Editorial: Longevity serves as a useful euphemism in the pensions world.
It allows the industry to discuss the fact that longer lives have been one of the key causes of defined benefit underfunding, without quite seeming so churlish as to bemoan their members’ improved prospects.
Similarly, now that there are early signs of the pressure lifting on schemes, they will be keen to avoid looking like they are celebrating at what – for most savers – feels like bad news.
Certainly it will not be welcome news for the government, whose austerity policies have been blamed for the stagnation in some quarters.
But on a philosophical level, it feels that focusing on longevity, rather than quality of life (also flatlining according to the Social Progress Index), is the wrong approach. One pensions commentator has pointed out that a 100-year life beset by dementia is not particularly desirable.
Healthier lives would also ease many of the problems we face in the pensions industry and at a state level. Living longer without working longer is clearly unsustainable in an ageing population, so it is not unreasonable that governments have sought to increase the state pension age.
However, this misses the fact that in the poorest areas of the UK, where experts tell us life expectancy is significantly shorter anyway, health problems mean many are simply unable to work longer.
Like savers, DB schemes also need to assess their journey through later life, and employers face a tough choice here – secure members with ‘gold standard’ insurance, as a section of the Combined Nuclear Pension Plan is doing, or take a punt on one of the newly formed consolidation vehicles.
Thankfully, our feature suggests trustees are taking a more pragmatic approach in the face of some ambitious targets set by commercial consolidators.
Their narrow view of the target market for superfunds represents a key principle of DB trusteeship – that members should not see their security watered down if employers can afford it. In the absence of formal regulation, this prudence should be welcomed.
Angus Peters is associate editor at Pensions Expert. You can follow him on Twitter @peters_angus, or the team at @pensions_expert.
