Jonathan Punter, CEO, Punter Southall
Q1. From your point of view, what have been the industry and policy highlights of the past 30 years?
Congratulations on your 30 year anniversary, Stuart and I started Punter Southall around the same time so I appreciate the tenacity it takes to succeed over 3 decades.
From a DB aspect, the Pensions Act 2004 has to be one of the most significant policy highlights over the last 30 years. The introduction of tPR and the PPF provided a set of rules and a body to oversee those rules as well as protection for members in the event of sponsor insolvency.
I would probably point to the government's announcement on 11 June 2003 as having the greatest impact on DB schemes. They announced that when winding up a scheme the liabilities would need to be calculated on a buy-out basis. In essence this held the sponsor accountable to such a magnitude that the scheme became financially material to the sponsor. They were no longer allowed to walk away from the scheme and its members.
For DC schemes, auto-enrolment has to be the most meaningful policy over the last 30 years. Mandating millions of people to save for their retirement and ensuring employers support their efforts. Reversing the decline in workplace pension savings.
The use of technology would be my industry highlight over the last 30 years. Back when we started out, computers where the size of wardrobes. They fundamentally changed our pension consulting business by allowing us to spend more time on consulting and this dynamic has informed our development ever since: people come to us to solve problems that are beyond them. Technology continues to introduce efficiencies, freeing us up to solve the complex problems our industry presents.
Q2. Where are we today in terms of delivering great outcomes to members? Where do we, as an industry, need to do more?
If DB schemes fulfil their promises, they deliver members great pensions and because for the legislation I mentioned in the previous question, the impact on the members of the sponsor failing is minimised.
It is in the DC space where I believe more effort is needed. DC members need more options on retirement, that is why Punter Southall launched Pension Potential. It is an online service filling the "Advice Gap" vacuum of at retirement options. Savers can go online and work out in a few clicks what their pension pot can do for their retirement, from buying an annuity to drawdown. They can still talk to someone but much of it is done online.
Also auto enrolment rates need to increase, there are still too many adults with no private pension or a very small one which will not provide the financial resilience needed in retirement. It was positive to see the recent government announce that the next Pensions Review will explore these long-term challenges.
Q3. Looking to the future, what are the key areas in which you expect pensions to develop to meet the need of members? How can those in the industry play a role in building a pensions system fit for the future?
I mentioned DC above and DB feels like it has come full circle since the nineties, when we were talking about sharing surpluses and contribution holidays.
In my opinion, the key challenge for DB schemes is how do they run-on, using some of the surplus to benefit members, in a secure way. Schemes will need to take some risk and by doing so there is always a possibility that they will have a bad experience and slip back into deficit, like many did back in the nineties.
Robust protections are needed, there is a need for more innovations in this area. It is not just a modelling problem, additional security above and beyond the scheme's own assets will be needed. Like bringing third party capital to bear in the shape of capital backed journey plans.
Schemes can also help their members by taking active steps towards loss recovery through litigation. Historically trustees have been reluctant to file claims against the companies their asset managers have invested in, however I can see a tipping point approaching where schemes pre-define their position as default participators in this type of legal action.
In both DC and DB pensions we need to be open to adopting new ideas and innovation. It can take our industry far too long to see the potential in new ideas, we need to be brave.
