#APPC15 Why Payroll needs to manage Pensions.


This is an edited version of the keynote speech I delivered to the CIPP conference this morning (October 7th 2015).

I blog as the Pension Plowman,  and my blog is called the vision of the Pension Plowman.

You might think it is pompous for me to talk about my vision – like I was a visionary –

But I don’t share that view – I think everyone should have their vision.

I want to make my vision clear.

I want to help restore people’s confidence in pensions

Some years ago, the CIPP had “pensions” in its title

then you swapped pensions for professionals-

a smart move in my opinion!

Today you are a force to be reckoned with. When the Pension Minister consulted with key stakeholders over auto-enrolment

it was the CIPP who got the place at the table not the NAPF or the PMI.

Your CEO has the ear of the Treasury and FCA…for his work on Credit Unions;and the ear of the  DWP and the Pensions Regulator for the CIPP’s thought leadership on auto-enrolment.

Through Friends of Auto Enrolment ,you are helping to bring payroll and pensions back together, you are integral to avoiding the capacity crunch which looms from early next year.

You are (at least in my vision)the Chartered Institute of Payroll and Pension Professionals.

We know what payroll can do for pensions,

you make sure employers can compliantly operate auto-enrolment …..

and that members get the right money into the right pension pot

at the right time.

You help organise people to opt in and opt out of auto-enrolment

and you will have an increasingly important role,when people come to spend their retirement savings, in paying their money back

Pension people are beginning to work out how important you are!

But what can we do for you?   We can give you our jobs!

Traditional pension experts are in decline. The number of IFAs in this country has fallen from 50,000 to less than 30,000  since the Government stopped us getting paid commission.

As defined benefit schemes decline, the numbers of pension managers, trustees and consultants has also fallen sharply.

In sharp contrast to the fortunes of the CIPP, our trade bodies struggle, and our old certainties are under threat.

18 months ago the Chancellor gave everyone the chance to spend their pension savings – how they liked. We’re still in shock!

On the 25th November we expect to hear the outcome of the Treasury’s consultation on tax relief. I will wager that by the end of this decade, workplace pensions will be operating on a system of TEE , and I am a betting man.

Apart from defined benefit schemes, we will be taxed on our pensions like we are on our ISAs

Prepare for the power of Pisa Pysa – the Pension Isa!

These changes will present fresh challenges to payroll software providers , agents

and managers.But unlike the pension profession, (who are vehemently opposing change)

the CIPP reckons these changes will be positive for payroll.

That’s because payroll deals with everyone the same.

The current pension system rewards higher rate tax payers disproportionately

and offers progressively less incentive, the lower your income.

Indeed, as we now know, there is a class of employee who (under the net pay system) is excluded from tax incentives altogether. Pensions have never been for all – for decades good quality pensions have been a “perk”.

But over the next five years payroll will bring over 5 million new employees into workplace pensions and most of them will be at or below median earnings.

Unlike pensions, payroll is fiercely democratic, everyone gets paid and paid properly. 

It is part of my vision that everyone gets pensioned ….and pensioned properly.

Add to this the benefits of a simplified intelligible state pension and we have the foundations for my vision.

We may have the foundations but the building is still under construction!

The Pension Freedoms are here butwe have not found an adequate replacement

for the annuity.  We have no default  means to pay people back the money they have saved.

Traditionally we use the pensioner payroll. My firm still pays upwards of 30,000 pensioners their lifetime rights to a defined benefit each month

But these numbers are diminishing – slowly! In the short term, occupational pension schemes are doing their job. But – apart from in the public sector- they will lose their impact as pensioners die and new pensioners are fewer and less well pensioned

We cannot rely on defined benefit pension schemes for ever.

Nor can we rely on annuities. Annuity sales have fallen through the floor. Some people say that people will pay themselves through income drawdown.

But of the first 220,000 people using the new pension freedoms, less than 20% have set up an annuity or a drawdown policy.People are liberating their pensions but they don’t know what they can do next!

People know what they want to do. In a recent survey of 4000 people in their 50s, Aon asked “how would you like your retirement savings paid?”

62% described the workings of a pensioner payroll Clearly we have to find ways to pay people collectively. As we help them save collectively

Payroll’s boring, pensions are boring, work is boring- there is a natural synergy there!

One thing that links it all – is payroll.

Whatever the new pension taxation system will look like, it’s implications for payroll processing will be profound. Because it will be  simplified. There is a mountain of pensions legislation around tax.The last time we tried to get over that mountain (in 2006) HMRC got half way up and stopped!

To properly simplify pension taxation, and harmonise it with ISAs – a system that is simple and intelligible payroll will have to put in a  huge initial effort.

Software will need to be recoded

People will need to be re-trained

Processes re-engineered

And payroll will be at the heart of these changes. It’s a massive opportunity to shine

And then there’s auto-enrolment!

The staging of the remaining 1.8m un staged employers and the 250,000 new employers born every year, is a matter of national importance

We are building a platform on which everyone can save.

The amounts saved start small But they will grow in a couple of years. And are they likely to continue to grow as we move into the next decade.

Everyone from the DWP and the Pensions Regulator down is counting on payroll

Payroll is the radar for fraud and malpractice.

Payroll knows  which providers you can work with and which you can’

Payroll makes choice possible by helping pension providers stay in the market

Payroll is encouraging new entrants.

Payroll is adopting the API technology now being offered by NEST, L&G Peoples

and many other providers.

Payroll’s creation of the data standards PAPDIS and PAPDIS 1 and the innovation from Pensions Bib has encouraged pensionsync, and aeExchange to radically reduce processing times

There is much more we can do. Three years ago, a group of us went to Steve Webb

led by Karen Thompson It included both payroll and pension experts

The minister was impressed. The initiative got substantive changes  to AE legislation,the changes making it easier to  operate AE without compromising the interests of members

When Pension and Payroll people work together they are most powerful

We now have the chance to do the same for smaller employers, making the language simpler, the processes less complex

And we should  lobby for larger employers re-enrolling. We should lobby for the right to postpone re-enrolment as we postponed staging

These are some of the things that we are doing together. to build the apparatus to help people to a better retirement.This building is part of the vision.

It is not right for pensions to rely so heavily on payroll but to share so little of the reward.

There needs to be a fundamental shift in the value chain. You need to get paid like us!

But payroll still has its own mountain to climb!

Employers have a duty to choose a pension. A duty to their staff – their workers. That means making an informed choice – not being herded into a sheep pen and branded- “NEST” “NOW” or something similar

Payrolls that dictate what employers should do are taking big risks. I remember financial advisers took a cavalier attitude to what their customers were buying when they mis-sold endowments and pension transfers.

The reason why people trust payroll is that they haven’t been involved in scandals. You have behaved impeccably – don’t spoil it now!

That means seeking  out the providers of digital due diligence. We have to make sure there is informed choice on  right pension for the employer and staff-and not just the right pension for the payroll bureau!

For the payroll industry to prosper, it needs to climb the mountain

Payroll should not be the retiring cinderella to pension’s ugly sisters. Payroll should be at the ball and be the star of the ball.

For as the number of pension experts reduces, a vacuum emerges. Those with vision in payroll

– people like Kate Upcraft, Karen Thompson, Alex Rowson, Simon Parsons and Lindsay Melvin

have seen the opportunity for the payroll industry and reached out.

There have been some  in pensions- and I point especially to our good friend Andy Agethangelou – have responded.

My vision for payroll and pensions is that we stop treating each other as rivals and and work better together as partners.

So where do we begin?

Over the next three months I will be spending the majority of my time with payroll agents… and the practice partners responsible for payroll.

Accountants are accepting that in the absence of pension experts, they need to empower their bureaux to manage pension matters

The next stage is to convert those payroll agents responsible for the majority of the 1.8m employers still to stage auto-enrolment, into pension managers.

We need a  proper partnership between pensions and payroll practitioners

to deliver auto-enrolment,- a fairer taxation system

and a means to help people spend their pensions

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When can you call a trustee “independent”?


It is quite easy to be an independent trustee. You need no qualifications, you need no expertise , the capabilities you need are negative.

you must not be a member of the scheme

you cannot be connected with the sponsor

you should not have connections with the suppliers to the scheme

Theoretically that makes you “unconflicted” and independent. But in practice things just aren’t that simple.

In the tight knit world of institutional pensions, the network of relationships that governs appointments creates a web of dependencies.

To become successful, a trustee can either be iconoclastic (think Alan Pickering) or be consensual. The iconoclast who demonstrates conviction is a rarity, it is a risky business employing such a person.

But the convergence of trustees toward a consensus does not demonstrate independence, precisely the opposite. Indeed if we expected uniformity of behaviour among our trustees, we could mechanise the job.

We do not have robe-trustees, but we do have a prevailing orthodoxy among independent trustees – especially in DC.Since most employers who participate in DC schemes now use multi-employer trusts or rely on the offices of Independent Governance Committees for governance., much of the traditional role of the independent trustee is lost.  There is no conflict with the sponsor to avoid , nobody to be independent of.

Theoretically independent trustees have no employer, they are paid by the sponsors of the plan -the employer in “own trust” arrangements and the entity that owns the master trust where there are multiple employers -lets call it the provider.

But whereas the conflict between an employer and a trustee is obvious – and easy to detect, the relationship with a master trust provider is difficult.

The fundamental conflict is that a trustee can only be paid from the profits of the master trust, and the greater the profits, the more the independent trustee can be paid.

Last night i spoke with the Chairman of the Trustees of one of our largest master trusts.

“How’s it going?” – I asked

“Oh very well – we now have 600,000 employers and more employers than anyone else”.

Clearly the mindset of this Chairman at this meeting was focussed on the marketing of his trust.

He could have answered

“Oh very well, we are meeting our investment targets and members are very happy with their service”.

But I don’t think that’s what Chairmen of Trustees think. And it’s because their interests are aligned with the commercial success of the provider more than the outcomes for members.

This may be a little unfair, one of the considerations of any master trustee must be to ensure the long term security of member’s interests and this is dependent on the success of the trust’s business model.

However, I am only being a little unfair. The long term success of a trustee is measured in the outcomes delivered to members.

I fear we are seeing a new breed of independent trustees who are little more than an extension of the provider’s management and that is anything but “independent”.

How can we ensure that we have trustees who are acting in the interests of members (as well as of the trust as an entity?

The obvious answer would be to allow member’s to choose their own trustees. I could easily name my squad!

If I wanted a safe pair of hands at the back, I’d look for the evergreen Tony Filbin– a replete custodian

For my doughty centre backs , I’d pick a couple of heavyweight bruisers – step forward Martin and Paul Lewis.

I’d want agile and athletic wing-backs – Alan Higham and Andy Young would be my picks!

Worryingly I have an all male back five and I’d even things out by having an entirely female midfield picked for their brains – tenacity and guile.

Jo Cumbo, Stella Eastwood, Jocelyn Blackwell, Debora Price and Kim Gubler

And for my striker , I would pick the inimitable Tom McPhail.

There are many others I would have in my squad, all equally awkward and disinclined to tow any party line.

Step forward Mick McAteer, Rita Powell, Gregg McClymont and  Michelle Cracknell.

What have all these people have in common (apart from being good eggs)? I doubt that between them , they can muster more than a handful of trustee positions!

And this is the sadness. The homogeneity of trusteeship means that those iconoclasts who stand up for the interests of members – are largely ignored by the large master trusts. If I saw any of my team – or squad players – on the board of a master trust – or sitting on an IGC, I’d jump for joy.

It isn’t going to happen right now and that’s because nobody has the right to shout as I am shouting for their inclusion!

Were they to have positions as fiduciaries, the interests of members would undoubtedly be promoted as a counter-balance to the commercial interests of the trustees, because my team and squad are genuinely independent.

I don’t think the same can be said of most master trustee boards that I come across – and sadly I can say little better of the IGCs.

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Why this carnage at the Investment Association?

daniel godfry

I think I owe Daniel Godfrey an apology. I met him on a couple of occasions and he impressed upon me he was serious about transparency of cost and charges. I didn’t believe him- or at least I thought he was simply creating smokescreens so that – for his members- life was business as usual.

As State Street now advertise “there is opportunity in complexity” – transparency simplifies and makes it a lot harder to syphon money off.

But it appears that Daniel Godfrey, CEO of the Investment Association, wasn’t lying, he really was trying to improve the way that fund managers report their costs and this has cost him his job. The Financial Times report today that he has been “jettisoned”.

The FT, who are seldom wrong on these things report an insider saying

” Mr Godfrey just ploughed ahead with his own ideas”.

“He needed to consult more with his members and listen to what they wanted and what were their key concerns,”

If Mr Godfrey’s agenda was the agenda he spelt out to me, I think we should be making him a martyr.


So what is causing the Investment Association to “jettison” the boss? I can only speculate…

Is the FCA finally getting to the point of implementing the proposals put to them by Novarca in April and establishing a formal requirement to report on costs and charges?

Is it the reported repatriation of middle eastern sovereign wealth from UK funds (to shore up reserves).

Or is it the body blows from the Chancellor this week, which will set massive net out-flows from the cash-machine known as the Local Government Pension Scheme?

Whatever it was, it was enough to excite M&G and Schroders to announce they were leaving the Investment Association. Perhaps that won’t be necessary any more.


So what is the upshot of all this?

It may just be that the fund managers, who have had life all their own way – for a very long time – are a little rattled.

It may be that this year’s bonuses may not quite cover the expenses of those who sit on the IA committees and boards.

It may be that there are some very nasty skeletons that transparency might uncover.


I try not to speculate too hard on these things. It is not in my remit to influence fund managers or those who regulate them.

But if Daniel Godfrey is reading this – here is my apology. I underestimated you.


The transparency task force.

The tireless Andy Agethangelou has (with Dr Chris Sier) assembled a working group dedicated to improving transparency in fund management. It is meeting this week and I wish I could be more a part of it.

I hope that it will not be another initiative which is squashed by the Pythonesque foot of the fund management industry.

It seems impossible, that at a time when VW are being hauled over the coals, the whole Chinese economy is being marked down and the RDR is biting, that the Investment Association cannot see change in the air


Can the Investment Association heal itself?

The problem with the Investment Association is the problem with fund management, it simply cannot heal itself.

I was at the Conservative Party Conference yesterday afternoon, on our panel of four, two were fund managers , one worked for Deutsche Bank -(I was the fourth).

Harriett Baldwin MP, Economic  Secretary to the Treasury

Carlton Hood, Customer Director, Old Mutual Wealth

Jeremy Quin MP, Work and Pensions Select Committee

The interests of the fund management industry are so pervasive that it seems almost impossible to resist their lobby.


A change is going to come

But that appears what George Osborne is doing, and with Baldwin’s support and with the support of good people like Carlton Hood and Jeremy Quin.

The interests of the customer are being championed ahead of the financial needs of fund managers.

It’s been a long time coming, but change is gonna come.

Thanks Daniel Godfrey.




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“How can government ensure people get the pensions advice they need?”



I’ll find myself , at the beginning of the day, on a panel charged by Jon Cudby with John Moret and other financial services dignitaries discussing the New Retirement Freedoms

I’ll find myself, at the end of the day, at the Conservative Party Conference on a panel chaired by Andy Davis, Associate Editor, Finance for Prospect, with Harriett Baldwin MP, Economic Secretary to the Treasury, Jeremy Quin MP, Member of the Work and Pensions Select Committee and Carlton Hood, Customer Director, Old Mutual Wealth

“How can government ensure people get the pensions advice they need?”

More specifically

  • Are we sure there is an advice gap and if so how big do we think it is?
  • Does everyone need advice?
  • What defines someone who does need it?
  • Is generalised guidance enough or do most people need regulated advice?
  • What is the best way to deliver pensions advice to people saving for or entering retirement?
  • Who should deliver it?
  • Does it have to be face-to-face?
  • How early should the process begin – should it be early in people’s working lives?
  • Should advice be mandatory in certain circumstances?
  • What protections should exist for people who insist on ignoring professional advice?
  • What is standing in the way of a market-based solution to the advice gap?


This is how Prospect Magazine- who are hosting the event- view the question.

“If, a couple of years ago, you had found yourself standing next to someone at a party who said they were a pension advisor, you would probably have been less than overjoyed. A brief exchange of stilted pleasantries is about the best outcome either of you could have expected.

Things would be rather different if you bumped into the same advisor again this summer: rarely have so many people spent as much time talking about one of the most complex and important financial issues that any of us will face—how to pay our way in the world once we retire; and how can we make sure we can access clear and reliable advice?

An asteroid has struck Planet Pension.

Until the Budget in March 2014, the rules that govern pension saving had developed by a process of sedimentation: year after year governments and regulators deposited layer upon layer of minor changes and tweaks on top of the last, creating a complex landscape that very few people could navigate with any confidence.

Then came a bolt from the blue.

Suddenly, the longstanding obligation on all but the wealthiest retirees to turn their pension fund into a guaranteed income for life via an annuity was scrapped. Instead, we were promised freedom, choice and flexibility.

Robin Keyte, a leading financial planner based in the West Country said that the promise of greater freedom and flexibility in how we can manage our money, along with the move to make undrawn funds inheritable without steep tax charges, is making people he speaks to more willing to save for their retirement.

This supports the notion that the previous regime had come to appear so restrictive and the returns available so unappetising that it had become a disincentive to save.

And beyond that, there is simply the beneficial effect of the government’s bolt from the blue— suddenly people are thinking and talking about pensions as almost never before.

“I do think that all the debate and coverage has made people think more positively about pensions and that has to be a good thing in the long term,”

said Chris Curry, Director of the Pensions Policy Institute.

“If they can see pensions in a more positive light, they must be more likely to want to be part of the system than to avoid them or not to trust them.”

While pension reform is welcome they have created a much more complex set of choices for people who are reaching retirement and many of them risk making unwise or poorly informed decisions that could have far-reaching consequences for them if they don’t have sufficient access to expert advice, and could also have a major impact on the state’s finances if too many of them run out of money part- way through their retirement years”.

And for the rest of the day, I’ll be with my colleagues working out how we can convince the industry and Government, that what people want – to quote Paul Lewis, at recent FT events is

“a product that delivers at low-cost with certainty income  for the rest of their lives with some flexibility.

There is a need for advice, a need for guidance and there’s a need for somewhere to invest our pension pot.

And that’s where the debate needs to go!



Tuesday 06th October 2015 17:45-19:00


Stanley Suite
The Midland Hotel (Secure Zone) 16 Peter Street
Manchester M60 2DS

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The savings paradox – a crux of trust!


The more people save, the less we seem to be saving.

This seems to be the paradox facing auto-enrolment. And if the doomsters contemplating the impending changes to tax relief are right, not only will auto-enrolment reduce per capita spend on pensions by corporates, but George Osborne will reduce the incentive for individuals to save for the long term till we are left with virtually no pension system.

There’s no doubt that more people are saving as a result of auto-enrolment and no doubt too that the impact of the 1+1 saving regime for the newbies has diluted contribution rates to workplace pensions.

But does this mean that something is wrong? Or does it mean that something is wrong and is being remedies.

I incline to the second view. In America, where employer contributions have always been lower than ours, there is a lot of interest in the broadening of the savings base from auto-enrolment. the 401k tax system incentivises employers to include low paid workers but it hasn’t achieved what auto-enrolment has.

What’s more, auto-enrolment has not compelled anyone to stay in a workplace pension a moment longer than they wanted. It cannot properly be called a tax or an infringement on our spending liberties.



It has democratised savings bringing Steve Bee’s Fish and Chip Shop Owner and Neil Esslemont’s “Flo the Florist” into workplace pensions.

We have yet to see the reactions of the literally hundreds of thousands of employers to the duties they will be taking on next year. Putting aside the inevitable casualties, I am looking forward to some great conversations with employers and their agents approaching pensions for the first time.

I write guides like this because I am genuinely excited by the choices available to employers and their advisers.


That’s because, behind the scenes, some of these workplace pensions have some great things going for them.

I was looking over the weekend at the investment strategies employed by a variety of providers including Legal and General, Standard Life, Smart Pensions, BlueSky ,NOW and NEST.

All employ credible strategies designed to meet the needs of their members. From the sophistication of Standard Life’s Gars, to the target dated approach of  the target dated funds of BlueSky and NEST. From the massive weight of NOW’s leverage on Danish parent ATP to the sheer scale of LGIM’s global operations, ordinary people are getting to invest in strategies that should stand the test of time.

The costs of investment have plummeted and competition is keeping costs low. As providers discover the new technologies, we are seeing partnerships that should bring innovation to the way we manage our savings and spend our pots in later life.

This is the remedial action pensions needed, all these providers, and many more, are bringing a fresh approach to retirement saving which will be enjoyed by the whole adult working population in time.

There can be no better incentivisation to save, than the confidence that your money will be invested wisely, at a low cost and with the options to spend your money as you want. These savings are not built around tax giveaways but on the assumptions that whatever we’re in, it’s pretty good.

The changes that we are going through, and will continue to go through as we find remedy for the pension mess we found ourselves in , will cause paradoxes. We will save less to save more and I’ve no doubt that weaning ourselves off our current crazy system of tax reliefs will mean more of the same.


But the evidence of our past and of many of our competitor nation’s present, is that if you can get confidence into retirement savings, people will save, and to adequate levels.

A post on twitter says it very well

Just telling people to save, without giving them confidence about their savings, is not going to work.

People need a tax system they can trust, greater certainty about outcomes and confidence that the plans into which they invest their money are working for them, and not just for the financial services industry.

That’s why we say that Restoring Confidence in Pensions, is the Vision of the Pension PlayPen!



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When organisations believe their own hype


The weird behaviourist thing about Volkswagon’s lack of emissional intelligence is that the “people’s car” is now disowned by its own people. Imagine how proud you must have been to work for VW, remember those proud adverts about the Golf, this was an organisation that so believed in its own product that it could carry out a decade long fraud firm in the belief that they behaved like this – it must be right.

Large organisations have little scope for objective introspection, there is no corporate sense of humour that accepts that the organisation might be wrong. VW has been riding to hell in a handcart and no-one saw the gates!

So when I read a headline such as Think Before you act George Osborne and discover

Industry bodies unite in their scepticism of shifting to TEE system and call on the government to think long term

I am a little sceptical.

Like VW, the pensions industry believes its own hype. Despite clear evidence to the contrary, it believes it is acting in the long term industry of the country, its clients, the members of the various schemes it has devised.


Collectively. “the pensions industry” is far from industrious. The industry talks a lot, at conferences, but it talks to itself. It does not run conferences for the people outside the industry, so the voices it heats are echoes. The only collective thing about that , is the capacity for collective myopia.

So like VW , the good volk of pensions suffer from a lack of emissional intelligence. I can think of nothing more laughable than telling a Chancellor – at the very top of his game – to think before he acts. The “pensions industry” was so  wrong footed by the announcement of the pensions freedoms it (the NAPF) issued a press relief to say it found them incomprehensible. Earlier this year, its Chair started a speech “with auto-enrolment almost over…”.

The pensions industry has quite forgotten what it is supposed to be doing and is now busy convincing itself – as the VW scientists have been doing- that it is right- despite all the evidence.

The evidence – such as it is – is that the general public prefer the certainty of TEE -where the know what tax they are paying, to the uncertainty of EET where they don’t. This is borne out by the numbers saving voluntarily into ISAs (and not cashing in before retirement) against the numbers paying voluntary contributions into pensions.

IF you want evidence, ask people who know – Martin Lewis, Paul Lewis – George Osborne.

The only part of the Professional Pensions article that made sense to me, were the comments of David Fairs who (as ever) is bang on the money.

“The changes under consultation could represent a real ‘revolution’ in pension provision, following closely on from the freedom and choice changes announced in 2014 and in force from earlier this year.”

Fairs suggests any proposals to alter the tax structure should be subject to full consultation and with sufficient time for implementation.

Fairs is fair, this shift to TEE – which I see as inevitable, needs – like AE – to be embedded gently, slowly but resolutely into the way we do things.

The pensions industry is broken. as VW is broken, it could not see it and is in denial. It still thinks it is in charge.

We will see on November 25th if I am right, but – in case anyone thinks the pension industry speaks as one, I’d urge them to read the Pension PlayPen’s response to the recently concluded Treasury consultation.

You can find it here



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State Street and People’s – a lack of “emissional” intelligence?


I am not very happy that People’s Pension has chosen State Street to manage the money under its master trust.

In early 2014, State Street were found guilty of over-charging a variety of pension funds and were fined by the FCA. Funds which were stolen from included the staff scheme for Sainsburys and the Royal Mail pension scheme. You can read about it in my blogs at the time – what do you do when the lights go out and too big to worry about- what should we do about State Street.

State Street now have three big UK DC clients- it provides underlying investment administration to NEST, it manages the bulk of funds at Scottish Widows and it is lead fund manager at People’s.

In February 2014 I wrote to Toby Strauss, Scottish Widows’ CEO (he resigned yesterday) and asked if Scottish Widows would make a statement on State Street and would , on behalf of its customers, take action to censure the global American investment bank. I have never received an answer (and since he is leaving I expect I never will).

Logically, I should take the matter to Babloo Ramamurthy who since February 2015 has been Chairman of Scottish Widow’s Independent Governance Committee.

Babloo  was till 2011 on the Global Steering Group at Towers Watson so is used to big company governance.

However, I doubt that a direct approach would prove any more effective as Babloo is also Independent Chairman and Non Executive Director of B&CE which owns the People’s Pension.

And since NEST has such a close relationship to State Street, I doubt that anyone’s given State Street’s little larceny a moment’s thought. I met with Laurence Churchill , Chairman of NESt in March 2014 to ask him the same question I’d asked Toby Strauss, he laughed and looked at me as if I was the village idiot.

“State Street have been slapped on the wrists, what’s it to do with you”

There is one thing to have a governance policy, another to use it effectively.

I haven’t for gotten and I won’t let it lie!

At the Manchester FT Adviser Forum last week I was asked what the financial services industry could do to restore confidence in pensions. My answer, in a public meeting, was that we should make sure that where malfeasance has been discovered, sanctions should be put in place against the malefactor.

State Street have had no commercial sanctions put against them since the FCA judgement and they have continued with Business as Usual. In my answer I made mention of State Street as my example.

Did the Forex theft even get mentioned?

But back to Peoples Pension. This is an organisation that has a strong moral compass. Its Trustee board is chaired by Steve Delo of Pan Trustees , its executive is headed by Patrick Heath-Lay and its management team is conscientious , competent and effective.

I doubt that anyone involved in the decision to appoint State Street, had consideration for the FCA judgement in 2014 or looked into the report that the FCA produced on the behaviour of State Street towards the pension funds it stole from.

I doubt that anyone has commented on the potential conflicts for Babloo as he now controls relationships with two out of State Street’s three major DC clients in this country.

There is nowhere for these things to be said. The Governance is in place, the “i”s dotted and the “t”s crossed. People’s and Scottish Widows and NEST are now providing State Street with an ideal marketing platform.

Dirty emissions

It isn’t really the done thing to have a go at Global Investment Banks. You don’t get to sit at the top-table if you do.

So these conversations have to go on in private between those in the know. with the odd snigger and knowing glance.

I guess this is how VW was able to get away with it for so long.

state street

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Thus speaks the Regulator – and TPAS too!

Pensions Regulator

Some help is at hand for Britain’s SMEs and their business advisers, but there needs to be signposting to specialist advisers that can apply tPR’s guidance and offer a “definitive course of action”.


The Pension Regulator has published some new guidance to employers and their advisors on choosing a pension scheme which can be found here.

The guidance includes some help on the tricky choice of tax-relief to use for your staff though it stops short of listing those schemes that operate under net pay and those that offer relief at source (and the scheme that swings both ways).

The Pension Regulator is a good regulator and the best resource, those of us setting up auto-enrolment arrangements have. What’s more , it has just about the best organised web-site of any Government department in the UK – especially for enquiries around auto-enrolment.

Nonetheless, there is more for the Regulator to do.

Without a list of providers and what type of  tax relief they offer, their guidance leads nowhere- other than to an adviser who probably has no clue about the issue. That’s not me having a dig at advisers, but this kind of advice (unless your Stevie Brice or Chris Daems or a handfull of others) is not something you do.


So where can you go to for help?


Today is Michelle Cracknell’s birthday (happy birthday!) and it’s the day that the Pension Advisory Service open their auto-enrolment helpline which is- wait for it-

0207 630 2705

This helpline is for members who have been enrolled and for people considering whether to opt in , out or who simply want to know what auto-enrolment is about.



You get to speak to a real person and that person will know their onions. I can say that because we have been hassling TPAS for this helpline for ages and TPAS do not offer a service they cannot deliver. The wait will have been worth it!



Guidance and Advice

Although the Pension Advisory Service has Advice in its name, it can only give you the relevant information necessary to help you make your decision.

If you are an employer, responsible for setting up an auto-enrolment pension scheme for your staff, TPAS can only point you to an adviser who can tell you what you should do.

TPAS is there to help members not employers but it can signpost where employers, and staff interested enough to get involved with the employer’s decision- WHERE TO GO.


Where to go for advice

Pension ignorance of employers and their business advisers- accountants and payroll bureaux, is very high.

Decisions such as what type of tax relief to go for are decisions most employers and their advisers cannot take.

Even less, can they articulate what they are looking for in a provider’s investment strategy, how they assess at retirement options and what due diligence they do to understand whether a workplace pension will be around in a few years.

But these are the things the Regulator wants employers to consider when making an informed choice on behalf of staff.

There is only one place where employers and their advisers can go for comprehensive specific advice on what to do. That place is http://www.pensionplaypen.com


What next?

For the Regulator, TPAS and representative bodies to make available the skill and knowledge which underpins the advice in http://www.pensionplaypen.com, we need publicity.

We need direct signposting from tPR and TPAS and from the websites of the representative bodies to our pages so that employers can make informed choices.

We call on Government to recognise the advice gap that exists and to promote our service (and any like it) to the 1.8m employers who have nowhere else to go for this particular help.

To do so carries some risk but not to do so carries more. The risk to Britain of 1.8m employers buying blind a complex financial product for their staff is much higher than the risk of recommending specific advisors prepared to stand up and be counted.


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Is pension salary sacrifice an answer?

salary sacrifice2

After the ruck created by articles in the FT and the Daily Express, I’ve heard several pension experts tell me that if we did not have employer contributions, all the issues around net-pay and relief at source would go away.

This is of course what happens in Australia where pension contributions are part of a blessed social contract between providers, Government, employers and employee representatives.

And many large occupational schemes have adopted salary sacrifice as part of a flex-program that enables employees to exchange salary for rights to pension in future years. These arrangements are not just efficient, they reduce the salary on which national insurance is levied – so they are most efficient to employers.

salary sacrifice 4

I don’t want to get into moral arguments about the legitimacy of salary sacrifice, not least because I make my contributions by requesting lower salary in return for higher pension contributions from my employer. It would be hypocritical of me to condemn what I personally benefit from.

But I don’t think that salary sacrifice is a panacea for the mass market and for three reasons;

  1. It is much harder and more perilous to administer than people think. You are altering people’s contracts of employment and could be sacrificing people below the minimum wage, any change of contract involving less notional salary is going to set alarm bells ringing with some staff and this stuff needs good communications. The Government write well about this  here
  2. The political future of salary sacrifice is open to question. We are about to conclude a consultation on how pensions are taxed. One of the key considerations is that pensions are taxed simply and fairly, I see salary sacrifice as a sophistication in the pension system that may not survive this process.
  3. Salary sacrifice under auto-enrolment may be a complexity too far for payroll. We are looking to standardise and simplify the operation of auto-enrolment for 1.8m employers. The options to choose contribution tiers,defer and phase create enough complexity as it is, for many payrolls, salary sacrifice elicits the response “don’t even think about it!”

For organisations that have introduced salary sacrifice, there are immediate benefits and these should be enjoyed by the employer. Hopefully, those who voluntarily agree to contribute by exchanging salary for pension, can share in the savings they create for the employer, as well as for themselves. There is a marginal reduction in state pension rights for those on certain pay bands but for the moment, salary sacrifice is a perfectly acceptable way of organising pensions as part of deferred pay.

salary sacrifice 3

But please let’s not pretend that salary sacrifice is anything other than what it is – an arbitrage against the national insurance fund with a very limited shelf-life and limited application.

The fundamental problems of our pension taxation system are being exposed as the tide of auto-enrolment rolls out. The issues for low paid part-timers highlighted in previous blogs cannot be solved by salary sacrifice. They are real issues in themselves and the reaction of the press is a reflection of the reaction of everyday people to the pension system.

I described the super-subtle solutions being put forward by some of my fellow consultants as pension sophistry.

A sophism is a specious argument for displaying ingenuity in reasoning or for deceiving someone

I think most people are worried by complicated arrangements which is why the certainty and simplicity of ISA taxation.

salary sacrifice

I don’t think that salary sacrifice is the answer, in fact I think it another part of the problem. We need radically simple solutions to pension taxation which do not give space to the pension sophists , nor create gaps through which rights to tax-relief can fall.

Though I , as a consultant, might benefit in the short-term from the complexity of the current system, I cannot see that complexity strangle the confidence in pensions that I see emerging. It is not in my – or anybody else’s – long-term interest, for pension taxation to be this complicated. It is certainly not in the nation’s interest for so much time and money to be wasted with sticking-plaster solutions to intractable problems.

The debate over net-pay and relief at source demonstrates once more that we need a radical change in the way pension taxation works.

tax relief

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85 million reasons for change! Why pension tax relief is front page news.


How the Express report the FT’s story

The Daily Express has picked up on the “loophole” caused by the increase in the nil rate band that is denying £85m of pension tax relief at source to part time workers (and the very low paid) in occupational pension schemes.

The Express is using the numbers sourced by Jo Cumbo in her article in the FT on Saturday (though the £85m has now jumped to £185m as the Express to include public sector part-timers !)

As it is running the story in a very hight profile way, it’s now reaching that point where the story will get it’s own momentum and this will become a mainstream issue for the “pension industry”.

For the record, the FT’s £85m number looks more relevant. Public sector workers get so much for their contribution from the Treasury that the loss of tax relief (while still inequitable) is only a small part of the story.

Sic Transit Gloria Mundi

For those unfamiliar with the Latin tag – it roughly translates “and so it goes”.

This blog has been banging on about the inequity – indeed the iniquity – of running DC occupational schemes for the benefit of higher rate tax payers and at the expense of non-tax payers all year.


Relief at source is nothing new

There is nothing new in relief at source, it has been around since the introduction of stakeholder pensions, which ushered in the idea that even those who do not pay tax, including children, can be credited with tax relief on pension contributions to their pots.

The practice of pre-funding children’s pensions was popular in the naughties as a kind of middle class tax-prank , practiced by the denizens of nappy valley.

Since the nil rate band was very low in those days, no-one paid much attention to the point of the legislation, which was originally that the 5m of so low paid and part time workers excluded from occupational schemes, would find a way (voluntarily) into the system.

It didn’t work, mainly because employers did not promote stakeholder pensions to these people and these people did not have the money or inclination to invest in stakeholder pensions , the benefits of which were obscure.


What has changed?

Two things have changed since those days.

Firstly there are many more people who are not paying tax but earning reasonable money. The increase in the nil rate band to £10,600 (soon to rise to £11,000) means that many people working part time are now well enough off to enjoy the capacity to save some of their money voluntarily.

Secondly, the auto-enrolment rules mean that many of these people are being included in workplace pensions either automatically (because they earn £10,000 or more) or because they are entitled to join a scheme (earning less than £10k but with means to pay). There is a third group- non-eligible workers who are either too old or too young to be “eligible” but who can opt-in to an employer contribution whatever they are earning.


What hasn’t changed?

Despite the serious amounts of money thrown at large occupational pension schemes, in terms of administration, consultancy and most of all – contributions, nobody seems to have noticed that the old system of granting tax-relief- known as net-pay, is totally useless for anyone earning at or below the nil rate income tax band. This is because, under net pay, you need to have taxable income to claim back tax.

So occupational pension schemes have carried on advertising the terminological inexactitude that “you can’t get tax relief if you don’t pay tax”.  The phrase “terminological exactitude” was used in the House of Commons as an alternative to the word “lie”, when it was thought improper to suggest a member of the house might be fibbing.



For example, someone contributing £40pm to their pension would have to earn £11,080 to get tax relief on all the contribution (£10,600 + £480).


If they earned £10,600, they would get no tax relief at all under net pay.

But if they earned £11,080, they would get an extra £96 back from the taxman in a year.


However, someone making a contribution of £40pm  under the relief at source would only need to pay £32pm (£384pa) to get the same pension benefit.

The £85m number is calculated using a rough estimate of the number of part time and very low-paid workers in this kind of situation who would be better off under Relief at Source than net-pay.


The £(1)85m raises the point but isn’t the point

The real point is that occupational pensions, which have the resources to do what they want , have chosen to ignore the issue. Some pension managers may be unaware that the issue exists, so unimportant is the issue of what low-paid workers get in their pensions (to them). Other managers may point to their consultants , who have generally failed to pick up on this issue, and many will blame the Government or the PMI or the NAPF for not bringing this to their attention.

But the reality is that everyone sat on their hands and thought no-one will notice. Well this blog notices and the FT noticed and now the Daily Express has notices. And guess-what, we now have another problem on our hands, because we thought that the interests of the low-paid and the part-time workers could be swept under the carpet.

People matter more than sums

The only way we can get confidence back into pensions is by paying attention to the pensions that people get. Whether that be the employer choosing the  workplace pension for his or her staff, or the consultant advising a mega-occupational scheme, it comes down to the same thing – people matter more than sums.

Until we learn to be fair to all the people we employ, we will not have learned the less on auto-enrolment, which is that a private pension system must be inclusive.

This net pay v RAS argument is a big story because it is about the way we treat people. People who earn a little are not second class, they are not even a different class, they deserve as much attention as those who pay higher rate tax.

When we begin to learn that lesson, we will have moved on and things really will have started to change.

tax relief guaranteed

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“Low earners miss out on £85m pension tax relief” – and why!?

tax relief 3

“Millions of part-time workers are being denied valuable tax-breaks on their pension contributions as government officials knowingly all low them to save into schemes that will not pay them relief they are entitled”

So thundered the FT (26/09/15) and it’s a mark of the increased influence of workplace pensions , that Jo Cumbo’s story made it into the National News section of the paper. This is not just a pensions issue.


Another DC Governance failure

tax relief 3

The story should ring alarm bells for anyone involved in DC governance. Net pay schemes, which only grant tax relief to those who pay tax, account for the majority of the arrangements granted the NAPF’s Pension Quality Mark. The NAPF publish the list here.

Many of the PQM schemes are established as Group Personal Pensions – which do provide tax relief to contributors who don’t pay tax. The first question we should be asking is why the Trustees haven’t switched to the Relief At Source method. NEST and Peoples Pension are two Trust based DC plans that use RAS – why haven’t others followed suit?

Members of the NAPF have recently complained to my bosses that I have been criticising them for inaction. I make no apologies. They are belatedly admitting there is a problem

“The National Association of Pension Funds said most employers chose to operate their schemes on a “net pay” because -taken overall, the maximum amount of contributions was paid into members’ pensions as quickly as possible”.

This is short-hand for “so that our higher rate tax payers don’t have to wait a couple of months to get their tax back”.

But now it’s the FT asking the questions, they aren’t quite as belligerent as they add…

The current anomaly between ‘net pay’ and ‘relief at source’ is a very real, though a very recent problem for both savers and schemes. We have asked the government to conduct a thorough review of how this can best be resolved and avoided in the future”.

This can best be translated into everyday language as

“ok – we accept the game’s up; HMRC this is your problem – go away and think about it for a couple of years”

This is buck passing of the worst kind, the NAPF need to put their own house in order, trustees need to exert their fiduciary influence on their suppliers and members should get their tax relief without further ado.

Why is it all so hard?

tax relief2

I spoke with Moreton Nilsson, CEO of NOW pensions about this earlier this month. He runs a trust based scheme under net-pay which – inadvertently -denies its low earners tax relief. Moreton acknowledges there is a problem and could only say it’s not so easy to fix”.

NOW uses a pension record keeping system known as Profund which is owned and administered by JLT. I am wondering whether JLT might explain what is so difficult about administering RAS.  JLT is also administering the Pensions Trust “SmarterPensions” , a scheme for charities and NGOs.

(Ironically JLT are quoted in the FT article bewailing “the huge numbers being automatically enrolled exacerbating the problem”. Considering JLT are making good money from these huge numbers, this is more than a bit rich).

NOW Trustees really are a collection of the great and the good. They include a former General Secretary of the TUC, a Conservative minister and a past Government Actuary.

SmarterPensions trust board is also packed with pension grandees. Both NOW and SmarterPensions qualify as “PQM ready” multi-employer schemes. The NAPF tells us

A PQM READY scheme is one which is able to accept multiple employers. We have already assessed the schemes as having good governance, low charges and clear member communications. If you choose one of them as your workplace pension scheme, then you only have to pass the contributions element of our assessment process to be awarded a Pension Quality Mark in your own right

Quite clearly, the problems created by the changing tax position of pension contributors earning less than £12k, have not been addressed by almost all occupational pension schemes and the PQM and PQM ready kite marks are proving themselves inadequate to protect low-earners. I speak as a


That means a friend of DC governance but no friend of  timidity and inaction.

A governance failure or a Government failure?

tax relief guaranteed

If the governance failure surrounding the NAPF’s DC governance framework are not bad enough, what do we make of the Government’s own part in this? This blog has been high-lighting this issue ever since the proposals to increase the nil-rate band were first put forward by the Liberal Democrats in their 2010 election manifesto. In the intervening time, the nil rate band has increased to £10,600 and is shortly due to increase again to £11,000. It is now above the auto-enrolment threshold for eligible jobholders (£10,000) and is likely to stay that way.

What pressure has Government been putting on net-pay schemes to treat low-paid employers fairly?

Belatedly, Ros Altmann has started talking about this problem, the Pension Regulator’s auto-enrolment department is aware of it and TPAS know about it. But I know for sure that the first time TPAS became aware of the problem was when I brought it to the attention of their CEO.

This is a failure not just of governance but of Government.

What is to be done?

  1. As we have said in our submission to the consultation on the Green paper on tax relief , this cock-up is symptomatic of the problems around a complex system of pension taxation. Until we have a simple system that aligns pay, tax and pensions in a comprehensible way, we will continue to have these Governmental and Governance failures. I hope that the Government use November 25th to create a simple system and I don’t mind if we don’t see it implemented for a couple of years. We need a thorough, well thought through taxation system – built to last.
  2. In the meantime, net pay providers need to explain what they are doing to put right the inequalities. I hope that campaigning organisations like the NAPF put pressure on the Net-Pay schemes to make a statement of intent to switch to Relief at Source as soon as possible.
  3. Thirdly, we need to understand why moving to relief at source is so hard for pension administrators. Until recently, I heard from third party administrators that trustees would not let them move to Relief at Source as it denied them the ability to take refunds of contributions made to the pension pots of employees leaving within the first two years. This excuse is no longer valid, September 2015 is the last month when refunds can be collected. I note in passing that the principle use of the contribution refunds was to pay the administrators and advisors to the occupational pension scheme.  The conflict of interest has gone too!
  4. If there is no good reason why Trustees cannot operate their schemes under relief at source (and I can’t see one), then the Pension Regulator should intervene and make kick butt. I mean by this Andrew Warwick-Thompson’s DC team – but this is an issue for the Board and Lesley Titcombe (tPR’s CEO).

A disgrace to pensions

This situation is a disgrace. It brings pensions into disrepute and reinforces prejudices that the pension system is being manipulated by those with power and money at the expense of the poor and powerless.

That this is unfurling in front of Ros Altmann, a consumer champion, and now part of Government , makes this the more farcical.

This is not a problem which is hard to fix, it needs prioritisation.

If there is a positive coming our of this, it is that it is drawing people’s attention to pension governance , that not all pensions are the same and that the choice of workplace pension does matter.

For some time, http://www.pensionplaypen.com has been marking down net-pay schemes being used for low-earners and if you want to be sure you don’t choose a pension that denies your staff their due, make sure you use our choose a pension service

tax relief

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The tyranny of payroll or the management of pensions?

payroll tyranny

The received idea in Government circles is that employers don’t give a toss about the pensions they set up for their clients.

In a recent thread on the Pension Play Pen Linked In Group (if you aren’t a member , please join),  the idea is rehearsed …

The vast majority of owners of SME’s are working hard and long hours to maintain successful businesses – making and selling widgets or whatever.

The hassle, time commitment and associated costs (in their/ their staffs time, systems and contributions) is about as welcome as a dose of Gout!
Is it not quite reasonable for them to expect, as this is a legal requirement and schemes must meet QWPS, that the Government has ensured within the legislation that such schemes meet all requirements including a suitable investment fund?

Indeed, if it is not possible for us to judge now (and it is not) which fund or investment process will produce the best returns in 20-30 years, what hope does the MD of Widget Co Ltd have?

In my experience, these people are in the main driven successful business people………who have little idea of savings and how investments work. Should we be expecting them to spend many hours trying to learn about something that they can’t afford the time to do?
Yes, they can take advice and oversight, but at a cost; a lot would ask why should they as this is regulation driven with set standards for the scheme.

This view is held by some in Government who see auto-enrolment as part of the red-tape that Government should be getting rid of.

payroll tyranny4

I take a different view,

I see people’s savings into workplace pensions as every bit as real and vivid as savings into bank accounts or ISAs. £100  in a qualifying workplace pension is a tax-free investment which attracts low charges and is added to every month by payroll without an employee having to do anything but sit back and watch the savings grow. What’s more, the money is locked up and cannot be spent till 55, so it really is a pension – not a savings account. You get money paid from the Government into your account for locking it away, even if you don’t pay tax*

For ordinary people, especially for the low-paid, auto-enrolment is such a blessing. But we are painting it as a tax that is prohibiting the manufacture of widgets. Is the production of widgets all there is. Are the people who make those widgets not entitled to a top up to their basic state pension (with the option to opt-out)?


Later in the thread , my friend Steve Brice arrives, to tell this story…

Only yesterday I was speaking with a client who had chosen L&G as their provider and approached their payroll provider to discuss assessment. They were immediately told that they should change to NEST because that was easier for Payroll and that there was little point in talking to me as advisers get in the way of Payroll!!
I offered the client the opportunity of a three way call to discuss how we might all work together which he welcomed…payroll refused and gave the client the number of a software provider who would charge him to build a template for L&G for Payroll to use…at the employers cost!!
That employer engaged in the whole choice journey and chose L&G because his employees already have personal plans and may need to transfer to L&G if cheaper/better. They are also paying reasonable contributions into their existing plans already so once you add an employer contribution to this there is a real chance that contributions will breach £400pm….soooo tell me where NEST fits with this criteria??



payroll tyranny alert
Payroll can make tyrants of us all…

And they can point, in defence of such stonewalling to the Pension Regulator’s website. Which tells employers that the criteria by which a pension should be chosen are

  • whether the scheme can be used for automatic enrolment and will accept all your eligible staff

  • whether the scheme is compatible with your payroll software – ask your payroll software provider for help with this

  • whether the scheme will write to your staff on your behalf to tell them about automatic enrolment

  • whether the scheme will assess your staff for automatic enrolment – if not, ask your payroll software provider if they can do this

  • the costs and charges for you and your staff

So where are the views of those whose wages are going to be docked and who will live with this decision, taken into account?

Is anybody asking staff what matters to them, and is anyone trying to match the needs of staff to what’s on offer from providers? To pick up on Steve Brice, is any thought being given to what has gone before?

The answer is “NO”. 

So what does the worker get from these bullets?

The benefit of AE compliance? – no benefit

Payroll compatability? – no benefit

A letter from the provider? – no benefit

Workforce assessment? – no benefit

Costs and charges? – a benefit- but only if there’s some proper governance in the scheme – costs leak out of poorly run schemes like water from a leaky pipe.

payroll tyranny 3

Not only have we moved to an imaginary world where employers are too busy making widgets to talk with staff about what they want, but we are assuming that anything that “gets in the way of payroll” is “pointless”.

This is the madness of process over people, a kind of technological paranoia that sees the individual preferences of purchasers as secondary to the running of a well-oiled machine.

If employers don’t give a toss about their staff’s welfare , they jolly well should. That is what the Trade Union movement was set up for and why we have legislation that protects staff in the workplace and beyond.

I have never met  employers who tell staff they don’t give a toss about them. At least not to the staff’s face. Why would you hate your staff so much?

The disconnect is around pensions, many employers don’t get pensions and don’t see why they should be running auto-enrolment but the same was said about the welfare state, the basic rules of health and safety – even the most basic workers rights.

Someone needs to stop and think. We are about to enrol 5m more people into workplace pensions; not into “auto-enrolment” – into “workplace pensions”. Unlike the last 7 million who had employers paying attention to the pension , this lot have no such protection.

Instead they have people potentially laying down the law on how their pay is invested for 40 years who are following guidelines from the Regulator that pay no attention to the needs and desires of staff.

Instead they are being told that the needs of payroll trump everything.

This does nobody any favours!

This tyranny of payroll , does nobody any favours, least of all payroll! If payroll can’t offer a choice of solutions then change payroll!

That doesn’t mean change your software – with all the disruption that brings, but it means that payroll must adopt the kind of plug-ins that make it possible to add choice. Even the most unsophisticated payroll software can provide choice through plug ins to software that makes choice available. Pensionsync, aeExchange and ITM are just three of these plug-ins.

And employers can access advice on what pension is right for their staff, and it can cost less than £100 to do so (as the Peoples Pension pointed out this week). If employers want to get hold of the software, they only have to google pension playpen or financial satnav. Or ask their payroll or accountant whether they have a link to these systems.

In a couple of week’s time, I will be speaking at the conference of the Chartered Institute of Payroll Professionals. It will be an important speech for me, and I hope for many of the 1.8 million employers still to choose a workplace pension.

I am going to make it clear to the payroll professionals in the room that it is not just the future of auto-enrolment that rests in their hands, but the confidence of the 7m people, not yet “in”, in the pensions into which they invest.

They can act as payroll tyrants- but this carries big risks- or they can step up to the plate and become pension managers- which carries great glory.

The choice is in their hands.

choice exit now

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It’s the crowd who decides how the club is run.

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Crowds run clubs in the long run

We have got so used to the concentration of power and money in football and rugby clubs that we can forget that England rugby or Chelsea or Man City are the product of their fan-base. The management holds the keys to the changing rooms but they are their under sufferance. Even where, as with Newcastle, the management of the club is controlled by someone who holds out for years against his own supporters, we know that in the end it is the 50,000 Geordies who turn up at St James Park each week, who are the long-term owners of the club.

VW – the people’s car- has “let itself down, let its share-holders down and let Germany down” – so reads the end of term report for the current management. Those who manage, do so under sufferance, there can be no short-cuts to success when success is determined by the customers/spectators – the crowd.


You can’t obstruct the river for ever.


I’ve been thinking this when sitting on the panel at a couple of meetings of FT’s Retirement Freedoms Forum. My co-panellees, and the hundreds of good IFAs in the room, are holding the keys but outside the fancy hotels where our meetings have been going on, the crowd flows down Piccadilly and Princes Street taking decisions as crowds do – by seeking out the easiest way.

We might be able to influence decisions, just as we can influence the currents in a river, through creating temporary obstructions, but the river is bigger than anything we can throw in its way, even the mightiest damns are eventually broken, water will find its natural course to the ocean.


Few people properly understand the mood of the crowd.

Paul Lewis

Those who understand the natural course of decision making best are those, like Paul Lewis who watch and commentate. Paul has well over 80,000 people who follow his tweets , millions have listened in to Money Box. Because he understands what people want.

Paul spoke at the event yesterday, though I disagreed with him on some things (his obsession with cash as an “investment” and his dismissal of the threat of inflation), I agreed with his simple observation that people need a simple and secure way income as they grow older, and they need protection from living longer than their savings.

The financial services industry is trying to re-shape the natural course of the river , sluicing and damning and building artificial watercourses that they hope will irrigate their particular estates. Every asset manager has its unique formulation to provide “all-weather” funds (most of which appear to have lost money in the last three months). The providers of SIPP platforms offer tools to help the crowd follow the flows of their savings and promise that they will stay in the correct channel. Most extravagantly of all, consortia of banks and asset managers and insurance companies build synthetic alternatives to annuities as if the derivative markets can succeed where mortality pools failed.

Only Government can unblock the watercourses!

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The river, like the football crowd, keeps on and will ultimately determine its own natural course.

How long this will take, may be influenced by Government. Tax legislation prolonged the hegemony of individual annuitisation well beyond its “best before” date but when the damn was broken, pent up demand quickly changed things. Over 200,000 people have exercised their rights to pension freedom since April.

There remain market distortions preventing the proper flow of money. The legislation to allow new mutual structures to spring up to help people spend their money collectively is still only half built and getting scant funding. However the legislation in place is sound and can be returned to when demand dictates.

In my view, the FCA’s attempt to solve the problem through creating more relevant advice for the crowd is proper. Advice and Guidance should be easier and cheaper to access but this will only happen if people feel confident that it will allow them to do what they want with their savings. The current options “pay lots of tax”, “pay lots of advisory fees” and “pay hidden costs to insurers” (how most people see in retirement choices) does not have them queuing up at Pension Wise’s door.

New advice and guidance mechanisms must lead to better ways to spend retirement savings (decumulation if you must).


We need to get back to what people want, not what we want from them.

target pensions

Not since 1987, when the golden era of workplace collective pension schemes came to an end, have we had the chance to build the apparatus to have their pension savings back to people’s satisfaction. We have that chance now, or will do if the DWP can finish the job they have started and provide us with the legislation to run CDC.

The mutual structures that were created in the 19th century and flourished for most of the 20th century, are the foundation for the financial services industry we know today. They represent the natural course of the river, the direction the crowd would obviously take.

These structures have been obstructed, sluiced, damned and irrigated by intermediaries so we can hardly see them today. But they still exist, and if we can get rid of the pestilential blockages that still remain, we may yet people back to the true channels of the river.


The crowd’s voice will be heard again.


The underlying power of a Newcastle United, or the game of Rugby in England is not held by Mike Ashton or the blazers of Twickenham but by the sea of black and white to be seen on match day and the army of kids and mums and dads and coaches and referees that turn out on Sunday morning for mini-rugby.

The long-term future of pensions and what will restore confidence in them, lies with a return to the pension structures we built in the middle part of the twentieth century which Frank Field called in 1998 – Britain’s economic miracle. These structures have not gone away, they are a little under-water, but they will be back – because the crowd wants them

Nottingham Forest v Yeovil 180507

The crowd will win again – and so will Yeovil Town!

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It’s auto-enrolment what’s done for tax relief!

pension sell out

I was leading a recent research document from the DWP assessing the impact of auto-enrolment, these are the key findings

  • 10 million workers are estimated to be in the eligible target group for Automatic Enrolment.
  • 9 million workers are estimated to be newly saving or saving more as a result of Automatic Enrolment by 2018.
  • Three quarters of the working population is estimated to meet the age and earnings criteria for Automatic Enrolment.
  • £14 – 16 billion extra saving per year in a workplace pension as a result of Automatic Enrolment by 2019/20. 

There are others relating to the gender distribution and the relative impact between small and large employers but my heart stopped beating when I read the final bullet.

It wasn’t so much the penny dropped, it was 1400 to 1600 billion of them!


The vast majority of money saved into auto-enrolment schemes will be under relief at source, a system of taxation which means that tax-relief is granted even where an individual doesn’t pay tax (all the GPPs, NEST and most of Peoples Pensions work like this).

So pretty well all that £15bn is lost revenue to the taxman (£3bn) a year, plus the DWP loses a big chunk of National Insurance because of salary sacrifice (say half as much again). You might say that’s a different budget but the Treasury ends up paying – it’s the bank of Mum and Dad.

So by the time everyone’s in (and nobody’s out) and the contributions have ramped up, we are shelling out another £5bn a year on pension reliefs,

Now you might say that this is to the social good (and you’d be right), but you can’t have a pension system which is so good, everyone’s getting a redistribution. Because you are then just robbing the means of production, Britain’s Gross Domestic Product which has to bear the strain through higher overall taxes. And in the big picture, that is not what Conservative Governments are about.

Something has to be done and pretty fast as in macro terms, 2019/20 is nearly upon us. And of course….


The easy target is DC personal contribution reliefs, simply knocking on the head the higher rate tax relief and moving to a flat 30 or 33% (the Steve Webb solution) hurts the rich a little but it doesn’t really do the job. I very much doubt it would do more than move the cheese around the board, it is not a fundamental reform – it is tinkering and keeps the status quo- it is of course what the ABI and NAPF want- I don’t think it will happen.

The hard target is the employer contribution, especially the value of a DB contribution, especially the value of a DB accrual in an unfunded pension scheme (such as the teachers, firemen and civil service). Taxing these contributions as a benefit in kind is what should happen but to have an equitable solution that includes the Government employees looks like a nut that’s too hard for even an iron chancellor to crack.

DB will be starved of oxygen until it expires or becomes too weak to put up any further fight and is put quietly to sleepy some time in the future.


Think 25th November

My guess is that we aren’t going to wait too long and that the key date may well be 25th November which is when Osborne announces his Departmental Spending Review. If ever there was a day to announce big pension news that would be it. It is by far the scariest day for public finances between now and the next budget, and for all the talk of consultations, I see the majority of the paper written to the Treasury by September 30th going straight in the bin.

Do I think that Osborne will have the guts to do the full monty and start taxing DB accrual? No.

Do I think that Osborne will move to a flat 33% or 30% structure? No

Do I think that Osborne will give DB another rabbit punch to the kidneys? Yes – most probably by fiddling with the GAD conversion rates to make DB accruals more expensive effectively reducing the AA and LTA still further.

Do I think that Osborne will move to incentivised TEE (the Altmann solution – taken on by Michael Johnson as BOGOFF) – an absolute yes.


And what are we going to see?

And what will be the key dates to introduce all this? Well he can keep chipping away at DB all the time, so pips will be squeaking as soon as GAD get round to doing the Chancellor’s bidding (actuarial independence -pah!).

But the big DC change that will impact the vast majority of our future benefits? Well you saw the numbers. If you want to hang bad news on anything, put it on the hanger next to good news and call it “fair”

We are about to lose £5bn a year in tax and NI, as AE kicks in – in 2019-20. The coins all dropped as one. That’s when you introduce your lasting settlement and see if there is anyone to stop you.

In my opinion, there won’t be. Osborne, the master strategist, is seeing his ducks lining up in a nice neat row.



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Credit where credit is due – how those outside of work get a pension


This blog’s mainly about public service information. But it’s also about influence and how people get it. It was sparked by my reading some stuff on twitter about why we should all be checking our entitlement to the new state pension and it ends with some thoughts on how advisers can be more influential in their businesses.


Most of us don’t know where to go for information on state pensions. So every year a high proportion of money due to people in retirement goes unclaimed. This is bad news for those of us on average retirement income This is desperate for those who have low incomes because they don’t have income from workplace pension plans,

Many people don’t do paid work for a whole load of reasons. When they are not at work- most can still get national insurance credits towards their state pension entitlement. You can see what you can claim for by clicking on this link.

The important think people need to know is that a lot of these credits need to be claimed, they aren’t dished out automatically.  So for those not in paid employment, keeping your entitlement to state pensions up to date, can be as important as workplace saving (for those who are).


I was speaking at a couple of events yesterday about why people would go to a financial adviser. I wanted to talk about this but realised that financial advice on state pension credits only enters the advisory equation at exam time.

If you want to learn about these things, follow the twitter feeds of Paul Lewis or Jo Cumbo, or go to http://www.moneysavingexpert.com where this there is a steady diet of what used to be called public service information.

Indeed the DWP are cottoning on to these authoritative voices and pushing information out through them. I read Jo Cumbo on the DWP as she always makes the information more interesting (which is an art with 140 characters to play with!) The twitter feed is @Josephinecumbo

In our (First Actuarial) financial education sessions with employees, we spend a lot of time talking about these things- which may seem strange, as most-times we are talking to people in the workplace. The reason we do is that everyone knows people who are out of work, through sickness, through unemployment and because they want a break. Most of these people are due credits and people like to help their friends and family with this stuff.

Which makes me think that financial advisers are probably missing a trick here. I am sure many advisers reading this will tell me they always talk about state pension entitlements, but when I talk about investing in extra years in the state pensions (or even S2P) or deferring the state pension (a brilliant investment), most advisers eyes glaze over.

The feedback we get from sessions on state entitlements is wildly positive and I think I know why. People are desperate for people “on their side”. Martin and Paul Lewis is on their side, so is Ros Altmann and so – increasingly- is Jo Cumbo!

Ironically, while Jo has been keeping us up to date on national insurance credits, she’s also been publicising how many people aren’t building up units in workplace pension plans (through auto-enrolment).

The DWP published some important information last week on who auto-enrolment covers. You can read it here

They also published research commissioned by the OMB on the decumulation options available to those in workplace pensions – click here. Jo’s report in FT Money on the issue was quoted twice by the DWP.

So it is , using social media, that information is circulated and disseminated. Financial advisers are almost entirely out of this loop but they need not be. There is no reason why they cannot share the information mined by the DWP and distributed by the media mavens.

I suggest that if they spent some time ensuring that those they influence- their clients and prospects were as up to speed on these matters- as they need  to be, they would be trusted more, referred more and would have better businesses.

That’s a very arrogant thing for me to say and I appreciate that it’s totally inappropriate for me to preach like this (where IFAs already do this work), but – heh – how many advisers would like the Klout of Paul Lewis. And how exciting must it be to be Jo Cumbo!

penson service


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GenLife to Smart – a case study in prudent planning

smart 2

smart pensions founder – Andrew Evans

Friendly Pensions and its successor GenLife have now become Smart Pension and the outlook for its 10,000 members has been substantially improved.

While GenLife was not insolvent, it decided the best way to achieve its targets was to obtain scale through another key provider in the market. Smart Pension has the financial strength to do the things that GenLife couldn’t.

Most importantly, Smart has the capacity to get the Master Trust Assurance Framework.

Smart Pension is now working with The Pensions Regulator to make sure there’s a smooth transition for GenLife members.

The deal now makes Smart Pension one of the biggest providers specialising in small and micro firms.

We’ve spoken to Smart and we’ve spoken to the Aytons who are handing over their business. We’re satisfied that from an employer and adviser’s perspective it is business as usual. Members’ pension pots will remain with Legal & General and members should move seamlessly to the new trust.

Smart Pension expects to see integration with GenLife completed over the next few months. Last month Smart Pension brought in former Pension Protection Fund (PPF) delivery director Peter Walker to oversee the integration of the GenLife master trust and members with the Smart Pension platform.

With the uncertainty surrounding the acquisition now over, Pension PlayPen looks forward to welcoming Smart Pension onto its platform.

We hope that advisers, employers and the members of GenLife have an orderly transition and that they’re kept abreast of each stage of the acquisition.

The message has to be 

keep calm

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Why we want PENSION AWARENESS every day!

pension awareness day2

The bus of the Geeks!

It’s been a week of contrasts for me

On Wednesday I spent time in the splendour of Mayfair’s Claridge’s Hotel learning how Legal and General were designing products to help people in retirement.


Claridges Hotel

On Thursday I was in the Kingsley community Centre (in Cornwall) taking with 60 childcare companies about providing for their staff’s retirement using auto-enrolment.

kingsley village

Kingsley Village conference room


On Friday I was on the Pension Awareness Bus in West London’s Westfield Centre talking with shoppers about what worried them about pensions and retirement. This final event was the last of a week of drop in sessions organised by Pension Geeks, sponsored by Scottish Widows, Peoples Pension and doing an amazing job from Edinburgh to London.


Geeks bearing gifts

Trying to connect the needs of the three audiences into a common purpose is a challenge, but that’s what auto-enrolment is doing. It was good on Friday that almost everyone I talked with had heard about auto-enrolment and were either saving or expected to be saving. At Kingsley the employers had shown up to find out about their duties and there were only 2 no shows! I was impressed by the diligence of those large employers at the posh London Hotel who now have AE in their DNA.


How do you link that lot?

But I still struggle with the common purpose. For large employers AE is about delivering something abstractly called “good DC outcomes”, they are over the administrative hump and some are even re-enrolling after 3 years on the job.

The employers are terrified of getting it wrong (scared by tales of fines and confused by a new language of entitled and eligible job-holders, of workers  and staging dates.

And ordinary people still see pensions as one big stitch up where nobody is acting in their interests. This is hardly surprising, they don’t think about good DC outcomes, they worry about retirement, find it hard to work out what it looks like, let alone how to pay for it and they have no idea how the saving they are doing today will solve the problems of tomorrow.

Pension awareness day

We need more pension awareness every day

Who is accountable?

Sadly the responsibility for engaging , educating and empowering ordinary people about the workplace pensions they are joining is not something that anyone is happening. The people in Claridges Hotel are removed from those in the Westfield shopping centre in many ways and frankly – were they to be asked to sit down together in the local Costa, would struggle to have a common conversation.

More sadly still, those people listening to the Pension Regulator talk in Kingsley Community Centre, heard nothing about why they should want to offer a workplace pension or why their staff should want to join one. As for what kind of workplace pension to offer, it was as if the only criteria worth thinking about was that the schemes should “qualify” to some standard or other.

In practice, the employers in Cornwall will be dependent on the accountants of Cornwall and their payroll bureaux to get this sorted and they will have very little say in the choice of the pension . This is very worrying. Without engagement in the choice of the pension and education as to why that choice was made, employers will not be empowered to talk to staff about it in anything other than functional terms. “It qualifies” is not an inspiring reason to use a savings plan for the next 40 years.


Open for pensions?

What we are trying to do?


On Monday, I will engage with providers and accountants and bureaux and employers over the choices of workplace pensions to be offered to the 6m + staff still to join workplace pensions. The discussion will almost certainly centre around issues of “interoperability”. By which I mean how easy it is for a payroll bureau to conduct a pre-assessment, pass data to a provider for on-boarding and  establish an ongoing process to comply with the auto-enrolment regulations.

These issues have no interest to the people in Claridges Hotel, who are talking the investment talk or the shoppers in Westfield, who are simply interested in saving and spending. But they are the issues on which organisations that providers are now pinning their hopes.

I am extremely nervous about this mania for interoperability. It is unbalanced and short-sighted. The things that really matter to people are to do with investment, and how they can spend their money and the security of the pension and how they can get information about their savings have to be a part of the decision the employer takes.

And there are massive gulfs between providers on these issues. Last week, a workplace pension with over 7000 members had to be bailed out by another workplace pension. That is not the first time this has happened, there have been other failures – in the past year. Another pension provider has had its approvals removed by HMRC. There is absolutely no certainty that (no matter how good its inter-operability) , a workplace pension is going to be around to pay out the benefits.

The issues being discussed in the Claridges Hotel around investment defaults, options to spend the pot and the governance of the pension ensuring plans don’t go bust, are vital. But they aren’t even on the radar of the accountants and bureaux and certainly aren’t being talked about to employers. So employers and staff have no idea why they are investing where they are.

Connecting providers and staff  through employers is what should be happening and is not happening and I am very determined that the providers of workplace pensions continue to focus on providing pensions and talking about how they do this. I am very keen that accountants and payroll bureaux are focussed on how the pensions they are installing work and why they are good for members. And I’m really keen that the members who save into workplace pensions understand what is going on and are given a clear and intelligible reason why the decision that has been taken on their behalf – has been taken.

For this to happen, there has to be some engagement at every stage of the chain. The Regulator cannot assume that the bureaux and accountants they are supplying pensions through, have a mechanism in place to conduct due diligence on the pension providers marketing their ways.  Without financial advice, there has to be some means for bureaux and accountants to know that the workplace pensions they are installing into their clients payroll processes work.

That decision has to mean more than “interoperability”. The workplace pension that went bust this week had excellent interoperability, it just didn’t have a sustainable business  model. There are workplace pensions we have researched that simply are not fit for purpose in terms of their investments and their governance and the services they offer their membership. They may not be on the Pension PlayPen’s platform but they are being offered by accountants and bureaux as “qualifying workplace pensions” that meet the Government’s criteria for auto-enrolment. Like the master trust that went bust this week, these schemes are doing nothing wrong.


There must be engagement , there must be choice and there must be a means by which informed choices are made. Without engagement, choice and engagement, there can be no empowerment of people. Would you save more into something which you knew nothing about? If you asked your boss why he chose to invest your money in a 40 year savings plan and he had no idea, would you hold your boss in esteem? If you went to your bosses advisor/accountant/payroll office and asked why the workplace pension you were investing in had been chosen … and they couldn’t answer you.


What would you think?

pass the parcel

This is a great game of pass the parcel in which everyone is passing the choice of workplace pension to another contestant. No-one knows who will end up taking responsibility (though the rules say it is the employer).

I do not think that those last Wednesday in the Claridges Hotel should be sitting comfortable. Unless people who choose the providers workplace pension make that choice on an informed basis, those encouraging that choice may be guilty of mis-selling.

Nor do I think the advisors accountants and payroll agents advising the employers of Cornwall should sit comfy, for their clients know nothing about the choices ahead of them.

And especially, the employers relying on providers , advisors, accountants and payroll agents- should not be sitting comfortably. For the are ultimately accountable to their staff.

In short, we need to move beyond the bare bones of “interoperability” and start talking up the reason why we are doing this auto-enrolment thing in the first place. That is the investment of billions of pounds worth of pay, deferred for anything up to 40 years before it can become spendable.


Comparing pensions with Pension Play Pen (yesterday’s version!)


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What Mr Corbyn taught us yesterday


Yesterday was the first parliamentary test of Jeremy Corbyn’s leadership.

He created history by crowd-sourcing 6 questions from over 40,000 submitted him by people like you and me. Because these questions were from ordinary people, they were treated with respect. What ordinary people got from Parliamentary Question Time was an orderly debate not a bear pit.

Whether this new found temperance will last but once again Corbyn has confounded his critics. With Angela Eagle by his side he is appearing every inch the party leader and yesterday he controlled the house.

Cameron is sensibly not going to get into a battle of personalities. The result is what most people (other than the journalists) want, a proper discussion of issues.

Ongoing denial from the ruling caste.

I was at the Legal and General DC (not David Cameron) conference in the very posh Claridges Hotel yesterday. I suspect many of the people in the room had been at the posh Gleneagles hotel the weekend before and there was that sense of unreality I get when in the company of so many people who do not have to talk to customers.

The conference was addressed by Iain Anderson of Cicero consulting who made a number of points about Corbyn, the most salient being that Corbyn probably won’t be the next prime minister. This is to me an admission that Corbyn might be the next prime minister. This in itself is contrarian. Most people I speak to about Corbyn do not begin to understand his popularity.

Anderson commented on the confusion among journalists (he cited Skye) who have no access to Corbyn and are being denied their licence to taunt. Journalists have had it pretty easy since the advance of Blair and his spin doctors, now they may find life a little tougher, it is hard to have any sympathy for them.

There is no reason whatsoever that Jeremy Corbyn , leading a resurgent Labour Party cannot just be an effective opposition but a credible contender for Government post 2020. I am looking forward to the next five years, much more than I ever thought I would.

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Should I give my job to a computer?


This week the BBC has been running a series of programs on artificial intelligence. The first program asked the question

HOW SUSCEPTIBLE ARE JOBS TO COMPUTERISATION? and reference was made to a study published here.

I’d give it a read if you have a lazy hour in the evening. The paper covers the history of technological innovation as useful context. But its central idea is that

the current trend towards labour market polarization, with growing employment in high-income cognitive jobs and low-income manual occupations, accompanied by a hollowing-out of middle-income routine jobs

In short, work with your hands or your brains but don’t compete with computers for the boring stuff in the middle.

child 4

If you are interested in examples that touch upon financial services , I can think of three

  1. Managing Funds with no idea how to beat the market (closet tracking)
  2. Manually conducting selection exercises for workplace pensions
  3. Constructing bespoke portfolios for people with small amounts to invest

For computerised alternatives to your job, try respectively ETFs, Pension PlayPen and Nutmeg.

nutmeg 2hi res playpen

The reality is that the application of knowledge that created these three products is exactly what the authors of the academic paper are discussing. The paper was written in 2013, the emergence of services that replicate high value problem solving at an everyday price is what FINTECH is all about.

This useful article about the introduction of  threshing machines into agrarian England (detailing the antics of Captain Swing and his mob) shows remarkable similarities to the behaviours of active fund managers, HNW IFAs and employee benefit consultants.


Dark clouds for the rural labourer

For me, the issue is not about capitulation to the FINTECH sump into which middle order jobs are disappearing, but in how to organise our careers to clamber away. Clearly there are two directions we can take. One is towards manual labour where our flexibility is prized, albeit more in terms of personal interaction than financial reward. Examples are the caring professions including jobs with Pension Wise and broker consulting.

The alternative is to become the masters of the algorithms that control the machines that took our jobs. There need be no more than a dozen people to operate a nuclear power station but those people can be very highly paid (unless they are called Homer).

But we cannot mourn announcements from insurers that they are cutting hundreds of jobs without recognising this process and the redeployment of (our) labour. It is beholden on us to understand our skills and skill gaps and learn how to get to the areas of high value.

Otherwise we have no value, we – like the farm labourers of the 19th century- become valueless – our threshing skills are o’ertaken.


The masters of the algorithms need not be those that write them, they can be those who adopt them and use them for their benefit. Those who can use ETFs, Pension PlayPen and Nutmeg as a means of turning menial work into meaningful value are mastering technology. Rather than being defeated by the machines, they are turning the monsters to their vantage.

Nobody teaches a child how to use a phone, it comes naturally to emulate, practice and ultimately supercede the previous generation. That is why our kids use apps better than we can. Infact we turn to our kids to learn the skills to meet the challenge mentioned in this article.

As children know, there is virtually no job that cannot be delegated through an app, other than the dish-washing without which the means to pay for the phones would be cut off!

They are the exempla of the new labour market,


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The left needs steady (not raw) nerves!

Corbyn in parliament

Appalling behaviour from the bulk of the Parliamentary Labour Party

I am not a socialist and I didn’t vote for Jeremy Corbyn. I am a Liberal Democrat , I believe in democracy and I want a strong opposition in Government because that is good for governance.I believe in voting and that people stand by the results of a vote , that’s democracy.

So I find the reaction of senior members of the parliamentary Labour party to the massive mandate given their new leader incomprehensible. The raw nerves displayed by those refusing to serve under Corbyn and the half hearted endorsements by the likes of Hilary Benn show a lack of nerve to the nation.

Corbyn has not appointed Angela Eagle but John McDonnell to be the shadow chancellor and he has done what he said he would. He was voted to his position to do this. The likes of Benn were voted to parliament as Labour candidates, not to further their careers as they best pleased.

Eagle has not thrown her toys out of the pram. She didn’t get the top job , but she has accepted the next best job with good grace. We pay leaders to lead, we don’t always get what we want but we stay calm and carry on

Those who have not should listen to her.

If there were more women of Angela Eagle’s calibre in the Parliamentary Labour Party, there would be more women in the shadow cabinet. I would have many more Angela Eagles in parliament (on whatever side of the dispatch box).


Corbynism and pensions

owen smith

The appointment of Owen Smith as Shadow minister for the DWP is raising the heckles of the media and senior spokespeople in pensions. They cite as evidence

  • On 28 Jun 2010:
    Owen Smith voted to oppose measures intended to make workplace pensions more attractive. Show full debate
  • On 18 Oct 2011:
    Owen Smith voted against accelerating raising the state pension age to 66, against amending the rules on enrolment to occupational pensions and against taking a pension contribution from judges’ pay. Show full debate

I am pleased that Owen Smith is questioning the basis on which we are progressing pensions, not because I agree with him, but because I think much of what I do believe in needs challenge.

Those on the left in pensions, Bryn Davies, Tony Lines , Hilary Salt and Con Keating have long argued that there are other ways to provide pensions for people with little money than by getting them to save for one.

The system of SERPS designed by Labour , delivered good pensions to those who needed them most. It was cumbersome and did not engage people as it was impossible to explain, but it kept a lot of people out of poverty.

The abolition of what remains of SERPS (known as S2P) will happen in a few months. What will replace it , the single state pension , is a pale dilution of the vision of Barbara Castle and indeed of Bevan.

There is a strong tradition of positive state intervention in pensions that has led to the construction of the Financial Assistance Scheme, the Pension Protection Fund and most recently NEST (For whom congratulations are due).


For you , my friends, the war is over

If the labour lightweights who refuse to come in line with Corbyn (or their own paymasters- the unions) continue to hold out against the democratic change that has occurred , then they are worthy of ignominy and should retire to the back benches and resign in 2020.

For them, my friends, the war is over.

But I fear they will not go. They will fester and ferment dissent by talking to whatever journalist they can find, briefing against Corby, Corbynism and the new way of things.

The Fourth Estate are behaving in a typically destructive fashion – no surprise there


The press are already irritated that Corbyn isn’t talking to them. The Evening Standard ran a story “Reporters get the silent treatment as new leader shows his tetchy side”.

“Mr Corby stared straight ahead and kept walking, he also ignored questions about pulling out of a BBC radio interview…and why he picked John McDonnell as shadow chancellor”.

I don’t see that as tetchy, I don’t see that as a display of raw nerves. I see that as exemplary behaviour from a politician who is currently displaying absolute integrity. If the press expect spin , they are going to be disappointed.  I suspect that Corbyn’s refusal to put his head in the media’s noose will endear him still further to a public fed up with spin.


You can value someone and not agree with them

I don’t agree with much of what Corbyn says and I don’t agree with the positions adopted by Owen Smith. Nor do I agree with much that many of my friends think. But I value my friends for their integrity and because they value me. I value Corbyn because he has integrity and he is showing steady nerves.

Which is more than can be said for the majority of Labour politicians.

Today Corbyn will address the TUC – I look forward to hearing a labour politician for the first time in a long time and I’ll be on you tube as soon as I knock off work tonight!

watson and Corbyn

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Why Corbynism is radical (and what it means for pensions)

vorbyn new

The most tweeted action of Corbyn’s first 24 hours as Labour leader was to choose to go to a constituency engagement rather than go on the Andrew Marr show. For Labour apparatchnick schooled in two decades of Blairite PR and spin, this was heresy. But Corbyn is adamant- his outbursts against the media in his acceptance speech demonstrate that he is not going to use the conventional pitches – PM Question Time included – to get his points across.

The press, business leaders and most of all – the City, have got used to pulling politicians’ tails. I doubt they will be pulling Corbyn’s. Indeed, his strength- if he has one – will come from his distancing himself from these paymasters and aligning himself with the people who gave him the mandate he has, the 450,000 people who voted for him- and by extension the voters of this country who he hopes will follow in the same direction.

This refusal to cow-tow to Marr, or the accepted media obligations of a political leader are the outward signs of a much more profound change of direction he wishes to bring to British politicians.

This video of Robert Peston, which might have seemed marginal in importance even a week ago, is now pretty much required viewing as a first step in understanding Corbynomics.


The economic theory is very simple. It is Keynsian, reflationary and deeply socialist. It uses the apparatus of the City (the Bank of England) to regenerate, redistribute and re-organise the British economy.

To what extent he achieves what he is setting out to achieve, is anyone’s guess. We may look back at Corbyn and his policies as an aberration. He may be squashed like the SDP or as Farrage is being squashed. Corbyn may be just another spasm in the death throes of socialism.

But I suspect that a dialectic between left and right is needed in this country. The Conservative- Liberal Coalition more or less extinguished the Liberals as a dissenting voice and the feeble post-Milliband alternatives to Labour leadership were what gave Corbyn his opening.

He has seized it brilliantly – look at the numbers – now he has created a cabinet in his own image and put as his shadow Chancellor John McDonnell. This is a radical declaration of intent that demonstrates he has every intention of turning words into deeds.

The impact of this new way of doing things is going to be interested to watch. In my opinion, there is significant popular support for any politician who is seen to be making his or her own way and speaking his or her own mind. Corbyn has 32 years practice at this and he now has a mandate he could not have considered possible before the last election.

The dialectic between a reformed left and the established right is surely better for Britain than the homogenised stale political and economic quagmire into which we have been sinking.

For small businesses there is hope, for big business there is a challenge and for the financial services industry there is an opportunity to restore some confidence in itself. Let us hope that John Kaye, Con Keating, David Pitt-Watson,George Kirrin, Hilary Salt, Chris Sier and others with radical views on how financial services can serve, are given a platform,

Let’s hope that Corbynomics will  work with the consumerist agenda of Ros Altmann, the Regulators and yes- the Treasury – to deliver something better for the British worker (especially in sickness and in later life).

Posted in consultant, pensions, Pensions Regulator, Politics | Tagged , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments

Mastertrusts – an accident waiting to happen?


How do we pay for pensions?

We still know too little about what we are paying for pensions.

The following statement appears on Standard Life’s website

Employers can be confident that their schemes will all be compliant with the charge cap by April 2015. All new schemes including our 6 minute Good to Go solution for AE are now priced at 75bps or less.


This is very cleverly worded but doesn’t say very much.

It doesn’t tell us what people are really paying, it tells you what contracts are priced at. Anyone who knows anything about financial services knows that what the price says and what you pay are not the same thing.

How do master trust service suppliers get paid?

Mastertrusts have lots of mouths to feed. They have to pay for funds, administrators, lawyers, marketeers, technology suppliers and for trustees.

Let’s suppose for instance that I am the trustee of a master trust. How do I get paid?

Option one; I bill my service to the operators of the master trust who meet my bill from the revenues generated by 0.75%.

Option two; I bill the member’s funds directly (either taking the money before it is invested or actually taking the money from the member’s funds).

Amazingly, both options are legal.

That is because the DWP still have not clarified what charges can be regarded as fund expenses (and are hidden) and what charges are met from the AMC (and are declared).


Why is this important?

Insurance companies have to keep a reserve for meeting unexpected expenses. This is required by the FCA and it’s also needed to meet EU solvency rules. In addition, if there was a failure, members are protected (where insurance is in place) by the Financial Services Compensation Scheme.

Most mastertrusts are not run by insurance companies and do not have to reserve. Many do, because they are run as prudent businesses. But some don’t.

For the mastertrusts which do not keep reserves there is no lifeboat. If they run out of money and cannot pay their bills, they are trading insolvently. Creditors, including trustees who have unpaid bills either have to get in the queue or try option two.

But option two is very dangerous. The more bills are charged to the fund , the lower the fund’s return to members, quickly it becomes apparent- especially where the market is trying to track a market – that there is a difference between the fund’s performance and the performance of the index (known as the tracking error).

Even more dangerous is when bills are paid from available cashflow in the fund. The only available cashflow in a DC pension fund (now that short service refunds are banned), is from inbound contributions. Taking money out of contributions (before investment) is a very dodgy practice and may well be the start of a slippery slope.

Slippery Slope 1

If the people managing the master trust run out of money, the temptation to use hidden charges or even to raid contributions can be too great.

Why controls need to be put in place.

The master trust assurance framework, in place at NOW and Peoples Pension (and on its way at NEST), is designed to provide these controls. We want all master trusts to have the controls in place to stop suppliers raiding member pensions and we want the master trust assurance framework universally in place.

Where these controls aren’t in place and where we can’t be sure (as we can with NEST) that there is money to pay the bills. We will not allow  a master trust to be advertised on http://www.pensionplaypen.com.

We are constantly reviewing the financial solvency of the providers on our platform and use the services of rating agencies such as AKG to properly understand the likelihood of a master trust running out of money.

What happens when a master trust declares itself insolvent?

The short answer is that until it happens, we don’t know. However an eminent lawyer (Duncan Buchanan) has  speculated in an excellent article in Pensions Expert.

Duncan concludes

Unless, and until, legislation requires mastertrusts to adopt discontinuance plans, members will be at risk that on a wind up of the trust, administration costs would have to be deducted from their savings. 

He too points out that the independent assurance framework for mastertrusts developed by the Institute of Chartered Accountants recognises the potential problem, and requires mastertrusts seeking an assurance report to adopt formal discontinuance plans that address how members’ savings are to be safeguarded in the event of it failing.

But it won’t be Peoples or NOW who will be discontinuing. It will be the master trust that no-one has heard of, other than the employers who have signed a deed of participation – typically as part of staging auto-enrolment.

What can be done about this?

Firstly, the DWP must clarify what is legal and what is not legal when it comes to charging services to member’s funds (rather than to the provider). We would like a more inclusive definition for the AMC which allows as few expenses as possible to be borne by members outside the AMC

Secondly , we want to see the master trust universally in place

Thirdly, where the master trust assurance framework isn’t in place, we want much stronger reporting from the providers of workplace pensions qualifying for auto-enrolment. The reporting should be to the Pensions Regulator and should ensure that alarm bells are rung with participating employers well in advance of the money running out.

It should not be down to organisations such as http://www.pensionplaypen.com to be saying these things and to be acting as an unpaid policeman. Auto-enrolment is an important Government project. If we get a provider failure, there will need to be a bail-out.

We should not have to wait till that happens. We should be doing something about this now. The steps we have suggested should be in place, in law at the latest by April 2016.


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How Pensions are getting fairer.


I was speaking with a Scottish friend , an academic and one of the few  politicians I know who was brought up without a lot of money in the family. I had to phrase that carefully, for when  I first wrote “poor family”, I realised the ambiguity. There is nothing poor about being poor.

His point was that long-term saving meant something different to him as a child than it does to him as a former Shadow  Pensions Minister. Long-term saving for a low-income family means saving for Christmas or for a holiday. The idea of investing for the future is something for other people.

The class divide between “saving” and “investing” is one that people are uncomfortable with. By people , I mean my kind of people, people who have had it inculcated into them that saving for the future is an abstract good. I am embarrassed in talking about this with Gregg because it has taken me 53 years for the coin to drop – so hard-coded has the benefit of investment been to me.


Institutional prejudice against low-earners

It also explains why institutions like the NAPF , the Investment Association and the ABI find it so hard to talk to ordinary people about pensions. Riding the tram into Edinburgh , I railed against the conference of big-wigs from the pensions industry at Gleneagles hotel this weekend. Collectively it is a jamboree, each individual within that jamboree is confirming (at however much a night) that they the thought leaders. As Jonathan Lydon wrote

“Bet you thought you solved all our problems, but you are the problem”.

The problem with the long-terms savings industry (pensions being the  epicentre) is that it is fundamentally unfair. It is so biased towards the needs and aspirations of one sector of society and so ignorant of the needs of another, that it cannot help itself.

Sitting behind me on the tram was one of the people who I railed against. She is a good lady – but she runs a scheme that is hugely unfair to its lower paid employees. The example below explains how.

Short service refunds are unfair on low-earners

For the past goodness knows how many years, occupational pension schemes have been able to provide short service rebates of contributions to people leaving schemes in the first two years of joining them. This has been sold as a benefit to staff who may get a little extra windfall in their final pay-packet representing the contributions they’ve made to their pension scheme – less tax.

It isn’t any such thing, the pittance returned does not include the money invested for them by their employer and it may be that they get taxed on the way out, without getting tax-relief on the way in. Either way, they are giving up any entitlement to a benefit in retirement for their period of service with the employer.

The majority of short-service employment is among low-earners, short-service refunds deprive low-paid migrant employees of pension rights. Longer serving employees are subsidised by short-service refunds. Longer-serving employees tend to be higher paid- they are the highly valued staff that employers “want to retain”.

But it’s worse than that. Short service refunds create a pool of money that is used by the trustees of the pension schemes to pay their bills, these are typically the bills of the advisers who consult on scheme design. There is an obvious conflict of interest here, the savings to a company from refunds pay for the advice that perpetuates the system.

Net pay makes short-service refunds even worse for low-earners

But it’s even worse than that! Because of the recent increase in the nil-rate band on which people pay tax, there are hundreds of thousands of people in low income jobs who no-longer pay tax. They are however paying pension contributions- because they are being enrolled into pension schemes (many for the first time).

The vast majority of occupational pension schemes operate under a “net-pay” agreement with the inland revenue where employee contributions only get tax-relief if the individual pays tax. So these people are getting no tax-relief on the way in. However all short-service refunds are being taxed on the way out. You can read the rules here.

Denied tax relief on their contributions, taxed on the return of their contributions and with nothing to show for their “pensionable service” except a poxy refund in their final pay-packet, low-earners leaving in the first two years of being in a company pension scheme are being ripped off.

It does not have to be unfair. Personal pensions operate a system of tax-relief on contributions known as “relief at source”. This means that low-earners get basic rate tax-relief (at 20%) even if they don’t pay tax. So for everyone earning under £11,000, the net pay system is a disaster- they should all be taxed using relief at source.



So who gets hurt?

If you are in one of the big private occupational pension schemes and a low earner, you may be getting no pension tax-relief and will be getting taxed on your pension refund if you leave in the first two years. Frankly (if this happens) you would have been better off not joining the scheme – purely on tax grounds.

The Government reckons 20,000 people are currently getting DC short service refunds (2014 figures) and that this will increase (because of auto-enrolment to 27,000 within the next year).

There are exceptions, most of the new occupational mastertrusts such as NEST  and Peoples Pension do not allow short-service refunds. NEST does not operate under net-pay, Peoples allows net pay and pension relief at source (though it’s not yet very good at explaining why relief at source is needed by low earners)

.So if you are in NEST or in some versions of the Peoples Pension- you won’t (as a low-earner) get ripped off either on tax relief or from leaving early

Disappointingly NOW pensions takes contributions on a net pay basis,  If you are earning under £11,000 and in  NOW pensions, you are probably missing out on tax relief needlessly. However NOW does not allow short service refunds.

If you are in one of the big private occupational pension schemes and a low earner, you may be getting no pension tax-relief and will be getting taxed on your pension refund if you leave in the first two years. Frankly (if this happens) you would have been better off not joining the scheme – purely on tax grounds.

The Government reckons 20,000 people are currently getting DC short service refunds (2014 figures) and that this will increase (because of auto-enrolment to 27,000 within the next year).

We do not know the numbers of people in net-pay schemes paying contributions but getting no tax-relief. But I suspect it is very many more than 20,000. It is only a matter of time till some canny lawyer picks up on this , teams up with some employee representatives and starts a class action.


And why are pensions getting fairer?

Not before time (and it was announced in 2011!) the Government is finally going to ban short service refunds (for DC occupational pension schemes) from next month (October 2015).

The Impact Assessment produced last year shows relatively modest change. The change will cost employers around £15m , will benefit employees by £20m* and the revenue will miss out on the balance by way of extra tax receipts.

* The benefit to members includes the longer term benefit of staying in a pension savings while other costs are calculated immediately. 

Although the macro- figures are relatively small, for the people who will benefit , the benefits are big;- and since no low-earner knows whether they’ll stay 2 years, there are many more people who could benefit than in the assessment.

For the 20,000 people who will benefit, there is a benefit of around £1,000 per head. A lot of money for low-earners who form the bulk of those who get refunds.

These numbers do not include the double-whammy impact these low-earners had from paying tax on the refunds when they weren’t tax-payers and not getting tax-relief on contribution (because they were non-tax payers)!

A little better…

The long-term benefit of this little change is that “poor” people are not going to miss out from joining a scheme and then leaving the employer within two years.

Companies will lose out and it will be harder for advisers to collect their fees from the slush fund created by refunds. (There will be some administrative savings to offset this but the £15m figure includes these).

Hopefully, with the slush fund (sorry conflict of interest) gone, more occupational pension schemes will be advised to switch to a relief at source basis by advisers.

Whether the third party administration systems that most large occupational systems rely on, are up to administering relief at source is the subject for another blog.


But still a long way to go!

All is still not well. The central problem which is that companies don’t run pensions for low-earners is still the root of the problems

So large employers will continue to operate their schemes on a net pay basis (handy for higher rate tax-payers , dreadful for those who don’t pay tax).

They will do so because they always have and because there is no commercial imperative to move to a relief at source system of taxation. The advisers who should be pointing out the need to move to relief at source, have had no incentive to do so – the cost benefit analysis of switching a scheme to retirement at source doesn’t add up.

In any event, it really doesn’t matter to employers, how the low paid are pensioned because pensions are for high paid people (who create the pension policy and are probably tucking into breakfast at Gleneagles as I type).


The mountain of unfairness still to climb

Short service refunds will continue, even after next month, for those in defined benefit schemes. The Government has yet to take on this problem or the more general inequality of defined benefit schemes which absorb the vast majority of the tax-payers money.

Actuaries will argue that – relative to the DB problem – the changes to DC are just tinkering. It’s true – but every time that DC gets better, DB seems less fair. The threat to DB is structural and its edifice is falling away ever year.

The likely impact on the pensions system of the current consultation on the taxation of contributions will dwarf that of short-service refunds. It is how the unfairness of the net-pay treatment of the low-earners will be addressed.

I say this with sadness, as the occupational pension schemes (and Mastertrusts operating net-pay) could and should move to relief at source today. That they don’t do so , is indicative of their lack of focus on those who are low-earners.

As I started, so I’ll finish. The people who run occupational pensions in this country (and most of those who run master trusts) do not understand and empathise with poor people. They talk about investment for the future while poor people talk about saving for Christmas.

Until we’re all in!

To make pensions fair for all, we need to start with the tax-system, which as Michael Johnson tells us, is set against the poor and aligned to the needs of the rich. We need a pension taxation system which is fair for all – if we are to have “everybody in”!

australian super




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Linked In’s no website for old men!


Yeats wrote that Byzantium was no country for old men. He was right, according to the Daily Express, we are all on linked in leering at young girl’s profiles. It looks like the poem should get re-written for young women profiling themselves and those who think it a place to flirt.

old men

I refer of course to the furore over a young woman and an old man who connect and row and are now nationwide celebrities. They have never met, or spoken and all they know of each other is that they are connected on linked in.

The old man slinks back to the ignominy he has brought upon himself, the young women is now a media superstar. So what lessons can we learn?

For old men.



The internet does do funny things to middle aged guys, it makes us feel we can behave as if the people on the other side of the profiles had no feelings.  But is Linked In the place to get your kicks?

It’s true that Linked In is full of fake profiles of young girls designed to tempt us into such lecherous connectivity. Young girls who end up selling us leads to vulnerable numpties – ripe for internet fraud -typically of the pension liberation flavour. But it’s hardly a hotbed of desire!

Because somebody connects with you, it doesn’t mean they find you sexually exciting. If you want to be found sexually exciting, you can make your advances on www.adultwork.com where you will be sure of a quick response, especially if you put cash upfront!

And if you think that people in real life look like their profiles, you should get out more. I’m afraid that photoshop , make-up and a professional photographer can do more for someone’s profile than 1000 endorsements! If you don’t believe me, check those people who have the most profile views amongst your connections!

The vanity of Linked in photos

And in case you think that it’s just about photoshopped kids, take a look at your own picture.

old men 4

Indeed lying about your age or your sex or your beauty is all pretty much part of the game, whether you are a young lass or an old man, we may pretend that looks don’t matter, but the vast majority of my connections seem to have gone to a lot of trouble with their gravatars.

We all are guilty of profile deception and our vanity drives us to excesses – we believe our own lies and they can get us into trouble!

Kindness and tolerance required!

old 7


But there but for the grace of God go I , and many like me. I have been tempted to do the same and – I’m quite sure that in the tens of thousands of interactions I have had on linked in – I have behaved every bit as badly from time to time – as the flirtatious solicitor (whose name I can’t be bothered to remember).

Indeed ,only this morning i was able to openly slag off a fellow pensions professional on an Edinburgh tram without knowing that the women was sitting within earshot.

If I were her – and she is probably reading this- I’d have made a fuss. She had the presence of mind to smile demurely and leave me to my own embarrassment. This was a bizarre chance meeting, but they’re happening all the time on Linked In – we never know who may be listening/watching,

In such an inter-connected world – mistakes will be made. We are all crap from time to time and the best we can hope for is the kindness of our internet connections in tolerating us. I sympathise with the young lady but I hope that she doesn’t feel the need to assassinate every inane idiot who approaches her.

old men 2

She’d have me on toast I’m sure!

Linked In is a professional meeting place and all parties need to learn manners- and that includes kindness and tolerance!

old men 3

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The Monarch and the Baroness – long live our queens!


the Queen of England

Well done Ma’am!

It’s a good week for the monarchy – and for our revered Queen Elizabeth who today becomes Britain’s longest reigning monarchy.

Enough has been said about Elizabeth Regina for me to trouble these pages with further congratulation. She’s been on the throne ten years longer than I’ve been on the planet and I’m no spring chicken, for the majority of us Brits, we know no other!

Who’s a naughty Baroness!


Our pearly queen of pensions

Not such a good week for our latest pension’s minister who forgot to cancel her membership of the Labour party when taking up her peerage. She’s our newest pension minister but not yet our most accomplished!

Ros Altmann and Elizabeth Windsor are an unlikely couple, one to the castle born, the other from “trade”, but they’ve made it in their careers, brought up families and have survived the odd annus horribilus.

Prospects for Baroness Ros

So putting aside the local embarrassment, how does the pension landscape look for the DWP’s new minister for pensions?  What next?

Having got used to Steve Webb and Gregg McClymont in the Commons, it is all a bit of an anti-climax at the moment with Baroness Altmann and Lord Bradley quiet as door-mice.

How long can you keep a good woman down?

I am sure Ros will surface soon! She’s our North London Pearly Queen and sooner or later she is going to come out of her current purdah and do the ministerial bit.

Rumour has it we are due a policy statement from the Lady, telling us her priorities in Government and defining the political tone in pensions till the next election in 2020.

More change needed (I fear)

The accepted wisdom is that we should put the breaks on change and give everyone a chance to take a deep breath and absorb the shock (of being in the 21st century). However, putting the breaks on the lorry as it careers down the hill is more to cause an accident than to allow the momentum of change to play its way out naturally.


The big political change in pensions – the change in which our benefits and contributions are taxed, is still under consultation. It is unlikely that we will see any announcements before the budget and sources close to my neighbourhood tax consultants (KPMG) tell me not to see anything implemented this side of 2107.

Contracting out

Meanwhile the spectre of 2016 looms large. For the occupational pensions industry the key date is April 6th when we get a new single state pension and contracting-out comes to an end. If the Government had any intention of reviving the defined benefit sector it would have carved out a reprieve for DB schemes from the increased costs resulting from paying full rate national insurance on the contracting in scales.

DB schemes look like demolition sites with various contractors at work dismantling the tower blocks put up in the past fifty years. We can only speculate as to whether new collective structures emerge to replace them. My guess is, that as with housing, not everyone is going to be able to afford a detached dwelling.


The FCA review on the delivery of Financial Advice in the Market, on-going consultation on pension transfers, the hideous activities of the pension scammers and questions over what Pension Wise is actually doing, suggest to me that some kind of policy initiative is needed, if only to give people a proper way of having their hard-earned pots paid out efficiently as income.


Auto-enrolment is having a phoney war. The large companies have enrolled – and are starting to re-enroll, the small companies have (save for a trial run in July) yet to get started. We are neither fish nor fowl. The next big push – and the big battles of 2017 and 2018 are yet to be fought and politicians seem to be settling on simplification of compliance process as the best way forward.

Having killed off commission, or its close friend consultancy charging, the only back-door for member borne charging to pay advisors is the vertically integrated master-trust. For many advisers, the “in-house master trust” is a means to pick some value from the chaos, but whether the remaining loop-holes that allow this remain open, is a matter for the DWP’s ongoing work on the charge cap.

Workplace pension governance

Which brings us to DC Governance the muffled chant “it’s all gone quiet over there”. Just what the IGCs are up to is anybody’s guess. Whether they are the insurer’s way of putting the ghost of the OFT report to bed or whether they will serve useful purpose – keeping insurers honest- has yet to be seen.

I haven’t seen one output from an IGC that gives me hope that they will improve governance in contract based plans, but these are early days. We’ll wait to see what the IPP has to say on “legacy”, this may be the IGC’s first real test

And what of master-trusts? At best they are slimline , efficient and progressive. NEST is doing well, despite its £400m debt, Peoples is prospering, NOW has yet to digest its early successes and there’s a long-tail of smaller schemes ranging from the progressive to the desperate. There will be failures (my intelligence is that there already are).

The imbalance between the properly reserved , fully insured personal pension and the unreserved and unaccredited master-trust is a recipe for disaster and more needs to be done to ensure that the barriers to entry for master trusts are set at reasonable levels.


Without the participation of the traditional pension experts (and even the commission focussed corporate advisers) , 1.8m employers are about to buy into workplace pensions with a blindfold. The major issue of training the new advisers (the accountants and payroll bureaux who are over-seeing this) to understand what makes for good outcomes has only just begun.

Bless em all!

As I congratulate our monarch and commiserate with our Baroness, I’m drawn to one conclusion. Keeping calm and carrying on is the way forward. 5 years is as long in pension minister years as 63 in queenie years. Liz’s reign is mature, Ros’ reign hasn’t really got started.

May we remember Ros in 2020 as we do Elizabeth Regina today!



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Are employers buying workplace pensions on value or price?


We have started an interesting project looking at the reasons given for choosing a workplace pension. Our sample is those employers who have used http://www.pensionplaypen.com ‘s “choose a pension” tool.

For those who don’t know- the tool analyses data input by employers and rates the offering of up to 20 providers of workplace pensions , against their profiles.

The propositions of the pension providers are presented in order of merit, the most attractive having the highest score and the least attractive the lowest.

The scores are generated using 6 metrics that focus on value for money, inter-operability and member functionality.

Around 85% of those using our system choose our top-rated provider. The remaining choices are made out of personal preference and presumably a view that their preferred provider scored well enough.

Every employer, before completing the process, has to input the reason why they chose the provider they did. This “reason why” statement is documented in what we call the “actuarial certificate” that is distributed to members (and also future-proofs the employer).

The reasons why are unique to the employer and (as employers use our system only once) show a high level of engagement. Taken together we are seeing trends in choice that help us better understand what drives employers – this informs our ratings and the default weightings we give to each of our 6 metrics.

We are quite excited by this exploration of the decision making, not least because most of the decision makers will not have taken such a decision on behalf of others before. We are charting how a mass market of business purchasers are behaving and we expect the results of our work will be of considerable interest to the industry.

We won’t be publishing our findings for a couple of months- and we intend to repeat this process regularly as we see the uptick in employer numbers from 2016 onwards.

What is already clear is that decisions are not being taken on headline price. We have seen only a handful of “reasons why” in which (low) price is stated as the primary reason for purchase.

The pricing metric (the “money” in the value for money equation) has been reducing in importance in our default weighting of the six metrics. This is partly because of the “reasons why” but also responding to the behaviour of sophisticated users who are adjusting the weighting of the metric according to personal conviction.

We are seeing a consistent trend in these bespoke weightings away from a high weighting towards price in favour of an emphasis on investment value and interoperability (the capacity of the provider to deal with the employer’s payroll and HR interfaces.

It is too early for us to speak with authority. But the evidence we are collecting suggests that our sample, albeit a sample of more conscientious employers (this service is not free), are more concerned with value for money than headline price.

The implication seems to be that where engagement occurs, the quality of decision making is more sophisticated, whether this equates to “better buying” is another thing.


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So what does a poor boy do? (Aberdeen and Parmenion)

poor boy

Fund managers think of themselves as the asset managers of their clients -the investors. But lately they have found themselves serving platforms that treat funds as commodities. They have lost their primary relationship to their customers.

The millennials took it upon them to debunk the myth of the star manager to the extent that stardom featured high on the risk register.

inevitably, the drive towards a homogenised process led to homogenised results, active managers became passive managers with salaries, active funds were passive funds with higher fees. The closet tracker had arrived

There are a few exceptions. Terry Smith of Fundsmith is as close to his investors as Warren Buffet. Indeed his nickname- the sage of Portman Square, owes as much to his investor’s reverence for his personality as for his investment style.

But there are not enough Terry Smiths to go round and no sooner does one announce him or herself – than they’re off to Mayfair to get rich managing a hedge fund.

All this is depressing to the long-term investor. The chances of being able of follow a fund manager over decades is ridiculously low. Even the fund manager’s style is unlikely to survive the regular changes in management (and ownership)..

So the fund managers never get to know their clients and the clients never get to know their fund managers.

I rather suspect that Aberdeen’s mooted purchase of Parmenion has a lot to do with re-connecting with their investors. Even if the platform remains properly “open architecture”, and doesn’t promote Aberdeen funds over those of its rivals, Aberdeen will stall be talking to their investors

Which is rather better than talking to intermediaries, if what you are about is seeing yourself as the manager of people’s investments. It is not a particularly big step from being considered a fund manager to being a manager of funds.But in the pecking order that is called the “value chain”, owning the platform is a step nearer owning the relationship with the investor.

The logical next step is to own the advisor, which would complete the chain and mean that fund managers not only managed the fund administration but organised the fund choice. This process, known as vertical integration, is precisely what the Regulators have been trying to break-up for the past thirty years.

Ever since the birth of polarisation where independent advisers were set at nine pole and fund salesmen at the other, the assumption has been that intermediation will bring value to the consumer.

And now this idea is being challenged.

Aberdeen could own Parmenon and the advisers who use the Parmenion platorm and would anyone really worry? I quite like Aberdeen. They are my kind of manager – focussing on long-term outcomes and practicing what they preach.

Such an arrangement would at least mean the advisor was properly capitalised and there was some control in place – consistently applied.

Is this what fund managers should do? Is the ultimate goal disintermediation?

Two years ago, I sat on a platform alongside Jon Kaye and Martin Gilbert, Martin Gilbert is CEO of Aberdeen, John Kaye Britain’s most passionate advocate for disintermediation. At the time i didn’t get it but I think I get it now.

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When cheap is not cheerful – Boris Bikes and uncapped liabilities.



Boris Bikes are wonderful. For £90 a year you can hurtle around the streets of London on the cycling equivalent of a Sherman Tank. All you have to remember is to dock your bike at the end of your trip and check the green light comes on.

Boris bike

Which is what I forgot to do at the Hop Exchange rack outside Borough Market on Tuesday night. In mitigation (m’lud) , it was stair-rodding down and I was legging it to the Market for some grub with my son – en route to an evening at the Globe. In short I was distracted.

But – and here is the rub, for the next 48 hours, my bicycle was AWOL, it had been re-cycled by another biker and did not get found till I had amassed a shocking £98.50 in late return penalties. The last time I felt this way was at Shaftesbury Library when I returned a book a year late.


The fine is perfectly fair, it is in the T&C of your agreement with “Santander Bikes” and there is an appeal procedure which I am following which may get me some relief.

The £98.50 is not crippling and probably reflects the trouble I put Santander (and their agents Serco to).

I remain a fan of Boris and his bikes despite the frustration of never being able to find or park your bike in the rain without something going wrong!


But here is the bit that interests me. For the 48 hours that I was racking up the fines, I had no idea where the bike was, when it would be found and what my final bill would be. In short I was incurring liabilities without any control on their management.

Although it hurt when I heard the bill, I did at least have closure. I was back in charge of my finances.


Boris Bikes are cheap, but they require a degree of attention to detail without which they can be expensive (a taxi from Vauxhall to Borough does not cost £98.50).

The real cost of the experience of losing the bike includes numerous calls to the Boris Bike helpline and my loss of productivity while I fretted. All these consequential losses add up.


The issue I now have with myself is whether to trust my ability to use the bikes going forward or accept that, cognitively impaired as I am, I should accept that I am a taxi and bus man going forward (I hate being stuck underground).

I suspect that this is precisely the mental process that many trustees of Defined Benefit pension plans are going through. Do I hand over to a Fiduciary Manager (and get an expensive taxi ride) or do I carry on propelling myself through the hurly-burly of financial markets, trusting myself not to screw up (with the occasional financial disaster).

I suspect that this precisely the mental process that someone approaching the exercise of their pension freedoms has to go through. Do I sell up to an insurer in return for an expensive annuity or do I risk running out of money?


And of course there is the x-factor of the appeal. Will my £98.50 be reduced for mitigatory factors (it was raining, I was in charge of my son, I reported the incident, preciously of good character).

I suppose this is where my analogy should break down , for if you screw up on financial markets, you should have no redress.

Except you have. Just as I am gaming the Boris Bike system by appealing, so anyone who screws up a pension transfer into drawdown can game the decision (if they screw up), by appealing to the Financial Ombudsman and all they have to do is pick the person to blame



Ceding Scheme

We want things to be cheap and we want to be cheerful. Sadly we consider this need an entitlement and we rant and rave (as I have done about the bike) till we get our way.

Like spoilt children, we expect to get our way and for someone to wipe up the mess we create once we have moved on.

And after all that- am I withdrawing my appeal? I’m thinking about it and the more I think, the less I like myself!


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Will auto-enrolment capacity get crunched?



Today is the day of the Friends of Auto-Enrolment Capacity Crunch Conference which takes place in PWC’s offices at Charing Cross.

Friends of

The big debates of the day will be about

  1. Whether there will be a capacity crunch either in provision of pensions or advice in the next three years
  2. Where the demand from the 1.8m employers still to stage will be met.

I have always been an optimist, believing that if people adopt a positive mental attitude to a problem, whether individually or collectively, they can make a difference and solve the problem.

I share this conviction with Andy Agethangelou, which is why I have always supported his work with Friends of Auto-Enrolment and urge everyone I come in contact with to do the same.


It is very easy to hear the Friends of Auto-Enrolment being dismissed as a collection of suppliers looking for a market. This is precisely the characterisation it received from one senior policy wonk at a meeting I attended with the Pension Minister,

But that is entirely to miss the point. There are indeed few on the buy side attending these meetings and those that are are mobbed like females in a sex-club. It is inevitable that suppliers (I am one of them) will drive things forward – they are motivated to do so.

But the momentum created by suppliers motivated by a common purpose (to keep the auto-enrolment show on the road), has proved sufficient to bring to the party the Pensions Regulator, Steve Webb and representatives of the DWP. We haven’t seen much of the current Pensions Minister yet, but I hope (and suspect) that that will change.

For my optimism to be justified we need three things to happen

  1. We need to maintain the political imperative ;- auto-enrolment is both too big and good to fail
  2. We need to continue to attract innovation to the provision of auto-enrolment services and the workplace pensions schemes they supply.
  3. We need to change the perception of auto-enrolment among small employers from being a duty to a blessing.

Auto-enrolment – too big and good to fail?

The political imperative to ensure that auto-enrolment works is impressive. Both at home and overseas, the success of the project so far is unquestioned. Steve Webb’s’ line “we have that political rarity, a policy success story” was reserved for auto-enrolment (and auto-enrolment alone).

The market forces needed to fulfil on the promise of the early years are various and there will need to be skill and ingenuity applied to ensure that all the moving parts work. The Government know this and HMRC is actually running a conference on Monday to make this happen.

Ironically ,  the people I know involved in auto-enrolment offering this technology aren’t going, they are too busy applying it!

Whether it be because of  Real Time Information, Auto-enrolment or any of the smaller initiatives that Government is rolling out using payroll as its intermediary, there is a realisation that Government cannot light the blue touch paper and stand back.

I am confident that the support from Government for auto-enrolment (based on pride in success and fear of failure) will be the first ingredient in the cocktail of success that I predict for the next three years.


Auto-enrolment; a challenge to the innovators?

For some time, people like me have been moaning about the tarnished state of out private pensions market. Pensions seemed owned by dodgy salesmen, operating on commission or by toffy-nosed geeks operating on the profits of large companies with bottomless budgets. Either way, the public’s perception was that the noses were in the trough and were likely to stay there.

Auto-enrolment has changed much of that and though one senior policy mandarin has recently declared auto-enrolment over, that is because she represents the tiny minority of employers who have staged and knows nothing of what is to come.

Since there is neither the inducement of commissions, or the sponsorship of the large employers, the auto-enrolment market seems a barren place for traditional advisers and providers.

But it is fresh ground for the entrepreneurs who are starting up, using new technology to disrupt the old stale practices and bring new life to a moribund sector


Auto-enrolment; a blessing (as well as a duty) for small employers?

The policy argument has been won, there is no capacity crunch as an army of worker ants in payroll, accounting, advisory and in the provision of the pensions themselves has mobilised.

What we are yet to see is fulfilment for smaller employers. The missing ingredient is the enthusiasm from employers, in truth we do not know whether this will arrive but there is an “if we build it they will come” feel in the house. That’s why today’s conference will be a sell-out.

The feeling’s like that before another great enterprise, the 2012 Olympics. I remember (and wrote about) being sceptical before the event and then surprised, relieved and ultimately overjoyed by what was delivered. People like me (who were no more than spectators) were brought into the project by the enthusiasm of the likes of Seb Coe, the organisation that preceded the event and the delivery of every aspect of the Games by an army of enthusiasts.

Workplace pensions are not as sexy as the Olympics , but they will have a longer legacy. What we achieve, or fail to achieve, in the next three years, will set the tone for the next thirty. It is vital that we enthuse employers and staff with the vision of a better retirement.


You work – you save!

This auto-enrolment hot-pot has now been a decade in the cooking. More energy has been spent in its planning than any other pension project I have been involved with. It is simply the greatest pension innovation of our generation.

It will not see it’s fruits ripen for decades (and a generation) to come. Those who are enrolled now on 1% and retire in the next five years will see relatively little from the project.

But for those who are young, and those like me who are older but recognise we have many working years left in us, auto-enrolment will be highly beneficial.

With auto-enrolment we can instil a savings culture for those at work in the UK which will become business as usual.

The rate at which we save is a conversation we have still to have, just getting us all “in” is today’s problem – and making sure that what we’re “in” is fit for purpose!



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What does it mean – being connected?


By some measures I am well connected. By the strictly quantitative measure of linked in first degree connections I could be seen as a well-connected man.

But I can assure you that internet connections give false security. Whether you have 50 , 500 or 5000 linked in connections will not increase your self-worth one iota (unless you are a fool).

People who count their popularity in terms  of connectivity, are delusional. Connectivity on social media is an investment of time and energy- and a speculative one at that.

What does it mean – being connected?



Well firstly it means you have responsibilities. You are exposed to large numbers of requests on your time – many from people you do not know – but are connected to. You have a responsibility to yourself and those for whom you have promised your time (in return for payment) to prioritise wisely.

The internet is a destroyer of a time. It is a massive festival field in which there are many attractions but not all can be visited.  You learn as you go along to be selective to prioritise.


Aligned to prioritisation, you need to be well organised, keep a diary that enables you to give time to the cultivation of your new connections, without neglecting your existing “estate”.

In my case, groups help me organise how I interact, in particular my own groups (Pension Play Pen and Bryanston School Alumni).

Through groups , you can keep in touch with large numbers of people and learn what is making a difference to them. Social Media (in both personal and business worlds) is a means for me to organise my time to make the most of it.


Dissemination and induction

There is nothing new about dividing people between extroverts and introverts. The former (and I am one of them) use social media to get messages out. We consider “content” – what we have to say – to be worth disseminating. This in itself may be delusional, but a true extrovert does not have the power to help him or herself!

The introvert may find connectivity helpful in a different way, a means of testing thinking and feeling against the thoughts of those who make a lot of noise.

This dissemination and induction of information feeds a basic need in human nature – to talk and share and to listen and absorb.


Is digital different?

None of this is new. We have always had to prioritise, organise, disseminate and absorb. Social media is simply a means of doing things digitally.

I don’t think there is anything radically different about the use of social media other than in scale and scope.

What social media does (often referred to as amplification) is to enable horizons to be widened and for people to enjoy a new richness of experience. The richness is “new” as in different, but not necessarily new as in better.

Why Columbus should have sailed his boat west when there was a perfectly decent life for him in Portugal, I don’t know. I guess, if interviewed way back then he’d have said “because I can” or some such platitude.

We don’t really know what happens in a fully digital age, we aren’t there yet. The way my son uses digital technology is different to the way I do but even he, at the age of 17, recognises that younger children at school are teaching him new ways to enlarge his horizons.

Space – the final frontier?

In the sixties, we thought that space travel was a way to expand the human consciousness, which was delusional.

Similarly , many – like me – have looked at digital connectivity and seen a new opportunity – which is proving like the old opportunity – only different.

Whether we are digital Columbus’ or social media astronauts, social media is not creating ways to expand our consciousness, it is simply helping us to understand what we already have.



Connectivity means nothing – it is a way of doing the old things differently

Connectivity – in the digital sense is a way of exploring what is already there, not a way of changing the world.

It is simply a way of doing the old things in a new way, adapting to changes in the way we communicate.

The reason I stay connected is that I, like a puny Columbus or Neil Armstrong, want to know what it’s like to be finding the edge of the world or floating in space.

Not many people want to do this connecting thing like I do, and properly so. The sacrifice of time in doing things this way, means changing priorities and re-organising what might be well organised in the first place. For many people the dissemination and absorption of information can be done in different ways – that work better for them.

But the fact that you read to the bottom of this blog, suggests that you – and many like you, are part of the digital process.

I don’t thank you for reading this, any more than I want to be thanked for writing it. But it makes sense from time to time to ask why bother.

I’ll allow you to draw your own conclusions on that.

social media


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Pricing your auto-enrolment service


This article is for the advisers to small employers who are considering offering an auto-enrolment service, both to help the employer get started and to keep the employer compliant in months and years to come.

Of all the considerations, pricing is probably the hardest.

  • Price too high and not only will you not get business, but you may prejudice existing customers against you.
  • Price too low and you may find yourself incurring more cost than revenue.
  • Adjusting pricing upwards or downwards is never helpful to a business, best to try and get it right first time.

In creating a pricing model, most intermediaries will take market soundings and establish what services other firms are offering, what they are charging and what customers are prepared to pay.

Clearly the larger the customer, the larger the budget and as customers are decreasing in size (a function of the staging calendar), so far pricing has fallen.

However, the size of employers is about to plateau, in future (nearly) all employers staging will have between 20 and 1 employee.

client sizes

For these employers , there will be varying degrees of dependency for advice and intermediaries might consider a pricing model that offers tiered levels of service depending on the level of hand-holding needed.

To do this you will need to work out what services are you providing.

The Pension Regulator has established a ten stage process for an employer to  complete the staging of auto-enrolment plan.

1.Mark your staging data in red in your diary

2.Nominate your point of contact to the Regulator

3.Find out who you have to enrol and what it’ll cost

4.Create your project plan

5.Check your payroll know what they’re doing

6.Choose your pension 

7.Assess and enrol your workforce

8.Write to your staff

9.Ensure your ongoing processes are in place

10.Complete your declaration of compliance

Could these be priced individually to help an employer select their own price? Some are quite easy (1,2 and 10  for instance). Some are difficult (notoriously #6 and 7) and some look harder than they are (using the Pension Regulator’s Project Plan tool makes 4 a doddle).

Presenting bundles of services priced on a gold, silver and bronze basis might mean hand holding on all ten (gold), those services “payroll dependent” (silver) and those that are establishing the pension interface (bonze).


Creating this matrix should enable bespoke pricing for clients wanting a tailored service. I would strongly suggest that any accountancy, bureau or IFA establishes on a time-cost basis an estimate of its cost of delivery for each part of its service.

Outsourcing the pension selection service

Where an intermediary does not feel competent to provide a service (such as helping a customer choose a pension) then the intermediary should investigate the cost of employing an outsourced provider.

This is particularly common when a “pension selection” service is needed. While many intermediaries are happy with a “pre-select”, where one pension provider fits all, many intermediaries are looking to provide a whole of market selection process using the research and selection algorithm of a digital service.

There are currently four such services to choose from

  1. DeFaqto 
  2. F&TRC
  3. Financial SatNav
  4. Pension PlayPen

Increasingly we expect to see these services embedded into the payroll software service offering. It is worth checking with your software provider and with the selection service providers whether discounts can be achieved for bulk use.

Pricing the on-going service

ae ready

Intermediaries can choose to price the initial work into an on-going service price or charge it as a standalone (implementation) fee.  While it may look attractive to roll all initial costs into the monthly service contract, it may be less risky (and more transparent) to price for implementation and on-going service separately.

A customer has three ways to meet on-going compliance requirements

  1. Using  payroll software
  2. Using third party software (supplied by the provider or independent middleware supplier)
  3. Doing the calculations and running processes on a DIY basis.

The market expects the majority of employers will manage the ongoing compliance using payroll software. But that a proportion will use options 2 and 3. Explaining that all three options are available may be sensible, customers generally appreciate the offer of choice and those  who choose a DIY or middleware option, will probably have special needs for such an approach.

As with the pension selection process, intermediaries may wish to create an alliance with a middleware supplier where the payroll software simply isn’t fit for purpose. There are a wide range of middleware suppliers, the majority can be found in the CIPP’s Directory of Friends of Auto-enrolment. 

Getting the messaging right

Employers are likely to approach auto-enrolment with trepidation. Providing a pricing plan that explains what is important, how much it will cost and how an employer can choose a service that’s right for them will ease the tension.

Approaching pricing in the way I’ve outlined is likely to go down better with your customers than a “finger in the air” approach. What’s more, it will make your service market leading for prospective clients shopping around


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Understanding the Great Fall of China (in the pub).

Great fall 7

While y’all went on holiday, market analysts threw a tantrum , Emerging stock Markets tanked and the Developed Markets went red and green faster than a traffic light.

I love writing this stuff, it makes me feel grown up – like I had some job in the City playing with billions of other people’s money. Now I live in the City, I meet the grown up people who play with billions of other’s money – typically in the Cockpit (my local).


The people who decide whether a stock goes green (up) or red (down), drink the same beer and piss in the same urinals as I do and I can tell you, they have no insight into world affairs that you could not get from listening to Wake up to Money every morning.

Infact most of the people who drink in the Cockpit have no more idea about what is going on than the people behind the bar.

cockpit 4

The City is following orders, the brokers and dealers execute the trades which are primarily driven by the algorithms determined by the models created by the analysts and fund managers. They are driven by fundamental research by economists who interpret the data released by the finance directors and (in the case of macro-economics) the Treasury departments of Governments.

In short, everyone is connected. When the wind blows through the cornfield, we see the waves not the wind. The waves tell us of the wind but by the time we’ve observed, that wind has moved on.


Making sense of the Great Fall of China

Making sense of the markets is much easier in the Cockpit after a pint of Timothy Taylors and a smile from Zoe (mine host).


Zoe not shown

Let’s take some slides created by Reuters and republished by Citywire (with some incomprehensible gibberish as commentary. You can see the Citywire stuff here.

(The captions are mine)

Borrowing doesn’t keep the bubble floating

China has been borrowing to meet its growth targets (and is getting found out).


Growth like that – you’re having a laugh?

No-one believes the Chinese Government about their growth forecast.


You’re going down with the China!









The other Emerging Markets in the Far East get dragged down with China. (In the market’s opinion, they’re all as good (or as bad) as each other.


Nobody believes the Americans (FED) either

The market (orange line) reckons the Americans will put the squeeze on China, the Government (blue line) , still talk about giving more support. China is insisting it will grow fast (with American support), the market sees this a “double lie”.



You’re not saving any more!

The Markets have worked out that rather than building up savings (in overseas currencies, they’re now spending their savings. This makes them nervous.

China 6

For the high borrowers, the party’s over.


Cheerio cheerio cheerio!

The markets are giving China and other Far East economies a red card. As they get frustrated with broken promises, they drive The Emerging Market (EM) stock markets lower.

By comparison , the Developed Markets (DM) look more reliable and are being treated better.

keep calm


The language of the PUB (lic)

So in the language of the pub, which is mainly the language of football fans,

the Emerging Markets in the Far East (China principally) are currently serving a ban for a series of yellow card-able offences.

If Zoe (mine host) asked me to explain the Great Fall of China (and she might well do), that’s how I’d put it.

The great communicators of these things- the Micky Clarkes and Tom McPhails and Justin Urquhart- Stewarts and Ann Richards of this world, can translate these complicated charts into simple sentences that we all can understand – and do it off the cuff (as they think simple).

keep calm

What happens in China now affects the likes of Zoe and her customers and not just because they are in the market. We are all directly impacted by stock-market valuations because we all have (or will have) savings linked to the market.

So it’s no use writing gobble-de-gook like this.

The Bank for International Settlements has been loudly warning from the side-lines about the fault lines which could become apparent as huge carry trade flows into EM markets sparked by ultra-low developed world borrowing costs begin to reverse. Easy financing terms have resulted in a major global explosion of debt and other claims on EM states, as well as stoking domestic credit booms.

When you could say this

They’ve boomed and now they’re bust!

Great fall 6


After thought

If you want to read a sensible evaluation from a real economist (Roger Bootle) , you can do so thanks to the Daily Telegraph


The upshot is that, in my view, the world economy is not on the brink of a China-induced relapse. On the contrary, as lower commodity and oil prices work their way through the system, in the US and the UK at least, we will see consumer spending rising and the economic recovery strengthening.

keep calm




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Don’t be daunted – it’s not hard (or expensive) to choose the best workplace pension for your staff

how to choose

If you are a boss, or act for a boss as an accountant, financial adviser or payroll manager, you may be getting worried about auto-enrolment.

You’ve probably had your little brown envelope from the Pension Regulator telling you that you have been allotted your own staging date.


Don’t be daunted, getting a pension in place for your staff and managing the new process called auto-enrolment is not as hard as some would make you think.

Plan ahead and use the tools available to you. The Pension Regulator has an excellent ten point plan which- providing you stick to it- should see you through.

You’ll need some help from the people who manage your payroll and you’ll need some help on the pension.

If you don’t know where to start on the pension, watch this 10 minute video.


If you want to choose a pension for real, go to http://www.pensionplaypen.com

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Carfest South – your chance to wear those wellies



They’ve been lying in the back of the cupboard since you bought them. They made you feel so young- they made you feel like spring had sprung.


But you never made it to (let alone through) the Glastonbury ticket scrum and the line-ups at Leeds and Reading this weekend didn’t make much sense.


But there’s always Carfest, which is altogether nicer. It’s in posh Hampshire for a start, and it’s on a farm so you can test your recently acquired cooking skills decorating biscuits and making ice cream – and Father can learn how to flip burgers to professional standards.

And then there are the kids- Sharky and George, those ex-Etonian reprobrates will entertain them all afternoon with water-bombs fired high into the damp air from catapaults.

In short, if you are white, from the Home Counties and have 1.8 children in private education, Carfest is for you.

Music – (it ain’t what I call rock ‘n’ roll)

Friday 28th

Saturday 29th

Sunday 30th

Jools Holland

Scouting for Girls

The Boomtown Rats

The Lionels

Paloma Faith

Paul Heaton & Jacqui Abbott

Seasick Steve

Sophie Ellis-Bextor


The Feeling

Ward Thomas



Bjorn to Rock

Eddie and The Robbers

Level 42

Midge Ure

Take That

The Shires

We didn’t stay for Paloma, put off by her sneering earlier in the summer about Mums and Dads in the audience. WTF was she doing here then?

It was a Chris Evans love in and it rained enough for us to feel the wellies were a worthwhile purchase.

For some reason we found ourselves in front of the stage so if you are a fan of Dan Gillespie Sells, and what right thinking man isn’t, here are some pin-ups.

IMG_2938 IMG_2937 IMG_2929 IMG_2971

For Stella , it was all about the Smiley Car


And for me it was about the Camaro

I met her on the strip three years ago

In a Camaro with this dude from L.A.

I blew that Camaro off my back and drove that little girl away


Seasick Steve was great and so were Paul Heaton and Jacqui Abbott


Stella and I were able to demonstrate some Legal and General/First Actuarial solidarity


This is the car that Ayrton Senna drove in his first season (so nearly winning Monaco in the rain) – Tolman 1984


And this is the car that Jody Scheckter won the Formula 1 championship in in 1978


And here’s a racing Outspan orange and a racing sofa

IMG_2793 IMG_2791

And Chris Evans’ Mum was guest of honour


And I shed a little tear because I must be getting old to like this stuff. And…….

‘Cause summer’s gone and the time is right

For racing in the street’

Tonight my baby and me we’re gonna ride to the sea

And wash these sins off our hands

Rock and Roll was always a lie, Springsteen was the guy who made me see that.

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IFAs take the lead in sorting the transfer blockage.


think big


Two things I’m really looking forward to in September are threesixty’s two “Big Thinking Days”. One’s in Edinburgh and one’s in London and if you’re going, you;re in for a treat.

Threesixty are a pretty pucker outfit (IMO) and I’m  chuffed to be involved. Here’s how CEO Phil Young bills his event

There can’t be many professions subject to as much outside influence than that of the financial adviser.

threesixty’s Big Thinking Days have been put together with exactly this thought in mind.

Here’s the ‘Big’ idea …

If you were able to take a look around, and understand all the issues which were likely to shape the views of yourself and your clients, you would have a better chance of knowing how to react, when not to react, and how best to prepare and position things with your clients. It’s rare that we get a chance to take a step back, look at the bigger picture, and think about the future . . .

This is your chance!

Sadly for IFAs, their future has been shaped by legislation, they have little input into the way to lead their markets. Looking at the line-up for these events, the Big Ideas survive, this is not just a marketing jamboree for the insurers , fund and platform managers.

big idea

One Big Idea – addressing transfer values

We’ve been providing actuarial input and our client feedback to threesixty for six months now as they make a concerted bid to shift regulatory emphasis governing the transfer of defined benefits. The “Big Idea” that threesixty has, is that the primary driver should be what the customer wants  and this should be informed by the Transfer Value Analysis rather than governed by it.

Currently, the analytical process makes decisions black or white, you either have a transfer value that is sufficient to cover the guarantees given up – or you haven’t. The measure of that is known as the critical yield and this is calculated using similar assumptions to those operated in calculating the transfer in the first place.

As we all know,  the process of paying a pension from a defined benefit scheme is less expensive than replicating this process using an individual annuity. Were the guarantee from the defined benefit as good as the guarantee from the life company, it would not make economic sense to transfer.

Any system based on a like for like comparison is always going to favour leaving the money in the DB scheme. This is what the TVAS system does, and it makes pariahs out of advisers who pursue the right to transfer and turns people who are determined to transfer their rights into insistent customers.



Is the law an ass?

By no means.  We need an extra layer of protection to make sure people properly engage in what they are giving up and recognise the nature of the risk transfer.

We also need to protect people from scammers who are using pension freedoms (and even the scorpion campaign) as a front to steal their money,

The law is not an ass, but it makes an ass of advisers who are unable to pursue legitimate lines of advice because of the threat of action from their Regulator, from the Financial Ombudsman and from their Professional Indemnity (PI) insurers.

So how does the Big Idea turn out in practice

What threesixty are doing, and this is largely down to Phil Young’s vision and Russell Facer’s expertise, is creating space for suitably qualified advisers to act in, just as actuaries have. Space where, subject to the agreement of the insurers, regulators and ombudsmen, they can advise in what the Americans call a “safe harbour”.

They have taken an idea , pioneered by Margaret Snowden and the Incentivised Transfer Working Group, to establish a code of conduct from within.

I won’t spoil the boys thunder- I have only seen drafts – but I tip my hat to them. It looks more than likely that through this initiative, those wishing to shape their retirement finances through financial planning (as opposed to the payment of a defined benefit) will be able to do so.


Why is this such a big idea?

I sense, at last, that there is some grown up dialogue happening between advisers and regulators and that advisers are – independently of their former paymasters – negotiating the terms under which they advise.

This is an important step in their gestation from salespeople to professionals.

I’m not saying that some advisers have not had individual influence, you only have to look at Alan Higham and Michelle Cracknell, both of whom have been practicing IFAs in recent times to see that advisers are influencers.

But what threesixty are doing is responding to calls from the actuarial community and from the trustees of occupational pension schemes, to show leadership. And they are doing so.


big thinking

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The markets are back but the damage is done.


There are those who thrive on the ups and downs of the stock market; high frequency traders take fractional advantage of moves up and down and like wind farms, make most when it’s stormy. You can buy and sell this volatility, using derivatives based on the Vix index (of volatility in the S&P 500 over the next 30 days).

For those who are saving, there is the comfort that when the market is down you buy cheap and when the market is up, what you bought cheap is “in the money”. Even when you buy “dear” , you don’t have to sell “cheap” because you are saving.

Savers needn’t be afraid of volatility, but spenders should.


Volatility is why most income drawdown plans don’t work as planned.

Unless, you are Paul Lewis, and invest your retirement pot in cash (forsaking any chance of investment returns), your money is in the market and the market is historically volatile.

This is a chart of 30 day volatility on the American stock market 1985 to 2012.


You may not read the small print, but you get the big picture.The big spikes are where the market is all over the place and over the course of 27 years (around the lifetime of an average drawdown), your fund is going to get punctured by one of those spikes.

It’s not as broad as it is long.

The problem is asymmetrical, it does not have as many winners as losers. I presented this slide some time ago to explain why (thanks Alan Higham for the graph).


The spike in the volatility on 9th August 2011 wasn’t caused by anything rational, it was down to some problems with computers that screwed up valuations.

But the market had a field day. Those who could see what were going on and were able to trade were able to take advantage of those who had to trade but didn’t.

In short, hundreds of thousands of small investors (quite often people with money in drawdown cashing out to get their monthly payment) found themselves selling at a price 9% lower than at the start and end of the day.

Alan Higham’s internal statistics (when he ran Annuity Direct) was that over 70% of the money that was disinvested to buy a once in a lifetime annuity , was disinvested from the markets.

What this means is that a high quantity of those people buying annuities around the 9th August – sold shares on 9th August – many losing as much as 9% of their retirement savings.

And 9th August 2011 will go down as a day when nothing much happened, the markets started and ended the day at around the same levels.


Paul Lewis – right and wrong

Why Paul Lewis is both right and wrong is that he understands he is powerless to protect himself. As a single investor he has (as the slide above shows) no power to determine when he is disinvested and it’s not just sod’s law- it’s market forces, that dictates that he will get the worst price in the day for his disinvestment.

This is not paranoia, it is the law of the jungle. Individual investors are easy meat for high frequency traders. Infact without individuals wandering around in the jungle, there would be no-one for the tigers to eat.


But Paul is wrong to think his cautious approach is right for everyone. Paul is (I think) 67, my actuarial tables tell me he’s got another 20 years in him (and they are probably underestimating Paul!). If Paul stays in cash for 20 years, he will either get a pitiful amount of income or he will drawdown too fast and find himself cashless in his eighties. Paul says cash is no place to be for someone in his 60’s, I say (in general) he is wrong.

Back to the Great Fall of China

On Monday, the Chinese stockmarkets tanked, today they are on the rebound. The FTSE tanked on Monday and but on Thursday it had recovered all its losses and a little more. Like the 9th August 2011, the week of August 24rd 2015 may be remembered as one where nothing much happened.

But  people who were selling their pension pots to pay off the mortgage – and did so at the start of the week – the amounts in their accounts could have been 5% more if they’d waited till the back of the week.

Who is to blame?

No doubt there is some ambulance chasing dingbat, opening up the back doors and wheeling out the stretcher as I type. Somebody is to blame for the Monday disinvestor being in shares, somebody to blame for him selling at the bottom of the market on Chinese Black Monday.

I can understand the disinvestor being peeved, he had no control. No one was looking after his interests, he was wandering around in the jungle on his own.


The problem with being in the jungle at night..

Some time ago we gave up on the idea of mutuality. The concept that held together our insurance companies, building societies, even banks – was that you were stronger together.

Part of the problem has been that idiots have been put in charge of the co-operatives, but the bigger issue is that we have been led to believe that given a good torch (and a financial advisor) you can get through the deepest jungle on the darkest night.

Forget it- I’ve been an advisor – advisors are no more likely to stave off a tiger than you are. Which is why sensible advisors have always suggested people club together to protect themselves from night-time jungle perils.

Until now that is.

Now it’s every man for himself. People with little or no understanding of the markets are drawing down from individual funds which offer little or no protection and many will be ruined.

Even people who drew down a slice of income early this week (from an equity based fund) will have upset the plans for the rest of the year, they’ll have sold too many units, their fund will be ravaged and the remaining units will struggle to get the plan back on par.

The ravaging for these people will be felt for years to come as their funds remain in deficit, only two things can happen – they must take a pension pay cut or risk running our of money.

Are collectives better?

You bet they are. collective drawdown arrangements (better known as CDC) have three key advantages

  1. They manage the risk of selling at the wrong time over thousands of people, some drawdown luckily , some unluckily but the lucky subsidise the unlucky and everyone gets something like what they expected – no nasty surprises.
  2. Collectively you can afford someone to manage the dealing on the fund so you are not always selling at the worst point of the day/minute/second. Collectively you have some clout in the jungle.
  3. Together, you can provide each other with protection against calamaties – living too long being the most calamitous happening for someone on their own. Collectively , “longevity” can be managed.

Where are the collective solutions?

The last great attempt to sort out retirement collectively – the defined benefit scheme – was scuppered by guarantees. People got too greedy and wanted all the risk transferred to the plan sponsors- the employers. Employers recklessly agreed. Government’s encouraged the greed and the  recklessness.

The door slammed shut on DB plans when accountants introduced mark to market valuations and things could get a lot worse. If DB plans had to reserve for their guarantees as insurance companies do, then the deficits would be out of sight.

The collective solutions are in hiding – or perhaps in waiting. There are brave people- people like Kevin Wesbroom, Robin Ellison, Con Keating, David Pitt-Watson, Barry Parr and a few others who keep the flame alight for collective solutions.

There are many – many on social media – who want to extinguish the flame. In weeks like the one we’ve just been through, I realise that income drawdown is not the right plan for most ordinary people. They would be better off in a collective arrangement.





I’m going to make sure that the light does not go out and that the collective solutions to this problem continue to get publicity.

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Pot follows member – over a cliff?

Horse over cliff

There’s a great saying in racing “I’d follow that horse over a cliff”. It’s a morbid comment on most gambler’s instinct to chase losses for sentimental rather than economic reasons.

When conviction sets in, then rationality is the loser and an idea can detach itself from reality, we really can follow ideas too far.

There are a number of Webbian ideas floating around at the DWP and pot follows member is one of them. Steve Webb was long on ideas and short on time to execute them. His term of office ended before those ideas reached the cliff-edge of execution. I would put CDC in the same category.

Why I’m writing about this today

Yesterday I arrived at Centaur Towers to do  a podcast with Sam Brodbeck. I had no idea what about nor whether I was podding solo or casting with a colleague. Sam announced as he switched on the mike that we would be talking about Pot Follows Member and that the gentleman I was sitting beside was Ben Cocks of Altus, who is in the thick of it (PFM speaking that is).

If you hear the podcast, watch out for an agile Plowman winging it , it was uncomfortable!

This blog is the result of a sleepless night trying to work out what I would have said if that Broadbeck hadn’t played that trick on me!

What Ben, Altus and the PFM crew get excited about

Ben’s views are documented via a recent blog published on Altus’ website and on linked in. The gist of his argument is that he hopes the DWP will press on with PFM

it will help avoid a proliferation of small and easily forgotten pension policies but more importantly it will show both customers and the industry that pensions can be quickly and easily transferred between providers. Without this free flow of assets between providers it’s hard to see how pension freedoms can be effective or more generally how competition can work at all.

This statement suffers from the myopia of the enthusiast (punter follows horse). The idea’s of pots free flowing between providers in a game of musical chairs. When the music stops, so to the pots, leaving one big fat pot for the retiree to enjoy in later years.

This works for ISAs because of the simplicity of ISA structures. ISAs have no nasty little secrets, like capital units, guaranteed annuity rates or guaranteed minimum pensions. ISAs are all taxed in the same way and they all invest in transparent investment vehicles without Market Level Adjusters.

Most importantly, the ISA pot is transferrable in specie. “In Specie” means that not just the value of the pot , but the actual investments, can be transferred as they are, without them having to be bought and re-sold. This process is called re-registration. It makes pot follows member as easy as sticking a new label on a tin of peaches.

So why can’t we have re-registration in pensions?

It’s a good question with a bad answer. The bad answer is that when your contribution is received by the pension provider it buys units in a fund that is typically created by that pension provider in a policy that is owned either by trustees (occupational schemes) or by the contributor (personal pensions). The policy may be owned by the trust or beneficiary but the assets within the fund are owned by insurance company issuing the policy. The insurance company typically outsources the management of those assets to another party who in turn sub-contracts many of the duties of fund management to other parties. The result is a buggers muddle of ownership.

Ownership issues in pensions are so complicated that the only way most pension pots can follow the member is by being “cashed out” and reinvested when they get to the next pension provider. While the money is in transit – it is “out of the market”, if the market falls while you are out of the market- you win, if it rises – you lose. It’s a zero sum game overall, but (as usual) the policyholder takes the risk and losers lose.

Not only is there the zero sum game of out of market risk (with winners and losers) , there’s also the frictional cost of buying and selling units. Insurance companies are fond of telling the market that they can manage the buying and selling of units across vast books of business at minimal cost.  It is true that the process known as “crossing” means that insurance companies can minimise the number of units actually sold and bought, but they cannot eliminate the costs, especially in thinly used funds for which a seller may not find a buyer.

The ideas of a “free switch” of funds, or indeed a “penalty free transfer” are myths created by insurance company marketing departments. The process of moving money from pot to pot is fraught with potential costs , many of which are crystallised. You will not see the costs show up on your transfer statement because of the subterfuge of another insurance company invention “the single swinging price” of a unit.

The single swinging price

This wonderful invention allows insurance companies to portray the buying and selling of units as being at no cost. But this is not the case, if you do the maths you will often find that the value of the units you sold (at the previous day’s price) does not match the value of the units you buy (at today’s price). Something’s happened.

What has happened is the imposition of what is wonderfully called a “dilution levy”. The dilution is in the price of the units you have sold, which have swung from one price to another. So you have lost money. The justification for the single swinging price working against you is that the insurance company has to make up for losses created in trading.

Theoretically the single swinging price could work for you as well as against you. But there is little chance of that. The single swinging price is not producing a zero sum game, there are a lot more losers than winners and that is why so many people on the wholesale money markets in the City- drive Ferraris.

The risks of Auto- Pot Follows Member.

Pension are complicated – every fool knoweth that. But why pensions are complicated, very few know. That is because the complication is papered over by half truths like single-swinging price, free switch and penalty free transfer. There are many other phrases used to explain away complexity and most of them are invented to disguise the cost of the complexity – to policyholders (and ultimately pensioners).

We cannot have pot follows member till we have assurance that the costs of transferring pots from member to member are fully disclosed and are kept to an acceptable minimum.

The arguments put forward by Ben Cocks and Altus are right at a high level. If we were talking ISAs , where all these issues disappear because of the simplicity of the ISA and because we simply re-register , then I would have no problem.

But to have an automatic , or even a default mechanism to transfer pots from place to place, we need to be certain that there will be fairness in the process.

The current proposals draw an artificial limit on the auto-transfer process, which will only apply to pots under £10,000. This artificial limit has no sense at all. £10,000 to someone who has £1,000,000 in his big fat pot is a huge amount. But £10,000 to someone with a big fat pot of £20,000 is a third of their pension savings.

Unless  the insurance companies are prepared to guarantee “loss-free-transfers” to all with pots of less than £10k, I cannot support a blanket switch. I have seen no evidence they are thinking of doing so.

Follow the member where?

There is a final point to this. The pot may follow the member to a better place, generally pension plans have been getting better for the consumers (especially with the abolition of commission). But that’s for new savings.

Existing savings, where the bulk of the costs may have been paid up front, may well be better left where they are (especially if there are guarantees in the air).

And some of the new pensions we have researched (and are accepting contributions under auto-enrolment) aren’t very good at all. Indeed we’ve had to report one or two to Action Fraud.

So to suppose that money flows around the system to the betterment of DC outcomes is naive. Generally things are getting better, but try telling that to people for whom things get worse.

Where I stand

In 1999, I wrote a paper for the Government’s stakeholder consultation (via Eagle Star) which argued for a system similar to that in Australia where members determine where money goes , employers pay money into a central pot and it gets dished out to the member’s pot using technology. You can see how this works by going to SuperChoice’s website. Australia adopted this system, we didn’t. Tough on us.

We are where we are, there is so much spaghetti out the back of the hi-fi, that I’m tempted to ditch it and start again with an MP3!

But we can’t do that with pensions, we have to live with the legacy and make the best of a bad job. We cannot insist on pot follows member to clean up the legacy.

The best we can hope for is that “scraping technology” as used by the likes of MoneyHub can pick up live fund values and give people the semblance of one big fat pot -despite the pots sitting with differing providers.

The big issue is where those pots go – and as I have no confidence that those pots would go to a good provider who would help the ordinary person spend their savings as income effeciently, I say – for the moment- keep the money where it is.

Do not press any buttons, do not incur any (extra) charges, do not follow the pot over the cliff.

horse apple


If we get a default decumulator that is as good at helping us spend our savings as build them.

If we get a way to satisfy people that they will be protected in later life through such a decumulator from living too long (or even from nursing fees).

If we have a radical simplification of taxation to make pensions as structurally simple as ISAS

If we have a no-loss guarantee from participants in the transfer that makes the phrase “penalty free transfer” real.

Then I am for pot follows member. Right now I am giving it an amber light and it won’t get a green light till I can see that the pension landscape is clean enough to see money’s flowing freely through it in the ideal way promoted by Ben, Altus and those who will follow pot follows member over a cliff.

horse over cliff 2

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How do you compare pension default funds?


apples and pears


An old colleague contacted me yesterday with a simple (but great) question. “how do you compare pension default funds”.

I can speak on this for First Actuarial, who provide the investment ratings on default funds for the Pension PlayPen and for Pension PlayPen who apply these ratings to the circumstances of each employer.

You could split the question into “what’s best” and more particularly “what’s best for you”.

This is my answer , but I’m looking forward to hearing what everyone else had to say when the FCA publish the results of their call for evidence later in the year.



It’s a great question. Of course this is what http://www.pensionplaypen.com tries to do using a value for money benchmark which is (currently) all out own.

It’s not as simple as it was, in the past a workplace pension’s default fund targeted an event -retirement (a pretty nebulous notion but at least one that everyone thought they understood). Now defaults can target a certain age (or year), or a product (annuity, drawdown,cash) or even- (were we to see CDC) – death.

But the fundamental measurement always comes back to value for money and can only be based on anticipated outcomes based on likely probabilities of success.

To achieve anything like a fair basis of measurement, there has to be consistency in the way “value” as well as “money” are measured.

Even the “money” or “cost” measure is tricky. What might look like an investment AMC may be anything but. With the wholesale market price for a global equity tracker around 6-8bps, even the super-low AMCs of 25-30bps are clearly mainly a handling rather than an investment charge.

If you are paying 75bps (0.75%) for a default fund, you are probably only having 10% of your payment passed on to a third party. The rest is kept by the product manager.

But the 6-8bps being paid by the product operator may be subsidised by all kinds of member borne charges that the member doesn’t see. These might include the charging of secondary services to the net asset value of the fund (NAV) which creates a drag on the performance and but’s not part of the AMC (hidden charges).

It might also include the re-use of the fund for secondary purposes (stock lending) where the member’s stocks are re-used for the profit of the fund manager and to the detriment of the fund (stocks lent are not always returned).

So a value for money measure has to be independently measured from the AMC. The value measure is even more complicated as defaults split to do different things.

We may sometime see a reclassification of defaults around their targets (in the old days we had “balanced”, “equity”, “property” etc. In the future we may have “target date”. “whole of life” “annuity at retirement” “cash at retirement” etc. This at least would enable analysts to compare apples with apples.

Within each category we could then establish what members would be likely to get for their money – what the “value” was. To do this, there will need to be commonly agreed benchmarks for what a fund might reasonably be expected to achieve and then a risk adjusted return analysis that looked at how the fund was progressing based on both the actual performance and the risk taken to achieve that performance.

The ultimate performance measurement has to be a composite of the two strands of analysis (value and money). But the more fundamental question is what do I want my fund to do.

To use an analogy


If I can buy a functioning Ferrari for £10k and a functioning mini for £9k I might still struggle -tempted by an inappropriate choice (I don’t need a Ferrari- even though it is better fun).

If I bought the Ferrari because it appeared better value for money and then used it for the school run, it might be fun for a bit, but it would soon become tiresome (they’re a nightmare to park). The mini might have been a better fundamental option after all!

But if I’m looking at a mini for £9k and a Trabant for £9k, the choice is easy, in the same category of car- the mini wins hands down.


I won’t stretch the analogy because of course it also comes down to condition etc (when buying cars) and I know you can’t buy a first hand Trabant but I think this gives you the right picture.

The point I’m making is that we don’t (yet) have a proper system of comparing apples and pears , let alone different types of apples and pears and certainly no way of comparing value for money when we’re buying different apples and different pears.

If you wanted a simple answer as to why this is, I’d say it comes down to a lack of holistic thinking. Investment consultants (apart from the magnificent Adrian Kite of First Actuarial), still think about DC investment funds in terms of the past and not of the future. They don’t have a clear set of categories, they don’t properly measure costs (money) and they haven’t developed an outcomes based (risk-adjusted measure) for performance (value).

The FCA called for evidence on all this in April and we are now nearly in September. Hopefully they are busy thinking about what value for money looks like in a DC world and will take us one step of the way towards answering your question for the country.

We need more people asking your question Dominic, and more people thinking about it in a clear headed way. When an employer comes to me and asks me “what’s best for my staff”, I am expected to give him a straight answer, a comparison of the default fund is critical to that answer.

I can tell the employer what is best based on investment ratings, durability, communications, payroll interface and admin, at retirement strategy and of course cost. I can of course tell whether the provider is prepared to offer his product in the first place.

But our system is based on First Actuarial analytics and on the weighting to all the measures listed above determined by First Actuarial and by the adjustments made by the customers of Pension PlayPen to those ratings.

It is only one view, one way of doing things. But at least I can explain it and (for me at least) it is convincing.

What we need is a nationwide, consultancy wide, Government approved, answer to your question. I will continue to press for that and glad that other people (like you) are asking the same question

Kind regards

The Pension Plowman

Dominic Jessup

Dominic Jessup


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What the great fall of China does to my pension.

great fall 2

The falls in the world stock markets since April appear huge, our own market has fallen 15% , market in Asia, much more. But the equity market that has fallen the most is China. The great fall of China is being billed as a “re-calibration” – in other words, market experts would have us believe that the original valuations of Chinese company’s worth was wrong and the fall in values really is a matter of better accounting.

Great fall of China

A more pessimistic view is that global economists have been lulled into a false sense of security, relying on growth from China and other emerging economies to drive up valuations of European and American companies.

Whichever view you take, and I suspect the truth is somewhere in the middle, this has been a crappy six months for people who’s pensions have been invested in shares.

Is your pension invested in shares ?

Great fall 7

Most people have no idea where their pension is invested, but they will – especially if they are in a Defined Contribution scheme, most likely be invested in shares. This is because most people in pension schemes (rather than drawing pensions) are some way from retirement and the default settings for their investment strategies have them 100% invested in shares until they are at least fifty.

So if you are under fifty you are probably mostly invested in shares. And as you get older you are less invested in shares and more invested in bonds. Bonds aren’t supposed to go up and down like shares, the value of bonds depends on the outlook for interest rates and the financial strength of the organisation issuing the bond (which is an i.o.u.).

If you are Paul Lewis , then your pension isn’t invested in shares or even bonds but in what is invested in cash.

My comment is fair. Paul is (hopefully) in no need of taking all his pension as cash and is likely to live at least 20 years (he was born in 1948 making him 67 – I think).

Paul can crow for the moment that he’s unaffected by the “great fall”, but with cash yielding little more than 0%, Paul is using his pension as an expensive cashpoint.

George collects your pension

George collects your pension

Most people who have pension pots and are over 55  are not invested in cash, but in real assets – shares and property , mixed up with debt (bonds) and cash. This is the default strategy for most people in drawdown and in lifestyle strategies.

If you are not in drawdown, you have a guaranteed income and you have no worries (at least about market crashes) – your income is guaranteed. You could  be getting a pretty crappy income in the first place mind! (unless you bought your annuity when interest rates were high or were in a DB scheme a decent time).

Does it matter if you are invested in shares?

Great fall 5

It matters more as you get older. If you have 20 years to go till the point your pension starts paying you, then you will go through many “great falls” and you should shrug, keep calm and carry on.

If you are approaching retirement and thinking of spending your pension , especially if you are thinking of taking all or a big chunk at once, then being in equities over the past six months will be bad news. You have two choices, bite the bullet and cash out (tough) or hang on and wait. If you are cashing out of equites right now- it’s going to be painful -especially if you are looking at a statement dated from earlier this year!

Similarly , if you are currently drawing down from your retirement pot each month and you are in shares, then this dip could really hurt you. You could become a victim of what has been called “pounds cost ravaging”.

What this means is that the monthly amount you are drawing is meaning you are cashing in your shares at a very low price, depleting your retirement pot far too fast. The payments you are currently taking could deplete your pot to such a level that you will have to adjust your payments (downwards) in the future.

Great fall 6

This is why Paul Lewis says that someone in his sixties should not be invested in shares.

What does the great fall of China mean to those with a  pension?

To youngsters- it’s a blip, that will be forgotten like all the other blips (including 1987 and 2008) by the time they start spending their money.

great fall 3

To the middle aged it could be a pain, if there’s a plan to cash out all or most of the pension

To those in later life (who don’t have income guaranteed), this fall of China could be bad news. It could mean them having to take a haircut on the amount they pay themselves for the rest of their life.

great fall 4

Why is Paul Lewis wrong?

Paul Lewis may be right for Paul Lewis, but he is not “everyman”. Most people cannot afford to have their pension pot in cash the last 20 years of their life. They need to take some risk to get some reward.

Over the long term, a diversified approach to investment which intelligently mixes up shares, bonds, property and cash is the most sensible way for most people to be invested to have a secure income.

Insurance companies invest this way with their mega-funds and so do the big public and private defined benefit funds. Go abroad and look at what the big sovereign wealth funds do – it’s the same. They invest across a range to get a smoothed investment return.

What’s more, because they are investing collectively, the cost of investing for the big boys is much lower than for you and me.

Finally, these big funds are investing on behalf of everyone and can manage payments much more easily – it makes sense that if you are managing for millions of Paul Lewis’ (so to speak), you can run a fund for the Paul Lewis’ that die young and those that live a long time (without the fund going bust).

If you are a DC investor in Holland or much of Scandinavia, you get the protection of collective investment. It doesn’t seem worth much when markets are going up, but when times are tough (as they are now) collective investment protects people from pounds cost ravaging and allows them to continue to draw a stable income.

Paul Lewis Paul Lewis Paul Lewis 4 Paul Lewis 3Paul Lewis 3Paul Lewis 4Paul LewisPaul Lewis

Paul Lewis is wrong because he is only Paul Lewis, he should be in a collective fund with lots of people like him , he should be invested in a diversified way (not just in cash) and he should have protection against being a super long-living Paul Lewis (which he very well may be).

The great fall of China

So what does this massive fall in the value of world shares mean for pensions as a whole? It means that for the first time since the Pension Freedoms came in (in April) that people’s pension pots are likely to have fallen in real terms. Sooner or later, all the people who have chosen not to buy an annuity but to drawdown from equity portfolios are going to get a nasty letter from someone saying they are going to have to take a drop in drawdown or risk their money running out.


These people are going to moan, they will moan like crazy. They will moan at fund managers, insurers, advisers and they’ll moan at the Government.

And people will start asking questions about the pension freedoms. First of all, they will ask why they stayed in equities, then they will ask why they didn’t get protection and eventually they will ask why nothing is being done to provide a collective way to spend their pension pot. Put another way, why there isn’t a default spending option.

The answer’s coming (slowly)

Unless the Government cans CDC, it can legitimately claim that it is building the conditions for a default spending option for people who want and need to be invested in real assets and cannot afford the “risk free” option of annuities or the Paul Lewis cash option.


CDC won’t be around for a few years yet, this is because there is precious little resource being directed towards building the detailed regulations that allow it to be integrated into our already complicated pension system.

It may be that the changes in taxation of pensions make the progress to CDC quicker (if pensions become simpler) but I think this is more dream than reality.

A solution to the problems that people will face from the great fall of China is on its way but won’t be here till the end of the decade (IMO).

The pain that many people over 55 will suffer as a result of the slump in stock-market valuations will come soon and with it a call for reform. In a perverse way, the pain of a stock-market crash is probably what we need, to provide a lasting solution to the problems we face spending our pensions.

time to spend

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The tricky job of enrolling the self-employed into pensions


The estimate from the Citizen’s Advice Bureau that some 460,000 extra workers are currently missing out on auto-enrolment because employers deem them independently self-employed seems reasonable.

When employers conduct a workforce assessment, they generally do so with a cut of data from payroll. They do not ask their finance person for a list of people who are regularly invoicing the organisation for the possibility some are so dependent on the payments of these invoices that they should be reckoned “workers” and subject to the assessment.

This is particularly important for the many employers who claim to employ no-one but still submit trading accounts. These firms are typically paying regular bills submitted by self-employed individuals, if only to their book-keepers!


This state of affairs is problematic and needs clarification. Ros Altmann is currently running an informal consultation to find areas where simplification is needed to make auto-enrolment easier.

Clearly this is an area where simplification would be most helpful.

But for the self-employed person the situation is anything but simple. Not pushing for a pension contribution is to deny yourself your rights, but most contractors who are dependent on one employer are frightened to death of losing the fragile contract. Could it be proved , following the pension conversation, that the contract was lost because of it? The self-employed have few rights and the right to a pension contribution is very far from the top of the list.

The Government struggles to find a definition of a worker that properly covers the contractor.


So the question for Ros Altmann is whether to press their rights – and cause a lot of trouble, or to drop their rights by maintaining the current state of affairs.

I am unsure about what is the best way forward. I am not used to sit on the fence but while I don’t see the current situation as satisfactory, I think there could be a lot of harm done by forcing employers to make an invidious choice.

This is not an argument for compulsion (which is where these conversations usually lead).  Making it compulsory on the employer to include all self-employed contractors on the auto-enrolment assessment may be helpful to the Treasury – who have long been wary of the bogus self-employment contract. But in the process of forcing the company’s hand, it risks driving the self-employed into unemployed at a time when the unemployment statistics are crucial to the Government’s reason to be.


So it’s going to be very interesting to see how this conversation turns out.

What may be best is that we have another consultation (we haven’t had one for weeks). A consultation on what to do about self-employed pension contributions is long overdue.

My personal feeling is that we need to introduce a voluntary class of national insurance contributions from which the self-employed could opt-out, through an act of extraordinary complex tax- shenanigans which would need to be signed in triplicate by any advisor (ensuring that there was no incitement).

Contracting out of these higher rate self employed national contributions would then become as onerous as opting out of employer contributions.

With a Government match on contributions , it might even become a popular thing for the self-employed to stay in.

Posted in advice gap, auto-enrolment, Henry Tapper blog, Politics, Treasury, welfare | Tagged , , , , , , , , , , , , , , , | 4 Comments

What passing bells for those who work as cattle?

passing bells 2

It’s currently cool to talk about treating your workforce as a commodity. Evidence- Jeff Bezos can get on the Front Page of the New York Times for his experiments in office cruelty. “Amazon is successful right now- Bezos must be getting it right” – this from one hard-pressed “worker” in Pension PlayPen Ltd!

Bezos’ antics haven’t gone un-noticed – not least in the pages of the Guardian where Will Hutton has written brilliantly about the disposability of the workforce, citing the behaviour of Jeff Bezos to show just how far Amazon is from what is the cultural standard in UK’s traditional employers.

But the standards of the past are not always transposing into the present.

The Citizens Advice Bureau have calculated that there are 460,000 people in this country who are being classified by employers as self-employed but are their “workers’ according to the definition applied by the DWP for inclusion in auto-enrolment.

In the old days, we’d have heard about this from the unions, but the 460k lost souls aren’t union members. Of course pensions aren’t the only things they are missing out on but it’s the kind of issue I’d want to have our new(ish) pension minister getting her teeth into

For the record Baroness, it’s not cool as far as I’m concerned.

I wrote in 2012 about the practice of some staffing agencies to move workers to offshore contracts (typically housed in Sark) to ensure they were not eligible for pension contributions till 2017. One organisation offered supply teachers a fractional advantage in take home in exchange for giving up benefits. The staffing agency was supposed to be based in Sark but was run out of Victoria. When I visited their offices they had as piped music- the sound of seagulls. Presumably this helped supply teachers believe they were employed offshore!

This abuse is still going on. It’s not cool to dupe people out of their benefits, nor is it cool for productivity. The decline in the benefits payable to UK workers has followed closely the decline in their productivity, or is it the other way around?

The “don’t give a damn about our staff ” culture , espoused by Bezos and others is replaced by a “give everything for your company” culture. Reading about Amazon, I am reminded of my early years working in life insurance when I (and many of my colleagues) became obsessed with mission statements and quite forgot the broader values that governed social behaviour.

We not only became extremely annoying to our customers, we created an anger against aggressive insurance salesmen that persists to this day. Short term win- long term disaster!

What is cool, is to see employers investing in their workforce for the long-term through training and through benefits. It would certainly be “cool” if some of the companies that manage the pension funds of the likes of BA and Cadburys and Centrica, started to look at the shareholder value they create in terms of the way they treat their staff.

I am an advocate of long-term investment, the fund managers I admire- like Aberdeen and Fundsmith, are managers who value companies who take a long-term view on staff welfare and who invest in their human resource as a priority.

But these investors are few and far between, at the other extreme are the venture capitalists hawking private equity. Their time horizons are seldom more than five years and- as they feel they will not reap the dividend of investment in the workforce, their priorities are immediate profit maximisation.

For the companies being founded in the past fifteen years, the easiest path to growth is through the short-term financing of private equity.

What is needed  is a realignment of interests. The interests of people in the company they work for needs to be a long-term interest, just as the interest of companies must be in building long-term relationships with staff.

For those of us who work in pensions (the ultimate long-term product) , there’s a need to return to a vision of what we do that links the benefit of the staff pension to the long-term good of both staff and companies.

This means getting beyond the “compliance culture” of auto-enrolment and convincing employers to treat their staff fairly.

This means including the 460,000 “self-employed” workers currently excluded from workplace pensions, closing down the loopholes that allow British teachers to be employed in Sark (to avoid the payment of VAT and pensions) and a general move back to the payment of proper contributions into auto-enrolment plans.

I don’t meet many bosses who want to be seen as uncaring employers. Even Bezos believes he is caring for his staff (no matter how frightful working at Amazon appears). Lucy Kellaway is quoted in today’s FT as having Bezos as a corporate pin-up.

She argues

“At Amazon, the customer wins- and the employee does not. The company may not have chosen the most morally acceptable trade-off. But it has laid bare this fact of economic life, when some win, others lose.”

I’m a boss , a shareholder and an employee. I don’t see things aren’t as binary as that. Nor do Facebook or Google it would seem. Compare the attitudes of these organisation to what we know of Amazon by reading Gill Tett’s recent FT article.

We don’t need to be nasty to our staff to get the most from them. As Will Hutton concludes

Ultimately, long-term value creation can’t be done by treating your workforces as cattle. It’s the great debate about today’s capitalism. It would be a triumph if it was taken more seriously in Britain.

Ultimately , this is a long-term v short-term debate. Good guys win in the long-term.

Passing bells

Posted in auto-enrolment, dc pensions | Tagged , , , , , , , , , , , , , , | 2 Comments

Helpless? – and scammers in town!


One of the worst things about doing my job is seeing people being fleeced without being able to do anything about it.

I know that Katie Morley feels the same way – I can feel it when she’s writing about fraud. It must be particularly galling for Katie to discover that the articles that she is writing to prevent people being ripped off by unscrupulous villains in the Middle East are being used as a smokescreen of concern by.. unscrupulous villains in the Middle East.

I can’t tell you who these unscrupulous villains are as I might be seen to be “tipping them off”.but they’re the usual crew in new clothes.

Robbers will be robbers and cops will be cops and it’s all a bit keystone in Dubai and the Emirates.


Which is why the Pensions Regulator has decided to spend time engaging, educating and empowering people to stick two fingers up at the villains, rather than get on his camel.

I am not at all sure why I should be helpless. God helps them who help themselves, especially when they’re helping themselves to a big fat slice of someone else’s pension.

Maybe the shark has the right to eat me…

shark in his house

Maybe I’d be better off on the rob – in the dunes or wherever professional pension robbers hide out. Is this pension robbery state sponsored pension terrorism.Are Bin Laden’s kith and kin now dressing up in ISIS headgear to fill the caliphate’s treasure store with the infidel’s retirement savings?

I’d have some kind of God on my side, and not be skulking ignominiously in silence, afraid to tell what I know for fear I made things worse.

And there’s no dove from above that I can call down to peck these poxy pension pickpockets.

So i really am helpless and not helping myself much by going on about it.

There’s a shark in the house and there’s a scorpion in those dunes.

The scorpion’s scurrying about right now and he’s after your savings. Keep your eyes peeled, don’t get stung-

scamproof scorpion

If it offers you a “free review “,

that scorpion is after you.


Posted in pensions | Tagged , , , , , , , , , , , , , , | 4 Comments

Mobilising millions – training employers on AE.


Who is going to mobilise the millions of bosses still to stage auto-enrolment?

There are not 1.3m but 1.8m employers in the UK who will need to stage auto-enrolment.Of these , all but around 65,000, more than 1,790,000 employers have yet to get going. And only a tiny proportion of those employers know anything about providing a workplace pension for their staff.

To date, the issue has been about advice, tomorrow it will be about training. Few properly understand who will be doing the training as the vast majority of payroll agents are not regulated. Even the software houses who license payroll software through these agents (known as payroll bureaux) know little about the majority of them.

They exist because of the accountants who manage the back offices of most small businesses in the UK and who are critical to the success of auto-enrolment (part II).


Training is not about financial advice

If there is one phrase guaranteed to annoy practicing accountants working with SMEs  – it is “financial advice”. Accountants do not give financial advice to those who have no means to pay for it or capacity to use it. As Steve Webb used to say, people staging auto-enrolment don’t need advice, they need training.

The biggest issue facing the Pension Regulator over auto-enrolment is whether it can mobilise the silent army of payroll agents working in payroll bureaux for the legion of accountancy practices and book keepers, to manage through the auto-enrolment process till it becomes Business as Usual.

The Pension Regulator has worked out that it is this training, not enforcement, that will make auto-enrolment a success. The job of mobilising the millions of employers will fall to maybe 75,000 payroll bureaux and a hand full of organisations offering free internet payroll services (Payroo being the most notable). Beyond these organisations are those employers who operate the most basic payroll service using HMRC guidelines (and a little anticipated help from tPR).


Web-based training is now in place

The training resources at the disposal of these bureaux and to those providing software are principally web-based. The Pension Regulator has now reorganised its website into a ten step auto-enrolment process. The employer journey is better organised and it’s now possible for payroll agents to take clients from one end to the other with relatively little difficulty. If you haven’t visited the website recently, click here.

There is still one dodgy link in the chain, the infamous step 7 . We know the Pension Regulator is working hard to help employers choose a pension scheme but this remains the weakest link. If you can select and onboard your workplace pension then steps 8-10 are a relative doddle.

But it’s one thing to have a website , another to engage, educate and empower people to use it.


Training means training (not selling)

Training to help employers stage auto-enrolment (including choosing a workplace pension) should be mandatory. It should not be about selling software though promoting the obvious software solution may be a part of the training.

When I got cross with Sage a couple of weeks ago it was because of exploitation of free training resource  (from tPR) to profit on the need for training. Sage ,Iris and Moneysoft (in that order) have the biggest roles to play in organising the training of bureaux staff (and the engagement of the accountants who own the bureaux). It is critical that they get training programs in place by early 2016, to train staff to help the 1.8m through.


Face to face is best- webinars will do

If you are a payroll agent and you have the opportunity to go to a face to face training session of even webinar, where the emphasis is on training not selling then go. Anything which has the Pension Regulator at it , is worth going to, though bear in mind, they are appearing free of charge to the session organisers.

Webinars are not so good , but a lot better than nothing. Again, pick webinars where the emphasis is on training.


Give Feedback

If the seminar or webinar offers training, give them good feedback, if it’s a sales pitch, then tell them it wasn’t helpful.

In our opinion, this training should be free and offered by software providers as part of the support package. If you’ve not yet  been offered training on auto-enrolment and you are a customer of one of the payroll software companies, ask them why not. If they are threatening to charge you for it, ask what you get for your money. If you aren’t satisfied with the answer , ask them to contact me (henry.tapper@pensionplaypen.com).

We have a training budget and we’re not afraid to spend it.


Posted in auto-enrolment, pension playpen, pensions | Tagged , , , , , , , , , , , , , , , | Leave a comment

He’s here, he’s there,he’s every f**k*n where -Carsten Staehr


If you were in Carriage B on the 15.35 Kings Cross to Newcastle yesterday afternoon, our apologies. It was a quiet coach, it wasn’t quiet. Carsten Staehr was in the carriage.

Two weeks ago, at the age of 52, Carsten Staehr became a father for the first time. The man is a viking marauder, a blue-eyed Dane who looks trouble. He’s tall with a mane of fine silver hair, the man knows no moderation in his love of life – were life a party, he’d be its life and soul.

When Carsten won best boss at the Payroll World awards, this is how his company promoted his profile

carsten colourful

I have tried to tie this man down for a year. He runs a decent payroll-Cintra, it made the best part of a million quid last year off a turnover of £5m, Carsten’s making the company grow and he doesn’t have time for idle chat. I made up my mind to ride the East Coast Box-Car to Newcastle – listen to his story for three and a quarter hours, so I bought a day return to Newcastle, a bottle of Chablis and pulled the cork.

Here are the few notes I took

“write this down Henry- we like to spread the jam”.

Carsten on HR

“If you don’t give a f**k about your customers, you get a P45”.

The idea behind Cintra is “happy clients”. Carsten is happiness in a bottle , though I haven’t seen his wrath, it seems fired by the injustice of sadness. “Make my customers sad, feel my wrath”.

Carsten on sales

“I keep enough money in my company so I don’t have to sell anything” ..how many companies do you know, who don’t have to sell anything?”.

Carsten is always selling, he doesn’t know how not to. But his point is about capacity, about getting rich slow and about keeping customers happy over time.Sometimes you cannot take on new business, if it threatens to swamp customer service.

Carsten on Denmark,

“Denmark is good because there’s no fu**in corruption. Everyone in Britain is on the make, We (the Danes) enjoy paying 73% tax rates because nobody ever goes to hospital old and hungry.”

The man’s an old fashioned socialist, a wealth generator who believes everyone can be as happy and rich as he is, because everybody he meets leaves him happier and wealthier. I am sure there are people who don’t get Carsten , but they probably don’t like sunshine either.

If this sounds like the Pension Plowman, losing his bearings and succumbing to a potty-mouthed Scandinavian charmer- so be it. I haul up the white flag and surrender to three hours on the train and a further three in some Persian Restaraunt in what Carsten called the intelligent end of Newcastle. We were to drink Austrian wine in the Cherry Tree but the Cherry Tree was shut. We drank Chateau Musar and remembered the Hochar’s who produced great wine in a war-zone.

I smiled my went back to London on the last train, and Carsten went off to look after his new baby!  This morning I am bubbling with the spirit of the man and with the pleasurable prospect of doing business his way.

It won’t be a struggle!

And to Alexandra , who arranged all this , I leave the last word. Carsten told me that when she started working with him, she wrote the right formal letter. Here is the email she sent me last week after I’d tried phoning Carsten to confirm …

Hi Henry 

Lovely talking with you yesterday – sorry for confusing you by talking in a coherent way with no swearing

carsten -chicken


Carsten runs Great North Run with Usingh Boult – I can see this blog running and running!

Carsten and Usingh

Posted in Payroll, pension playpen | Tagged , , , , , , , , , , , , , | 4 Comments

Financial advisors need better retirement products


Better products that deliver what they say

I had the pleasure of Chris Radford’s company over the weekend. Chris is a consultant to pension providers , a regular at our Pension lunches and someone who thinks about the way ordinary people buy things.

I’ve recommended him to get on the panel of experts who will conduct the “Financial Advice Market Review”.

Our conversations come back to the missing ingredient in the adviser’s soup – the product. Chris argues that we need fewer but better products that deliver what they say.

Certain delivery

This idea of “certain delivery” is critical. The sofa you order this month for Christmas is not the sofa that arrives two months later in February, it is a Christmas sofa. If it doesn’t turn up then it’s a rip-off.

We want products that deliver the right money , in the right way , at the right time. That’s all that products do – shift money over time. The recently conducted survey of 2000 individuals that showed a preference for paying tax now in return for certain tax treatment in the future, shows which way the Government should be heading,

But certainty is only half the story, the certainty of failure – or at least of disappointment against expectations, was what prompted the lifting of the rules around annuity purchase.

“From this moment on nobody will have to buy an annuity”

Advice is judged by outcomes

The difficulty, financial advisers find themselves in , is not about the cost of advice, but justifying the cost of advice in terms of outcomes.

Here are some numbers from the Daily Mail study into why people retiring don’t want to take financial advice

Daily MailThe startling thing is that  almost every comment (typically 1.5 comments per person) relates to value for money.

We know that value for money is an equation that people make between the cost of something – and what they get. Discount the small number of people intimidated by financial advisors and the public is saying they do not get a product that justifies the price.

The result is that only a few of those spoken to , either have or intend to get advice when they access their retirement savings.

Mail 2The most important part of the article is the ‘vox pop” of comments (125 of them when last I look). I would strongly advise those running the Financial Advice Market Review, to read every one.

Though many are pusillanimous, they add up to a powerful statement, the statement is that the outcomes of the advice do not justify the cost.

I was told I had to get financial advice before I could transfer to income drawdown. I know what I want to do with MY money so I told them to get lost. Still waiting and will take the matter to the Financial Ombudsman if necessary. (speakwithsharptongue)

and again

For financial advice see financial sales, without any real concern for what happens after (general Harry Flashman)

and again

The problem with Financial Advisors is they gamble with your money, charge you 10% for the privilege of doing so, sometimes say sorry if things go wrong but often tell you they did warn you of the risks involved!! (Bread Man)

and again

After decades of being scammed by insurance companies, pension companies and banks, one can be forgiven for being reticent to trust some 25 year old advising how you can ‘guarantee’ a fantastic retirement beyond your wildest dreams. (gasman)

(I have selected comments that have the most endorsements).

If the advice leads nowhere, then people feel they are better off on their own. The Daily Mail tells its readers to take advice but the vast bulk of the comments are of the kind I have selected.

What is most worrying for advisers, is that many of those commenting are thinking of advice in terms of what happened to their endowments and other “legacy” products.

Simply repeating the advisory process for today’s retirement products, repeats the (negative) experience of the customers). I suspect that the way that advice is delivered will become one focus of the review .

Better products – not more advice.

But even more important for the Review is to understand where the advice is leading to. We may re-invent the advisory process, but if it leads to products with the same systemic issues, all that has changed is the shop window.

As the first comment about Income Drawdown, points out, if the product requires advice and the outcome of the advice is seen to be a poorer product, people will get nasty (go to FOS).

To the public, the products that people buy with their retirement savings either offer rip-off rates (annuities) or rip-off charges (income drawdown). In the public’s mind, these rip-offs are associated with the intermediary salesmen.

The last word should go to the top-commentator (in terms of endorsements) – Frank Howorth

As a retired business man I think I could give many of them better advice than they could give me !!!!!!

This hostility is not reasoned or reasonable, it comes from the frustration of people who are told  to go to advisers but are frustrated by the outcomes of that advice.

The problem is in the product and we have to get a better retirement income product into circulation than those currently on show.

I will be arguing to the Financial Advice Market Review for better product. If you don’t know what I mean, press here.

piggy bank

Posted in pensions | Tagged , , , , , , , , , , , , , , , , | 1 Comment

Disruption – is how social media regulates


In the context of Business continuity management, Disruption is an event which causes an “unplanned, negative deviation from the expected delivery … according to the organization’s objectives”.

In this blog, I argue that disruption is part of the governance process and is closely aligned to “Regulation”

The word “regulation” has rather lost touch with its roots. If we returned to what the word is composed of “the act of making regular” then it begs questions about why we need things “regular” at all. Why not total diversity, a free for all where nothing can be expected and choice is everything.

The act of regulation assumes that a standard way of doing things is best, and that deviation from that standard, a divergence from the rules, needs straightening out.


There is a strong theme in capitalism, that markets self-regulate. This is often referred to as “mean reversion” , the process by which everything returns to the standard way over time because the market demands it.

The demands of the market , to return to what it considers the “mean”, the standard or (to use a loaded word) the “right” way is typically considered in terms of customer buying patterns. If a product or service is mis-priced , it will ultimately return to the right price. But “ultimately” may be too long, some times Government disrupts the market’s process and accelerates a change.

An example – in financial services – is the Retail Distribution Review – which forced change on advisers and providers of financial services – abolishing commission – requiring higher qualifications and insisting on better ways to treat the customer fairly. The RDR was disruptive – still is.

But this kind of top-down disruption is informed by the political process. Political – radically – derives from Politikos and simply means “of or relating to citizens”. The market forces , on which capitalism depends, demand democracy, where the voice of citizens is heard though process.

Disruption happens when citizens demand change, understanding these demands is the job of politicians who create rules , like those arising from the RDR.



Sometimes, the market self-corrects without political influence. This is when the voice of citizens is listened to by those “out of line”. If South West Trains chooses to reduce its carriages in August and as a result people have to stand in out-dated rolling stock for hours, then pictures of unhappy customers start appearing on twitter.

This can of course work in other ways. When Lords reformed itself to allow paying customers to walk on its hallowed turf.

Or when the Pensions Regulator gets its act together

Or when a politician makes a difference, as Steve Webb did last parliament.

These comments , postings, blogs – call them what you will, go into the great electronic scrapbook called the inter web and get ordered by Google and served back to the people impacted through searches.

A friend of mine, who is on the Board of NEST told me that when she gets press clipping, half of them have comment from me. That I’m sure is an exaggeration but it is proof that if you bang on about something for long enough, you will probably get heard! You may not get fed (NB – I am owed a lunch) – nor liked. But your voice gets heard.

And your voice, like all the other other voices, creates pressure for change.

What I write is designed to get read, not just by people who like what I am saying, but by those who don’t. Those who’s way of doing things will be disrupted. If I am wrong, they will be vindicated, if I am right, they will be castigated.

Somebody phoned me up yesterday , to say that a blog I wrote about his company, “did not help my cause”. I am amazed that people still do this. I wasn’t criticising his (large) organisation, because it was rubbish, but because it was behaving in a rubbish way.  I may be wrong, I may be right- my voice is only one of many,

But “my cause” is not helped by me sitting idly by when an organisation profiteers from people’s fears about auto-enrolment. I am better off pointing out where things are going wrong and suggesting ways of doing things better. If I am wrong, then the market will tell me (which it often does).


Unplanned , negative deviation?

Organisations that threaten customers ( I am a customer) because they point out that the service is rubbish are missing the point of the self-regulatory process. In isolation, a blogger may not be right, but he or she can often be saying things that others are thinking and not saying.

So South West trains- which has an excellent Social Media strategy, came right back at me

We had a conversation, South West trains are not trying to asphyxiate customers on purpose, they just have crap rolling stock! I forgive South West trains where I won’t others, because they are always listening and to some degree trying to change.


We have an open media, many countries don’t. We can be thankful that we can all have our say with our comments and postings. Many choose not to talk on the web – no one says you should. Those who talk are rightly shot down if they talk rubbish.

But shooting people down because they are not “helping their cause” is not quite the same. Sometimes, the only way to help your cause, is to tell it like it is.

Publish and be damned, In the interests of disrupting, or correcting and regulating.



Posted in advice gap, auto-enrolment, Payroll, smelly | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Re-engaging employers with their staff pensions


Once it was so simple. Good employers offered good pensions and lousy employers didn’t. The good employers congregated at NAPF conferences and congratulated themselves and an industry fed on the easy money growing within these plans.

But then came lower than expected interest rates, lower than expected  market returns, longer living and ever greater demands on companies to account for pension promises as corporate debt.

Pensions stopped being fun and started becoming a problem.

The decline from “reward” to “liability management” has continued to the point that the proudest boast of a CFO is that the “pension problem will be over soon”. It’s the length of the flightpath to buy-out that is the metric by which the success of a pension is measured.

There is simply no point bemoaning this. This is what it looks like in Corporate Britain and the only reason the public sector is different is because the tax-payer is not as savvy as the share-holder.

If the point of investing is return, the return on an investment in staff pensions has rendered it pointless. Pensions are now a corporate obligation (under auto-enrolment), effectively a lag on cashflow, a stealth-tax.

The marketing departments of pension consultancies, corporate IFAs and the new breed of auto-enrolment consultancies stress that auto-enrolment has nothing to do with pensions and employers and their representatives (the trade bodies) have picked up on this.

The success of the auto-enrolment project is judged in terms of regulatory compliance and employee apathy. The opt-out rate is low because nudging is working., regulatory failure is low because employers are aware of their “duties”. This is not a project that has – as yet – captured the popular imagination.

Auto-enrolment – tomorrow’s challenge not today’s success story..

However, the pensions industry is starting to wake up to the possibility that it might have a public policy success story on its hands and is keen to grab whatever positive PR it can (for itself). Follow this link to hear Ruston Smith of the NAPF claiming the success of Auto-Enrolment is down to the hard work of his audience (NAPF members presumably).

The difficulty for the NAPF is that they have absolutely no part to play in the extension of auto-enrolment beyond their membership to the 1.8m employers who have no pension. Their quality mark, PQM is fine for BAE Systems, the BBC and Taylor Wimpey who they advertise on their landing page, but look at the news feed – on August 14th, the latest piece of pensions news was from May 20th. At a time when things are moving fast – the NAPF and PQM aren’t moving at all.

When its CEO can start a talk in the spring of 2015, “with auto-enrolment almost over…” , you know there’s a disconnect.

Auto-enrolment has done nothing to revive DB

The truth’s auto-enrolment is no more than a platform which ensures that people can be involved in pensions. It puts people and companies that have been excluded, in the same place as the BAE, BBC and Taylor Wimpey.

But if everyone is on the same platform, what incentive is there for employers to return to pensions with a sense of pride? The appetite of corporate Britain to take on any kind of guarantee (even if its only a promise) has led to a total lack of enthusiasm for CDC as an alternative to current DC workplace pensions.

The only engagement between DB pensions and auto-enrolment in the corporate sector was when WM Morrison enrolled members into a cash balance plan and Tesco countered using their career average plan. Tesco have done a u-turn and reverted to a standard DC structure, while Morrisons continue to enjoy the short-term cashflow benefits that mean many staff are not having to be enrolled till 2017. We wait to see what happens then.

Employers are walking away from pension governance

The idea of an employer establishing a pensions trust for staff is as obsolete as DB. Master trusts fulfil the duty of care by proxy, the IGCs do the same for Group Personal Pensions and Stakeholder Plans.

While consultants continue to promote governance committees at employer level, it is increasingly difficult to see what effective governance they can do – certainly in relation to improving the member outcomes. What influence a governance committee has is based upon current assets and future cashflows. While the grandees- the BAEs , BBcs and Taylor Wimpeys can still do their willy-waving, for the vast majority of SMEs and micros have no-one shouting their corner other than the fiduciaries of the providers (and Government).

How do we re-engage employers?

Here’s a simple blueprint

  1. Start by making sure that the workplace pension is fit for purpose- an employer can select the best plan it can without a great deal of fuss.
  2. Focus on the things that employees can do for themselves, chiefly save sensible amounts.
  3. Engage and educate employers in what “sensible amounts” means – and it will mean different things to different people.
  4. Empower people to save by making it easy to contribute through payroll and easy to see the impact of their saving online (on whatever device they choose)
  5. Make sure that people become addicted to this by establishing and maintaining a budget to engage, educate and empower staff.

This isn’t rocket science, the rocket science is going on elsewhere. We shouldn’t be asking employers to become pension rocket scientists, in fact we want pension managers who can focus on the 5 simple tasks above.

Employers will become re-engaged with pensions because they can see their staff re-engaging with pensions. The circularity of this argument is a problem. Most employers see employee apathy towards pensions as a clear signal not to bother.

The consultants (and to some extent the Pension Regulator) have to move on from this insistence on payroll compliance towards an engagement strategy that includes employers and employees.

Most of all, we need Government to act to make pensions more engaging. After years of timidity , this is finally happening. The Pensions Green Paper could turn pension tax around incentivising people to save rather than putting them off. The FCAs approach – put forward in the recent Financial Advice Market Review – is pointing advice back in the right direction while the DWP and FCAs ongoing work in nailing “value for money” is (slowly) getting there.

We have yet to properly deal with the way we organise people to spend their savings, people need a “spending default” and I hope that the Defined Ambition project will eventually deliver them one.

We are not there yet.

But I genuinely believe we can and will restore confidence in pensions. Employers have a huge role to play in this but it’s not the role they have traditionally played. The employer is now a facilitator, engaging, educating and empowering staff. It would be nice to see more employer contributions to DC, but better still to see staff choosing to pay meaningful contributions themselves.

Posted in auto-enrolment, Liability Driven Investment, pensions, Pensions Regulator, Popcorn Pensions | Tagged , , , , , , , , | 1 Comment

Simplifying AE – why the workforce assessment IS worth it


The Government is calling for ideas to simplify auto-enrolment. 

I had an interesting discussion with a senior payroll policy lobbyist yesterday. She argues that the “workforce assessment” is too problematic to become part of the normal payroll function of Britain’s 1.8m smaller companies and that we should instead auto-enrol all employees.

I can see her point, nobody told payroll operatives they were signing up to become pension administrators – let alone pension managers. If they were working for LRT, no doubt we wouldn’t have been paid these last few years!  Apparently payroll people aren’t happy and are threatening to stop being payroll people and be something else.

I will return to the issue of payroll morale at the end of this blog, but let’s try to remember what the workforce assessment is there for.

Here’s the point…

  1. It stops the very youngest and very oldest workers from being automatically enrolled into a workplace pension
  2. It stops those who aren’t ordinarily working in the uk from being enrolled
  3. It stops those who earning too little from being enrolled.

The point of excluding some people is to find the right balance. We are trying to enrol the right people at the right time of their lives. This is useful for employers and it is useful for employees.

The workforce assessment is not an elaborate game of snakes and ladders devised in Whitehall to trip employers up. It is not a cruel trick played on employees to force them out of welfare and into self-dependency.

Auto-enrolment is about finding the right balance between “reasonable force” and the natural libertarian principles that underlie British democracy.

Is it too complicated and can we simplify?

The devil’s in the detail, and here’s the detail about how you work out if someone’s working for you. In my opinion, this is where simplification can be achieved. Read these detailed guidance notes and you realise that you are walking through a legal minefield, not once, but every pay period.

There is scope for simplification in this detailed guidance and better minds than mine are working hard to ease the plight of those who have migrant workers, employ seafarers and those who work on oil rigs and the like.

The core principles of the assessment are simple and sensible

But as for the core eligibility criteria, age and earnings, I think there is general consensus that these are right.

The current pattern is accepted, understood and is increasingly coded into payroll processes either through the core software or through third party software (known as middleware).

To remind everyone,  here’s how you look at your staff by age and earnings.

Monthly gross earnings


Weekly gross earnings


From 16 to 21

From 22 to SPA*

From SPA to 74

£486 and below

Has a right to join a pension scheme 1

£112 and below

Over £486 up to £833

Has a right to opt in 2

Over £112 up to £192

Over £833

Has a right to opt in

Automatically enrol 3

Has a right to opt in

Over £192

Figures correct as of 2015/2016. *SPA = state pension age

1 Has a right to join a pension scheme

If they ask you to, you must provide a pension scheme for them, but you don’t have to pay contributions.

2 Has a right to opt in

If they ask to be put into a pension scheme, you must put them in your automatic enrolment pension scheme and pay regular contributions.

3 Automatically enrol

The long term solution for payroll people

Those are the rules and millions of employees are being assessed every pay period by large and medium sized employers.

Life’s complicated because state pension age is a moving target, because the lower end of band earnings no longer corresponds to the top of the nil rate income tax band and because most people have variable earnings which have to be treated in a special way.

But the point is that you can now get workforce assessment software that does the heavy lifting for you and it doesn’t need to cost the earth. http://www.pensionplaypen.com will allow you to do an immediate assessment for freetry it here. This is not the kit to do the work every month (you wouldn’t want to be faffing with CSV files as we still have to)!

And this brings back to payroll. At the moment , many payroll people (agents and in-house) still have to work manually – cutting and pasting- downloading files and sending those files- often by unencrypted email -from place to place.

These problems can and will disappear when payroll software companies provide a way for payroll to talk with pension providers using proper data integration techniques. This means moving to the straight through processing of data using proper encryption and with data passing in and out of systems through data gateways (API technology).

Linking websites this way is well underway, it is made easy by everyone employing common data standards (that should be a common data standard but certain providers still want to use their own data standard so we have to have more than one).

The Pension Regulator’s position

Yesterday, the Pension Regulator published a response to a consultation on what could be done for the smallest employers (what they call the micro-micros) who don’t use proper payroll software but pay people using a spreadsheet or some such back of an envelope technique.

These people need a back of an envelope workforce assessment tool and the Pensions Regulator has decided to build one for them to use.

We think tPR have got this response about right (to use the parlance – it is proportionate). They conclude that if these micros were to do this work manually, disaster would follow.

The consultation responses indicate that a high proportion of (micro) users would not seek the use of commercially available software. Attempting to assess their workforce and calculate contributions manually could lead to errors, burden and non-compliance. For this reason, we believe there is a need for a tool to mitigate the compliance risk.

We recognise that the existing payroll provider market offers a range of either free or low cost solutions that include automatic enrolment functionality. (Micro)users, if they wish, can currently find and access a range of these products through lists and links hosted at http://www.gov.uk/ payroll-software/overview ….

We will continue to offer information about the range of options that (micro) users should consider using including payroll software.

Doing the workforce is a pain, it is the job of industry (and for the smallest employers perhaps tPR) to make is as painless as possible. It is the job of Government to simplify rules where it can to reduce the pain further.

But it is not needless pain. The point of workforce assessment is to make sure the right people are paying the right contributions at the right time. We have invented a world-class system and the world is watching as we refine that system to be even better.

Don’t throw the baby out with the bath-water

It is not a good idea to throw the baby out with the bath water- we do (from time to time) need new bath water. Now is such a time.

Posted in accountants, advice gap, auto-enrolment, DWP, pensions, Pensions Regulator, risk, Ros Altmann, welfare | Tagged , , , , , , , , , , , , , | 1 Comment



Addiction is not a word that resonates positively.

But we had a discussion yesterday centred on getting people addicted to properly managing their money, in which the word seemed entirely appropriate.

People get addicted to courses of action resulting from a need to feed some personal craving. If that craving is destructive, as most addictions are, then the addiction needs be fought. But what of positive addictions?

A Christian may be addicted to prayer, or to attendance of church, my CFO is addicted to the perusal of time sheets and I must accept I would find it hard not to blog in the morning. Others are addicted to Facebook or Linked In and these obsessions last so long as the objects of our addiction remain absolutely relevant to us.

When the relevance wears off, then our attention waivers. The difficulty that most social media sites have is not in attracting custom, but in keeping it.

Constantly relevant?

The constant reinvention needed to keep a subject  relevant, to maintain the level of user addiction is the long-term challenge of the financial educators.

It is easy to engage, harder to educate but to maintain the levels of education and engagement and engage over time so that good financial practices are hard-coded into people’s brains involves a great deal more than good intentions.

That is why most financial advisors struggle to get clients to renew fee contracts year after year, why subscriptions to websites are rarely maintained more than a few months and why most workplace financial education programs receive remarkable initial feedback , but have little lasting impact on participant behaviours. They lack the wherewithal to addict.


Speaking to my friends at MoneyHub about this, we talked about a rule of 95 where 95% of what you do , remains the same, but the 5% that changes is the nicotine in the cigarette that keeps the punter coming back for more. It’s the mojo- the x-factor, the magic ingredient that makes and keeps a proposition continually impelling.

MoneyHub are currently talking about it as “financial wellness” a phrase that probably strikes a chord with the millions of us obsessed by diet, nutrition, exercise and health. I discovered yesterday that the funding for MoneyHub is linked to healthcare initiatives such as “multiplier” and “vitality”.

What is the secret to getting the addiction in place? According to MoneyHub CEO – toby Hughes- it’s all about the first three minutes you spend with a proposition. He reckons if he can give his prospective customers a good first three minutes, he can keep them for the next three hours- easily enough to create the germ of an addiction.

BTW- I can see this as intuitively the case though the majority of “wellness” advertising makes me shrivel like a snail as I reflect on my sorry lifestyle! I sense that a sense of humour is needed to attract me to a gym, something i find the wellness industry rather short of!


Technology to the rescue?

But the maintenance of relevance is a lot harder and depends on financial education continuing to educate and empower. This is where technology really cuts in. New means of capturing data, encouraged by the Government’s demands for more open access to our financial information is meaning we can now look at most of our finances on a single screen with a few strokes of our fingers.

I tried it yesterday using MoneyHub’s new systems (still in Beta). Because the data is constantly live, it draws me back to check, just as my wordpress stats, linkedin connections and Facebook “likes” do.

If this sounds very ephemeral, it is, there’s no doubt that what may work in Q4 2015 (when the new stuff goes live) will look as outdated in Q4 2016 as the mobile phone brick. The pace of technological change is (IMO) accelerating, especially in the areas where FinTech is trying to go.

Shakespeare’s had no problem staying relevant!

I wrote recently about this need to constantly be tomorrow’s prototype and to accept that no sooner have you scaled one summit than you must move to the next. Everything on the web is a prototype.

But driving back from Bristol yesterday with my friends Mark and Jenny, we were discussing Shakespeare. Jenny asked me “hadn’t I got Shakespeare sorted at college”. I thought of a couple of recent productions I’d gone to and realised that the Shakespeare I knew at college was different from my Shakespeare today.

If you get it right- really right- as Shakespeare did all the time – the writing – or should I say “righting” remains as relevant because of the 95% core of deep relevance.

For something, whether it is MoneyHub or First Actuarial’s financial education programs or http://www.pensionplaypen.com to remain valuable over time, the 95% core proposition must have fundamental value (in the old days we’d have called this “truth”). Perhaps the best word is “integrity” though any word loses its “validity” if sloppily used.


Facebook and the focus on “you”.

I’m drawn by this 95/5 formula for positive addiction. It is a useful way of thinking about sustainable relevance for a customer base. Of course the 95% is harder but it is the 5% of immediate relevance that requires ongoing attention.

Toby Hughes suggested that the reason why Facebook has remained totally relevant for so long is that it is a website totally dedicated to “you”. Designing something with total dedication to “you” and not as a means to reward “me” is Facebook’s brilliance and (if Toby has its way) , it may be why MoneyHub succeeds where thousands haven’t.





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Why I want to be old – rich and pay no tax!

Super tax

There’s a famous story, now fading from popular memory about Strand, a brand of cigarettes in the sixties. Strand came out with a strap-line

“you’re never alone with a Strand”

It killed the brand stone-dead. People associated smoking a Strand with being alone, being a loser – with failure.


The words and phrases we use, we get used to. Phrases like “tax-relief” and “retirement income shortfall” and “poverty in old age”. The encouragement we give people to save is couched in similar language; we should “save”, we should “avoid” and we should “plan”.

The language we adopt to encourage people to spend on their later years is couched in negativity. The people we should be encouraging are being asked to consider their later years as a time of financial hardship. The business of building up a big-fat retirement pot is being promoted as an act of denial.


And along comes Johnny- chancellor with  a new idea. We’ll encourage people to think of the money we spend on our old age as 100% tax free to us. Like our ISAs, 100% of what we put by , will be ours to spend as we like, without having to pay money to a future Johnny Chancellor.


And guess what? According to a poll last week by PWC, people prefer the idea of paying tax today rather than tax in retirement, especially if they are being encouraged to do this by “BOGOFF” fiscal incentives.


Here’s an extract from PWC’s press release

New PwC research reveals that people want their pensions to be treated more like Individual Savings Accounts (ISAs).

PwC surveyed nearly 1,200 (1,197) working adults following George Osborne’s consultation, launched in the Summer Budget, to radically review how pensions are taxed. When asked to choose the most appealing tax scenario for their pension, only just over a quarter (27%) picked the current system – where people and their employers receive tax relief on their pension contributions, and the pension is partially tax free at retirement with the remainder being taxed.

Moving pensions towards a similar tax treatment as ISAs, where you contribute out of post-tax income and any returns are tax free, is by far the most popular preference. Four in 10 respondents chose this answer as they say they would rather be taxed while they are working, than in their retirement. People also say it would help them better plan for their retirement as they won’t have to factor in tax deductions. Only one in seven people say the current tax exemptions on pension contributions incentivise them to save.

Six in 10 people say that constant changes by the Government to how pensions are taxed is the biggest barrier putting them off saving more into their pension. This is followed by people not understanding how much they need to save for an adequate retirement and the pensions system being too complicated.

The research reveals that the majority of people also don’t understand how pensions are taxed, with two thirds of people surveyed not able to correctly identify the current system.

…..Raj Mody, head of pensions consulting at PwC, said:

“The reality is that when it comes to tying up money for the long-term, people need an incentive. Otherwise why would you bother saving for your retirement when faced with more immediate pressures on your finances.

“We believe any new system should include a simple to understand incentive from the Government for retirement savings that would allow the lifetime and annual allowance tax regime to be abolished.”

So let’s be clear; even though most people will pay less tax under EET than TEE, people want to pay tax upfront so they save on tax later.

There is an important behavioural motivation to this and it comes back to problem with “you’re never alone with a strand”. People do not want to be told that they will be paying less tax in retirement than they are now because they don’t want to think of retirement that way.

They aspire to be rich in retirement, they aspire to getting a big fat tax-bill

Super tax

and most of all they aspire to ripping it up and telling the tax-man where to go. Like Tsipras!

tax bill

That’s freedom!


The language of freedom

The Chancellor is inventing a new language with which we can talk and think about pensions, it is a language that replaces “tax-relief” with “tax-incentive”, that swaps “save” with “spend” , “must” with “could” and which promotes “freedom” not “avoiding poverty”.

It is a language of aspiration, and however phoney you may think that aspiration, nearly twice as many people would rather aspire to be richer than in retirement than face the reality of being poorer.

Which is why the Chancellor will win, and the bean-counters will lose.

If people are encouraged to get stuck in and become self-sufficient – if the trick works … then I’m for “phoney aspiration”. Long-term investment turns “phoney” into “reality”.

Raj no bean-counter…

Bond 2

James Bond


Raj Mody








I do not include my good friend Raj Mody as a bean-counter, not least because he is an actuary and has the imagination to empathise with popular sentiment. PWC employ more actuaries than any organisation in Britain and actuaries have the happy capacity to see into the future.

Where I stand on this

I have written lots about a future based on aspiration, about what I call “Popcorn Pensions“. I share the view of the Chancellor and Raj and most of the population that I would rather spend on my later years with the prospect of a big fat pot of money as my reward than save to buy an annuity.

I don’t want to be “alone with a tax-bill” and I want to buy into a tax regime, which like ISAs, I can be sure of.

Will I benefit from a change to TEE? Almost certainly not – in financial terms. But does that worry me – no – not really! Actually I’d rather be certain about what’s going on , pocket my incentives and look forward to writing “zero” on my tax assessment than continue to live in a world of LTA, AA, PIP, Salary Exchange and marginal rate tax -relief.

If you want to read the Pension PlayPen submission to the Treasury on the incentives needed to get people to spend on old age, press here.



Posted in pensions | Tagged , , , , , , , , , , | 3 Comments

How to choose your workplace pension for your staff


The fifth of the Pension Regulator’s ten steps to staging auto-enrolment  is for an employer to choose a pension. Recent research by the OFT suggests that employers are not good at this.

So they will probably need to take advice to make an informed choice.

Employers need not be concerned that they will not be able to find a provider of workplace pensions, the Government provides a “long stop” in NEST which will provide a pension to any employer who applies to participate in its multi-employer scheme.

This may be good enough for some employers but many will want to look at other options to make sure they have made the right choice for the organisation and for the staff who will be investing.

This document is for these employers and for their agents – accountants, payroll experts and financial advisers looking to make an informed choice.

The basics

A workplace pension needs to operate smoothly with the employer’s payroll and refresh regularly to ensure it remains compliant with the Pension Regulator’s rule. We refer to this as “inter-operability”. Ideally, the pension scheme should be like background music in a film, adding value without being intrusive.

But inter-operability is only half the story, a workplace pension must offer value for money to workers using it and should deliver the money back to them as they need it when they come to spend their retirement savings.

This means the choice of workplace pension needs also include an assessment of its capacity to deliver good outcomes, in some cases in 30 or 40 years time.

Using a balanced scorecard

The accepted way to assess a pension provider is to score it on a number of metrics and give each metric a weighting depending on how important that score is.

For instance

Metric Default weighting Adjusted weighting Score= rating xAW
Cost to member



Quality of investments



Help while saving



Help to spend savings



Durability of provider






In this case, an employer has adopted a methodology set out by a professional rating agency which has a default weighting. The employer  considers this gives too much weighting to operational issues (inter-operability) and not enough emphasis given to investments and the durability of the provider.

This employer will get a different overall score which will reflect its particular view.

Putting theory into practice.

In order to choose a workplace pension, an employer must know what choice is available. This is not as easy as it seems as most providers exclude certain propositions put to them either because they are uneconomic to manage or because they consider there is too much risk in contracting with   the employer. This process is called underwriting – an insurance term.

Because providers publish their underwriting criteria, it is possible to work out whether a provider will provide terms and even establish what those terms will be.

So by inputting data into a computer, an employer can quickly find out what providers will offer a workplace pension.

By considering its individual requirements  an employer can create a balanced scorecard , adjust an existing scorecard or simply go with default metrics and weighting (see above).

There are certain organisations in the market who provide the research for employers and their advisers who have neither the time or expertise to assess each provider’s capacity to deliver.

Some of these research organisations package their ratings into balanced scorecards which enable employers quickly and cheaply to assess the market and choose the right workplace pension for them and their staff.

Where to go to for help.

Large organisations have for decades relied on this process to make informed decisions. But the cost of making a choice this way can be high and is beyond the means of many small employers.

If you would like to investigate using a pension consultant to conduct a “whole of market” review , rate providers using a balanced scorecard and deliver a full report on options, you should expect to pay in the region of £5,000. The Friends of Auto-enrolment directory produces a list of consultants providing this service.

Smaller organisations can get access to the same quality of research but without the individual hand-holding. For them a self-service approach using a digital application may provide similar results at a fraction of the cost. To use a digital service that provides an informed choice and full documentation, expect to pay between £100 and £500

If you have an existing financial adviser or an accountant prepared to help you with this choice, this is best of all. It may be that they already use one of the digital services but they can provide the individual guidance that makes all the difference. Expect to pay between £500 and £1000 for the advice and guidance to choose and implement the right workplace pension.

Why choose?

Three reasons

It is part of the employer’s duties as laid down by the Pension Regulator

It reduces the risk of litigation if something goes wrong with the chosen provider

It goes down well with employees who like to see their employers paying attention to getting the right pension.

Next steps

If you are an employer, or are helping an employer, to stage auto-enrolment, we urge you to pay attention to your choice of pension.

You may feel you are up to making this choice yourself or that you can provide the advice to your employer without recourse. But to do so, you are claiming to have skill and knowledge and if you are proved to be negligent in the future, taking decisions without research could come back to haunt you.

Listed below is a table of organisations that you might like to contact

Organisation Website For employers For advisers
Pension PlayPen www.pensionplaypen.com yes yes
Financial Sat Nav http://www.huskyfinance.com/ yes yes
DeFaqto https://www.defaqto.com/ no yes
F&TRC https://www.defaqto.com/ no yes
Posted in pensions | Leave a comment

Does “People Power” make for better pensions?


When we know nothing we take advice before deciding…

Conventional wisdom tells us that advisers tell employers and employers (or their trustees) tell staff. Staff get what they’re given because bosses know better and advisers know best.


But what if there’s a vacuum of advice?

But what if there are no advisers, and if the bosses don’t know much (and care less). What chance have staff to get proper help with their workplace pensions?

The events of the past three years, starting with RDR and culminating in the sunset clause that will see commission eradicated from workplace pensions next April, makes corporate pension advice a no go zone for many advisers.

The OFT have made it clear how little employers know (and frankly things are not getting any better since the publication of their report two years ago.


For the OFT, the problem wasn’t just that employers didn’t buy well, it was that staff didn’t engage in what was being bought for them.

This gave providers carte blanche to serve up any old rubbish – some of them did- the result was that we now have better provider governance , a charge cap and fewer and better providers.

But employees still don’t know what’s being bought for them, employers don’t know what they’re buying and advisers- well they’ve handed the jobs to accountants and payroll managers who are totally bemused!

Nature abhors a vacuum

Conventional wisdom says that nature abhors a vacuum and a new kind of adviser will arrive who can deliver help to employers or to the accountants and bureaux on whom employers are going to have to rely.

To some extent this is the case and we are seeing digital guidance emerging which enables employers to make informed choices -albeit at a price.

But whether the  price is £1000 or £1, it will not be paid if the entity paying it can see no value.

I am coming to the conclusion that the further we get from the member, the less anyone cares. To boot, employers I speak to who are dealing with staff on a day to day basis are concerned their staff  get the best deal. But the payroll manager, who may never speak to staff or even the employer, has considerably less reason to care. The accountant who owns the payroll bureau is a further step removed and the payroll software organisations who sell to the accountant are so far from the action for this conversation to be entirely abstract.

But this abstraction of the member of staff doesn’t bode well. We are in an age of consumerism. This morning sees the arrival of a raft of consumer legislation that gives people the power not just to complain but to get their money back if they see something as faulty. While the “30 day rule” doesn’t  apply to Auto-Enrolment, people in pensions know that the Financial Ombudsman applies a 30 year rule for retrospective judgments.

If accountants, bureaux and most of all employers think they are immune from censure for the choices they make for their staff, they should talk with those sorting out the issues around PPI.

But let’s turn this around.

Supposing that instead of the driver for a good pension coming from an adviser via the employer, we inverted the hierarchy and put employees at the heart of the decision.

Instead of telling staff what they were getting, what if we asked them what they wanted?

Would you be employer enough to send a five minute survey monkey to your workers asking them about what they wanted?

This question troubles us.

We want to know whether – were we to develop such a survey , would you as employers poll your staff.

We want to know whether – were we to develop such a survey, would you as advisers, encourage employers to poll their staff.

What we think!

Engaging staff in what is being bought for them, even in an area as novel and problematic as workplace pensions, comes down to some simple rules.

If you don’t ask – you don’t get

If you didn’t ask – you can expect trouble

If you ask- you can expect to get more bang for your buck.

I guess it’s a glass half full or glass half empty think, but either way, it’s probably better to ask.

But that’s what we think- take either poll (or both) and tell us what you think!

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