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It has been the singular achievement of this Government to take the best private-sector occupational pension provision in Europe and, by a mixture of short sightedness and misplaced intervention, virtually to destroy it. Occupational pension schemes, one of the great achievements of the post-war era, have been reduced to rubble in a decade - the majority closed to new entrants, growing numbers closed altogether and more and more sold by employers to insurance companies in circumstances and at prices that do not always fill this observer with confidence.
One might have thought the worst was over, but a survey published today by fund management group Fidelity, which questioned 100 finance directors from some of the UK's largest companies to assess their commitment to workplace pensions and thoughts for the future, does not even give that comfort.
The first point to come out strongly is how lack of Government support is making it much harder to salvage what remains of once-vigorous defined benefit schemes.
Many of these could still be preserved if the Government were to change the rules and give coherent and vigorous backing to risk-sharing. This would allow employers to temper future benefits to offset unpredictable higher costs such as the increase in longevity. Employees would get a pension below the maximum theoretical levels of today but would still be much better provided for and with much more certainty of income than if their scheme were closed and they were shunted into a defined contribution scheme.
There is more. Paul Myners, who as chairman of the Personal Accounts Delivery Authority has the task of implementing the new state second pension, told the National Association of Pension Funds conference last week that the Government scheme could make some lower-paid workers worse off if it curtailed their entitlement to other means-tested benefit payments.
There is nothing new in this, of course, except that it is the first time he seems to have said it. But he tempered his reservations by drawing an analogy with seatbelts: though they cause some injuries, the good they do overall outweighs the damage to a few.
However, Fidelity's survey finds others will be worse off too - not the poor otherwise eligible for means-tested benefits, but current members of some employer schemes. When the new pension comes in, several companies plan to switch all their employees into it and wind up their own schemes. Thereafter, the employees will earn a massively inferior pension but the company will save a bundle.
Fidelity predicts this will have an immediate adverse impact on 300,000 people but the total will rise rapidly because those same companies and others say all new recruits will be put into the state scheme rather than anything run by the company.
Given that Personal Accounts represent a minimum level of benefit, this dumbing down which was also widely predicted because it iswhat happened in Australia a few years ago, will result in further widespread degradation of British occupational pension provision. Assuming there is anything left by then to degrade.
THE flag of Vietnam was fluttering outside the City HQ of insurer Prudential last week in honour of a visit to the company by the prime minister of Vietnam. Significantly, he dropped in to see Pru chief executive Mark Tucker before going to see the chief executive of this country, Gordon Brown.
It was recognition, perhaps, of the astonishing business the Prudential has in Vietnam, a country of 90 million people and one of the world's six remaining communist governments. The Pru's activities there account for roughly 2% of Vietnam's gross domestic product - which is still small by Western standards but, like much of Asia, growing at a phenomenal rate.
This is another potent symbol of how that part of the world is transforming what used to be the most British of insurers. Asia now accounts for almost 60% of Prudential's new business. And Tucker believes it will reach 75% in only a few years. This, and the return of the UK business to robust profitability we are likely to see in figures due at the end of the week, probably explain why the shares have begun to edge up. It is a welcome sign of life in a sector put out of favour by problems elsewhere in the financial system.
More than any other British financial services company outside the banking sector, Prudential shares seem to provide an opportunity to participate in the Asia growth story. Indeed, so depressed are the shares that they seem only to put a reasonable price on the prospects of Asia, leaving the UK and the US businesses in there for nothing.
