WHEN we think of pensions policy we tend to visualise dull actuaries in grey suits and bottle glasses poring over columns of figures.
These are people who are very good with numbers, but clueless when it came to spotting the present retirement crisis.
Ros Altmann, an independent government adviser on pensions and a fearless campaigner for those crushed by the pensions crisis, breaks the mould. As an economist, she brings a different set of skills to pensions analysis and unlike the actuaries she is not afraid of rocking the boat.
She says the ‘brightest people in mathematics go to actuarial science’ and ‘are paid to make forecasts’. Altmann adds with irony: ‘It is just unfortunate that so many of the elements which they were supposed to forecast did not turn out as expected. It even takes them by surprise that people are living longer.’ Her high-profile campaign to bring justice to the thousands of workers left high and dry without benefits in the windup of company schemes has on occasion put her on the opposite side of the debate to the Labour government for which she is a consultant.
‘The situation we have in terms of the lack of security for occupational schemes is absolutely unacceptable. It’s a real scandal. It’s one of the biggest injustices that I have seen in social terms.’ believes that already there are 40,000 to 50,000 people who have paid into pension schemes for much of their working lives and have now been abandoned by the authorities.
She has decided to lend her support to two big unions the steel union ISTC and Amicus which are taking the radical step of legal action against the government to bring justice to workers at ASW.
The employees lost all their pension rights when the company went bust.
In some respects, Altmann is the most unlikely of campaigners. A tall, elegant woman with a permanent tan, she keeps herself fit by swimming 150 lengths of a pool three or four times a week.
She is an intellectual who has spent most of her life in academia and working in the City. These are not normally considered places to burnish one’s social conscience.
Retirement issues have been her major interest since she completed her PhD in pension policy at the London School of Economics after a stint at Harvard working with some of the greatest living economists.
She has very little good to say about the decisions taken by successive governments and she is appalled by the record of the Financial Services Authority at protecting the consumer.
‘The one thing the government has got to do is get the FSA in order,’ Altmann asserts. ‘Where have they been? What are they regulating? They are picking up the pieces after the problem. We’ve had regulation in place for years and the scandals are going on.’ Her harsh comments about the FSA could be a trifle embarrassing. As a governor and recently appointed non-executive director of the London School of Economics, she will have to work closely with Sir Howard Davies, the man who shaped the regulator.
Oddly enough, the injustice of pension windups is a direct result of muddled thinking in Whitehall in the aftermath of the late Robert Maxwell’s raid on the Mirror Group pension funds. ‘The law was changed in such a way that people who contributed for 30 or 40 years to their pension could end up with no benefit because it is not protected,’ Altmann observes.
This, she explains, is because the post-Maxwell legislation changed the ‘priority order’. When an employer becomes insolvent, all the assets in the scheme are in the first instance used to pay fees to the people who run the scheme and secondly to buy index linked annuities for people who have retired.
‘This costs a fortune,’ says Altmann. ‘For every 10,000 worth of pension, you have to have given an insurance company 250,000.’ She points out that to provide a director with a relatively modest pension of 40,000 a year would cost the insolvent firm’s fund 1m.
‘If there’s nothing left in the scheme after the existing pensioners have been paid, no-one else gets anything. It was dreadful legislation,’ she adds.
She worries about companies with large pension deficits in relation to their market value. ‘If Alstom [ currently in receivership] goes, or British Airways, Corus or Rolls-Royce, there’s nothing in place to protect pension scheme members.’ Altmann also has strong views on what the government needs to do to strengthen private sector pensions provision. This has been undermined by tax changes and by people living longer but retiring earlier.
She believes that the government has huge leverage in this area. It gives back 14bn a year to private pensioners through tax relief on contributions.
A further 11bn is funnelled back to pension schemes which have opted out of the second, earnings-related state benefit.
Altmann would like to see a radical new approach to tax relief on pensions.
She also advocates different investment strategies using hedge funds. So far, despite three green papers in the last year and innumerable studies, very little of this has happened.
Altmann, 47, a mother of three, is a product of a middle- class upbringing in London. Her father was a dentist and her mother an artist. Altmann went to the North West London Jewish Day School, before moving on to Henrietta Barnett a state grammar school with high academic standards.
From there she went to University College London where she graduated with a first class degree in economics.
‘Then I got really lucky and won a Kennedy scholarship to go to Harvard for a most fantastic year. I was on the PhD programme in economics and had the chance to meet or listen to John Kenneth Galbraith, Kenneth Arrow, Richard Porter and Martin Feldstein.’ The latter is among those tipped to run the Federal Reserve when Alan Greenspan retires.
When she eventually returned to the LSE, Bank of England governor Mervyn King was one of her supervisors. Her subsequent career reads like a Who’s Who of the City including Chase, NM Rothschild, NatWest and the Man Group.
She then became an adviser to an inquiry led by fund manager Paul Myners into pension investments.
Altmann also counsels the policy wonks at 10 Downing Street.
Like so many working woman with families, she has to juggle.
But it is easier now she runs her consultancy from home as does her husband Paul, an IT specialist.
‘I work late into the evening and if I have to get up at 5am and finish a report on time for a client, I get it done. But I am there for my kids.’ If Altmann had her way what would be the major changes to pensions policy? She believes that the incentives for higher- paid taxpayers ‘are very generous’.
She adds: ‘For every 3 you put in your pension, the government gives you another two.’ She believes it would be far more equitable if everyone was given higher-rate tax relief, but admits that it would be too expensive.
Altmann reckons, however, that the present higher-rate tax relief could be provided to everyone on, say, the first 10,000 of their pension.
She believes people could be encouraged to save for pensions if Whitehall showed some creativity.
‘One of the ideas I have had is a lottery, whereby anyone who puts 10 a week into a pension would be entered into a draw and might win 1m each week.
‘Young people might see there is something in it for them today.’ This is all potent stuff. But so far the government has been slow to take the bait.
