‘Pension freedom’ versus ‘pension security’

The weekend edition of the Financial Times has a debate on pensions between Alan Higham of Fidelity Worldwide Investment and the the Thatcher’s Pension Reforms project.

,Alan Higham, putting the view of some but by no means all in the industry, says the government’s reforms, dubbed ‘Pension Freedom’, give savers a chance of a better income in old age. ‘Retirement has changed, just like society has’, he argues, and the people need more freedom to manage their finances in this more complex world. A reformed financial advice profession, he thinks, can be trusted to guide them in making the necessary choices. [Read the article here]

In the same issue of the FT, I take a rather different view, one that comes directly from the work being done by this project on the pension reforms of the Thatcher era. I’m all in favour of freedom in principle, but people also need security. That need has lain at the heart of pensions for as long as they have existed. People need to understand that in embracing ‘freedom’ they may (on reflection I would say almost definitely will) reduce their security in old age. This is mainly because by going it alone they will abandon the benefits of risk pooling, will lack the information and expertise to make the right decisions, and, sadly, because recent history suggests many of them are going to be sold inappropriate and/or costly products by unregulated firms. [Read the article here]

Hugh Pemberton
Principal Investigator, Thatcher’s Pension Reforms project.



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