Ros’ Pensions Week 2008 predictions

by Dr. Ros Altmann

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The most important events in UK pensions in 2008 are likely to revolve around three themes.  Firstly, how  the Government can help the industry to start rebuilding confidence in pensions?  It could begin by finally resolving the scandal of the Financial Assistance Scheme.  This is the Government-run scheme that is not really providing assistance to most of those who need it and has spent more on administration than it has paid out to victims.  Ensuring that the wind-up victims receive at least the same as those in the Pension Protection Fund would provide an end to naked pensioners grabbing headlines as they beg for justice.

Secondly, there will be yet another Pensions Act in 2008, this time paving the way for ‘personal accounts’.  These are intended to cajole the un-pensioned lower earners into pensions.  The Tories will probably embarrass the Government over this policy by highlighting how mass means-testing in the state pension scheme could undermine the suitability of private pensions for the very people the personal accounts are supposedly aimed at.  I also expect that the Opposition will warn of the administrative dangers of trying to track contributions for millions of workers and ensuring that their data are correctly and securely recorded!  No doubt some compromise deal will be agreed to alleviate the problems, but this is unlikely to be sufficient to ensure proper solutions.

Thirdly, the trend of employers looking to offload their final salary pension schemes will accelerate and there will be more innovative new entrants wanting to take them on.  Liability driven investment approaches will be refined to help trustees understand that they should not just be switching from equities to bonds in an attempt to ‘match’ liabilities more closely.  Consultants will help them find ways of managing both returns and risks more carefully, while allowing sufficient upside potential over the long-term.