[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Herd instincts

CRISIS, WHAT CRISIS?’ you might have asked if all
the pensions stories you had read in the
newspapers over the last year were part of
your daily bread and butter and not new at
all. The year 2001 to 2002 must, however, go down as
the year when pensions became the pressing issue for
the writers of virtually every national paper, including
the red-tops (and I still call them that even when they
change their colour to an exciting shade of black).
One of the most interesting presentations to the
National Association of Pension Funds conference this
year was made not by one of the usual hacks in the
industry (like this author) but by the BBC economics
editor, Evan Davis. He talked to us about how it is journalists
that set the agenda, not the professions, nor
even big business. Like a surfer, you have to catch the
wave when it happens and that is exactly what we
have been doing in pensions over the last 12 months.
It all began with all those stories about Equitable
Life. You would have thought from reading the papers
that the Society had gone bust. Sure, its payouts were
lower than they would otherwise have been, but the
Society was still in the black; however, its being
solvent did nothing to dispel the alarm (including the
alarming suggestion that it was hardly worth saving
for a pension at all).
Making dull stories interesting
One of the biggest, though quietest, pieces of work by
the profession was the intense development of a
detailed note (Technical Memorandum 1) on money
purchase illustrations. This dry subject could well
have achieved little coverage if our original press
release titled ‘Actuaries issue new money purchase
illustration basis’ had not been replaced by ‘Wake up
call to pension savers’. As it happens, we had every
major Sunday paper, Radio 4, and even a programme
on BBC2 devoted to the new statements and the
shock they would give most savers, who have no idea
how little pension they will get for their hard scraping
away to save a bit for their retirement.
Pension stories can be made as, for example, when
people put out interesting surveys that report (usually)
some obvious fact with some hard data, producing
juicy headlines like ‘half UK pension funds
insolvent’. But the real running is made by the journalists
who pick up on the consumer angle, find a distressed
steel worker who has had his pension taken
away or give you the stark facts of a 64-year-old nonpensioner
who has suddenly had his retirement
income halved because the American Company that
took over his business has closed down the pension
scheme without enough to pay for his pension.
An area the press has made an awful lot of is the annuity.
As Jane Austen said in Sense and Sensibility: ‘An
annuity is a very serious business; it comes over and
over every year and there is no getting rid of it’. The
problem is the very word, which sounds like something
dreamt up by Charles Dickens or Ebenezer
Scrooge himself. If you start talking about guaranteed
income for life, people see this as a good thing. As
soon as a complex word is used, it becomes easy for
the press to portray it as daylight robbery, when we all
know that the high cost of annuities is simply the
result of people living longer and investments yielding
less than they used to.
So annuities became flavour of the month for a
while and on the back of this we gained meetings
with government ministers, policy advisers, and so
on, who saw that they had to react to what was public
concern about an ill-understood subject. Fortunately,
our contribution was seen for what it was the
only balanced, sound contribution that understood
all the issues, without any of the vested interests that
commercial or political axes would have ground.
Good for the profession
All this activity (which shows no sign of abating) is
great for the profession’s ability to manage its reputation
by taking part actively in the agenda the journalists
set. But a word of warning: if you were trying
to set the agenda yourself, there is absolutely nothing
you can do if a senior royal pops their clogs, a football
hero misbehaves, or heaven forbid a politician
is found with his trousers down. The journalists
will revert to type and pensions will be quickly