This is my last editorial for Pensions Expert and the last edition in which I have played a part, as I have moved on to fellow FT title Investors Chronicle.
For my last missive, rather than self-satisfying praise on what we have achieved over the past couple of years – the relaunch, the refocused editorial content, the new platforms (okay, couldn’t help myself) – I thought I would write on subjects of lingering concern.
The world of defined contribution pensions is facing a revolution under the banner of ‘freedom’.
While the failures and current questionable value of the annuity market had to be addressed, my concerns have revolved around the protections against bad decisions – and the timeline.
These are intrinsically linked as can be seen from the Financial Conduct Authority's contention – reported by the FT's Josephine Cumbo – that it did not provide reams of detail on the second line of defence given the industry's concerns about timing.
That deadline, unsurprisingly placed just before the election, has meant many in the industry are not prepared and the government’s guidance service is as yet largely unknown.
Perhaps the risks of cashing out have been overstated, but it is not clear that the government has learned the lessons of the personal pensions scandal from the later years of the previous Conservative government.
Illustration by Ben Jennings
For defined benefit pension funds, there is another precedent that I would argue should be kept in mind – that of global banks loading their balance sheets with credit instruments that they assured themselves they could handle.
Now, as banks leave, pension schemes are moving into alternative credit to get yield in a low-yield world. But how far are they prepared to go along that credit spectrum? Are they aware of what liquidity issues might lurk around the corner?
Next week I will be chairing a live roundtable here at the FT on fixed income, where we will press institutional investment experts for the answers to these questions.
I hope the government and regulators have created a structure for good retirement decisions by April. I hope DB consultants are as sure of these alternative assets as they purport to be. Meanwhile, this title will retain a healthy scepticism.
Ian Smith is outgoing editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.
