Over the past six years, David has spent much time campaigning for a better system to allow people to save for an income in retirement.
His work begins by noting that there are two particular uncertainties which face people who wish to have an income from retirement until death.
The first is that neither they, nor anyone else, know how long they will live. We can estimate much more accurately how long, on average a group of people will live for. The second is that they cannot be sure what return will be achieved on their savings.
The solution is to allow them to save collectively and share “longevity risk”, within a fund which has some flexibility to adapt payments to circumstances. Such a system of savings, while working effectively in Holland and elsewhere is illegal in Britain. Collective pension saving is only allowed if payments are guaranteed by an employer or an insurance company. All studies suggest that a collective pension system would generate a more predictable retirement income which was at least 30% higher than one purchased from an insurance company 1.
Advocacy for Collective Pensions began in 2012 with the publication of Collective Pensions in Britain. Together with a group known as the “the Friends of CDC” (Collective Defined Contribution) pensions, David was successful in securing the passage of the 2015 Pensions Act, giving the government the powers to establish collective pensions.
The government is still to take up those powers. Parliament through a report of the DWP Select Committee concluded that collective pensions represented a “New Beveridge”, and should be introduced. Royal Mail would like to introduce such a system, and the government has indicated that it will pass legislation to allow this to happen. As of the Summer 2018, the RSA established a new group, led by David, to help address any outstanding issues in the introduction of Collective Pensions2.
References can be found in various RSA publications at https://www.thersa.org/action-and-research/rsa-projects/economy-enterprise-manufacturing-folder/pensions