Dickens on pensions

A small matter,” said the Ghost, “to make these silly folks so full of gratitude.”

“Small!” echoed Scrooge.

The Spirit signed to him to listen to the two apprentices, who were pouring out their hearts in praise of Fezziwig: and when he had done so, said: “Why! Is it not! He has spent but a few pounds of your mortal money: three or four perhaps. Is that so much that he deserves this praise?”

“It isn’t that,” said Scrooge, heated by the remark, and speaking unconsciously like his former, not his latter, self. “It isn’t that, Spirit. He has the power to render us happy or unhappy; to make our service light or burdensome; a pleasure or a toil. Say that his power lies in words and looks; in things so slight and insignificant that it is impossible to add and count them up: what then? The happiness he gives, is quite as great as if it cost a fortune.”

Of course Dickens was using this as a metaphor for automatic enrolment, pointing to the fact that even if the first two million extra savers have much lower contributions than their DB baby boomer predecessors, they could accumulate a decent retirement pot over time.

Bob Cratchit would be one of his auto-enrolees – presumably at minimum contribution rates. “If I move job and my new employer puts me in another pension scheme, what will happen to this one?” said Cratchit. Despite getting no response, he had been reading some of the pensions trade press of late and knew that the Government were planning that pension pots would move automatically. “Pot follows member, great idea but unlike automatic enrolment it lacks cross-party consensus,” he muttered under his breath.

Tiny Tim wasn’t interested in the pensions chat. His only contribution had been that “it was a shame he couldn’t transfer his Child Trust Fund to his Junior ISA.” I’ll never be able to buy a house at this rate, he pondered, as he checked online how much he’d accumulated in each.

Jacob Marley, who had been closely following the conversation, was a big fan of the Danish ‘collective DC’ approach. Lifting his eyes momentarily from the DWP’s ‘defined ambition’ paper, he contributed that “an intergenerational cross-subsidy to smooth payouts during more volatile markets would give pension savers the certainty they need. And it means we don’t have to bother with PFM as DA schemes will be exempt.” He left it at that, following his triumphant outburst.

“But what if new money falls short of what’s required and payouts have to be unexpectedly reduced, or if the cost of a guarantee outweighs the benefit?” interrupted the Ghost of Christmas Past. “We’ve been down this road before when With Profits was the prevalent investment. Nothing wrong with the concept but it’s not immune to long term changes in market conditions,” he concluded. “It ain’t no pensions panacea”  he warbled in a strange attempt at an American accent, as if rolling a big cigar between his lips.

We are where we are,” clichéd the Ghost of Christmas Present. “At the end of the day, these are all good ideas, but we need to work through the implications of the charges consultation, quality standards, defined ambition, etc and then see where we are. What will be will be.”

The Ghost of Christmas Yet to Come was much more pragmatic. “I can see many different outcomes here…” he tantalised.

“First, we could continue to debate every aspect of pensions and try and make lots of changes all at the same time, hoping everything fits neatly together. But we risk taking our eye off the auto-enrolment ball and employers start to miss their staging dates in their droves. We may never get the momentum back if that happens,” he said, to a now fairly alarmed room full of people dressed in pre-1850s attire.

“Second, we could make no changes and simply carry on without regard to some of the issues that are leading to poor member outcomes. We might get automatic enrolment done ok, but would we be happy all the pension schemes used are competitive and appropriate?” Spirits and humans alike looked contemplative at this.

“Third – and my favoured option – we prioritise the key actions we need to take and deal with them in a timely, orderly manner, keeping the success of auto-enrolment as our number one focus.” Even Tiny Tim was nodding vigorously, having just invested his JISA in emerging retirement holiday firms.

Dickens was big on pensions, generally. Had he been around today, he’d probably be harping on about long term care and other connected societal issues. Actually, he probably would. He saw society for what it was and the impact people’s financial position had on them – young people, working and old.

He would of course, be keen to stress that investments can go up or down in value and may be worth less than was paid in.

There’s much we can learn from Dickens and his Ghost of Christmas Yet to Come. Meantime, enjoy the one in front of you…

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