When Ed Miliband warned the City last week that a new Labour government would target fees and commissions levied on retirement savings, it provoked an angry response from the pensions industry.A couple of days later the Royal Society of Arts joined the fray. It commissioned a report from pensions analyst David Pitt Watson, which accused pension providers of charging double the fees levied in some other countries.Pensions are a big subject as we approach the launch of auto-enrolment for 10 million workers into the government-sponsored Nest scheme, which is for employees without an occupational pension. According to the Office for National Statistics, only 3 million people in the private sector are saving for their retirement, 600,000 fewer than in 2008. And some pension experts believe the figures are an underestimate. Some surveys show three times as many self employed professionals, part-time workers and full-time staff have turned their backs on pensions.Only public sector workers have bucked the trend, with a rise in membership from 4.1 million in 1995 to 5.4 million in 2009 before slipping back to 5.3 million in 2010. With more than 29 million people in the workforce, the ONS figures show that 21 million are not saving into a pension. No wonder the government is panicked. To some extent the financial crisis and a four-year squeeze on living standards can be held to blame. But the lack of enthusiasm for retirement saving goes back further.A legacy of low returns, mis-selling and over-charging have discredited pensions just as the biggest state-backed scheme in history is scheduled to launch. Pitt Watson decries the lack of transparency, which denies savers a true picture of where their money is going. He says the value of a pension leaches out over time, not just
на хостинге вирус 993! because of management fees, but because fund managers apply a range of commissions and charges that are hidden from view.Pitt Watson's attack is on retail funds that bamboozle the personal saver. But the opacity issue also applies to occupational schemes and especially the final salary schemes that once dominated provision in the UK's major companies.There is more than ?1tn locked up in final salary schemes. The promise to pay a pension worth around two-thirds of a worker's last pay cheque after 40 years of service is a huge liability that many companies struggle to cope with.Last week, Dawson International, which is a small Scottish cashmere maker and textile firm, said it would be forced to go into administration after being overwhelmed by its pension fund. The commitment to pay pensions to its former employees (now pensioners) and the 200 still at work has proved too much after an re-valuation of the fund and its liabilities opened up a huge deficit.It is a typical story, even if it is an extreme example. Current pension assets at Dawson total ?110m, while liabilities are ?150m, leaving a ?40m deficit. The market value of the company was almost ?3m before the announcement and ?1.4m after. The pension scheme dwarfs the company.Most British manufacturing companies are caught in this trap. For many of them, life is not about feeding hungry shareholders at the expense of employees, but feeding a hungry pension scheme at the expense of both shareholders and investment in the company's future.Big companies are also affected. A recent study found that pension commitments represented 37% of the FTSE 100's total value. In other words, the promise to pay pensions to FTSE 100 staff was equal to almost two-fifths of their market capitalisation.Unfortunately the situation
загрузка процессора на хостинге! is only worsening as stock markets and property values stagnate and life expectancy soars.A report by Lloyds TSB Private Banking found that asset values fell over the last year for the first time since the economic downturn in 2009. The average return, combining shares, bonds, property and commodities was only down 0.1%, but that is enough to knock the projections of pension fund managers for six.Among the 7,000 companies still coping with their final salary pension commitments, many can expect to go bankrupt from soaring pension costs. Last month, industry figures showed final salary scheme deficits jumped to ?312bn at the end of May 2012, from ?217bn at the end of April (a 44% or ?95.3bn increase).What happens to company schemes when their sponsoring employer goes bust? They enter the Pension Protection Fund.This is an industry scheme with a duty to rescue the pension schemes of bust employers. Any shortfalls are supplemented by a levy on solvent schemes and investment returns. The PPF is now one of the biggest pension funds in the land and gives us some lessons about the state of things at the moment.For one thing, it is like a honeypot for banks and City firms struggling to make a profit in a downturn. John Ralfe, the independent pensions consultant, says he was shocked to find that the PPF keeps some 50 fund managers on its roster and plays every game the City has to offer to grow and insure the scheme against losses.In the retail savings arena, the policies of the PPF would be akin to buying the kind of structured investment product that costs a fortune because it promises punters get only the upside while being protected on the downside.The chief investment officer at the PPF
curl download website! believes he will outperform the average pension scheme by 20 percentage points when his results are published in the autumn, so clever is the investment scheme.But the PPF will not publish what it will pay for the advice and products it is buying on behalf of the 138,000 members in 453 schemes it has taken on. Ralfe says the PPF's last annual report shows it will be paying more than ?90m in fund management fees on assets of ?17bn by 2015. "With ?90m paid in fees, a large part of the PPF's annual levy on pension schemes is going straight into the pockets of fund managers."This significant deadweight increases the cost of the levy and the likelihood the PPF will have to reduce the compensation it pays at some point in the future.Nest is another scheme that refuses to reveal how much it will pay the investment banks and fund managers hired to manage its funds. It will not be doing anything nearly as fancy as the PPF, but it is not transparent.The economic point is that pensions are increasingly a drag on the economy when they should be a force for investment in our children's futures, which means growing UK companies. Instead, they suck the life out of company balance sheets. The Royal Bank of Scotland must put aside millions of pounds to fill its pension deficit rather than lend it to clients for investments in new equipment and technology. And the opaque structures allow the finance industry to extract billions of pounds in fees and commissions that go to City pay cheques instead of pensioners.The pensions industry should be prevented from becoming the last refuge of the City slicker at the expense of pensioners and the wider business community.
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