Pensions World

Lindsay Tomlinson, NAPF chairman, signs off with a review of the pensions scene over the past two years and what the future holds

Two years ago, in my first Pensions World article, I set out my thoughts as incoming NAPF chairman. In this, my final article, I am going to review my predictions and speculate on future developments. My position changes both because of the onward march of events and because, as outgoing NAPF chairman, I feel less compunction to be circumspect in voicing my opinions.

In October 2009, I said that after the election the incoming government would take decisions, consciously or unconsciously, which would shape the pensions landscape for a generation. The prediction has held good. The new government’s commitment to the 2012 reforms and its willingness to tackle major issues such as the foundation pension have been impressive. The future pensions landscape has indeed been forming before our eyes.

Crystal clear

Considerably less impressive has been the Coalition government’s lack of action to support private sector defined benefit (DB) pension schemes. Nothing much has been done. In fact, government action to tackle other problems, such as quantitative easing aimed at stimulating the economy, has been distinctly unhelpful to pension schemes. DB schemes remain extremely important in underpinning pension promises and as repositories of the nation’s savings capital. It is really disappointing that nothing has been done at least to prolong their existence. Interestingly in his farewell speech as chairman of the Pensions Regulator, David Norgrove came clean and confirmed that his role had been to manage out and de-risk a legacy problem.

Couple this inaction with the government’s support for Personal Accounts and with the continuing rise of defined contribution (DC) arrangements and the future becomes crystal clear. We are heading towards pension provision for future private sector employees being through DC schemes. There are, of course, implications for NAPF. There is a pressing need for an organisation to promote occupational pension provision. Irrespective of the structure of workplace pension provision, we need to promote effective governance in the interests of beneficiaries and to seek to keep cost down at wholesale levels rather than have them balloon to retail levels. So NAPF has plenty to do. It needs to try to focus on tomorrow’s issues as well as yesterday’s problems.

Two years ago I emphasised the need for a sensible discussion of public sector pensions, which government has taken forward through the Hutton Commission. But given the lack of support for private sector DB, the effort to preserve it in the public sector looks behind the times. If the private sector goes to DC, it is absolutely inevitable that the public sector will also have to do so.

Great experience

My last prediction was that we would see immense quantities of regulation following the financial crisis. That was a very safe bet. The only surprise is that we seem to want to tackle every issue at least twice. Firstly the UK tries to work out its own regulatory solution. Then we do the same at EU level. Over and on top of that, we experience the backwash of US legislation and then the global bodies such as the G20 have a go. This one will definitely run and run.

So reviewing my time as NAPF chairman, I can at least give myself reasonable marks for prediction. My ability to get anything done in practice was considerably more mixed. But being chairman was a great experience. It should be on the list of 50 things to do before you die.

Finally, heartfelt thanks to everyone involved with NAPF and best wishes to my successor.