DO YOU get a warm feeling inside when bankers turn up on television telling us that banks must be more socially responsible? Or do you just find yourself yelling “YES WE KNOW” at the telly?
Antony Jenkins, the new man at the top of Barclays – after taking over from the odious Bob Diamond in the wake of the Libor scandal – has wisely set out to distance himself from his predecessor.
Last week he told the BBC that banks must become “socially useful” if trust in them is to be rebuilt. Jenkins isn’t the first bank boss to talk in almost sombre tones of the need to change. Stephen Hester of Royal Bank of Scotland made similar noises last month. Even Bob Diamond talked last year of the loss of trust in banks, oddly insisting that bankers “can be cuddly”.
Barclays, in fairness, is looking at a new reward system that would take into account the impact of employee actions on customers, investors, society and other stakeholders.
But the apparently remorseful sentiments are meaningless while every day banks continue, gleefully, to rip off their customers with useless investment contracts, opaque savings products and mis-sold packaged accounts, to cite obvious examples.
We’ll believe that you’re trying to change when you produce some real evidence. Until then, talk of being more socially responsible is borderline insulting.
Pension changes must go further
SO THE big project – the one with the modest aim of halting the desperate slide in pension savings levels in the UK – is finally under way.
Last week, workers at the UK’s biggest employers became the first to be automatically signed up for their workplace pension scheme. Those not wanting to be any part of it must opt out, the hope and expectation being that the vast majority will remain enrolled.
As a result, millions of people will be saving into a pension for the first time. So the job’s done, right?
Far from it: the reforms should merely be the basis for measures to get people saving more for retirement.
There’s a belief that people aren’t saving because they don’t see the need to. It’s true to some extent, yet dangerous to overstate. The main barrier to savings remains the ability to save.
Most of those opting out will do so because they can’t afford their take-home pay to be eroded by pension payments, even if they appreciate the need to save.
It’s a formidable obstacle to overcome, but surmountable with innovation. Take the debt-to-savings model I’ve mentioned in this space before. Debt-to-savings, in a nutshell, would involve employees using their own and their employer’s contributions to their pension to first repay debts such as student loans, credit cards and overdrafts. When those debts are under control or cleared, the individual’s and the organisation’s contributions then go into the pension plan. Employees would be obliged to contribute for a minimum term, even if they change employer. The appeal for companies lies in retention, and could doubtless be boosted by tax incentives.
Its time has come, not only because the personal debt crisis continues to deepen – as the main story on this page makes clear – but because the reforms ushered in last week pave the way for further innovation. To really make a difference, automatic enrolment as it is shaped now must be considered not as an end in itself, but merely a means to an end.