2008 – Pensions saving in lifetime accounts
One of the great comforts of being employed was the death
in service benefit paid to my wife in the event of my sudden
demise. In fact the benefits paid out from death on an international
assignment were so attractive I used to wonder whether it
was influencing her enthusiasm as she waved me off on the
Such insurance arrangements have always been something
of a mystery to me so it was enlightening to find myself
at a conference in Edinburgh last week discussing issues
surrounding insured employment benefits.
The conference, organised by Insurope, a multinational
pooling network of life insurers, was discussing the kind
of employment benefits covered by such arrangements. These
networks have proved a popular method among big companies
for simplifying expatriate insurance.
The audience was a mixture of human resources specialists
and actuaries. The prospects for actuaries in traditional
pension roles have been declining in recent years in line
with the closure of so many defined benefit pension funds
to new members.
The job was never straightforward but it must have grown
even more complicated with ever increasing longevity. As
average life expectancies in industrialised nations creep
up to – and in some cases over – 80 years, funding
20 years or more of retirement has become increasingly expensive.
Job hopping has been another barrier to pensions planning
as people struggle to keep abreast of their accumulated
pension cover. I found myself agreeing, therefore, with
Ralph Turner, ICI’s director of benefits, when he
suggested that we shall need to find new concepts and new
language to replace those of “retirement” and
Instead of pensions, he said, people might benefit from
lifetime accounts that could be topped up or drawn upon
depending on individual circumstances. The idea of a lifetime
account was suggested a few years ago by Ros Altmann, an
independent pensions expert, who highlighted the need to
encourage people to begin building their savings early in
She blamed poor levels of savings, particularly among low
income groups, on inadequate financial education and a lack
of government incentives to save. Individual Savings Accounts,
stakeholder pensions and pensions credit, all designed to
encourage saving, she noted, were failing to make much impact
among those relying on benefits.
The Child Trust Fund, on the other hand, where children
born after September 2002 are paid £250 to start a
savings account that they cannot access until they are aged
18, she believed could be an effective way of kick-starting
a savings habit.
Ms Altmann’s lifetime savings framework made provision
for long term saving in a “retirement section”
of the account with other sections for short term saving.
This, she argued, would allow a more equal distribution
of pension tax benefits across all incomes groups than exists
There has to be a better and clearer system to help people
save for their different lifetime needs depending on their
circumstances. Students, for example, may need to let their
accounts go in to deficit to finance learning. But with
the right incentives and the scope to plan for longer, variable,
careers, it should be possible to establish a savings culture
that avoids the uncertainties of the existing system with
defined benefits pension schemes in retreat.
The combination of declining pension provisions and longer
lifetimes means that all of us must begin to assess our
careers differently. It is no longer sensible to put our
trust in a single employer, hoping they will take care of
our career development and progression. Even if our prospects
look reasonable in the short term there is no knowing what
might happen should an employer be involved in a merger
or takeover, for example.
We need to take more control over our careers just as we
need to ensure we are in control of our lives. It’s
easy to become swamped by work pressures and domestic problems
that can feed off each other. No matter how paternalistic
your workplace, there is nothing your boss can do about
a fractured relationship.
I’ve seen colleagues struggling in such circumstances,
sometimes leading to genuine cases of burn out. In every
case the causes have been complex, related and cumulative.
At the very least they have derailed or damaged careers,
often at the expense of an individual’s health. We
can’t expect our line managers to deal with such problems.
We need to look out for ourselves.
I couldn’t help noticing that two of the presenters
at last week’s conference were doing just that, deliberately
pacing up and down during their presentations in order to
accumulate “steps” on their pedometers.
The pedometers, or personal fitness monitors, were associated
with incentive-backed fitness programmes awarding points
based on the number of steps achieved in a single day. One
of these “vitality points programmes” run by
a company called Fitbug awards points for those who manage
to undertake 10,000 steps in a day and more still for a
The steps are registered through monitors in the pedometers
that download their readings on to the Fitbug
website. Other points are awarded for buying fruit and
vegetables and certain sports goods purchases. Depending
on the number of points accrued, participating employees
can each claim a cash rebate from their company health insurance
plans of up to £150.
I can imagine a bright future for such programmes. That
kind of cash return just before Christmas is a real incentive
for people to work on their fitness. Besides, it’s
helpful to remind yourself how much exercise you are doing
This kind of approach in companies, combined with new thinking
on funding lifestyles within and beyond our working lives
must begin to feed through in to more enlightened policies
within government on work and health.
Companies understand that, given demographic trends, with
fewer young people entering the jobs market in the next
10 years, they must be offering first class employee benefits
if they are to recruit and retain the best people.
This means that many young people today are viewing such
provisions not as benefits but as entitlements. That seems
reasonable. We should all be entitled to organise our careers,
savings and lifestyles in a way that enables us to enjoy
fulfilling, productive lives. That’s not too much
to ask, is it?
See also: Retirement
ages and pensions