Recently I was asked by a union education representative to undertake pension workshops at one of the offices of a large financial company that has both DB and DC pension schemes. I was to give a short introductory talk followed by a ‘question and answer’ session on general pension issues.
The sessions were well attended and my presence well received. However having prepared myself for questions on the health of the pension fund, investment strategy, the strength of the sponsor and myriad others reflecting on my role as trustee, I was actually confronted with one overwhelming question from defined benefit employees; when and how can I get money out of the pension fund?
Steve Webb, the then pension minister, attracted media attention in March 2014 when he remarked in a television interview that due to the coalition governments pension reforms, he was relaxed if pensioners wanted to spend their savings on a Lamborghini.
This remark was an apparent attempt to make sexy the boring world of pensions and, though ill-advised, it succeeded for a while, making pensions newsworthy and part of the public’s consciousness.
Sadly this euphoria did not last long and the subject has once again effectively disappeared from the news, only reappearing as part of larger stories around buccaneering owners and store closures.
However what seems to have remained in employees’ minds is the ability to withdraw their fund from a scheme, even if that scheme is a defined benefit scheme. This is reflected in the significant increase of enquiries and transfers we have within the pension fund in which I am a trustee, and I expect this is mirrored in other schemes. Although we are monitoring this position, we are not unduly concerned as transfers out reduce the liabilities of the fund.
We are though mindful of the potential for pension liberation fraud. The law, however, obliges us to make such transfers provided we make the necessary checks. When I was asked the question at the workshops I was able to go further than normal checks by asking the question; ‘why do you want to withdraw from the fund?’ The consensus seemed to be simply because it was a pot of money that they hadn’t realised they could get at. There was little or no concern as to what that would mean for their future retirement income.
The workshops had been advertised for anyone who was in any form of pension fund; disappointingly only one person came who was a member of the contributory pension fund.
Because there was only one person I effectively gave a one-to-one talk to the individual. Well into my stride I suddenly realised what I was doing – helped by the rather glazed expression on the persons face – I was doing what my daughters called, when they asked my opinion on a subject, a ‘dad lecture’!
I apologised, saying I had realised what I was doing. The individual kindly said that she had recognised what I was doing as “her dad did the same” and that he had even encouraged her to come to the workshop.
We had a better dialogue after that, discussing the many calls on her income; student loan, saving for a mortgage deposit and general living costs. Pension provision was not foremost on this list.
Many of my generation were the fortunate recipients of a final salary pension scheme; I did not have to make a choice as I was automatically placed into the scheme. One of the great decisions I never had to make. But perhaps both generations deserve more help from all of us than simply receiving a ‘dad lecture’.