A call for a cross-party consensus on pensions
-Damian Stancombe is head of corporate defined contribution at Punter Southall. The opinions expressed are his own.-
Pensions were a prominent feature of the chancellors’ debate recently, and are becoming a key battleground in the run-up to the election. Perhaps more interesting for us, however, has been the reaction of UK plc to the pensions issue and any government-led ‘solution’.
Punter Southall recently undertook its annual Corporate Defined Contribution Survey 2010, one of the largest and most wide-ranging undertaken in its field. Responses were received from representatives of a diverse spread of over 330 companies, and considered all aspects of pensions, but focused on defined contribution in the UK and influencing issues: from the current and future impact of economic conditions to the far-reaching effects of planned pension reforms.
The respondents included some of the UK’s largest employers, including 24 FTSE 100 companies and the survey conveys an authoritative range of opinions reflecting the views of UK plc. It revealed a strong sense of dissatisfaction with politicians for their seeming inability to bring about positive changes with regard to pensions. The feeling was that any future political change would have little or no impact on pension legislation, for better or worse. This is borne out by the fact that 86 percent of respondents believe there will be a change of government at the next election, while 57 percent believe this will have little impact.
With only 14 percent of respondents believing a change in government will have a positive impact on pensions, we believe that this is a strong steer from the business community for government to establish a cross-party consensus solution. This is seen as essential to achieve stability for non-state pension provision and bring an end to constant damaging intervention arising from conflicting policies. Indeed this cross-party consensus may be even more important if, as some commentators have claimed, we may be heading towards a hung parliament.
Many companies are pleading for government to stop passing the welfare buck to them (essentially taxing them to provide it by forcing companies to make contributions to pension plans) and to stop legislating them to the point of distraction.
With employer duties and National Employment Savings Trust due to arrive in the near future, we asked UK plc for their opinions on the proposed changes. The recently announced NEST charges have come in for some criticism in the press for being grossly unfair. In reality, when compared to the pensions industry prior to 2001 and the introduction of Stakeholder Pensions or the cost of schemes in other countries such as the U.S., a comparative charge of 0.5 percent is actually very reasonable.
Regarding NEST, on the whole respondents were generally positive about employer duties, with 49 percent either fairly or very positive. Only 21 percent of respondents viewed employer duties as a negative idea. However, 47 percent of respondents felt that employer duties will have little actual impact on retirement saving in the UK, and only 39 percent believed there will be a positive impact.
The Conservatives’ idea of a lifetime savings product does not seem to engender much more positive response, with only 33 percent of people thinking it is a good idea. There is a fairly even split of opinion regarding the lifetime savings product’s comparison to NEST.
At this moment the real fear is that none of the parties concerned – companies, individuals or the government – seem to accept their need to be part of the long-term solution.
The survey results strongly indicate that the business community is keen on a cross-party consensus on pensions, but in essence all parties – state, workplace and individuals – need to work together to sort out the confusion surrounding pensions. A strong consensus and less legislation would at least give UK plc the chance to focus on the more immediate challenges facing it at this time.