired by Adair Turner, wrote the obituary for the second consensus in 2005.

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Equality
Inheritance and pensions wealth

26th April 2013 — Filed under: Equality, Pensions & Investment

Craig Berry

The chart below summarises a particularly interesting statistic released by ONS last week – it was tucked away on page 25 of Pension Trends: Chapter 10 so it’s possible some readers may have missed it!

The chart, which shows the mean pensions saving for 50-64 year olds with at least some savings, emphasises the importance of inherited wealth in the accumulation of pensions wealth. Obviously it is impossible to infer causation, and I suspect that it is largely the correlation of wealthy people being far more likely to inherit things that make them even more wealthy, and wealthy people being far more likely to have access to a good occupational pension.

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Pensions & Investment
Pensions regulation doesn’t stand up to scrutiny

25th April 2013 — Filed under: Pensions & Investment

Craig Berry

The Work and Pensions select committee has today added its voice to the head of steam building up against ‘defined contribution’ (DC) workplace pensions – the type of pension that most people will be automatically enrolled into under new obligations on employers.

Debate is now beginning to focus on the issue of how DC pensions are regulated, or more precisely, who regulates them. There is currently a discrepancy between the Pensions Regulator’s (TPR) oversight of the auto-enrolment process and workplace pension scheme design, and the Financial Services Authority’s (FSA) oversight of the insurance companies that provide DC pensions.

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Pensions & Investment
Pension schemes continue on the slippery slope of decline?

22nd April 2013 — Filed under: Pensions & Investment

Helen Nadin

Another study has indicated why the changes the European Commission envisages would be bad news for UK defined benefit pension schemes. This time it was the preliminary results of the Qualitative Impact Assessment, recently published by EIOPA (European Insurance and Occupational Pensions Authority) for the EC which showed the impact of proposed changes to the Institutions for Occupational Retirement Provisions Directive.

The study estimated that UK defined benefit (DB) schemes would have to put £450billion into schemes to maintain scheme funding levels. This could result in increases in members’ pension contributions or cuts in scheme benefits, or worse still scheme closures to new members, or closures to future accruals. It will also have wider economic implications for businesses as they will have to divert money into their schemes rather than invest in company growth, job creation and R+D.

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