Changes needed to restore confidence in UK pensions
23 March
2004
sharingPensions.com
was privileged to meet with the Rt. Hon. Frank Field MP,
at Portcullis House, House of Commons on 23 March 2004.
Mr. Field was Minister for Welfare Reform, Department
of Social Security in 1997-98 and had been
specifically charged with 'thinking the unthinkable'.
He actively seeks to improve and amend new and existing
legislation and has been MP for Birkenhead since 1979.
We first asked Mr. Field if the problems faced by employers
now, in keeping final salary schemes open to new entrants,
are really that much worse than, say, the late 1970s.
He explained that successive Chancellors have made things
worse. In particular Nigel Lawson's Finance Act 1987 taxed
pension schemes holding assets greater than 105% of liabilities.
He said that Mr. Lawson thought pension schemes were a
tax fiddle and took action to reduce the tax privileges.
This
"there
has been
an unholy alliance between some employers
and Actuaries"
resulted in surpluses being run down in fat years,
meaning there was no surplus to draw upon in leaner
years and whilst some of the measures were designed
for long term growth, in the short term pension
schemes have suffered and they may not be around
in the long term.
For some industries in particular,
globalisation has put companies under greater pressure
on costs and margins. However, "I do think there
has been an unholy alliance between some employers and
actuaries which has encouraged actuaries to give rosy
valuation reports and then it just so happened that they
were re-appointed as the actuary", said Mr. Field.
Company managers may also be accused
of irresponsibility if they do not take a critical view
of pension costs. Because the media industry has been
particularly hard hit by globalisation and the loss
of jobs for life, it has promoted the view that this
was typical of all industries and that is what we all
came to believe. The same kind of campaign has been
run over pensions with employers thinking that everyone
is closing their pension scheme. He said that, sadly,
the "British like a panic" and this has been
applied to final salary pensions.
Furthermore, with the closure of final salary pension
schemes to new members it will not be that long before
current members become a minority of the firm's workforce.
We asked if the improvements in life expectancy really
should have taken employers and insurance companies
by surprise. Mr. Field explained that it ought not to
have, as life expectancy has been
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