In the 1989 reworking of Batman, Jack Nicholson’s Joker rained the streets of Gotham City with dollar bills, and belted out the immortal lines:
“Hubba, hubba, hubba. Money, money, money – who do you trust? Me?! I’m giving away free money… And where is the Batman? He’s at home washing his tights!”
Suffice to say, Batman turned up and gave him what for, and that particular outburst failed to win any scriptwriters' or actor's awards; but it always sticks with me – “who do you trust?”
I’m not giving away any free money here, but nor am I necessarily asking for you to put unbridled trust in me. I’d imagine many will disagree with my point of view – as we know healthy debate and respectful disagreement are the cornerstone of a well-functioning society. See recent events in the USA for evidence. But when it comes to the world of pensions provision and trying to make preparations for old age, there is a huge amount of trust needed.
Government devise all aspects of state pension policy including state pension age, how much an individual gets, how it increases. They also set rules around national insurance, including who pays, how much and how their record translates into a state pension record. Government also sets the framework for giving tax relief to old age savings including what limits apply. In respect of workplace pensions, government makes the rules that apply including the minimum level of pension provision, what terms should apply to any pensions promise and how any promise should be funded. They are also responsible for provision of social care, means tested benefits and equality legislation for anyone working at older ages. They also determine the regulation of the world of savings and investments.
Employers have a duty to select a pension scheme and provide a minimum level of pension provision. Many will exceed this and some still provide a guarantee of pension income. In terms of any promise made, employers are responsible for ensuring these accrued promises can be met. A promise (including pension age, pension amount and how a pension increases) can only be diluted if an individual member consents or if a sponsoring employer goes insolvent.
The point is that the views of Governments and employers (acting as two of the mainstays of retirement provision) can, and do, change. Governments have changed the goalposts significantly in terms of state pension age and state pension increases. They’ve introduced a mandatory workplace pension arrangement. They also preside over standards of health and social care which are widely perceived to be falling.
Employers, collectively, are paying billions of pounds more in retirement funding than they were 15 years ago. This is good, but they are also abandoning the gold standard of pensions by closing defined benefit pension schemes which offer a guaranteed income in retirement, meaning individuals face greater uncertainty in old age. And for those who do have certainty of retirement income there has been lobbying of government from employers to give special powers to allow easement on how protections may be diluted. A Green Paper from government covering this is expected early in 2017. It maybe that employers are successful in being allowed the power to move their own goalposts.
So the world of pensions has changed and is likely to continue to change into the future. So – who do you trust? The Government, elected by the people for the people? Although their hands may be moving the goalposts, it is our collective will that put them there. As for employers - well we may not be able to elect them, but we do retain the power to influence their actions through strong, engaged union membership and the possibility of action when needed. So there can be an element of control on the pace and degree of change.
In the absence of either a mega-villain throwing free money from atop a giant birthday cake, or a Santa Claus dedicated to ensuring dignity in old age; can anybody be trusted to offer cast iron certainties?
Which brings us to the third pillar of pension provision - the individual. Ultimately yourself. You could make your own provision for retirement through a property empire or with your own savings although if not placed in a pension scheme these may not receive tax relief (with the exception of ISAs), may not attract an employer contribution and crucially may not benefit from an employer guarantee.
However maybe more importantly the role of each of us is to act as an important check and balance to workings of governments and employers – to ensure they act in the common best interest. Our ability to do that individually maybe small, but if you look around and think that your spouse/partner/child/parent/neighbour/colleague/drinking buddy/Facebook friend or fellow worshipper is similarly facing an uncertain future then you can join together with like-minded individuals to engage. You can write to MPs and Ministers. You can also become active in a trade union set up to work for the best interests of members collectively, in line with policies devised and debated by members. Through a trade union members’ voices will act as a check on unacceptable moves by employers and will act to praise or criticise the work of governments and put our points to policymakers. All of this is done with the best collective interests of members at heart.
Change may unfortunately be inevitable in the world of pensions, and not all of it need necessarily be bad. 2017 looks set to throw up further changes. Who can be trusted to deliver responsible measured change? Ultimately I think it’s you.
After all, Batman knows nothing about pensions.