You've got to love the pensions 'industry'...

Actually, no you don’t. Anything but. Particularly when one reads yet another ‘lets drum some business up’ ‘Report’ from them. This time it’s Aviva keen to point out the bleeding obvious.

As reported in the SBP this weekend…

More than half the population expects to have to work beyond retirement to have enough money to live on, according to new research by Aviva.
The ‘consumer attitudes to savings’ research, conducted by Ipsos, found that 54 per cent of people accepted that they would have to work beyond retirement.

Stone the crows. Who would have thought it? Could it be anything to do with low wages? Anything, even a bit? Or a state which is in the process of raising the retirement age and thereby a sense that what once was stable is now no longer so. Or a discourse where there are no guarantees as to the level of provision for even the state pension in the future (for which a big thank you to the financial sector for lumbering us with the aftermath of its failure).

And what of this?

More than three in five of those surveyed said they were worried that they would not have enough income when they retired, but just over one in seven said they would rather live for today than save for the future.

Who can blame them when – as the last five years have fairly comprehensively demonstrated, find yourself in the wrong seat during the pass the parcel that is the modern economy and you will find pension ‘savings’ wither away as if they never were. No wonder the pensions industry is keen to get something, anything.

There’s more.

Almost four out of five respondents said they were risk-averse when it came to financial decisions, with half of those surveyed saying that it was more important to hold onto current assets than to accumulate more.
Mark O’Reilly, retirement marketing manager at Aviva Life & Pensions, said the survey results were not surprising. “‘Aversion to risk is a natural reaction to the general economic circumstances,” he said.

It is indeed. It’s not just natural. It’s logical.

But…

“All investment involves some measure of risk. Without it, there are few opportunities to make the types of returns most investors require for their long-term financial security. This includes pension provision.”
But aversion to risk may be resulting in lower returns for consumers. For example, according to Aviva, an investment of €10,000 by fixed instalments between September 2007 and September 2012 would have grown by 28.5 per cent in a typical balanced managed fund but only 9.26 per cent in a regular deposit account.

So we are offered the following:

“Risk can deliver investors’ expectations for returns, provided it is measured, managed and appropriate to each individual’s risk profile and risk target,” O’Reilly said.

Ah, all those defined contribution schemes. Delivering so much, no doubt. And then there’s just a smidgen of fear thrown in…

“The challenge is getting the risk balance right, particularly as more and more people are not providing for their retirement.”

How? How can an individual, any individual – at least any individual with low to ordinary incomes (and even in fairness many on higher incomes) make the sort of judgements that would genuinely deliver truly optimal outcomes. They can’t. And only this week there’s further evidence as to why this might be so with an article in the Irish Times which references the following…

…Report on Pension Charge in Ireland 2012 was compiled by the Department of Social Protection, with assistance from the Pensions Board, the Central Bank and PricewaterhouseCoopers.

The findings of which should send the pensions ‘industry’ scurrying back to the hole it emerged from…

It found that one euro in every six of retirement savings in occupational schemes was eaten away by charges while as PRSAs and executive pensions could see an average “loss” of between 21 and 31 per cent

And…

At the publication of the report senior department officials pointed to “worrying” lack of transparency in the charges associated with funds.

It also found that, and this will come as no surprise:

The study found that there was no evidence of a culture in the pensions industry of providing clear information in a simple manner.

Well I never. Massive charges, opaque structures, lack of information, a culture of… well… what exactly? Nothing good, that’s for sure. And even still week after week that same industry churns out self-serving stuff (only last week or the week before there were plaintive missives from its representatives bemoaning the fact the government was trying to restructure it).

That’s the thing with markets. They are self-serving. The value of ‘investments’ can go down as well as up and on an individual level there’s simply no way of assessing risk in such a way as to guarantee avoiding such an eventuality. In a way the economic crisis would, all else excepted, have done one genuine service if it had softened the cough of those who argue for market based ‘solutions’ in this area of social provision. But it hasn’t and worse again the dial has tilted towards those sort of ‘solutions’.

Maybe the Report on Pension Change in Ireland will go some way to redress that imbalance.

Maybe not.

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