Sections

True pension cost "higher than realised" – Waddingham

UK - The true cost of pensions could be twice the amount employers might initially have expected to see contributed to an individual's retirement plan, according to Adrian Waddingham, senior partner at the consultancy Barnett Waddingham.

In an interview with IPE, Waddingham - who is one of the 10 nominees for this year's Outstanding Industry Contribution award at the IPE European Pension Fund Awards in Vienna tonight - said the cost of providing employees with a reasonable pension at retirement is approximately 30% of their salary - substantially higher than employers might hoped to pay.

"In the good old days, when pensions thrived, the employers thought they were paying 10% to the employees' 5%. The extra guarantees and protection have pushed that to 25-30%. With the copper bottom guarantees being sought, that could be pushed again," said Waddingham.

At the same time as pensions have become more expensive, Waddingham is critical of the lack of progress made since introduction of the 1995 UK Pensions Act, as he believes little has been achieved through the various government reviews.

"The thrust of all [UK] government action since 1995 has been the protection of pension benefits. This is not a bad thing in itself, but the complete absence throughout that period of any action to encourage workplace pension schemes means it is all wasted. We have got the best protection system in the world but there is nothing left to protect."

He continued: "What I would request, although there is no sign of it, is incentive to maintain schemes, where there is only disincentive. [The authorities] say ‘right employers, you can have a cheap and cheerful DC or an expensive and complex DB scheme', but the government says you may not go between these two. Why does the law prevent this?

Waddingham, who became chairman of the Association of Consulting Actuaries in 2006, was nominated for the shortlist by IPE Readers for working "tirelessly on behalf of ordinary workers - particularly those in the private sector -with respect to their future pension prospects" and for continuing to "expound the simple concept of fair play in all he does as he has done in a career spanning over 30 years to date".

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2466

    Asset class: Multi-asset funds.
    Asset region: Global.
    Size: EUR 30m.
    Closing date: 2018-08-16.

  • QN-2467

    Asset class: Search for a broker (mainly ETFs).
    Asset region: Global.
    Size: 250m.
    Closing date: 2018-08-28.

  • DS-2468

    Closing date: 2018-08-24.

Begin Your Search Here