SEC Newgate's thoughts on pensions

I don’t know about you, but I’m gutted that England lost against the Argentinians. I really thought we could do it this World Cup. Nonetheless, we should be proud of what the England team has achieved. 

After hearing all the commentary post match, it got me thinking. Much of the scepticism has been around Tuchel’s decision after England went 1 – 0 up. Bringing extra defenders on (similar to previous games), and holding out until the final moment. And it’s moments like these, in high pressured environments where leaders need to make big decisions in high stake environments. Is this the right or wrong decision? 

All the weeks, months and years preparation for this very day, comes down to what decision is made on the pitch. This decision is not just made on the pitch. It was for the England team. But many leaders are faced with these decisions day after day after day. Over the coming days, weeks and months, the UK will be faced with big decisions, as a new leader, Andy Burnham becomes Prime Minister.  

The decisions that Andy Burnham sets forth will have a huge impact on the direction of this UK. It’s hard to say what this mean for the pensions industry, as we have a limited understanding about his proposed policies. 

But what we do know is that he brings a more interventionist economic agenda, especially around regional investment. Yet as Kim Gubler, Managing Director at KGC Associates put it, “I do not expect another wholesale redesign of workplace pensions during this Parliament”. And I expect, many will feel the same. 

This week, we saw the Government’s updated roadmap which includes a substantial programme of reform – value for money, consolidation, small pots, and the list goes on – and these new requirements will reshape the market and impact on peoples retirement outcomes. As Kim says in our Pensions Talk series “the immediate priority should be delivering those reforms well rather than continually adding new ones.” We need stability and certainty, and a government in control acting in peoples best interest. 

Pensions adequacy is an area which we will see debated over the next weeks and months. I wrote in a previous life & pensions newsletter on this very topic. We know 15 million people are under saving for retirement, and according to a new report from the Pensions Commission, this could reach 19 million without action, leaving large groups across the UK facing a severe cliff-edge when they retire.

I was listening to a webinar hosted by Henry Tapper, Pension Playpen, featuring Jo Cumbo, Financial Times correspondent and Tom McPhail, pensions expert, who started with this very topic. Jo will be leaving the Financial Times after 27 years as a reporter, and we wish her the very best of luck. I’ve thoroughly enjoyed following Jo over the past 15 years, and she’s an exceptional reporter and a real advocate for pensions.  

The question is how much is enough? This is a debate which has been discussed over years – still the same questions and the same issues. As Jo said, “we need a pension not a pot”. We need to differentiate between how much is being put in at the front end, and what mechanisms are we using at the backend. 

The next major policy debate will be adequacy. The Pensions Commission has already estimated that 15 million people are undersaving for retirement and will make its final recommendations in early 2027. The difficulty is that the need to increase saving is becoming clearer at precisely the point when many households are struggling with day-to-day costs and employers have absorbed significant increases in employment costs. Simply requiring both parties to contribute more may be economically and politically difficult.

That means the Government will need to consider not only contribution rates, but how and when they increase, who bears the cost and how lower earners are protected. Phasing, better targeting and using behavioural defaults will all be important.