Why information is key – and government needs to plan for GenX

Staying informed is more important than ever

We relaunched Pensions Week as Pensions Expert in January 2014. Our goal was to take a weekly magazine and turn it into a ‘digital-first’ publication across responsive website, tablet and print, with a fresh design and greater use of data analysis. Behind the surface changes, we pivoted the editorial approach, away from shorter news stories typical of a trade title, and towards case studies and news analysis on pension scheme management.

Employers and scheme representatives will have to do more to ensure an adequate provision

We started hunting stories of scheme managers, trustees and employer stakeholders that were trying to improve performance, control costs, or manage risks: whether they got it right or wrong. This was based on what readers told us. They wanted to know what their peers were doing, successfully or unsuccessfully, in confronting the same challenges.

Our consultant and fund manager readers wanted to know that, too, but from the perspective of a service provider observing a competitive landscape, or reading reports on their own work.

The pensions industry is currently in recovery from a series of legislative interventions that began, broadly speaking, with the Pensions Act 2004. Whether it is managing a maturing defined benefit scheme, or dealing with the obligation of auto-enrolment, I would argue the case study and analysis approach that Pensions Expert provides is becoming ever more important.

Those dealing with the latest generation of savers in workplace schemes will bear more responsibility for helping them into retirement. The low employer and employee contributions required by law, and the removal of the effective obligation to buy an annuity at retirement, make it harder for workplace saving to provide the safety net that earlier generations enjoyed.

Employers and scheme representatives will have to do more to ensure an adequate provision. Other challenges, such as persistent funding deficits at a time of historically low interest rates, abide. I am biased, but I believe Pensions Expert has an important role to play in helping inform these crucial decisions.

​Ian Smith is companies editor at Investors Chronicle and a former editor of Pensions Expert

Keep the headlamps on

The entire pensions industry was blindsided when the pension freedoms were announced in George Osborne’s 2014 Budget, or it certainly seemed that way.

While some commentators’ response to the news that retirees would no longer be forced to buy a poor-value annuity was, ‘Ah, finally!’, an even greater number were beside themselves at the recklessness of government in allowing savers to ravage their pots, to then have to fall back on the state once the blowout was over.

A wall of people will reach a supposed retirement age with pots too small to provide a meaningful income

I became editor of Pensions Expert during the tortuous 12 months that followed, in which providers and advisers, wracked with a mixture of confusion, fear for savers – and in many cases their own business models – tied themselves in knots trying to figure out what on earth was going to happen come 2015 when the reforms were rolled out.

It was like waiting for a bomb to go off. Never had pensions been more politicised. By April, all eyes were on those over-55s to see whether there would be a mass savings raid.

It is important not to overcook any assumed negative effects that the freedoms are having on this age group – those cashing in have not been profligate wastrels, the data have assured us – but the government must stop thinking about this cohort as though they are representative of the pure-defined contribution generation of the not-too-distant future.

Those cashing in now are largely people with pots too small to provide a significant retirement income and/or those who have other income-generating assets to fall back on, which may include defined benefit.

When today’s 30-somethings reach retirement (whatever year that may be), with their small-to-middling DC pots, they will be wondering why their prospects are not looking so rosy. The answer? A dangerous permutation of less-generous employer schemes, low employee contributions and low asset returns.

Those who do well out of DC, in its current form, will be in the minority. A wall of people will reach a supposed retirement age with pots too small to provide a meaningful income, and too little time to do anything about it.

Many of those may see cashing in as the only option worth taking. After all, some of those will still be paying down a 35-year mortgage – which they took out late in life because they struggled for years to save enough for a deposit (and that’s leaving aside consumer credit). What then?

If the freedoms are all but irreversible, as former pensions minister Steve Webb said recently, then it would not be an overstatement to say that we have a possible catastrophe down the track. You do not need a Lamborghini to have a high-speed car crash.

Maxine Kelly is a production journalist at the Financial Times and former editor of Pensions Expert