No wonder, then, that their sponsors — Shell is only the latest — have been getting out of conventional schemes based on final salaries as quickly as they can, which is to say slowly, by closing the door to the newcomers. These schemes will be with us for another generation. By then the long cycle that seems to govern the stock market may have turned up again and the deficits may have melted away. All the same, the sponsors have been so thoroughly bitten that they must now be twice shy.
So they should be. Even in their heyday, such schemes were out of date, a relic of earlier ages when people might often be on the payroll of one big employer all through their working lives. Since then the six-figure payrolls have shrunk, and many of the employers are no longer with us. People, nowadays, can expect to live longer than companies.
They can also expect to move about in their working lifetimes, and so they should. A free market in labour is one sign of a healthy economy: a brake on mobility can only slow it down. A system that cross-subsidises the boardroom is objectionable in its own right. This used to be known as putting old George all square for pension. Old George has done quite well enough.
The conventional schemes provide what are called "defined benefits". They are giving way to schemes based on defined contributions. Time and the markets, good luck and bad management — all of these will make a difference, but each pot of money has an individual's name on it, and derives from the money put in, either by that individual or on his or her behalf.
Defined contribution schemes still leave the employers with plenty to do, by way of keeping the books, paying costs, finding volunteers to serve as trustees — what a mug's game — and arguing with the actuary. Employers may continue to ask whether the provision of pensions is their business. Years ago, the courts established that pensions are deferred wages — but employers, when they pay wages, do not try to specify where the money goes. The recipients must decide that.
It would be better to say that pensions are the by-product of savings, but that we can all have different ideas about savings, different uses and different priorities. One use may be to buy a house, and one way to save is to pay off the mortgage. One way to avoid that is to live in a tied cottage, but tied cottages have had their day, and so have tied pensions. The choice should be ours, so long as we realise that pensions do not grow on trees and never did. That was always an illusion.
Governments, who like to think they know better, come up with successive schemes meant to solve our pension problems for us. Serps was one, stakeholder pensions was another. The next scheme in line is called Nest, and ought to be called Cuckoo. An employer who points out its disadvantages will be liable to prosecution, which scarcely suggests that it will be sold on its merits. To believe that governments can be trusted to look after us in our old age is the biggest illusion of all.
