UK – The head of the actuarial profession in the UK has warned that the country faces “huge dangers” with defined contribution pension provision.
“There are huge dangers looming for the country in terms of inadequate contributions,” said Michael Pomery, president of the Institute of Actuaries, discussing DC schemes.
Speaking at the ‘Pensions Crisis Resolved’ roundtable organised by Cityforum, he said pension schemes need to adapt to new flexible working and retirement patterns.
He said defined benefit and defined contribution were two ends of a “very long spectrum” – and that there opportunities to develop “middle-ground” solutions. “We’re seeing an increasing number of companies looking at these.”
“Lots of actuaries are talking to clients about ‘middle ground’ solutions.”
Pomery added that there was huge scope for actuarial input into communications for DC schemes – he cited web-based interactive modelling for members. Communications with members had been “sadly neglected over the years”.
Professor Anthony Neuberger of Warwick University queried whether companies should have pensions for their employees at all. He called the UK’s ‘voluntarism’ approach “sentimentalism that masks the reality”. Companies only provided pensions if there was a benefit to them to do so, he argued.
He suggested firms should offer higher salaries to attract staff and consider cutting out pensions altogether. Pensions were better provided by insurance companies.
“Better that employees buy products from well-regulated financial firms than from the unregulated non-financial firms that employ them,” he said.
Another speaker at the debate raised idea that companies have been under-hand in the pensions crisis.
“I simply don’t believe there was no jiggery-pokery,” said Lord Peston, a former adviser to the government and emeritus professor of Economics and the University of London. He had no evidence for his claim - “just my instinct”.