What is your favourite pension acronym?
For sheer comic value and impenetrability it has to be UFPLS (uncrystallised funds pension lump sum). It might tell-it-like-it-is from a pension policy-maker’s point of view, but does nothing to help members of the public understand what on earth they’ll get from it.
It’s not LISA, then? That’s a good acronym.
At least it’s easy to pronounce. I’m less convinced about the product - while they might look attractive on the surface, we’ve seen similar politically-driven personal savings products come and go in the past (child trust funds, anyone?).
Can younger savers be confident that the promised levels of 25% government contribution and a bonus payment at 60 will actually deliver? For an 18 year old investing today that ‘bonus at 60’ is 42 years away. That’s at least eight general elections and 84 Budgets/autumn statements to get through.
True, but just think how much pensions legislation has changed in the last 42 years…
Without doubt - and there have been some enormous problems in that timescale, such as Robert Maxwell’s embezzlement of the Mirror pension fund (25 years ago this year) that not only hit individuals but undermined confidence in pensions savings in general. You could also argue that the move from RPI to CPI indexation of schemes also reneged on a past promise.
But, overall, those who have at least part of their retirement savings in well-run employer-owned DB schemes with strong sponsors can be confident that what they signed up for early in their working lives will be what they get when they retire.
That’s quite a lot of caveats, and while that might just about hold true for DB retirees now, DC doesn’t come with such certainties…
If you are reliant on a DC scheme to fund your whole retirement, you have less certainty about our savings now than at any point over the last 42 years.
We have three different core types of scheme (GPP, trust-based and mastertrust) governed by two different regulatory regimes. We have no clearly defined outcomes or end points - and far from sufficient guidance and advice to enable people to manage the freedoms they now have at age 55.
And, looping back to LISAs, we now have a dichotomy in very-long-term savings products which could be viewed as a test-run for more substantial changes to the way in which retirement savings and income are taxed in the future.
Will Workplace Pensions Live’s Big Fat Quiz of the Year solve these problems?
No. But it will be fun - and hopefully informative.