Business journalists used to have an award called ‘the golden bollock’. It was presented every year at the TUC conference to the hack who had written the story with the most outlandish clangers and predictions that later proved to be embarrassingly wrong.
I never won one, but I know plenty of good journalists who did. It is one of the perils of the job.
I hope this column proves worthy of that status, and that you can laugh at it in a few years’ time. I want you to look back and say: ‘what was he on about? What a fool’.
I’m very concerned about the future of pensions at the moment. From the consumer side, we’re not saving enough. Employers need to accept that they have an important part to play in this and that there is plenty more that they can do now without waiting for legislation.
We’re also nowhere close enough to solving the issue of declining defined benefit pensions. Every year that passes fewer and fewer people have the guarantee of inflation-linked income.
Meanwhile the pension freedoms roll on without any proper analysis that helps us understand how people who are using flexible retirement options are really behaving.
These are all significant looming problems, but one issue is of more concern for pension savers: the rolling back of Solvency II legislation.
I remember sitting next to the chief executive of a major life insurer a few years ago, before the EU referendum, while he bent my ear for hours about the huge administrative problems caused by meeting Solvency II requirements and how UK insurers felt aggrieved by having to meet capital requirements largely set for less well capitalised European firms.
Our insurers had largely sailed through the global financial crisis because of how well they were run, and the legislation was not meant for us, was the argument.
And you have to agree with all that. But the desire to have these rules rolled back has also come at a time when the Conservative Party wants to liberalise and allow more high risk assets into pension funds, giving a toxic mix and an opportunity for lobbyists in the insurance sector to achieve what they want, not what is best for the policyholder.
Self-interest (of insurers and of the Tories) is at the heart of this – not the needs of the savers which is what has to come first.
We’ve reached a stand-off where the Bank of England, alert to the potential weakening of insurer capital buffers is demanding greater restrictions, but insurers are arguing that without more liberalisation the Government’s agenda will not be met and policyholders will end up paying more.
We’ve already seen the softening of some legislation to allow performance fees to be built into the current pensions price cap.
I can’t see any way that this situation plays out that does not lead to even higher costs for consumers – and as we know, 1 per cent extra charge over a lifetime of saving equals 50 per cent lower profits for the saver.
In the worst case scenario we will see far more risk and far higher fees. At the heart of all this is the fact that we’ve not really had a sector-wide credit crisis for the UK insurance sector in living memory. It has been too easy to write off the past mistakes, such as Equitable Life or with profits, as the ineptitude of actuaries and the greed of salesmen.
But we are at a pivotal point. Be careful what you wish for.
Employee pension savers don’t want risk and they don’t want high fees. Their interests are being put second in the desire of insurance companies to undo rules they hate, and of a government absolutely desperate to kick-start the economy. The danger is not the mainstream firms with social responsibility built into their core, but the ones where profit is everything. It has the makings of a disaster.
This is my final column for Corporate Adviser, after a couple of decades writing about money and business I’m moving on to something new. One of the things about having a column in a magazine or newspaper is that your opinion is preserved for posterity you can look very clever if you predict something correctly, but if you get something wrong, well, a golden bollock beckons.
On this occasion, I would love to be wrong.
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