The overarching theme at the annual gathering of the world’s largest money managers and U.K. pension funds, hosted by the National Association of Pension Funds, was change.
And perhaps the biggest change came from the hosts themselves, who announced two days into the conference, held in Manchester, England, that the group would be rebranding as the Pensions and Lifetime Savings Association.
That change was a nod toward the continued transformation of the U.K. retirement market, with changes over recent years promoting accumulation and investment through retirement and beyond.
“If the world is changing, we need to change too so that we can shape the future, anticipate the future and get ready for the future of pensions; help our members and their scheme members; and help millions of people who are trying to do the right thing,” said Joanne Segars, CEO of the association, in a briefing ahead of the conference. The aim of the rebranding is to speak for all of the retirement sector — from defined benefit funds to auto-enrollment employers.
But it was not just a new moniker that delegates had to come to grips with. Also addressing the conference was incoming PLSA chairwoman, Lesley Williams, who is also group pensions director at Whitbread PLC.
Ms. Williams used her inaugural speech to implore the industry and regulators to change the retirement market for consumers for the better through simplification. She said educating consumers on the need for retirement savings should not be the only focus.
Ms. Williams said her peers and friends had advised that she spend her time as chair focusing on education. “Education isn’t a new thing. We have always wanted to educate people.”
Ms. Williams said by talking about educating consumers, “it feels like we’re blaming them — sure, we’re trying to help them, but it just feels like we’re saying it’s their fault because they’re uneducated. I don’t think they are the problem — I think we are. By ‘we’ I mean pension schemes, providers, the regulators and the legislators; collectively the group of people — clever people — who create the mechanisms,” who design and deliver the ways people save to provide themselves with income in retirement. “And we are kidding ourselves if we think that education is going to fix these issues.”
As delegates came to grips with the new moniker and changing faces at the association, they also heard William Hague, former politician, writer and historian, speak on the need for the industry to change its assumptions on economics.
Speaking on unusual economic uncertainty, Mr. Hague said: “There is always economic uncertainty … (but) long-standing assumptions may no longer hold. My own personal view … is that, for instance, the key assumption that low rates of interest stimulate economic activity, probably fails over time, particularly when they are persistent over very long periods of time. This loses its effectiveness as a cure and creates problems maybe as serious as the disease,” he warned.
Mr. Hague acknowledged that low interest rates and quantitative easing across the globe have “the effect of inflating the price of assets that are mainly owned by rich people, and therefore exacerbates problems of wealth and income distribution in the world.”
He said loose monetary policies cannot be continued “indefinitely,” and warned that “getting off them is a very difficult challenge. I do fear that central banks may be losing the moment to start raising interest rates — there is always a good reason not to.”
Elsewhere at the conference, there was a call for major change to the way employers communicate with their participants.
Robert Gardner, founder, co-CEO and lead investment consultant at Redington Ltd., spoke on what he termed “The Retirement Games” — picking up on the popular young adult trilogy “The Hunger Games.”
“I strongly believe that, 30 years from now, we have a pensions crisis coming,” Mr. Gardner told delegates in a conference stream titled “We’ve got retirement all wrong”
He addressed the “YOLO” — you only live once — culture of 18 to 30 year olds, who are spending more than they earn in some cases. “One in six pensioners in the U.K. is living in poverty,” and that is with the current but disappearing culture of “generous DB” funds. Mr. Gardner believes that could increase to 50%, to “maybe five out of six in the next 30 years, unless we take some action.”
Mr. Gardner was presenting alongside Mark Thompson, chief investment officer of HSBC Bank Pension Trust (U.K.) Ltd., which has a £2.5 billion ($3.9 billion) DC plan and about 80,000 participants.
“Investment isn’t really the issue here — it is about contributions,” he said. “Investment cannot do all the heavy lifting. If (there is) not enough going in, (there is) not enough coming out.” He said a total 15% contribution “feels about right.”
Engagement with participants is necessary, with “more segmented” messages to participants necessary, depending on their stage in life. “It all comes down to giving people the right messages at the right time in their life,” he added.