This is the last in the 2017 series of Pensions News (PN) and PN thought, as he started writing it, that he was in a summing-up mood. PN started the day thinking he would write about the year nearing its close seemingly ten minutes after it had got started. PN then reflected that, if it took him twenty minutes to write the piece, he would need to base any prediction for the New Year on what he thought might happen in 2020. This, thought PN, would be too difficult.
It is a mystery to PN how he and others are somehow surprised at the passage of time and, more precisely, the speed of the passage of time. At present, particularly at present, there is very little certainty about. One of the very few certainties we have is that time, like many other things, will pass quickly – unless, of course, one is standing on a freezing platform waiting for the delayed 08:15h into Manchester. There are other mysteries which, though unconnected with pensions, are nonetheless interesting. It remains a mystery, for instance, why so many people buy vast quantities of food and drink even though they know that the large supermarkets are closed for only one day. It is possible that such individuals know that they will consume said vast quantities of food – possibly to send themselves to sleep in the afternoon in order to avoid a game of charades or sleep through the repeat of that film. It seems more likely to PN that we are still, somehow, convinced by the unspoken retail message which plays on our fear; “buy it now. No; NOW. You wouldn’t want to be caught short at Christmas. You wouldn’t, would you?”.
There are other mysteries, closer to PN’s chosen discipline, which have characterised 2017 and which are still (PN thinks) worth talking about. One of them is the tendency of otherwise rational people to appear to be eager to swap a guaranteed pension in retirement for something altogether less secure. On Saturday 16 December, BBC News reported that a large number of members of the British Steel Pension Scheme (BSPS) were eager or appeared to be eager to take the value of their pensions and take advantage of what PN has previously described as the “new pension flexibilities”. PN has previously reported that “new flexibilities” is another way of telling a lot of people to “take some cash now – you never know what might happen later”. In taking cash now, one loses any sort of guarantee but “cash now” is as enticing a message as “buy that 10th box of mince pies. It may not be here later”.
Why, PN has wondered, would anyone give up the guarantee of a pension? The answer seemed clear on Saturday – even before Mr Paul Lewis started to talk about it on BBC Radio 4’s “Money Box”. One will take one’s money if someone who appears to know what he or she is doing advises that it is not safe to leave it where it is and that one can have “cash now” (for a small fee). It turns out that a number of “independent financial advisers” (IFAs) have made an effort to contact BSPS members in order to advise them that it would make sense to give up their right to a pension in the BSPS in return for a promise of (i) some cash now and (ii) potentially, something later or, possibly, not very much at all and certainly no guarantee. Incidentally, PN put the words “independent financial advisers” in inverted commas because there are many good IFAs out there and they might be offended to find themselves lumped in with the “IFAs” who were busy advising people to give up their BSPS pension rights – for a small fee. Things had become so bad, alleged Mr Lewis on the BBC, that the FCA had had to intervene in order, in effect, to force “IFAs” referred to in the BBC programme to stop targeting BSPS members. Intent on further shortening his Christmas card list, Mr Frank Field, chair of the Work and Pensions Committee, wrote to the executive director of the FCA (Ms Megan Butler) to state that the action the FCA had taken to protect BSPS members was “grossly inadequate”. Mr Field argued that members had been “seduced” into transferring the value of their rights outside the BSPS against their interests and further that requiring individuals to take advice from an IFA was positively unhelpful if the advice from the IFA was “shoddy or just plain crooked”.
The problem Mr Field has highlighted would be bad enough if it were confined to members of the BSPS. The problem, however, is somewhat larger than that as PN has indicated in previous editions. The mystery of the tens of thousands of persons who want to give up the prospect of having a pension is worth much more than tens of thousands in monetary terms. Research published earlier this week by Salisbury House Wealth states that, over the last twelve months, the value of funds withdrawn from pension accounts and pension schemes is approximately £15.3bn. This sounds like a lot of money and it is a particularly high figure when compared to the much lower £5.6bn that was withdrawn from pension schemes in 2012/2013. It seems clear that the lure of cash now is strong enough for normally sane people to experience something of a brainstorm. After all (they may feel), I may go under a bus just before retirement; what happens to my “pension” then. The good IFAs would always put the question “ah; but what if you don’t go under a bus just before you retire? Think about that one” but the poor ones (rarely called Del-boy these days to warn us off) don’t ask that question and so one is left with the mystery of (some of) the BSPS members who, having paid into that scheme for years, seem determined to risk the lot.
State regulators and state bodies appear to have had a difficult week this week. PN has already noted Mr Field’s having taken exception to the FCA’s handling of the BSPS imbroglio. It has fallen to another state body to be accused of taking the role of a pantomime, moustache-twirling villain (it is pantomime season I suppose). This time the alleged villain is the Pension Protection Fund (PPF) as advisers and directors of the business Toys R Us have expressed some dismay at the PPF’s handling of that company’s attempts to avoid administration and, according to The Guardian, the consequent loss of some 3,200 jobs. There is probably an irony somewhere in a story about a business, which traditionally does well at Christmas by selling toys, being in such a desperate plight immediately before that season. On 21 December, The Guardian reported that representatives from Toys R Us were engaged in talks with the PPF to convince that body to modify demands it had made of Toys R Us earlier in the week. Earlier in the week, Toys R Us had proposed a restructuring plan for its loss-making business. The plan involved Toys R Us paying off the existing deficit (of £93m) in its pension scheme over the following ten years. The PPF’s response was that it wanted Toys R Us to start more or less immediately by paying £9m into the scheme. Predictably (perhaps) Toys R Us stated that it did not have that kind of money and it is possible that the PPF’s insistence on a different form of “cash now” may cause the restructuring not to happen at all. Although it seems unlikely, it is possible that this particular Christmas story will have a happy ending. Charles Dickens, a writer of mysteries and ghost stories would have been able to explain how. The problem, however, is that Charles Dickens died a long time ago and the chances of his ghost returning like the ghostly figure in perhaps his finest ghost story, The Signalman, to sort out this particular mystery seem remote.
A week or so ago, PN was asked what he thought the immediate future of defined benefit pension schemes looked like. It is often the case that short, apparently simple questions are the hardest to answer. PN probably dealt with the question accurately but inadequately. It is no mystery, indicated PN, that the immediate future looks difficult and complex; ask any trustee trying to get to grips with the demands of the General Data Protection Regulations.
Have a restful, happy Christmas everyone. Until next time………