Guest Comment: Musings of an MNT

Written by Royal Bank of Scotland Group Pension Fund member-nominated trustee Stephen Fallowell
21/07/17

Those who have read my previous articles will be aware that I am a fan of musical theatre and cinema. I use some of the scenes from productions to enhance the piece I am writing, and this is no exception.

In the 2004 film I Robot, based on the works of Isaac Asimov and set in the not too distant future, a police detective follows a trail of clues left by a murder victim to find the culprit. Being a science-fiction film the first clue is a computer-generated hologram of the victim who has programmed the image to respond to specific questions. The problem lies in the detective not knowing the questions to ask. Eventually the detective stumbles on the appropriate question, but the only answer given by the hologram is ‘that’s the right question’. He then has to find the answers!

I recently attended an Association of Member Nominated Trustee’s event in which responses to the government’s green paper on defined benefit issues, looking at the security and sustainability of the sector were discussed. To start the debate a set of questions were provided; the first and foremost being whether DB is affordable.

Unsurprisingly the answer from all the DB trustees at the meeting was ‘yes’. I suspect that should the same question been addressed to employers representatives the answer would be ‘no’. So are we asking the right question?

The green paper calling for evidence from employers, the pension industry and consumers says that this will be a ‘wide ranging’ debate, yet restricts that debate to DB schemes and then places further caveats saying that the green paper will ‘consider the powers of The Pensions Regulator and encourage a debate about striking the right balance between the needs and aspirations of sponsoring employers, members, the Pension Protection Fund, and the wider economy, to ensure that no one group is unfairly disadvantaged’.

Whilst recognising the need to look at the changing face of DB schemes, particularly following announcements by Royal Mail and British Telecom seeking to close their schemes for future accruals, a cynic may view this paper as little more than a way of managing the decline and fall of DB schemes. If so then examining such schemes in isolation rather than examining the alternatives; DC schemes, state pension and other savings options, seems a missed opportunity.

At the same time as the green paper the government’s 2016 initiative on pension dashboards is moving apace. The dashboards are to be created by the pensions industry, enabling everyone to view details of all their pensions together. The government has indicated that every provider will eventually move to sharing data with their customers this way.

The former economic secretary, Simon Kirby, stated at a recent event: “Pensions and savings decisions are some of the most important a person will make during their lifetime. The government is determined to make sure people can easily access the information they need to plan effectively for their future.”

The pension dashboard, like the green paper, is looking at specific aspects of the pensions and savings industry without including state pension provision, longevity, alternative savings options, mortgages, debt and the plethora of financial needs and obligations that individuals are and will be faced with in the future.

There is a need to seek an all-encompassing response to answer people’s future financial needs, rather than have a different initiatives looking at specific parts of the right question. But I suppose like the answer to the question of ‘life, the universe and everything’, governments are worried that the answer may be not to their liking.

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