LETTERS Rich get richer
Sir: I share John Plender's concern ('An unerring eye for the vulnerable', 19 March) over the mis-selling of personal pensions. Few of us thought that the pensions indus- try with its friendly society ethos would have mismanaged things as they did.
However, the situation is rectifiable and at the end of the day those short-changed will be compensated.
Sadly, John Plender did not address the underlying inequity of final salary pension schemes. They too fail the test of fairness. The whole basis of cross-subsidisation on which they work is increasingly inappropri- ate as labour mobility grows.
Few senior executives are critical of such company schemes because they, above all, know that they can put massive ladles into the company pension pool and scoop out for themselves upon retirement (or by a change in their contract) a pension totally disproportionate to the contribution they or their company has even notionally made for them throughout their working lives.
As often as not the cross-subsidy pay- ment comes from those many individuals — particularly women — who inevitably have interrupted work patterns. It is quite wrong that such people should cross-subsidise long-serving members. Despite all the efforts to get decent and fair transfer values there is still an inevitable and inherent bias against the early leaver — and most people are early leavers.
Present final salary arrangements simply do not meet the appropriate criteria for modern pension provision — we have to move in an orderly way from defined bene- fit schemes to defined contribution schemes. What you get out depends on what's put in. This practice is far more com- mon overseas and is the only equitable one that satisfactorily offers the degree of flexi- bility in work patterns and retirement that the labour market needs.
That is why I am not alone in believing the growth of individually owned pensions is inevitable, preferably kicked off through low-cost, company-backed group schemes. Vinson
House of Lords, London SW1
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