Pension plan? Chance would be a fine thing. And what of the end of the welfare state?

Reading the results of the latest Friends First annual survey into pensions released last week it was striking how odd these exercises actually are. Sure, we know that they’re designed to publicise and promote the companies who commission them, but to what end?

One would wonder if the fact the survey was carried out online might have some impact. Though, in fairness, it had over 1,000 respondents (I also presume that it was carried out amongst private sector employees, though this isn’t made clear in accompanying reports).

The survey discovers that…

While Irish householders continue to report significant financial pressures, Irish employees are now reinvesting in their future incomes, according to the Friends First annual pension research published today. The research indicates that 71% of employees in Ireland are now investing in a pension – up from 67% in 2012 and 63% in 2011.

Though:

Among those who do not have a pension, 63% say they cannot afford to have one, 25% have not got around to it, while 13% of the 1,000 people surveyed, say they do not understand pensions.

And:

20% of the people surveyed by Friends First indicate that they have reduced their pension contributions in the past year, which is on par with 2012 and a 6% decrease on 2011. However, almost half of these (49%) have in fact stopped contributing altogether.
And:
55% of participants plan to rely on the state pension, upon retirement
24% have not thought about investing in a pension
63% of participants without a pension do not have one as they cannot afford it
80% of those without a pension are not confident that their income will be sufficient to provide for retirement

But what in this is positive, for anyone, including the industry? Friends First find a slender thread upon which to hang their hopes:

Commenting on the survey, Simon Hoffman, Pensions & Investment Director with Friends First, said: “It is not surprising that the continuing squeeze on household finances is negatively impacting on the ability of consumers to save for retirement, however, if we continue to put our heads in the sand on this issue, we will produce a new crisis – the pensioned poor. Clearly, there is now a real an opportunity to consider auto-enrolment, which was one of the strategies to increase pension coverage recommended by the recent OECD Review of the Irish Pensions System.”

Really? That’s it? And what about the problem funding the pension? Because for those on low to medium incomes that’s the real problem. They don’t, as indicated above, have the money for funding private pensions. Moreover, as also indicated above, many are unable to sustain the pension provision they currently have. How does auto-enrolment magic that away?

Indeed how are any of the following nuggets of information gleaned from the press reports all that positive?

45% of participants without a pension would be encouraged to start one if they were automatically enrolled into a voluntary pension scheme

41% would also like to access to some of their pension fund if they fell on hard times

31% of participants would be encouraged if they had a better understanding of how pensions worked

It seems to me that there is an interesting blurring of the distinction between many having pensions, and those pensions being any much use. For example:

Mr Hoffman continued, “We have been conducting this research for a number of years now and consumers are consistently telling us that although money is tight, simplifying the system and improving accessibility are the most effective ways to encourage greater private pension participation. The introduction of a flexible auto-enrolment scheme, similar to other jurisdictions could certainly provide an answer. It is now time to make decisions and to introduce a complete solution rather than the piecemeal approach we have adopted in the past.”

But how would greater private pension participation be of any great use individually if the amounts workers can put into them remains low? That surely doesn’t sound like a ‘complete solution’ to the problem, unless one is in a company selling pension products where sheer volume of numbers will keep the money rolling in, whatever the situation at ground level is for the worker and how much they as individual actually benefit from their pensions.

And let’s just dovetail this with the news from Holland, as announced by their King, in a speech written on behalf of the ruling coalition between the conservative VVD and Labour Party that it is the end of the welfare state and that:

“The shift to a ‘participation society’ is especially visible in social security and long-term care,” the king said, reading out to lawmakers a speech written for him by Prime Minister Mark Rutte’s government.

“The classic welfare state of the second half of the 20th century in these areas in particular brought forth arrangements that are unsustainable in their current form.”

Yeah. Right.

The same problem outlined above is evident here. If people have no money with which to ‘participate’, what then? Sure, Rutte is neo-liberal to his core. The participation of the Labour party is appalling but somehow not surprising. And of course it is political, attempting to see how far they can go (from talking to people with direct experience their read is that Holland is, despite its reputation, oddly antagonistic to even mildly collectivist/universalist approaches, at least in this era).

But note that they feel emboldened enough to come out with this sort of stuff publicly. That’s a change.

But we hear similar enough stuff over here, dressed up in marginally more emollient language. Wait until they start inflecting their rhetoric with that sort of stuff. Won’t be long now.

Actually, arguably it’s already started. Remember the pensions and insurance industry and their contribution to the Green Paper in 2007? An unashamedly right of centre political and social vision was outlined there…

* Why not mandatory [Pensions]? Because:
o Enhancing the “Pillar 1” State pension, as recommended, would go a long way towards providing an adequate retirement income for low- to middle-income earners; this in turn reinforces the idea that any additional pension provision – while it should be promoted and incentivised by the State – should remain voluntary;
o It represents an abdication of personal responsibility and it weakens the link between effort and reward;
o It removes personal choice;
o It enshrines the principle that citizens must be taken care of by the State from ‘Cradle to Grave’ and increases ‘Big Government’;
o It creates a dilemma regarding who should manage funds and may result in a lack of individual savers’ control over the management of their retirement funds.

BTW: Interesting to consider whether auto-enrolment is different from mandatory, or not.