Industry view – BESTrustees


which would attract and retain good qual- ity workers.


Alan Pickering is president of BESTrustees and a trustee of several pension schemes


LEVELLING DOWN PENSIONS


Populist politicians around the world are promising their electorates that they will build back better by levelling up. Populist politicians in this country have spent most of this century levelling down non- state pensions in the interests of equality. We entered the 21st Century with a two- nation private pension system which had the characteristics of a fortress. Those who were inside the fortress had good quality defined benefit schemes while those outside could not afford the entry fees. Occupational pensions had been improved by layer upon layer of well-in- tentioned consumer protection measures. The commodity was priced too high for existing and aspiring employer sponsors. Faced with a choice of building a bridge to the fortress with lower entry fees, politi- cians opted for a fresh start based on the principle of modest auto-enrolment. While auto-enrolment has been a success in many ways, it has resulted in a massive own goal as it has led to massive disen- gagement on the part of employers. Pro- viding a workplace pension is becoming a compliance chore rather than a means of offering


a valuable employee benefit


The continued growth in prescription affecting those employers who provide quality workplace pensions is further accelerating this disengagement. So great is the burden becoming that employers are not only seeking the shelter of pen- sion consolidation, they are often glad to wash their hands of any involvement whatsoever in the design and delivery of workplace pensions. As we seek to build back better, there are two key steps that we need employers to take. Firstly, to offer inclusive employment opportunities to those workers who can help us create the wealth upon which pen- sions depend. Our employment policies should focus on what people can do and how they want to do it. A silver lining of the pandemic is a fresh appraisal of the work life balance. A bottom-up approach to inclusivity


is preferable to top-down


approach based on quotas. Secondly, when it comes to pensions, employers should eschew the concept of productization but should see a pension as something which is tailored to meet the needs of each of the cohorts that they employ. A pension has a part to play in a modern cocktail of employee benefits. Employees trust their employer and there- fore the workplace is the ideal environ- ment in which to provide access to a wide range of financial services. These can include bank accounts, protection poli- cies, rainy day money and long-term sav- ings such as pensions. Everybody needs such access but the mix will require fine tuning based on cohort and personal circumstances.


Having killed off defined benefit provi- sion through over prescription,


politi-


cians and regulators should not make the same mistake as we all go defined contri- bution. If the authorities prescribe prod- uct features, they will lose the moral authority to intervene should things not turn out as anticipated. Imposing obliga- tions on trustees and directors is wanting, prescribing in detail what they have to govern is a massive step too far. Costs and league tables can be misleading. Pen- sions, like other aspects of the family budget, should reflect value and not just cost. While complex arrangements may not pass muster, some forms of sophisti- cation can add value. Employers are ideally placed to help their workers navi- gate this cost benefit analysis. We are, as a nation, criticized for not hav- ing a pensions vision. So often, policy is made through the rear-view mirror rather than through the windscreen. Here is my three-dimensional vision. Firstly, we need a workplace which pro- vides opportunities for everyone irrespec- tive of the compartment into which they were born or into which life leads them. Secondly, we need a state pension founda- tion which provides a guarantee against absolute poverty in old age where politi- cians are allowed to redefine ‘’absolute’’ and ‘’old’’ as the years go by. Thirdly, we need to encourage employer engagement in the accumulation of work- place savings which have pensions at their heart. Employee engagement alone is not sufficient, we need a genuine part- nership if pensions are to be seen as part of the solution rather than the cause of the problem.


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a.holt@portfolio-institutional.co.uk 10 | portfolio institutional | April 2022 | issue 112


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