Editorial: Wisdom (outside) of the crowd
Consensus can sometimes feel like the wind that blows this industry along, carrying the latest products from scheme to scheme as managers try to meet common challenges.
That is neither a wholly good or bad thing. Agreement on the best solution to a problem can breed standardisation, which in turn can reduce the cost of these products, making them available to smaller schemes that may not otherwise have been able to access them.
One place where there has been widespread accord has been the necessity, and even the manner, of bulk derisking strategies – the buy-in/buyout market.
Of particular popularity has been the pensioner buy-in – presented as an no-brainer step for funds to trade their gilts in return for insuring their pensioner liabilities. There has been a rush of such transactions over the past few years.
Illustration by Ben Jennings
Last week's Informed Comment saw Mercer's Andrew Ward questioning some of the received thinking on bulk derisking, with propositions including that "completing a pensioner buy-in now could make full buyout more difficult in the future".
Bringing balance to a debate is one of a journalist’s jobs, so it’s great to have someone do it for me.
Perhaps not all schemes have the capability of producing a cash flow-matching approach that will provide better value than a derisking transaction, but it is edifying to at least consider the alternative.
While chairing the CBI’s annual pensions conference last Thursday, among the debate on charges cap and pensions consolidation I was similarly struck by the healthiness of discord as well as that of agreement when it comes to improving the lot of members of UK workplace pension schemes, without harming the businesses that provide them.
But perhaps those two elements are in natural opposition. It is an open secret by now that the 8 per cent minimum auto-enrolment contribution is not enough, but is there a way to improve this picture over future years without employers having to reach deeper into their pockets?
M&S is again leading the way, this time in adequacy, by considering how automatic escalation could get its workplace savers someway nearer to an adequate retirement income.
But then, not all agree that is the best approach.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.