This is the last in the current series of Pensions News (PN) before PN goes away on annual leave.  PN feels the need to go away (that’s “go away” as in “go away from the area he inhabits”) on annual leave because, being based in this country’s second city (sorry Birmingham, PN’s view is that the second city is Manchester), PN needs to spend time somewhere other than Manchester in order to experience summer weather.  In preparing not to be in the North West of England for a couple of weeks, PN is in a summing-up mood.

During this series, PN has spent time considering the meaning of “enough” and “too much” money.  PN will not repeat what he said in previous articles but will refer to a source he has used before and will, no doubt, use again.  Writing at the time of the last financial crisis, Mr Clive James, an authority on many subjects (quite possibly up to and including pensions) observed that the financial crisis then had not affected or not seemed to affect the world’s rich and richest in a way that made them stop being rich or super-rich.  Being rich or super-rich, suggested Mr James, had become boring; boring to the extent that it was especially boring when yet another James Bond villain was a super-rich megalomaniac determined to take over the world by, for instance, diverting South America’s water supply.  PN tends to agree with Mr James and agrees with him especially when it comes to his view that the tendency of the super-rich is to purchase yachts.  The purchase of yachts appears to PN to be a particularly pointless way for anyone with intelligence to spend money.  “Too much” therefore, would seem to be where one owns a yacht that is so big that it is able to house a helicopter, submarine and (this, particularly, is an observation of Clive James which PN agrees with) no library.  What sort of twerp really wants to own or be invited to a yacht where there is almost nothing to do other than consider the next drink or the last one?  The point about the biggest yachts is this; as stated above, they tend to include the quickest and most effective means of escaping from them (leaving assembled guests trapped with nothing to talk about other than the last drink or the next one).  Added to this, and as a former colleague of PN used to say, no matter how big the yacht, there is always someone with a bigger one.

PN has observed that another person cast as a super-rich villain with a new, large yacht, Sir Phillip Green, remains obstinately in the news because of pensions.  In Sir Phillip’s case, the media is considering what should be done about BHS and, in particular, its pension scheme.  The media (plus an MP called Mr Frank Field) and a study by the Pensions Institute (part of the Cass Business School) has called on the Government to give the Pensions Regulator more powers in order to avoid situations such as the one the BHS scheme finds itself in; under-resourced and without a sponsoring employer.  Sir Phillip has said that the situation is “sortable” and that he is the man to do the “sorting” however his most memorable contribution to the select committee proceedings appears to have been his “d’you want some?” attitude towards a member of the select committee whom he accused of staring at him.  Considering the BHS situation and the Pensions Institute’s report, which indicates that the BHS imbroglio is symptomatic of what it refers to as the corporate world’s tendency to pay as little as possible into its pension schemes, PN was sceptical (as he has tried to be throughout this series) about some of the report’s findings including that last one.  What PN does think, however, is that the case gives a subtly different insight into the meaning of “too rich”.  “Too rich” is where one is asked for a cheque for £500m to put into an underfunded pension scheme and one’s reaction is not to flinch, not to sell one’s new yacht but, instead, ask another person not to stare.

Another feature of this series has been the referendum about this country’s future membership of the European Union (EU).  As we now know, for future membership, read future non-membership (but we do not know precisely when that will be).  PN has considered the referendum, the result of the referendum and the consequences of the result more than once and his views are generally known.  There is no need for PN to repeat his views on what the effects of this country’s exit from the EU are having and might have on pensions.  What PN can do (however) is to look at how pensions might affect this country as it navigates its way out of EU membership and back into what some (not PN in case you are still reading) are calling “splendid isolation”.  “Splendid isolation” was a phrase coined by a not-very-well-informed newspaper in the late 19th century to describe Britain’s independence from European military alliances.  The Prime Minister of the time, Lord Salisbury, disliked the expression and preferred not to use it.  PN hopes that the current Prime Minister is of the same mind.

Back to the 21st century and pensions; this particular story, reported in the Financial Times (FT) on 3 August (and other journals which PN doesn’t read), revolves around the rights of 3,000 plus British officials and former officials who work and have worked within EU institutions to benefits on retirement.  These rights are underwritten by member states meaning that there is no (so to speak) pension fund out of which benefits (i.e. pensions) are paid.  Rather; benefits are funded directly by or through member states.  In this regard, the scheme works in a way which is analogous to the NHS Pension Scheme and the Teachers’ Pension Scheme in this country; as a member retires his or her pension is paid out of central funds.

The EU has indicated that, as part of its exit, this country will, instead of funding individual’s rights to benefits on an ongoing basis, have to pay the EU a lump sum in order to discharge itself from future obligations.  As a principle, this makes sense does it not?  A owes B a certain sum to be paid over a period of time so; in order to get out of the obligation early, A should pay B a lump sum and a (so-called) clean break is achieved.  Right?  As you, the reader, will appreciate now, nothing is quite so straightforward in pensions terms when it comes to working out the value of the sort of obligation PN is referring to. This depends on a series of calculations which are, themselves, based on a series of assumptions and which can be carried out only by men and women with (generally) four figure IQs who live and breathe mathematical calculations; actuaries. The FT article PN refers to stated that, in order achieve a clean break, the EU has calculated that this country would need to pay €60bn in respect of hitherto unfunded pension obligations. Of course, the figure will be the subject of considerable (probably heated) debate and it probably is already (it was in the FT).  As you, the reader, have observed in this series, pensions is never far from the surface of everything so; expect more of the same as this country edges towards life outside the EU.

Finally and as part of his holiday preparations, PN was trying to get information about the times of his aeroplanes (both to and from his destination) and whether the airports he will fly from are prone to delays.  Bizarrely (perhaps to some), PN found himself considering how the Pope manages his journeys as he watched the news one evening which reported on where the Pope happened to be visiting at the time.  Considering the issue further in that twilight-zone period between wakefulness and sleep (or vice-versa), PN imagined the Pope flying with “Transcendental Airways” and reading the in-flight magazine which told him that, in the event of an accident, he, the Pope, would be alright.  PN’s mind wandered from there on to the parallel between airports and holy places.  In a lot of respects, airports, particularly those which PN has frequented, seem to be like holy places where, during certain seasons, crowds of people turn up and wait for a miracle.  Sometimes, whole groups of them are lifted into the air and sometimes, they reach their destination at roughly the same time as their personal belongings.  So; if you are about to go on holiday, PN hopes that you (and PN) won’t need a miracle. 

Until next time………