Freedom, fairness and a TUC pensions conference
Savers in their mid-to-late 50s are the group making the highest level of withdrawals from their pension pots, according to the latest figures from the financial regulator.
While it is very early days for so-called Pensions Freedom – the government’s great experiment with UK savings – there are worrying signs.
Savers in Defined Contribution pension schecmes are now effectively freed of the obligation to buy a retirement income through an annuity contract with their savers. But, perhaps because there are no clear and simple pathways to generating incomers though alternative means, it appears that many are simply opting for the simplest options: cash.
The Financial Conduct Authority revealed that in the three months to the end of September, 120,969 pensions (68 per cent) were fully cashed out. It sought to be reassuring by noting that of these, 88 per cent were small pensions – but the FCA’s definition of this is £30,000 or below which is actually around the average at retirement.
People aged 55-59 made the highest level of withdrawals as a percentage of their pension pot. More than one in five of them took an income of 10 per cent or more of their pot after any tax free cash was deducted. This level of withdrawal leaves a high chance of running out of money in retirement. And those accessing their cash so early could have many decades ahead of them on which to rely on their savings.
Even Pension Wise, the guidance service that is meant to help people think through their options is either unknown or being ignored by most savers. On average, 17 per cent of consumers told their provider they had used Pension Wise.
These figures raise questions about what retirement is going to look like in the future. Are we going to “emulate” Australia where large numbers of people run out of retirement savings before they even reach 70 years old? Is there a role for longevity insurance or risk pooling? Can we bring in modern default options so that those reaching retirement can choose from a small number of options that they know are likely to be sensible routes to providing an income over retirement?
These are among the issues to be discussed at the TUC’s Pension Conference taking place on February 4.The future of retirement income will be scrutinised in our panel session Cash in the attic: where now for decumulation? This features a heavyweight panel of speakers including Otto Thoresen, Chair, of NEST, David Pitt-Watson, Fellow, London Business School; Gregg McClymont, Head of Retirement Savings, Aberdeen Asset Management who was previously Shadow Pensions Minister. Overseeeing the discussion will be the chair Baroness Drake, a Labour peer, trustee and member of the Pensions Commission, whose emphasis on evidence gathering and consensus building stands in stark contrast to the rapid changes of recent years.
Th free event will allow members of its network of trustees, and others interested in a trade union perspective on pensions, to learn about and discuss the future of workplace pensions given the radical but potentially contradictory reforms of recent years.
Pensions Minister Baroness Altmann will open the conference with a keynote address. Owen Smith MP, Shadow Secretary of State for Work and Pensions, will also deliver a keynote address. Panel sessions include “Unfinished business? The Pensions Commission, ten years on” and “Plugging the gaps: are we asking enough of auto-enrolment?”.
Break-out workshops will allow delegates to address topics including “Arming the MNT: bolstering the member voice on trust boards and governance boards”; “Whose money is it anyway? Local authority pension funds and the government”; and “Sports Direct – keeping the ball rolling”.
Speakers and session chairs confirmed so far include:
- Kay Carberry, TUC Assistant General Secretary
- Naomi Cooke, Assistant General Secretary of the First Division Association
- Baroness Drake, formerly of the Pensions Commission
- David Fairs, Chairman of the Association of Consulting Actuaries
- Louise Farrand, former Editor of Engaged Investor magazine
- Helen Forrest Hall, Policy Lead at PLSA
- Andrew Harrop, General Secretary of the Fabian Society
- Jamie Jenkins, Head of Pension Strategy at Standard Life
- Gregg McClymont, former Shadow Pensions Minister, now of Aberdeen Asset Management
- Colin Meech, National Officer at UNISON
- James Meenan, Founder of JMN Research
- David Pitt-Watson, Fellow of London Business School
- Tom Powdrill, Responsible Investment Coordinator at the International Transport Workers Federation
- Luke Primarolo, Regional Officer at Unite
- Hilary Salt, Founder of First Actuarial
- Raj Sharma, Head of Pensions Investment at Pinsent Masons
- Daniela Silcock, Head of Policy Research at the Pension Policy Institute
- Rachel Smith, Principal Policy Adviser at CBI
- Nigel Stanley, Trustee Member of NEST
- Otto Thoresen, Chair of NEST
- Andrew Warwick-Thompson, Executive Director, The Pensions Regulator
- Steve Webb, former Pensions Minister, now of Royal London
- Janet Williamson, TUC Senior Policy Officer.
To register for the conference click here.