My kids know exactly what they want for Christmas, thanks to the magic of advertising and the joy of not realising these things have to be paid for somehow.
While my Christmas wishlist for pensions is a little more realistic, I am still dreaming of a Christmas miracle or two.
The best present would be an end to the Scrooge-like tendency to dismiss pensions as humbug.
Allowing schemes to reshape benefits into a single, simple standard that protects the overall value of promises would unlock massive savings from consolidation
It is easy to focus on the negatives at times, but the fact remains that on balance the UK pensions system is a huge success.
Let’s have some Christmas cheer
Almost 9m people have been auto-enrolled and will gradually build up a fund to supplement their state pension. Eleven million are members of defined benefit schemes that are paying pensions in full and reliably on time, month in and month out.
About 250,000 people have been rescued by the Pension Protection Fund when employers have unfortunately been unable to honour their pension promises in full.
We have employers who are committed to funding their schemes to the right level, and have paid £150bn over the past 10 years to repair deficits, as well as dedicated trustees who selflessly devote their time to managing schemes in members’ best interests.
Hoping for a transformation to how pensions are viewed may be the pensions equivalent of wishing for a Nintendo switch – a fantastic gift but one that may not be too likely to happen. Maybe next year.
DB sponsors deserve a reprieve
My second wish is a little more realistic, though far from guaranteed. I would love to see returns on equity investments soar over Christmas, bringing further relief to pension schemes that need to see real growth in their assets to reach their funding targets.
Alternatively, I would be perfectly happy to see higher gilt yields bring down the current valuation of pension liabilities to a more reasonable level.
Either way, it would be a wonderful life in 2018 if struggling schemes see a continued improvement in their funding that does not rely solely on hard-pressed employers finding yet more cash to pump in.
At a practical level, I hope the Pensions Regulator will continue with the excellent work it has done over the past decade, and not be overly influenced by some recent bad headlines about cases that are not representative of the wider pensions industry.
There are occasional rogues who need to be dealt with firmly, but the regulator has often managed to be sympathetic to the challenges facing those trustees and employers who try their hardest to do the right thing, even if it does not always work out as they wanted.
Well-meaning trustees and employers should be supported to get the best outcome for members, rather than criticised for minor technical failings that do not affect anyone in the real world.
Flexibility does not mean cutting pensions
My final wish would be a gentle relaxation of the section 67 protection for accrued pension rights.
I do not want to take away anyone’s benefits, but allowing schemes to reshape benefits into a single, simple standard that protects the overall value of promises would unlock massive savings from consolidation.
There are times when running costs can swallow up most of the money an employer can afford to pay, and there are thousands of small schemes who could benefit hugely from economies of scale if they could be given this tiny break from overly onerous regulations.
I do not want to seem greedy, but there are some stocking-fillers I want too. I would like to get a statutory override to allow indexation based on the consumer price index instead of the retail price index, a simplified tax regime, and political parties committing to building a long-term consensus for pension planning.
I would also like to see engaged members agreeing willingly to increase contributions to boost their quality of life after retirement, pensions for women that are at least a little closer to what men get, a sustainable plan for the state pension, and of course a satsuma. Is that too much to ask for?
Hugh Nolan is president of the Society of Pension Professionals and a director at consultancy Spence & Partners
