March 30, 2009 Leave a comment
Last Tuesday (24th March) the International Longevity Centre-UK (ILC-UK) and the Actuarial Profession hosted a Joint Debate at the Institute of Actuaries in London on aspects of pension reform and personal accounts and the implications of the current credit crunch.
Chaired by Baroness Sally Greengross and introduced by a speech from Nigel Waterson MP, Shadow Pensions Minister and Shadow Minister for Older People, the 2-hour session was remarkably interesting (if you’re into that kind of thing) and was extremely well-attended, mostly by people from within the pensions, actuarial and financial services industry.
As this was a debate mainly consisting of people inside the industry “looking out” there was a substantial element of “preaching to the basically converted” and much of the debate was about the “how” of saving for one’s old age and whether this did the trick. There was, therefore, a lot of comment regarding what one might consider to be the technicalities of structuring and operating a pension scheme. Also, running through, was the (unsupported) hope that people would move away from property as the means to save and back towards pensions.
In this latter respect research by the Pensions Policy Institute, represented by Niki Cleal, was particularly revealing. Her comment was, in a nutshell, that those who saved probably saved across the board, that is pensions, property and ISAs etc., in contrast to those who probably had little of any. This is not a case of substitution and changing asset allocation.
Rather, we believe, this is due to:-
1) the lack of sufficient resources for people to be able to save at the current time, or possibly any time
2) the phenomenal lack of understanding, generally, of what it will take to support oneself in old age in an appropriate style and over an extended and growing potential lifespan.
It is, therefore, the “why” people need to save that must also be addressed. There is an enormous educational task to be undertaken among the population in general and, until this is carried out, even the best designed schemes will have difficulty in succeeding. But all this is manageable given the will.
We are not talking deckchairs, shuffling, Titanic…yet.