So what’s the point of the DC trustee?



It’s the first rule of trusteeship- if you can’t measure it – don’t trust it.

It’s the right of anyone who has their own pension pot to know how much they are paying for the management of their money. If they cannot get this information or make sense of the data, themselves, they should have people to do this for them.

I find it hard to tell a worn tyre from a good one, I need someone I trust (Kwikfit) to tell me when I need a new tyre (and fit it).

As for my retirement pot, I need to know it is being managed well. I need the people at the Legal and General Independent Governance Committee to tell me that the money invested in their multi-asset fund is being managed efficiently and yes- I want to see the numbers! I want to know how it is doing against its targets and what I am paying in the way not just of upfront charges – but in management costs.

So I would have thought the first thing that a DC trustee should be wanting to do, is to match the people in the insurance company IGC and tell me what I was paying, not just in absolute terms, but against some relevant benchmark. They need to know if – relative to the best in the market- the fund(s) they are offering to members are up to scratch.

But this viewed in the same way by the trustees of DC schemes – or so it would seem if you read Stephanie Baxter’s piece in this week’s Professional Pensions.


In a very cute piece of journalism ,Baxter gives certain commentators just enough rope to hang themselves, and then sits back to enjoy the show.

Let me counterpoint a comment in the article against her opening remarks!

“The role of defined contribution trustees is getting increasingly demanding as policymakers seek to ensure that savers get a good deal from pensions.

A major part of this is ensuring that charges and transaction costs are fair….

Trustees will face an even greater challenge when they are handed responsibility for assessing and reporting on how they have achieved “value for money”

Here is the response from a senior professional trustee and a member of the NAPF’s DC Committee

It’s something the NAPF, IMA and the Financial Service Authority (FSA) have all tried to do and they’ve all failed… it’s almost as if the DWP is saying that “where everyone has gone and failed, you trustees now have to succeed”.

This is crazy stuff! The point of the FCA and DWP’s intervention in the market is precisely because of the systemic failure of these noble bodies to bring the people who manage our money to account.

The FCA and DWP have the power to force fund managers to disclose information and the resource to create the tools which trustees can use to properly measure value for money. Trustees should be calling for these powers to be exercised, for these tools to be made available to them. Past failure should not be a guide to the future!  Remember…

If you can’t measure it, don’t flipping trust it!

Being a trustee is not easy, being a DC Trustee is particularly tough- you are responsible for the outcomes of your members.

DC Trustees are currently walking away from any responsibility for the decisions being taken by members at retirement (regrettable but understandable).

But to suggest that “the onus on trustees to acquire detailed data on transaction give greater disclosure on headline transaction costs and ..provide information on the outcomes that these transactions produced”  significantly ups the ante for trustees is a flagrant abnegation of responsibility. The onus to get members VFM has always been there, past failure should not be a guide to the future..

Would my man from Kwikfit allow me to drive on dodgy tyres because he had trouble with a wheel-nut?

The Pensions Regulator has been calling for this kind of governance since it published its “value for money”formulation in the “good DC outcomes” paper in January 2011. This blog has been calling for better disclosure, for the introductions of benchmarks and for Trustees to step up to the plate since 2009. Here we are 1350 blogs later with a senior DC mandarin moaning

“It’s not something trustees have done in the past”

As Captain Mainwaring might have commented

“shut up Pike, don’t you know there’s a war on”.



I am beginning to question the role of DC trustees. If doing the job is too hard and we have to employ professionals, why don’t we give the fiduciary role to IGCs and be done with it.




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Cass calls on fund managers to be paid on results.




Dr Nick Motson of Cass Business School has issued another broadside at the funds industry who have been dilatory at best in responding to consumer pressure to better align its fees to the value it brings to consumers.

Cass’ idea is a simple one, fund managers would be paid on performance against what they said they would do. A sophisticated version of “no-win, no-fee”. The argument is that the good ones would be paid more and the poor ones less. The poor ones would have to leave the market- to everyone’s relief.



But it’s not as simple as that is it Justin?

Listening to Radio 5 live, I heard my red braced school-chum Justin Urquhart-Stewart defending the fund industry’s practice of charging people a % of funds under management rather than linking fees to the performance or underperformance of the fund – relative to what that fund set out to do – e.g. the benchmark.

This is of course, entirely missing the point - deliberately some would say!

Fund managers can (and should) be paid performance fees even if the fund shrinks!

The example was given of a fund manager investing in Japan who would have seen his fees fall over 20 years because of the capital losses in the Japanese Stock market. As I understand it, an active fund manager who had seen a fund fall by less than the benchmark (typically a Nikkei index) – would get paid more than a passive manager who just delivered the market return. The example is again irrelevant.

The point of aligning fees to performance against the stated aim of the fund is that it does not reward the 80% of active managers who consistently fail to bring home the bacon and bring some risk to the business of active fund management - to the managers!

But active managers should not be rewarded for not doing what they said they would

At present, anyone can set up as an active manager and charge high fees (1.5% of the fund is typically quoted as the RRP). But so long as the fund continues to benefit from the support of its uni-holders, the manager continues to rake it in whether he or she does well or badly.

Which makes for an appalling lack of incentive on the manager to perform. It makes for lazy behaviour (see the stuff below on charges) and it makes for a culture where the creature comforts of managers come before the returns of the investors

On the radio, the question was asked -

“why do investors stick with active fund management”.

The answer may lie in the difficulty of moving money, it may lie in the expense of moving money and it may be because investors are trying to buy and hold- as Warren Buffett tells them to.

Whatever the exact reason, investors are doing for fund managers, what fund managers need and want, giving them the long-term horizon to buy and hold for value. The question we should be asking active  managers is why they are doing so little to reward the people who are being loyal to them.

One thing that is for sure, is that all the cards are in the active managers hands and we can see (below) that the active managers are not too keen to show their hand to people who ultimately own the money.

This is known as fund management’s “asymmetry of information”.

Justin blithely spoke on Wake up to Money this morning about the days when fund managers were obliged to churn their portfolios every year to generate extra commission for the managers. Apparently these days are gone. This was another (successful) ruse of Justin to throw the pursuing journalist off the scent.

For, within the past two years, research by Dr Chris Spiers, the new MD of KAS Bank, showed some active fund management houses were still churning portfolios to a point that it was nigh on impossible to justify the transaction costs involved by the potential for higher performance.

Not only was Spiers’ research suppressed, but the fund management industry, led by the Investment Management Association, continue to suppress information on the portfolio turnover rates  (churn rates) of active funds.

Performance fees and full cost disclosure go hand in hand

The issues of linking active performance to fund management charges and the disclosure of the true costs of investing are co-joined. Many active managers have such high transaction costs (resulting from poor execution and over-trading) that they become serial underperformers no matter what the skill of the managers. It’s like trying to win a horse race with Fatty Arbuckle on its back!

For the fund management industry to own op to the true costs of active management, it would have to expose itself to the criticism of the journalists on Wake up to Money that allowed Justin to kick the issue into the long-grass.

There would be nowhere for fund managers to hide.


Earlier this year, the Pensions Institute issued a report that claimed investor returns are being hurt by hidden costs that are at least as big as the visible costs in actively managed funds. Here is the meat in their sandwich

Asset managers should be required to reveal the full costs of active fund management to help investors see the full drag on their returns.

The Pensions Institute at Cass Business School has published a white paper calling for asset managers to disclose all visible and hidden costs which are ultimately borne by investors.

Research cited in the paper suggests that concealed costs – such as bid-ask spreads and transaction costs in underlying funds – can make up to 85 per cent of a fund’s total transaction costs. The remainder is taken up by visible costs such as commissions, taxes and fees.

Director of the Pension’s Institute, Professor David Blake, said: “No good reasons have been put forward for why all the costs of investment management should not be fully disclosed. They are after all genuine costs borne by the investors.

“There is little point in requiring transparency where the reported measure for ‘costs’ does not include all of the costs, or in the short-term, as many costs as could currently be reported on an efficient basis.

“If total investment costs are not ultimately disclosed in full, how can there ever be an effective and meaningful cap on charges, and how can active investment managers ever asses their true value added?”

Costs could be reported in the form of a ‘rate of cost’ – which could be deducted from the gross rate of return to give a net rate of return – and as a monetary amount, which could be compared with the monetary value of the investor’s portfolio.

The paper suggests a staggered approach could be taken in the lead up to the full disclosure of all transaction costs.

In the initial stage, investment managers should be required to report all visible cash costs involving commissions, taxes, fees, custodial charges and acquisitions costs, together with the hidden cash costs of bid ask spreads, transaction costs underlying funds and undisclosed revenue.

“All these indirect costs relate to the efficiency of the investment management process and all good investment managers should have an estimate of their size,” said Professor Blake.

Once investment management firms have the right IT systems in place, non-cash costs should also be reported comprising of market impact, information leakage, market exposure, market timing costs and delay costs (see below).

Professor Blake added: “The hidden non-cash costs would be more challenging to calculate, since they involve the analysis of information that might not necessarily be automatically captured by the investment manager’s own systems. Nevertheless, the issue is whether fund manager systems could be configured to generate similar information on a cost-effective basis.”

Visible cash costs

  •   Commissions
  •   Taxes
  •   Fees
  •   Custodial charges
  •   Acquisition costs

    Hidden cash costs

  •   Bid-ask spread – of the hidden costs, the simplest to understand is the bid-ask spread that a dealer or market maker charges to buy and sell a security or an investment bank charges for, say, a currency hedge. The total spread costs incurred during the year will be related to the annual portfolio turnover.
  •   Transactions costs in underlying funds – if the investment manager buys funds on behalf of the investor, the transaction costs incurred by these funds are not reported even to investment managers, but are still paid by the investor in terms of a lower return.
  •   Undisclosed revenue – the investment manager might also benefit from undisclosed revenue, such as retained interest on underlying cash balances or retained profits from stock lending.

    Hidden non-cash costs

  •   Market impact – refers to the reaction of the market price to a large transaction, such as a block sale of securities. The market price will fall in the process of selling the securities and the average execution price will be below the pre-sale price. If the investment manager attempts to execute a large transaction in smaller batches – e.g., by advertising trades to attract buyers or seeking indicators of interest – this will lead to information leakage and will have broadly the same effect as market impact.
  •   Market exposure – refers to the fact that an investor is exposed to what is happening in the market during the period that the transaction is taking place. Suppose the investment manager is planning to buy securities for a client. The client is exposed to the risk that the market price rises before the transaction is executed.
  •   Missed trade opportunity or market timing costs are the costs associated with not executing a transaction at the best possible price. Finally, there are delay costs associated with waiting for transactions to complete (e.g., holding the purchase price in a zero-interest account). Some of these non-cash costs can be hedged against – e.g., those relating to adverse market movements – but the cost of the hedge then becomes an explicit measure of the hidden cost.

    Memorandum item:

On 13 May 2014, the Financial Conduct Authority criticised the investment management industry for not reporting charges to investors sufficiently clearly. In particular, it criticised the annual management charge (AMC) as failing ‘to provide investors with a clear, combined figure for charges’. Instead, it recommended the use of an ongoing charges figure (OCF) which, in addition to the investment manager’s fee, includes recurrent operational costs, such as keeping a register of investors, calculating the value of the fund’s units or shares, and asset custody costs. In other words, the OFC measures costs that an investment manager would pay in the absence of any purchases or sales of assets and if asset markets remained static during the year. The next day, on 14 May, the Financial Reporting Council accepted the Investment Management Association’s (IMA) proposal to report not only the OFC, but also all the dealing costs and stamp duty paid when an investment manager buys

and sells assets in the fund’s portfolio. IMA chief executive Daniel Godfrey said: “Our new measure is simple, easy-to-understand and covers every penny spent by a fund…It will give investors confidence that nothing has been hidden.” Unfortunately, even with the new information reported, there will remain costs that are hidden.

Fortunately, the FCA are on the case, they will not be fobbed off by stockbrokers in red-braces- no matter how charming!

The days of active fund managers getting away with lazy practice and in extreme cases malpractice, have to come to an end. Full disclosure of funds will be necessary for the IGCs from next year, and if the information is in the hands of the insurance platform managers, it has to be put in the hands of those who run institutional pension funds and individual portfolios of funds- soon after.

When the public sees the cost of active fund management, fund by fund, they will be able to decide which active fund managers are really doing their job on the hard evidence of cost control and performance against the stated ambition of the fund.

This will be a better basis than the current practice which appears to be based on the publication of ever more extravagant advertisements professing the prowess of fund managers and based on little more than pretty pictures.

And so say all of us , at….

hi res playpen


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The fine line between “patronising” and “paternal”.


Last week Tom Mcphail (Hargreaves Lansdown) had a go at Teresa Fritz (financial Services Consumer Council and MAS) about the need for advice.

You’d expect the two to clash, FSCS and MAS are not much loved by advisers who see it as an incompetent policemen and Hargreaves are every advisers least favourite adviser (mainly because they are usually right).

The Money Marketing version of events is here .

I’ve disagreed with Tom a few times recently – but I’m right with him here and I wrote to thank him for standing up for people who want to do things themselves.

He wrote back this morning

Lots of people need help managing their money, some need advice; a minority need no help at all. By suggesting everyone needs to be told what to do, the FSCP is obstructing the important work which should be going on right now to establish good minimum standards in how we engage and communicate with the millions who just want a bit of help.

With Hargreaves’ Vantage product, set to scoop the pool of non-advised money, there will be plenty of cynics muttering “Tom would say that”, but that is precisely the point.

If advisers aren’t happy with Vantage, there is nothing to stop them setting up an alternative.

I’m watching Saturday Kitchen as I write this so I’m being dragged into a culinary conceit.

Recipe for a successful drawdown service

  1. Find yourself an amenable bank or insurance company to provide you with a personal pension licence

  2. Get yourselves a funds platform – probably from the above (but other platforms are available)

  3. Find a sensible administrator capable of managing records and providing feeds to your customers so they can engage, get educated and be empowered to manage their drawdown)

  4. Organise your interfaces so customers get on with things as they see fit, contacting you when they need to.

  5. Market this to your clients and anyone else’s clients and to all the employers and trustees who have lots of staff and members who need your help from April 2015.

All this need not be very hard, you only need to understand the way people like to spend their money and be expert in the technicalities.

Alternatively you could join First Actuarial and enjoy the journey we are on!



I know and like Teresa, and good consumerists such as Mick McAteer. Tom says of them “They are actually a danger to the financial wellbeing of this country” I  know where he is coming from.

Yesterday I wrote about Nutmeg and and how we can use the new technologies to engage, educate and empower people to manage their income in retirement.

I will keep you informed about our journey. I suspect we’ll be calling off at various stops near you and I wouldn’t be surprised if our terminus is CDC central – where a lot of defaulters will pull in (or hit the buffers)!

I hope that Tom will spend some of the journey with us, we should be grateful that he spoke out at the reading of the Pension Taxation Bill (as we did at the Pension Schemes Bill).

I am proud to associate the names of Hargreaves Lansdown and First Actuarial who may be on differing trains and maybe parallel rail tracks – but taking people to the same (good) places.


me worry



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Is there a place for digital advice in pensions?


hi res playpen


I spoke yesterday at the Pershing Conference in Westminster. My pal David Calfo who is managing many of the seismic changes at the University Superanuaition Scheme  spoke with me and the session was chaired by Pershing’s Gerard Wellesley. It all went rather well.

The success of our session, which discussed the role of the IFA in 2015 in helping people make use of their new pension freedoms, was down to what came before, a brilliant debate between Nick Hungerford (CEO of Nutmeg) ,Emily Haisley, behaviouralist at Barclays Wealth and Michael Hall of Deutsche.

I tweeted during their debate



and indeed the debate challenged the role of the “analogue” adviser with a vigour that was both fresh and disturbing. Nutmeg have set out to change things and Hungerford’s approach is highly disruptive

Looking at my tweets I read

I hope these spontaneous remarks posted from the floor give an idea of the dynamic that was created.

It seems to me that for Nutmeg, and this goes for Pension Play Pen , the challenge is as much from its peers as from the scope of what it is trying to do.

If you’ve got time , watch Nick in action- this video is really only worth watching from minute 20 onwards – there’s about an hour of it

What’s scary is that Nick isn’t trying to be disruptive, he doesn’t seem to be trying at all!

In fact, in super-confident Nick Hungerford’s world, things happen his way – he just lives in a different paradigm.

I’ve no doubt that Hungerford is making sense to the people who don’t do investments (as well as people like me who do).

Pension PlayPen like Nutmeg uses what Nick called “rules based algorithms to get good outcomes”. Our rules work for the 90% of people who want to be guided to a decision that makes sense, not to the 10% who want to forge their own decision making process.

Nutmeg like Pension PlayPen puts financial decision making in second place to living and working.

Nick seemed quite happy for his team to be chatting on a webcam sitting on the side of someone’s screen while they got on with whatever work they were doing.

And I was struck by a brilliant observation by Emily Haisley, “people are more honest to a computer than face to face”.

I think there’s a real deep truth here, we are more candid with the machine, even when we know there is someone or something on the other side of the screen analysing what we input.

The motto for the future must be “engage,educate and empower” and this is what digital technology is doing for the new generations of people coming into the workforce and for people like me , tapping into the power of the web.

We are on the edge of a revolution in pensions where up to 400,000 people a year are going to be asked to manage their financial affairs in later life with freedoms unimaginable twelve months ago.

We need to play catch up to get to people, we need to use the new technologies in a way that Nutmeg and Pension PlayPen are pioneering.



nutmeg 2

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I don’t normally do press releases on here, I will make an exception here.

People are embarrassed about money – when it’s their money they are talking about. The taboos about debt, wealth and financial planning are real and we need to understand them, if we can get on with helping people to manage their money better.

So over to L&G…

New research from Legal & General reveals two fifths of the population (41%) say money is one of their biggest stresses, yet nearly half (46%) say finances are a personal matter not to be talked about. As a consequence of this social taboo, people are failing to plan for their financial future, and having to cope with money worries on their own.

The effects of money worries include: increased pressure on family life (39%); anxiety (39%); bad moods (29%); and sleepless nights (26%). A third (34%) of those surveyed say money is their biggest stress, yet the same amount (36%) avoid talking about their finances with friends and family because it isn’t the “done thing” – rising to over two fifths for those aged 55+*. 

Against a backdrop of an aging population, where people may have to work for longer, and the Chancellor’s recent changes to annuities, people are having to take more responsibility for their long term financial security. Financial planning has become more important than ever, yet many are failing to take action.

Legal & General’s Taboo Tent has been touring the country, speaking with members of the public to get to the bottom of why talking about money is such a taboo. The Taboo Tent uncovered the nation’s top taboos and challenged people to take their first step towards financial security by holding awkward financial conversations for the first time.   

The top six taboo conversation topics** are:

Between couples Between close friends With parents 
Past romantic relationships (45%)

Annoying habits (43%)

Weight (38%)

Spending habits (36%)

Death (34%)

Debt (32%)

Debt (46%)

Salary (45%)

Annoying habits (44%)

Savings (41%)

Family scandals (41%)

Politics (36%)

Debt (35%)

Death (33%)

Annoying habits (32%)

Family Scandals (31%)

Past romantic relationships (30%)

Spending habits (30%)


Annie Shaw, consumer finance champion and Taboo Tent host
, said:

As a nation, we simply don’t like to talk about money matters. It’s a social taboo that makes many people feel awkward. It’s not helped by the fact that financial planning can be a minefield of confusing jargon and alien terms that are difficult to understand. But talking about money doesn’t need to be a taboo. A conversation with someone who can explain the facts in plain English can go a long way to help people understand their finances and plan for the future.” 

Legal & General Assurance Society executive director and chief executive John Pollock, said:

“Taking the time and having the confidence to talk about financial planning is hugely important – not just for financial reasons but for our wellbeing too. Despite this, one in five people would prefer to avoid talking about their finances and leave their financial planning to chance. We need to break this social norm and start talking about money. No matter what the situation or stage of life, achieving financial security begins with having the right conversation.”   

The research shows that money taboos vary depending on the social situation. For close friends, salary and savings are awkward conversation topics, for partners many find it easier to lie about their finances altogether than tell the truth. Talking about debt is the biggest taboo when with parents. [See below for full breakdowns]

Between couples Between close friends Between parents
Over one in 10 (13%) of those in relationships say they are more likely to lie about their finances than any other topic with their partner, rising to over a fifth (23%) of people aged 25-34 years old.

White lies that have been told include: how much people earn (15%); save (21%); how much debt they’re in (22%); and hiding credit card statements (11%). 

Many say their partner has no idea what they have saved (18%), how much they earn (8%), or how much debt they are in (12%).

One in 10 (10%) say they do not feel comfortable discussing debts with their partner.

Only 10% of people say they talk regularly about their personal finances with their friends.

Salary is one of the most avoided conversations with 61% of people saying their close friends have no idea how much they earn.

Of those who have discussed the topic with friends, 16% admit to having told a white lie about how much they earn.

A quarter (25%) of people say they never set time aside to talk about their finances with a parent, and over a fifth (22%) say they do not feel comfortable talking about debts with their parents.

Perhaps as a result of this, over two fifths (43%) say their parent does not know how much debt they are in, and nearly half (49%) say their parent has no idea how much they have saved either. 

White lies that have been told include: how much people earn (15%); save (21%); how much debt they’re in (22%); and hiding credit card statements (11%). 

Many say their partner has no idea what they have saved (18%), how much they earn (8%), or how much debt they are in (12%).

One in 10 (10%) say they do not feel comfortable discussing debts with their partner.Only 10% of people say they talk regularly about their personal finances with their friends.

Salary is one of the most avoided conversations with 61% of people saying their close friends have no idea how much they earn.

Of those who have discussed the topic with friends, 16% admit to having told a white lie about how much they earn.A quarter (25%) of people say they never set time aside to talk about their finances with a parent, and over a fifth (22%) say they do not feel comfortable talking about debts with their parents.

Perhaps as a result of this, over two fifths (43%) say their parent does not know how much debt they are in, and nearly half (49%) say their parent has no idea how much they have saved either. 

The lack of conversation around finances means many are not planning for their financial future. Over two fifths (41%) of people only talk about money when they have an immediate worry and a fifth (21%) prefer not to worry about money at all, as they take the approach it will ‘all work out’. 

Encouragingly, the research shows two fifths (41%) of people say they are comfortable talking about money and their financial matters, and (33%) say they have long term financial plans in place and feel good about their finances as a result.

To help more people have financial conversations for the first time, Legal & General is providing information and top tips on its website to help individuals get started. With a fifth (22%) of people saying they find financial planning confusing and have no idea where to begin, Legal & General is helping people get closer to achieving financial security:


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Pensions are yours to spend – but how do you get to the shops?

Why shouldnt I by it

Ours to spend!

If I were to give you £100,000 and tell you that that was to bide you over to the end of your life you might initially be excited – you might then become apprehensive and you might eventually give the money to someone else for management,

The pension windfall that many of us will receive at 55 is just such a gift. True it is our own money, saved either from our own resources, in lieu of pay or in lieu of SERPS/S2P. But it is money that has never before been real (as in realisable).

It is money that has been in a wrapper called “pension” with a “not to be opened till 55 and then without the express permission of HMRC/financial adviser/pension provider”.

It hasn’t really been our money- it’s been making someone else money – but it’s not like our house or our stamp collection or even the shares we got when we worked for zyz. It’s not ours to spend.

time to spend

If you cant trust anyone – do it yourself!

If I was George Osborne , I would be marketing the whole pension freedoms project under the “yours to spend” banner. If, as Hargreaves Lansdown predict, 200,000 cash out their pensions next year, it’s not just that they want to spend their pot, it’s that they want their pot back from the control of others -trustees, insurers – even SIPP managers.

They might rather do it themselves, pay the tax but not be beholden to someone they don’t know, trust -let alone like. Let’s face it, have you ever seen a financial adviser or pension fund manager portrayed sympathetically in the mainstream media, the last one I watched on Coronation ended up driving his family off the edge of a dock!

In a brilliant blog (here)  Mark Scantlebury and a group of friends explore why the people who run and sell pensions are so distrusted. I won’t rehearse the same old ground. When I went to the Pitch a couple of weeks ago, one of the judges- a serial entrepreneur fingered me after my pitch

you guys in pensions have ruined two of my businesses, I’m not going to let you do it again

I asked her how she was going to avoid pensions with her sixties looming..

I’m going to do it myself

So how can we help people do it better?

I imagine the journey people take in retirement as needing some kind of transport. The alternative is you spend all your money on day one and never go anywhere!

And the choice of  the form of transport

- communal (CDC or annuity),

or taxi (advised drawdown)

or hire-car (self- advised drawdown)

is up to the people taking the journey.

To extend the analogy, until recently the only way to travel was by barge; the annuity got you there slowly and safely, but it was a little boring.

barge 2

I’m trying to imagine what is needed for my new transporters and I’ve decided their are four essentials

  1. There must be a trusted brand providing management
  2. The vehicles must be properly powered (with the right investment options)
  3. The vehicles must have sound chassis- (properly administered)
  4. There must be passenger information
  5. There must be a driver – at the controls


A trusted brand…

Supposing that a new and trusted financial brand – Virgin Money – Metro-Bank – Money Saving Expert – Pension PlayPen, decided to set up a product that helped people organise their finances to pay themselves an income for life- what would it look like?

Properly powered…

Well to begin with – there would have to be an investment platform- either an insured one or one of the new funds platforms like Ascentric, Nucleus or Hargreaves .

A decent chassis…

Then there would have to be a back-office system that  kept a record the state of play-

  • how much money was left in the pot?
  • what the tax position was (lifetime allowance, annual allowance, income tax etc)?
  • how had transactions been processed ?

Passenger information…

There would have to be a dashboard for people using the system to help them understand what was happening.

The key gauges would look like those on a car;-

  • a gauge showing the fuel burn and whether it was higher or lower than expected;
  • a gauge showing how far it was from the expected destination- sadly  the anticipated date of death
  • and a final gauge showing the likelihood of getting to the end without running out of petrol

Other gauges would show how close someone was to exceeding their lifetime allowance, what headroom they had to top up their pot with new contributions and where the person was relative to their current income tax bands.

For someone to be able to the pension transport system they would, at the very least , need to have the investment engine, the administrative chassis and finally the dashboard to see how things were going.

Someone to drive..

But there is one other aspect to this vehicle that is need, a system of controls that allow the vehicle to be driven. These must include a steering wheel to determine the direction of travel (let’s call this the fund selector), a brake to ease off the speed and an accelerator to speed up. Let’s leave any more complicated controls aside.

Pension Freedoms = Your choice of transport

Transport system

I believe that before too long, anyone who has a pension pot will have access to the transport system and the choice they will have will depend on the amount of control they want.


For some they will want to let the “train take the strain” and will be happy to let all investment and income decisions be taken by a trusted third party. This could be set up by a union or a trusted financial brand (MoneySavingExpert, Pension PlayPen)! They would set the burn rate on your money, maybe by looking specifically at your health or maybe treating you as one in a pool of all the people on the train.

For some, a taxi- driven approach will be “deemed more appropriate”. So an adviser will be brought in to drive the car and manage the fuel efficiency to make sure you get to your destination without running out of money. People will be able to find taxi-drivers at the MAS taxi-rank- sorry Directory


Finally , there will be dedicated enthusiasts determined to drive their own pension car. It may not be a Lamborghini but it should be a robust vehicle with an MOT provided by an IGC or similar . If you want self-drive, a map, instruction manual and a proper car is about all you expect.

We have the drivers – we don’t have the vehicles (yet) !

We do have taxi-drivers, they are called IFAs, we do have train-drivers- they are currently managing DB schemes but they could as well switch to running CDC options for those who want the train to take the strain.

Those who want to drive their own cars have probably taken instruction. There are a small group of people (Emma Douglas called them badgers) who will take to the road without anyone’s help. Fortunately it is only themselves they can harm!


What we don’t have are the right pension vehicles – whether collective or individual which give all types of travellers the view of their financial future necessary for them to decide how much they want to do themselves.

So we approach April 2015 with a blueprint for the travel system of tomorrow, but not the infrastructure.


Can we manage  the queues while we build them?

Fortunately , the numbers taking decisions in 2015 are relatively few and they can probably sit a few months on the platform or car showroom or taxi-rank waiting for the right form of transport to show up.

But the problem will be impatience. Many will simply decide to take their money and run, (200k according to Hargreaves Lansdown). The longer we leave it to find the right vehicles  to take people forward, the more will simply take their money to their bank account and away from pensions.

We need to encourage people to come aboard!

If you’ve read this far, you’ll know that for most people , taking money from a efficient environment where there are tools to enable people to manage their pensions and put it into bank accounts where there is no help from the tax man or from experts, is a bad move.

There are exceptions, if you’ve got a low life expectancy or a very small pot and an unused personal allowance and/or a pile of debt, you are probably best spending your pot (as the Citizens Advice Bureau should tell you).

But most people have got more ambition with their retirement savings than to spend them day one, most people (70% according to Aon Hewitt) want a lifetime income – a pension – which supplements what they get from the State.

Pensions people should be manufacturing vehicles as you read!

If we believe we are up to the job of managing people’s pensions, we cannot sit on the sidelines and allow the money to seep away, we should be working with each other to build these pension vehicles.

By way of a “fantasy team” we might haveMartin Lewis  talking with Paul Bradshaw talking with Sue Applegarth talking with Steve Bee to create new products that win back the trust of the many.

This might sound fanciful and I guess it is . But there is such a great opportunity to get it right! We have to think outside the traditional box and find a new way to deliver – whether we call it CDC or collective drawdown, or synthetic annuity or individual drawdown or defined ambition.

The game changer is the transport system!

The game changer for the consumer will be the ability to do it themselves. Right now people know that their pensions are “theirs to spend” but it is one thing to have the vouchers, they need a way to get to the shops.



Posted in advice gap, pension playpen, pensions, Pensions Regulator, Personality, social media | Tagged , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Straight talking from the IMA on charges?


APTOPIX Britain RBS Protest

In one of the least incisive video interviews I’ve seen this year, here’s Ian Smith of Pensions Week quizzing Jonathan Lipkin- IMA Director of Public Policy Decision- on how the IMA and its members are facing up to the challenges of 2015. The 6 minute video is here.

The background

The IMA and its members are charged with disclosing the real costs to members of workplace pension funds of fund management. To do this, they needed to work out a formula that includes not just what is charged overtly to the trustees or managers of a contract based arrangement, but what is charged indirectly to a member’s fund (the hidden charges).

The worry within the DWP and FCA is that more you cap the overt charge, the more managers find ways of increasing hidden charges which erode the “Net Asset Value” of your pension pot.

So the DWP are requiring the disclosure of the hidden charges  by 2016 and making sure that those governing occupational schemes (trustees) and GPPs (IGCs) are able to see whether members are getting value for money from these additional costs.

IMA obfuscation #1 -talk about something else

The tried and tested way of responding to these kind of pressures is to obfuscate. This word means to cloud the subject in smoke. The particular smokescreen being used at the moment is to pretend that the asset managers are far too busy responding to the challenges of the budget tax reforms and their impact on the default funds which they operate.

Let’s be quite clear, this is none of the business of asset managers. Asset managers are here to provide asset management , not to devise default funds. If their marketing departments decide they want to make themselves attractive to the people who buy their funds by suggesting default strategies- ok. But managing existing money comes first.

It is, in any case , impossible to accurately establish what people will invest in after April 2015. Firstly we can’t second guess individual choices and secondly, until a new default decumulation strategy takes hold, we have no idea what those who don’t take choices will end up not choosing (but investing in).

Faced with their being no default product and no information on what people taking choices will do, the asset managers would be better off getting their house in order and complying with what they have been asked to do by the DWP, the IGCs and scheme trustees.

IMA obfuscation #2 – pretend it’s somebody else’s job

So back to Jonathan Lipkin and his smokescreens. The second smokescreen is the IMA’s contention that the charges within their funds aren’t really important and what really matters is the annual management charge which is “not much” to do with them.

It is true that the cost of asset management to schemes and contract based management is a relatively small part of the Annual Management Charge. The AMC has to pay for administration, member communications as well as all the junketing that goes on to encourage people like me to recommend one scheme or CPP over another. The cost of fund management to the scheme of GPP managers may be less than 0.05% pa.

But what is the cost to the members of the fund management?

That is the great unknown

The cost to the members may be many times more than the cost of the fees. Recently Railpen admitted that following an internal investigation they discovered it was paying five times as much in hidden costs as the headline fee for fund management.

Railpen’s is an extreme example, it was investing in notoriously expensive fund management techniques , most of which would not be included by those creating and managing DC default funds.

Why it is absolutely the IMA’s job and why it matters

But this is the point. Until the IGCs and Scheme Trustees who choose the default fund strategies know how much these strategies are really costing, they cannot make a decision.

And until the IMA and its members agree a formula to properly disclose these charges, the people who make the decisions about the new defaults won’t be able to make informed choices.

And until the IGCs and Scheme Trustees get the information about hidden costs they will not be able to comply with their duties post April 2015 which include reporting to members of the Schemes and GPPs on the default (and other) funds offered them. This reporting must specifically mention the quantum of costs being born by members within the funds they are being asked to use.

Trustees and IGCs can report on everything else, they can show nice pie charts that demonstrate how the AMC is divied up between admin, comms, reserving distribution and “corporate overhead”. They can even include a slice for what they are paying for fund management. But that is only telling half the story.

What the IGCs and Scheme Trustees cannot tell members is what is being taken from the fund’s net asset value by way of hidden charges – the costs of dealing , of currency hedging, of  broker research (still bundled into dealing costs) and the market impact of the execution of trades.

This shameful dissembling must stop

It is absolutely wrong- shamefully wrong – of the FT to allow its pension magazine to be used as a PR soapbox for the IMA.

It is shamefully wrong of the IMA to imply that it is trustees and contract based managers who are lagging. They cannot define the AMC till they have the management information the IMA and its members are with-holding.

The AMC will be defined by subtracting both the cost charged to the trustees or GPP manager for funds and what is taken out of NAV from the 0.75% cap. The remainder of the annual charge pay s for the fixed costs and anything left over is the scheme or GPP managers to keep.

So Ian Smith at Pensions Week, these are the two questions you should have asked

  1. When are the IMA’s members going to publish the total cost of the fund management (both explicit and hidden)?
  2. When are they going to stop meddling in default design and public disinformation campaigns on AMC definitions?


What the Government are doing to sort this out

There is some good news on the horizon. We don’t have to listen to this kind of nonsense from the IMA  much longer.

The FCA are working out a formula which ICA members will have to use to calculate hidden costs. This “Government Intervention” has been deemed necessary because the IMA and the ABI would not publish a satisfactory formula themselves.

I have written elsewhere on this blog about the IMA’s continued support for shocking malpractice such as the bundling of broker research into trading costs (a form of soft commission). The FT have recently reported on the practice of some fund managers of putting trustees buying their funds under a “non-disclosure agreement” to make sure that where low prices are demanded- they are not made generally available to the market.

Why this Government Intervention happened

The DWP and FCA interventions are happening because the IMA and its members arrogantly refuse to comply voluntarily with what their customers can rightfully claim to be “best practice”.

I see I have a meeting with Jonathan Lipkin in my diary on November 11th and you can be quite sure that what I am saying in this blog, I will be saying to his face.


And how’s this for barefaced cheek?

Oh and if anyone wants to hear the Jonathan Lipkin view on investment governance – including his top tip to take DC governance seriously – try this little beauty from May 2013.

If you need the IMA to teach you about DC Governance – you’ve got a problem!

APTOPIX Britain RBS Protest

Posted in FCA, Financial Conduct Authority, Financial Education, governance, pensions | Tagged , , , , , , , , , , , , , | 5 Comments

10 reasons why I’m proud to work for @firstactuarial

First Actuarial Students

First Actuarial Students

  1. We have our Conference at the brand new Centre Parks at Woburn (KPMG hire the O2)
  2. Our clients don’t pay to hire the O2
  3. We don’t do fiduciary management
  4. We don’t have a vertically integrated mastertrust
  5. We let people blog, tweet and comment – we don’t do “thought police”
  6. We know how to laugh at ourselves
  7. We’re ten years old, 200 strong and turned over nearly £15m last year
  8. We don’t lose clients
  9. The 9 people who started this thing are all still here
  10. They own a wedge of Pension PlayPen

F1rst Actuarial hi-res

There are people who think that we are uncommercial. That’s because we take a long view. Because we don’t have bank debt and don’t have to report to venture capitalists we can build our business at our and our client’s pace.

Clients who fund pension schemes are in for the long-run. Pension plans aren’t “one and go”, they need nurturing. We could make a lot of quick money out of pensions (and many do) but since most of us are under 40, what’s the point of a Lamborghini today and your reputation toasted?

Working for people who take a long-term view is comforting, I’m 53 and I’ve probably got 20 productive years left in me. I’ve still got my health and my sense of humour.

First Actuarial is still at the start of it’s career, just breaking out of nappies compared with some of our rivals.

But if I was competing with my pension scheme for the running of my business – I’d want to be speaking to First Actuarial on how to manage those “bucking bronco” liabilities!

And if I was a trustee concerned to make every penny in the scheme and every penny of my sponsor’s contributions work for my members, I’d want First Actuarial helping me out.


First Actuarial is a great firm- I’ve been working here for nearly five years and can say I’ve never worked happier. We are celebrating our tenth anniversary with a day and a night at Centre Parks, we’ll be working and playing and dancing and we’ll be bedding down in chalets in the Woburn Woods.

actuarial post

No wonder we’ve been nominated as Actuarial Employer of the Year. Wouldn’t you rather be working for us?

First Actuarial Students

First Actuarial Students

Posted in advice gap, pensions | Tagged , , , , , , , , , , | 2 Comments

Steve Webb – a new model politician?




Let me declare an interest, I am a Liberal, born into a Liberal family in a part of the world where Liberalism is the natural opposition to conservatism.

Steve Webb is from that part of the world, his constituency 40 miles north of where I grew up in North Dorset. I would like him – wouldn’t I?

I remember the moment when it became possible that Webb might see power, it was when Nigel Waterson lost his seat narrowly (to a Liberal as it happened). The days following the general election saw Clegg as powerbroker. Had the Liberals joined labour to form a coalition, my political prejudices would have been satisfied but I doubted then and now that Webb would have been pension minister.

It was only because of the absence of expertise on the Conservative benches (Willetts excluded), that Webb could take the job. That and the fact that IDS is a charming collaborative man who could tolerate collaboration.


Speaking privately with Nigel Waterson, I got the impression that he is full of admiration for Webb. Graciously he has pursued an alternative roles as Chairman of NOW pensions.

Within pension circles, Webb is pretty well liked; other than the IFA boo-boys who troll their websites, there is an acceptance that this articulate, funny, balanced and decisive minister has got most things right and those things that he has got wrong- he has got wrong in a good way.

He’s had cock-ups, the false starts over the charge cap, the silly deferred annuity scheme he dreamt up with Alan Rubenstein and some naive attempts to take on the annuity industry prior to the budget. Clearly there are some things that the junior partner in a coalation (both in terms of party and department) can be excluded from. The Government Actuary knew about tax reforms before the Pension Minister and that doesn’t go down well with pension people.

But in all these things, Webb did not throw his toys out of the pram. The charge cap will be in place (as will be most of the pension reforms for workplace pensions) by next April. The ill-advised excursions into product design are morphing into strange synthetic products that may mutate into something useful , and his comments about annuities at least keep live the debate about whether anyone who bought an annuity in the years of QE was well advised. If there is a compensation bill- will it be HM Treasury that foots it?


But the Webb legacy will be felt most in his work on the State Pension  which will be simpler, fairer and better understood from 2016. Thanks to the triple lock, it will be bigger than it might have been but it remains “basic” and will continue to be for “old age” despite losing those badges. The options for women to catch up on contributions and the greater fairness to future generations for women are what make Webb’s work especially valuable.

I am hugely impressed by the way that Webb has handled himself since the Budget. As mentioned before, he did not throw his toys from the pram when the announcement was made. He did what any clever politician would do, and grabbed the initiative. Whether the Lamborghini was a deliberate distraction or a slip, Webb has made it his icon and in a strange way stolen a part of the Treasury’s thunder.

The Lamborghini and the meticulous work on the single state pension show that Webb is both a populist and a pensions teccie.

I was speaking to a payroll geek the other day and discussing the new auto-enrolment contribution bands. “I bet you wish your views were heard by the politicians” I joked. “They are”, replied my friend, “Steve Webb had lunch with us last week”.

For anyone who thinks Steve Webb a headline grabber, they should remember the unglamorous work he has put in on making auto-enrolment work for payroll. The Friends of Auto-Enrolment will testify to that.


His fellow Liberals have been slow to acknowledge him and I sense he doesn’t care too much. He is a great ambassador for the Liberal Party and if they had a little more sense, they hold Webb up for what he is- their greatest success of the parliament.

But Webb is rather less the party politician and more the pension statesman. In his dedication to the single cause of improving the lot of our elderly population, Webb has broken new ground. While Ministers for education, justice and many other departments continue to come and go, Webb has turned the pension brief from a shortcut to the Treasury to a personal fiefdom.

As Pension Minister, Webb seems neither a collaborator with Conservatives nor a scourge of the opposition, he seems what he is – a Pension Patriarch.


I think that Webb’s style of politics which involves an immersion in his department’s affairs, is hard to emulate. It requires all of Webb’s personal, intellectual and political skills to carry off.

But for politicians looking to rise above the mire and get the respect of those who are professionally impacted by their work, Webb should be a role-model.

I am a Liberal, I have not had much to cheer about these last five years, but I have had Steve Webb. Frankly that has been enough.

Posted in DWP, steve webb, welfare | Tagged , , , , , , , , , , , , | Leave a comment

The language of trust..Pension Play Pen Lunch- Monday


The Pension Play Pen lunch on Monday (Nov 3rd) will be led by Mark Scantlebury of Quietroom and will discuss the language of trust.

The point of the Pension Play Pen Linked in group is to get nearly 6000 people to work together to help restore confidence in pensions. We started out on October 30th 2009 so in our first five year term, we’ve got quite a number of people with different backgrounds,jobs and outlooks behind that general aim.

But we are still miles from restoring confidence in what we do.

In our view there needs to be a general cleansing. Much of this is going on. The work of the DWP in cleaning up workplace pensions is complimented by that of the FCA in cleaning up retail plans. The Pension Regulator is ensuring auto-enrolment works and sorting out the attacks of those who are trying to liberate pensions into their bank balances.

But the language we use about pensions is far from transparent.

Steve Bee in his latest blog- back to basics- mourns the loss of phrases such as “the basic state pension” and “the old-age pension” for a “single tier pension”. He is surely right, the state pension is basic, it is for those in old-age and the fact that it is now a composite of S2P and BSP is only of any interest to Pension Geeks.

There is a movement to ban the use of “pension” because it gives the wrong message. People like Michael Johnson believe that pensions are already dead and are happy dancing on their supposed grave. But people are not afraid of the word pension, they just want pensions to be fair and benefit those who pay into them, not just those who run them.

Mark Scantlebury’s consultancy, Quietroom, focusses on the language we use to describe what we are about and – all too often- Quietroom has to rewrite the words we write and teach us not to say things in the way we are used to say them.

My firm, First Actuarial, used Quietroom to make-over the way we talked about saving for old-age. they’ve had a profound effect, we’re forever pulling each other up when we use language that isn’t jargon-free and confronts our audience with expressions that are defensive and offensive.

I do hope that we’ll see you at the Counting House at 12 for 12.30pm. Typically the food and drink bill is £15 ,we wrap up by 1.45pm and it is always brilliant fun.


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“To meet the needs of those in the middle” – what pension consultancy should be about!

west was won2

The Advert

On Tuesday I am sitting on a panel with good friends; Otto Thoresen, author of the Thoresen report; Mathew Arends, Partner at Aon Hewitt, Duncan Buchanan president of the Society of Pension Consultants. The session will be chaired by Malcolm Mclean OBE.

The panel is the highlight of a day discussing the future of pension consulting and I believe you can still get tickets here

There’s a good supporting card including my buddies Simon Leyland and Peter Shellswell and some other people. They’ve even brought in that joker in the pack , Michael Johnson who I hope will do his party turn and tell us that pensions have no future. There’s nothing like Michael to boil the kettle.

The only thing missing is women – consultants don’t have to be male! I’ve put some pictures of some women in this blog to remind me that they are the people who generally get things done!

The Conference is  in central London and gives you all the tra-la-lah of CPD points so I hope I’ll be seeing you there.

The danger of uncontested scrums

The only problem with the panel is that it is in danger of agreeing with itself. Matthew is a fan of CDC (though he hasn’t quite got the point that it’s for people not employers- see yesterday’s blog). Malcolm is generally right though he works for Barnett Waddingham which is becoming an old folks home for retiring grandees, Duncan is a good man but spends far too much of his life devising tax-avoidance plans for the pension super-rich while Otto is representing a clapped out trade-body saddled with debt and a mutinous membership.

So I will find plenty to disagree on! I hope my colleagues will cast an equally jaundiced eye over First Actuarial and the Pension Play Pen. We need some genuine debate. Watching rugby with uncontested scrums (I’ve just watched England lose to Australia this morning) is a sad affair!

Where consultants can be so rubbish

I’ve sat on too many management boards of the consultancies I’ve worked for to have any respect for the way they are run. When the primary objective of a consultancy is to generate value for a small group of Founding Partners, then consideration for the other stakeholders –employers, trustees, members and yes- staff – is second order. The principle of the customer comes first cannot be subjugated to a spread sheet where the first line read is “margin”.

Where consultants can help

The future of pension consultancy lies in seizing the opportunities and managing them. That is not the same as exploiting them. The new pension freedoms offer us the Wild West. We can act as bandit or as sheriff, or we can be the guys who built the ranches and bring ordered prosperity out of seeming chaos.

west was won 3

There are a whole load of things we can do to make these freedoms work but if we start with a vertically integrated model which asks how many bps we can suck out of “funds under advice” , we will drag pensions back to where they came from – and that is not a good place.

I hope we can talk about the positive role that consultants can play to;-

  1. Construct products that engage, educate and empower people to organise their financial affairs in retirement
  2. Warn people off the scammers that beset our industry like the bandits and brigands that beset the ranchers.
  3. Ensure that we preserve the heritage of defined benefit provision- both funded and unfunded
  4. Promote pensions as things that serve the needs of people retiring and not the needs of the pension industry.

Where should our focus be?

All the panellists were asked to put down a few bullets about what they thought was important. One panellist struck me as hitting the sciatic nerve that should enliven the whole event, his bullet

(to meet) “the needs of those in the middle segment (too much money to just take the cash, too little to perceive value in seeking regulated advice” .

Consultants are not offering retail advice, they are working through those organisations that individuals rely on for the delivery of their retirement income, employers, trustees, unions, insurers and fund managers. They cannot both advise on and be the managers of the benefits for consultants have a critical governance role. They must remain unconflicted and properly independent to fulfil this function.

There are those who will serve the needs of those with limited funds and debt, those who will manage those with wealth but consultants need to focus on the vast majority of UK citizens who will reach retirement solvent but not comfortable. People for whom an acceleration of retirement income by 20% would constitute an economic miracle. I believe we can achieve such a goal.

I will be 53 in a few days, today the average person is providing themselves with around £1800 per year of private pension (based on median pot of £36k), if we could increase that to £2,000pa within five years – solely by making pensions more efficient – we would have done something worthwhile.

Increasing pensions efficiency by 20% over five years may be what we can do, but individuals, by saving more into the new and better vehicles we can hope that pension outcomes increase by very much more than 20%.

If I had a single phrase I could use to capture what 2015 will mean to me it would come from that quote.

“To meet the needs of those in the middle”.

west was won

Posted in actuaries, advice gap, auto-enrolment, dc pensions, defined ambition, drawdown, Payroll, pension playpen, pensions, Retirement | Tagged , , , , , , , , , , , | 4 Comments

Parliament debates CDC -with a twist in the tail!


If you are generally interested in the way Britain will develop private pensions in the next twenty years, I would strongly recommend watching the two sessions of the General Committee reading the Pension Schemes Bill,

The link to the video is here- fast forward the first two minutes that have no sound.

In particular I would suggest you watch the first session, which includes contributions from David Fairs of KPMG, Hilary Salt and Derek Benstead of my firm-First Actuarial, Stefan Lundbergh of Cardano and David Pitt-Watson of the RCA.

There are questions from a number of MPs including Steve Webb and Gregg McClymont and some healthy scepticism from Richard Graham MP

If I have one takeaway from the two meetings. If collective DC schemes are going to flourish in the UK, they will need to fix the problem with DC and the problem with DC is not just the “cliff-edge” of annuities but the lack of certainty from drawdown.

For those critics of CDC who want to hear answers to concerns about the communication of the benefit promise, listen to Derek Benstead’s explanation. For the views of Homer Simpson not Homer Economicus listen to Stefan Lundbergh. For a really good explanation of the employer’s position – specifically the desire of employers to use CDC as the back end of existing workplace pensions- listen to David Fairs. Finally, for a clear statement of why people can expect better outcomes from CDC than from annuitising DC schemes- listen to David Pitt-Watson’s opening remarks.

The second video deals with the Guidance Guarantee and has much to say about the Guidance Guarantee, especially from Sue Lewis , Chair of the Financial Services Consumer Panel. Jim Bligh of the CBI and Martin Lowes of Aon Hewitt speak of CDC but there’s is a different vision of the purpose of the collective. At one point Steve Webb interjects to suggest that it is infact the risk-sharing schemes that offer alternative guarantees to DB that might be of more interest to the employers Jim is talking to.

If my major takeaway from watching these two hours of video was that CDC is the answer  to the problems with DC, then perhaps Richard’s plea for a “default decumulator”  to which DC defaults can point will be an investment strategy, it will be a different kind of pension scheme.

It is the discussion in the final minute of the video (15.57) when Martin Lowes waves a flag for people with multiple dislocated pots and Sue Lewis a flag for the self-employed. These are the people for whom CDC has most to offer- and about whom we hear the least.





Posted in CDC, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , | 2 Comments

Cold turkey

cold turkey

A large proportion of people in pensions are currently going through cold-turkey.

I’m referring to those working for pension providers, advisers and employers who have benefited from commission for the past 30 years and are now finding the commission turned off.

Like junkies deprived their fix, advisers sit listlessly. The workplace pensions they recommended with such enthusiasm in the years leading up to 2012 are now a liability on their balance sheets, banked profits for commissions to be paid after next year must now be written off and be replaced by fees for which there is no certainty of payment.

Insurers, who may benefit in the long-term from not having to pay trail commission, have immediately to write off the banked income streams from AMCs exceeding the 0.75% cap (which from April next year must include any commissions paid. The impact on the commission paying insurers has in some cases exceeded £100m.

But it is employers who are in for the rudest shock. The “free” consultancy they have been used to will be no more. For the costs of the pension advice they have received will no longer be payable by members, it will be payable out of their p/l and its impact will sit on their balance sheets.

Employers have three ways to go. Either they can ditch those nice to haves which they have got used to – workplace pensions advice, clever communications and the odd invite to the adviser’s golf-day, or they can pay a fee commensurate to the commissions given up. If advisers are prepared to drop their commission revenues to a “reasonable fee” then the blow may be softened but there will still be unbudgeted costs.

The third way for insurers is to move to a new adviser. Where no accommodation can be reached with the existing adviser, this may be the preferred approach. We have yet to see whether the advisory community will recover their pension mojo but at present they are showing absolutely no appetite for doing so. The phrase “it’s not about the pension it’s all about the payroll” is as much about adviser’s capacity to make money from auto-enrolment as it is about auto-enrolment.

Of course auto-enrolment is difficult and employers need help with the payroll but it is patently about pensions, that’s where the contributions are going, that’s what staff see, that’s what they were telling employers from the first pronouncements on auto-enrolment in 2005 through to the point when the DWP turned off the commission tap in 2014.

When I presented to 200 odd employers at the Pitch Final, one of the judges told me afterwards that she hated pensions and would never pay a penny to me or any pension advisor. I asked her what she did for her current employees and she said they paid for their own advice. She turned really nasty when I pointed out they wouldn’t for much longer.

There are going to be some very angry employers when the proverbial hits the fan. Next year will be a year of re-negotiation, of re-statement and of resentment. Those advisers who have always charged fees will not be affected, indeed they will pick up business when employers choose or have to move. The 1.2m employers who will be staging auto-enrolment between now and the end of 2017 will be faced with the novel concept of having to pay for pension advice or risk offering their staff a pension blind.

The implications of the abolition of commission on these employers has not been properly recognised. They have at least one advantage over larger employers who have chosen to fund pension advices from their staff’s policies – at least for them there is no cold-turkey. They were never hooked.

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MAS goes it alone to provide an “at retirement advisor directory”.


The Money Advice Service has been consulting over the past few months on what a Directory of IFAs might look like. This consultation was spurred by the imminent launch of the Guidance Guarantee which will generate requests for financial advice.

The point of the Directory is to present people with sources of advice suitable to their needs. So it will be a “dating agency” filtering advisers by location, delivery options, (f2f, web and telephone) and any exclusions that advisers might impose to ensure that the customer is right for them.

We now know that, contrary to the stated intent of the procurement process, MAS will be building and managing the Directory themselves. This may be disappointing to organisations (such as ourselves) who pitched for the work, but it is perfectly reasonable for MAS to adopt this approach, provided MAS recognises the responsibilities it is taking on.

My first worry relates to MAS’ independence.

The database MAS will be using will not be Unbiased’s or VouchedFor’s or PICA’s or any other trade association. MAS will get its feeds directly from the FCA. This is absolutely right and it is what First Actuarial called upon MAS when they requested us for proposals. By using data feeds from the FCA’s directory, MAS are remaining independent of all trade associations, any accusation of bias or complain about exclusions vanishes since the FCA are the ultimate arbiter.

But by being the managers of the Directory, MAS becomes the gate-keeper and since MAS is paid for by a levy on advisers, we need to worry about conflicts. By including an adviser on the Directory, MAS and by extension the FCA are endorsing that advisor. There is no longer anyone else in the process acting as quality control.

So we need to feel absolutely confident that the experience for those seeking to buy advice – many of whom will be first time buyers- will be a good one.

My second worry relates to the “exclusions” being applied by Advisers.

At two recent events I have attended, the Corporate Adviser Summit and the Investment Network’s October meeting, advisors have told me that they intend to exclude not by “minimum fee” but by “minimum funds”. This sets alarm bells ringing!

If you want to see for yourself, just how prevalent this practice is – go to and search for advisers near you. I suspect that few will want to advise you if you have less than £100k of wealth.

If I go to a lawyer or an accountant I expect to be presented with a set of time/cost rates. I might get an indicative quote for the work to be done, if I was lucky I might get the job quoted at a fixed price.

So what is the relevance of the funds I have at my disposal?  If I have no funds to manage, can I not get advice?

The inference is that the fees I will be paying for my advice will be based on the funds I have to be managed.  But I am not going to an adviser to get my funds managed, I am going for advice as to how I should financially organise my retirement. This involves me thinking about how much I will have to work, how I should plan for extreme old age, what I should be doing about my property, inheritance, the advisability of buying extra state pension and when I should be doing all this.

The question of who and how I should have my DC monies managed may fall out of this conversation, but it should not be the primary conversation.

The impression I get from talking to advisers is that the major decision – the point of advisory sessions – is to find an alternative to an annuity. The alternative to be promoted will be the Advisor’s proprietary solution which is likely to involve a basis point charge over the assets under management. This is what is now called “vertically integrated advice” which is a posh term for commission.

And so long as this is the primary focus of the Advisor, all other options are likely to be discounted. So the woman with a reduced entitlement to the new state pension, or the person close to state retirement age may not be recommended the option to buy more pension rights because of this bias. When new non-advised products arrive as part of the DA agenda, they too may get ignored. Even annuities, which may be the most suitable choice, are in danger of getting forgotten such is the allure of “funds under advice”.

The obvious alternative is to ask people what initial fee they are prepared to pay for their advice,

My third worry relates to the customers of this advice.

There is a real danger that advice will continue to be advertised as “free” and that advisors will depend for remuneration from a charge on the assets under advice. Unless the nominal amount being taken out of the funds is properly advertised, people will continue to discount the basis point charge and forget that it is every bit as expensive as paying the advisor by cheque. 1% of £100,000 is a thousand pounds. But is not just £1000 in 2015, it is £1000 in 2016 and for as long as the £100,000 remains.

Here there are two further problems, firstly a conflict between the adviser and his client as to the spending of the money –the more spent, the less the adviser earns in future, secondly an inbuilt bias for the advisor to be inattentive in future years. We have ample evidence of how the commission system gamed against the customer. Commission- based advisers were better off letting sleeping customers lie (as they got paid for doing nothing).

The new customers that MAS will provide may not be sophisticated and may not understand that by entering into a contract where the adviser takes a charge on assets for advice just what this means. This advice is not free and if advisors free-load on advisory assets in future, it will be picked up. The financial press are watching and the cavalier practices of the past will be quickly exposed. Customers who claim to be fooled into advisory agreements are now well informed on their rights and will have the full-force of the consumerists behind them if they can prove they are not being treated fairly

My final worry is for MAS itself.

By taking on the management of the Directory, it is putting itself directly in the firing line for any criticism of the advice given. It is therefore doubly conflicted. On the one hand it is to act as a gate-keeper protecting consumers against bad practice and on the other hand as promoter of advisers who are paying its fees. Can any organisation act as an independent interface when it has such skin in the game?

And now three questions.

Can MAS can be smart and outsource the quality control to the customer?

If MAS are smart, they will follow up on the second of our suggestions to them. They will ensure that they receive feedback on the experience of using the advisory from the customer. When the dataset is big enough to be meaningful (for instance when five reviews of an advisor have been received, MAS have got to be tough enough to publish the consensus view of that advice – ideally by means of a star-rating. This blog will be subject to such rating and over time will get the rating it deserves. I see no reason why the same should not be the case for advisors.

Indeed over time, a composite rating which judged the advisory experience holistically might even be broken down into the individual measures by which advisors could be judged. What those measures should be is a matter for further debate which we need to have.

Will MAS be bold and promote feedback from day one?

It is important that the Directory that MAS builds – is enabled not just to issue feedback forms but to collect the feedback scores and start the rating process. The publishing of scores may have to wait a few months, maybe a year, but Advisors and Customers need to be aware that this feedback will be used in evidence.

Absolutely critical to any feedback is to capture whether customers understand what they are paying for and what they are paying. Since this is the point at which the financial services industry has fallen down in the past, this must be the point that MAS shows it is serious.

If MAS acts as the guardian of transparent charging then the rest can fall into place. I have no doubt that advisers, who have clear rules to work by, will work within those rules. It must be made clear that the Directory is here to promote financial advice and not as a means to collect funds under advice. Where advisers are seen not to be advising, but simply selling their proprietary product, this must be reflected in an Advisor’s rating. MAS must have the ability to share this feedback with the FCA and Advisor’s must be aware that their behaviour is being monitored in a very real way.

Can MAS pull it off and redeem itself?

I think this is the acid test for MAS. If they are to be the managers of the Directory, they must accept they are both the consumer and advisory champions. There is no reason why they cannot do this but they will have to significantly raise their game to pull this off. There is no doubt that MAS is held in low-esteem within Government and among Advisors, MAS cannot duck this perception. The Directory gives it a seat in the last-chance saloon. How it manages the Directory will determine whether it is turning itself around or whether it continues to be an expensive unloved quango.

Having given MAS free consultancy on this matter, and having seen MAS adopt the main thrust of our proposal to them, I think they are in turnaround mode. Indeed, by taking back the Directory- the management of which they intended to outsource, they are stepping up to the plate. They have rolled the dice and doubled the odds, success should be praised, but failure will be damningMAS2

Posted in Money Advice Service, pension playpen, pensions | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

When losing seems like winning- the last post from #thePitch14

Glad you did


We didn’t win but it felt like winning and how it feels to be Rebecca Coates of Properteco (the overall winner) , I’d like to know!

It’s a gruelling 12 hour day and if it involves a  trip down  to Bristol from the Smoke, it’s a young man’s day. Pension PlayPen were up for a couple of gongs at the Payroll World Awards which we managed to make (thanks PW for kicking off at 10.30pm!)

30 3 minute pitches, an address from the magnificent ,Mayor of Bristol , a few talks from entrepreneurs who’ve made it, including a young fellow called Mark Pearson who made £65m from selling vouchers and a lot of networking. That’s what you get in your twelve hours.

But what you take away is an understanding of how it works. The Candy Crunch generation of entrepreneurs who create algorithms that make you addicts to their service. Why can’t we have this in financial services, why can’t I find myself on level 21 of “Save my Dough” earning online bananas for level 22? What’s stopping workplace pensions becoming as much fun as the “Financial Game”, why can’t we come up with such a stunning concept as “night zookeeper” to excite the people we talk to about later life?

If I was disappointed by anything it was the absence of the financial services community from the event. Where were Hargreaves Lansdown  or any of the great advises from the Bristol area, where the life company strategists or the asset managers?

Here were the top 30 , chosen from thousands, the start-ups and SMEs who are making it, have proper business plans and ideas that can inspire and make money. Of the hundreds at the event, I did not find one who was involved in helping people save money.

But let me not dwell on the persistent failure of the financial services industry to listen. Let me finish by thanks Dan,Meg,Rachael and the whole Pitch Team for a brilliant day.

Many of our fellow contestants told me they’d back next year, I hope they won’t. I won’t! The Pitch has been going 7 years now and every year it brings through new entrepreneurs, new ideas and a new audience of inspiring and inspired people.

Without this new blood, we’d atrophy. I urge you if you are reading this and have a great idea to take the advice of  Mark Pearson, don’t wait a year for funding, just do it. Get out and start your business, put your idea into action, and even if you have no money, get yourself heard.

Mark’s been in touch since I posted this blog and has sent us a great endorsement. Obviously he’s not let £65m go to his head and he’s as keen to give us a leg up now as he has been to help out millions with his voucher scheme.

Here’s what he wrote us!

“Henry has clearly used his industry expertise to capitalise on a change to the law with regards to workplace pensions.

Many SME’s don’t have the internal resource to deal with issues such as these so there is a natural demand for Pension PlayPen.

Fuelling growth through education seems to be a key part of the business and a very strong unique identifier; the straightforward approach will stand the business in good stead as it scales up!”

One good turn deserves another so here’s a big fat endorsement for the brilliant and Mark Pearson -its founder!

My lasting memory of the Pitch will be of a young lady pitching the Noah Project Newquay, so nervous her whole body was shaking. I hope the Pitch post the video but here’s the link .

“here error is all in the not done, in the diffidence that faltered”

the pitch


Posted in auto-enrolment, pension playpen, pensions, Retirement, the pitch | Tagged , , , , , , , , , , , | 2 Comments

Wish us luck as we Pitch to be Britain’s top micro-employer!

Racing in Windsor 005


Today’s the day we pitch to be Britain’s top micro-enployer at the Paintworks in Bristol.

We are one of 30 employers left in the competition, one of 20 actively trading- we have a 5% chance of winning!

But that isn’t the only point, everyone seems to be winning from  the Pitch. We’ve made some great friends, learned a bundle about pitching and marketing and we’ve learned a lot about ourselves through working on our financial projections.

This competition is more than about marketing, it’s about building sustainable businesses that grow to be the employers of tomorrow, so win or lose today, we’re looking forward to a great day. Olly, my son, is with me- I say to learn- he says to stop me embarrassing myself!

So here’s our pitch!

hi res playpen

Who are we?

Pension Play Pen is Britain’s first end-to-end pension enrolment service for small employers. We engage employers , we educate them and we empower them to stage auto-enrolment with the pension that suits them best!


ae infographic

What’s our market?

Our opportunity is the 1.2m employers still to stage auto-enrolment , the majority of whom have no suitable pension for their staff, ask a group of 100 such employers how many are ready to enrol and one person might put up their hand. We need 1 person in a hundred to use our service to meet our financial targets.

Hilary Salt


What’s our solution?

We take data from employers and show them what auto-enrolment will cost, we give them tools to model that data to get the contribution structure right,

We send the data to up to 25 pension providers who we rate (using First Actuarial’s balanced scorecard). The employer pays us £499 (+vat) and sees all the providers who will offer terms and the terms on offer. Each provider is listed in a league table, with a rating beside them- the highest rated is at the top of the list.

The ratings are adjusted by the experience of employers who have already used the system and the experience of payroll suppliers and bureaux.

The employer then takes a decision, the data is then downloaded to the chosen provider who uses it to set up the scheme, meanwhile the employer gets a detailed report on the process and their decision which is their audit trail, they also get a certificate that confirms they have followed a process endorsed by First Actuarial.

pensions robbery

What are our threats?

Fear and apathy- fear of pensions and apathy about the pension decision. Many employers , their accountants and even regulated financial advisers do not understand what makes for a good process and are intimidated by auto-enrolment. Many employers are scared by new technology and the novelty of our approach.

Other employers get what they do but think all pensions are the same, they are sceptical that you can choose a good pension and will take the first offer that comes along (usually NEST)

To counter these threats we engage people with our enthusiastic approach ,educate people through blogs, talks and caseless natter on social media and empower people using our system to make a difference



How do we make out money?

So far the bulk of our revenues comes from our brilliant advertisers (thanks guys), but increasingly we are making money from transactions, as we build our big dataset through more and more use, we expect to become the primary source of data for those with a strategic interest in auto-enrolment in the UK.

the pitch

Why do we want to win the Pitch?

To extend our outreach and get to more of the 1.2m employers, the people who advise them and the people who run their payroll.

Please wish us luck today and if you haven’t already done so, please register at . We need your support!

Posted in advice gap, auto-enrolment, corporate governance, dc pensions, NEST, pension playpen, pensions, Retirement | Tagged , , , , , , , , , , , , , , , , | 2 Comments

Après-midi with the Bermondsey Bee – some thoughts on advice

girl in a bar

Girl in a Bermondsey bar – roller-pen on napkin- Steve Bee

I spent some leisure time yesterday afternoon with Steve Bee in and around the Bermondsey St Debtor’s Prison in which Jargon Free has its offices. I am 10 years younger than Steve and for many years have seen him as a mentor ( he co-wrote a book called Savings Sense with Ben Jupp in which he called for state paid advice for all) . I remain amazed about the simplicity and depth of Steve’s insights.

Lately I’ve had cause to question some of Steve’s thinking which doesn’t quite agree with mine but I’ve never had cause to question his integrity and as time goes by, the age difference seems to fade and Steve becomes a peer rather than mentor.

As well as the cartoon’s, Steve writes in an elliptical style which influences rather than opines. He sees me as a blunderbuss (which is right) a sort of Pension Ian Paisley, he is more the quietly effective Jerry Adams (IMO)!

Steve has developed an alarming habit of injuring himself, he broke ribs goalkeeping in a friendly against his grandkids and yesterday he bruised his coctics when falling off his bar stool. It worries me that Steve’s balanced approach may be a little out of kilter!



When I got home, there were a load of emails to deal with including a message from someone commenting on some remarks of Steve Webb reported in Citywire, Steve (Bee) had commented to me about the roasting he’d got on Citywire’s comment pages recently – certainly most of the reaction to our Pension Minister’s call for “cheap and cheerful” advice were little more than “abuse”.

One however stuck out as being thoughtful and well-articulated, Here’s someone called Paul Howard on the delivery of simplified advice to the mass market,


“The FCA set out its simplified advice guidance in July to support firms that wanted to provide simplified advice or sales without giving a recommendation. “

How can simplified advice be NOT a recommendation?

What chance do we have in the Regulator can’t be crystal clear on what can and can’t be provided?

Surely Webb and the FCA can agree, that if a simplified approach is required

1) The FCA needs to publish a procedure which if followed, will protect the firm from challenges that it failed to take everything to account

2) FOS needs to be told – if the rules are followed – they may not look at anything else – the complaint can only solely about the simple advice area and that’s what they look at. (As this will help ensure ‘Limited or Simplified’ Advice doesn’t become ‘Why didn’t you look into this’).

If firms then follow the FCA path on Simplified Advice – it should be profitable to the firm, suitable for the target market and be a win for the government. BUT the FCA and FOS have to work together and agree the rules are fixed and no matter what the complainant says – they stick to the rules (the procedures will state – there may be other aspects which will affect the suitability of this advice – if you are concerned about them – ask your adviser etc).

Paul’s comments fall in the same folder as my criticisms of the Regulator for muddying the waters on regulated and non-regulated advice on workplace pensions, we need a single definition of “advice” to me it is the delivery of a definitive course of action- e.g. a recommendation.

What Paul is calling for is a “safe-harbour” where an adviser can sit immune from the storms of protest, provided he has followed the rules. If the rules are not clear, there can be no safe harbour.

It is impossible to imagine a world where people will not want recommendations. Those walking through the doors of the Citizens Advice Bureau will not be expecting another door with “Citizen’s Guidance” over it. They will want to be told what to do- if only to go and get advice (simplified or otherwise).

My feeling is that people will then ask – what can I do without advice (which I don’t want to pay for) and the person giving the guidance will have to shut up. Because if you want a pension without advice you are back in the rough seas of “non-advised” annuities or the iceburg-ridden waters of “non-advised” drawdown – or you are in the Lamborghini showroom.

Steve Webb is asking the right questions though the answers may be in his “better product- Pension Schemes Bill”,



Which brings me back to Steve Bee, with whom I had a good old fashioned argument about non-advised products which concluded in us shaking hands, him drawing a nice picture on a napkin and us agreeing to work more closely in future.

girl in a bar

For the record, I don’t see how anyone would pay for simplified advice if it didn’t tell you what to do, and frankly I don’t think simplified advice can do much that you couldn’t glean for nothing on the pages of . Those who want to pay for advice have either so much money that the cost is irrelevant or such vanity that they feel they ought to have a financial adviser, I neither have the money or the inclination to take financial advice but were that to change, I would like an adviser like Mr Bee, with whom it is very nice to spend an afternoon in Bermondsey.



Another girl in a bar- biro on napkin- Steve Bee

Another girl in a bar- biro on napkin- Steve Bee

Posted in Blogging, brand, pension playpen, pensions | Tagged , , , , , , | 1 Comment

It’s not just pension taxation that’s changing- products are!

On Tuesday and Thursday this week a Parliamentary Committee will be considering the Pension Schemes Bill. This is the Pension PlayPen's written submission to the Committee.


hi res playpen


Pension PlayPen submission to the General Committee reading the Pension Schemes Bill

My name is Henry Tapper, this submission is from my company Pension PlayPen. As well as founding Pension PlayPen, I am a Director of First Actuarial who are acting as expert witnesses to the General Committee.

The Pension PlayPen helps small businesses to choose workplace pensions and explain to their staff the auto-enrolment process and why they chose the pension they did. There are 1.2m small businesses still to stage auto-enrolment and 200,000 companies born each year which will have an obligation to stage from 2017.


The central focus of my work is to restore confidence in pensions among ordinary people.

Ordinary people have fallen out of love with DC pensions, principally because the products have been seen as poor value for money and the outcomes, expressed in the annuities they have purchase, have not come up to expectations,

The public is right to feel this disenchantment. The real cost of DC pension often considerably exceeds the quoted cost (the headline AMC) and the total cost including all kinds of charges that members never see, is often ruinously high.

As for annuities, they are born down by the cost of the guarantees they provide which can reduce the income they provide by up to 50%. This is not the fault of the annuity, it is perhaps the fault of regulation, but the fault really lies in the lack of awareness of the cost of a risk-free product.

While the DWP have done much to address the costs of building up a pension, as detailed in the Command Paper in March, until the consultation that led to the Pension Schemes Bill, little had been done to address the problems with annuities.

For me, and for millions of pension savers dependent on defined contribution workplace pensions, the prospect of switching our past benefits into a collective scheme without guarantees but with sound management is very attractive.

But the public debate has been about collectives becoming an alternative to existing workplace pensions in the accumulation phase. This is no longer a problem for me, I am comfortable that following the OFT enquiry last year, the problems with accumulation have largely been solved. I want a product that can help me decumulate that provides more certainty than individual drawdown but does not contain the ruinously expensive guarantees that make annuities so unattractive,

CDC- the default decumulation product

For me, the default decumulation product is likely to be CDC. My colleagues at First Actuarial (Derek Benstead and Hilary Salt) who are much cleverer than me, have showed me how CDC can be made to work so that I can understand and feel comfortable in it.

However, they cannot give me the assurance that the structure of a CDC plan will enable me to transfer my DC benefits into the collective plan and get the benefits of collectivisation. For the record I see these benefits as

  1. Economies of scale so that I can benefit from the highest quality of investment and liability management at a reasonable price
  2. Good governance to ensure that all aspects of my Plan are properly managed.
  3. A smoothing mechanism that ensures that my pension can be adjusted in bad times so that the fund is not ruined by “pounds cost ravaging”
  4. Proper reporting on the benefits (whether increasing or decreasing) so that I can understand what Is going on
  5. A promise that my pension will be paid according to the best estimates of those managing the plan till the day I die (or where appropriate my spouse dies)
  6. A clear indication of what I am likely to receive immediately and by way of increases according to the best guess of those of the plan
  7. Property rights on my pension that allow me to take my remaining benefit promise as a transfer value either as a cash equivalent and a clear statement that this will be fairly calculated
  8. The publishing of the detailed rules underpinning any risk sharing or risk pooling within the plan , how it will operate and how I can check to ensure it has applied to me
  9. The right to transfer in benefits on my own account at any time I am in the plan.


10. Benefits I can enjoy whether my employer is sponsoring CDC or not

You will notice that in this “desideratum” there is no mention of my employer. I would like the General Committee to ensure that as part of the communication of the Pension Schemes Bill, it is made absolutely clear to everyone that a CDC plan can operate independently of an employer as a means for individuals to draw a pension from their existing DC savings.


It is important that this statement is made as most comment in the press and social media has assumed that employers will sponsor these plans and without such sponsorship, the plan cannot operate. I do not believe, from my conversations with my colleagues and my reading of the Bill and from my discussions with the DWP that this is the case.

When people understand the nature of a CDC plan and that it is a place where they can take their DC pots and not see their benefits at risk from individual drawdown or their income reduced by annuity guarantees, they will want to use CDC.

I mean especially those people with smaller pots which are unsuitable for individual drawdown and produce derisory annuities. These are the people who need their confidence in pensions restoring. CDC is a product that can help that process and I urge the General Committee to ensure that the points raised in this submission are raised in the sessions.


Thank you for reading this,

Henry Tapper Pension PlayPen Ltd.       20/10/2014

Posted in CDC, David Pitt-Watson, dc pensions, defined aspiration, pension playpen | Tagged , , , , , , , , , , , , , | Leave a comment

“Hope I die before I get old..?”

before I get old


The quote’s from Pete Townsend and the Who’s “my generation”. It’s a brutal version of the Beatles’ “when I’m 64” but both songs are driven by the fear of getting old

“will you still need, me, will you still feed me..”

I guess our generation now takes it for granted that there will be “a need” and “a feed” for those in later age and while the new 64 may now be 74, we are should be more worried about 94 or even 104

My son of 16 has a 22% chance of making it to 100, I have a 10% chance. The generations that follow us will present radically different challenges to those following them.

 It’s bigger than pensions

I don’t “get” the worry people have about pensions creating inter-generational transfers. The demands of one generation upon another goes way beyond such maths.

The relationship between ourselves and our children is driven by fundamentals – love, respect – what we used to learn as “honour”. These emotional values over-ride those temporary financial considerations such as the inequality of today’s housing and pension markets.

McCartney and Townsend now sing those songs with tongue in cheek . The same cannot be said about the American characterisation of GOPs (greedy old people). Here the little old lady is an economic and social menace.

Greedy old people

I have seen nothing quite as extreme in the UK (yet). However, I am concerned that the phrase “inter-generational transfer” now implies a one-way street where wealth flows from those currently generating it, to those who are now in their reclining years.

The  suspicion is that old people are destroying the housing market for youngsters

unlock wealth

Housing is the greatest source of regret, but there is also a growing resentment about pensions. Google Image “who stole my pension” and you have to scroll down a long way to find Robert Maxwell. Most pictures are of smug retirees pictured enjoying the fruits of others labour.

Maybe it’s because I’ve had great parents, maybe because my moral education was in a Methodist Sunday School but I find references to greedy old people too common in our society and I sense that the moral compass is being re-set against support for those in later life.

It is undoubtedly the case that wages for those at work today are artificially depressed by the cost of supporting those in retirement.

Paying the pensioners of a defined benefit scheme will be a drag on company profitability for many years to come (on current economic assumptions).


But isn’t this as it should be? The prosperity of Britain’s biggest companies (those that run defined benefit schemes) is based on the platform of the work enjoying the pensions today.

I am concerned that the far right age hate that is evident in the pictures above does not take root in this country.

Nowhere do I see more of this age-bigotry than in the debate about the post retirement pie currently being sliced up and redistributed as part of the “pension freedoms”.

On the one hand, people are being encouraged to pass on pension wealth through a tweak to the pension tax system that will encourage people not to insure against old age but maximise the possibility of pension wealth transfer.

On the other hand we are asking people to use their pensions as bank accounts leaving them destitute and dependent in later years.

These policies, which form the central planks of Osborne’s Pension PR offensive, miss the central point which is that there is not enough money in most people’s pots to bankroll an indulgent lifestyle or cascade wealth across generations.

Nor is there enough tied up in housing.

The housing wealth of our over sixties is already mortgaged twice. The cost for a couple to live with full nursing care in a home can easily exceed £100,000. But the housing equity to meet such costs is already earmarked- by many children, as their first step onto the housing ladder.

If they don’t get to live in their parental home themselves, selling the house will fund the deposit that allows them access to home ownership.

For many old people, this conflict between the needs of their children and comfort for themselves is becoming the central financial dilemma of their final years.

I can see no way we can use the Pension Freedoms to solve this problem. It will need more than tax tweaks and a shift from guarantees to create sufficient wealth to fund the long-tail of retirement for the baby-boomers.

It will take a re-assessment not just of our pre-retirement savings behaviours but a radical re-think of the deployment of our tax system.

For us to properly fund the problem of old age, there needs to be a deep understanding of the shape, size and cost of managing the issues faced by those in old age.

This needs to happen at a national level and forms part of a wide-ranging conversation we need to have, starting in the pre-election discussions on manifestos, continuing in the election debates and extending throughout the next parliamentary term.

I hope this debate will be conducted civilly and without rancour.

Posted in accountants, actuaries, CDC, pension playpen, pensions, Pensions Regulator, Popcorn Pensions, Public sector pensions | Tagged , , , , , , , , , , , , , | Leave a comment

The great pension bank robbery

George collects your pension

George collects your pension


I give 2 ½ cheers George’s pension package, the “½” being for the complex misrepresented “death-tax” changes which are regressive, complicated and could easily have been dealt with using inheritance tax legislation already in place.

I give no cheers for the spin-a-ling-a-ling with which the Treasury’s Pension Bill was presented to the press. The Pension Freedoms re-packaged as a “Pensions Bank Account” was not a new policy.

And a pension bank account is alluring but it’s not what you’re going to get. There isn’t going to be a pension cashpoint round the corner for three good reasons

Firstly, a pension is an income, generally paid for life to replace income that we cannot earn because we are getting old.

Secondly, there is no apparatus in place to provide people with banking from their pension account (and the cost of building it would be prohibitive).

Thirdly, the British public are right to differentiate one financial product from another by hypothecation, by tax treatment and by need.

By “hypothecation” I mean

“bank account –that’s for shopping”, “ISA account, holidays and cars”, “pension account- that’s to pay me”.

So this talk about Pension Bank Accounts is cheap and it’s confusing and it’s wrong. Which is a shame because while George and his mates are making cheap political capital out of their slogans, his own staff are trying to devise Guidance to the public on how to organise finances in later life.

Anyone who has been in the business of financial planning/education/advice, knows that a “savings framework” is essential to help people to organise themselves and plan for the future.

My own firm spends time in the workplace, not talking about the intricacies of investment strategy or tax arbitrage but about simple things like debt, saving and insuring against sickness and death and the “slow death” of living too long. People get it as they have first-hand experience of parents or grandparents or even with spouses of having to deal with the financial consequences of these adverse events.

People are not stupid, they know that bank accounts aren’t there as insurance. Nor there to invest for the long-term. They know that the cost of immediate liquidity is built into their retail banking rates. They will ask “Why pay for your banking twice?”

These truths are in the DNA of pension advice and George’s sloganeering cuts directly across the responsible work of TPAS and MAS (and whoever delivers face to face).

What’s more, to deliver the kind of functionality, pension providers are going to have to invest heavily (again) – and they won’t. An expectation is created – pensions will yet again be delivered “not as sold” – and fingers will be pointed at providers and advisers.

Trying to “sex-up” pensions as something they’re not is a dangerous business, But the risks of George’s sloganeering fall on providers , advisers and ultimately on the people who are hoodwinked into thinking pensions are something they are not. Everyone that is but George and his spin-doctors.

Posted in advice gap, annuity, auto-enrolment, NEST, Payroll, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , , | 2 Comments

Any questions on the Guidance Guarantee?

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This blog is about a conversation I had with the Pension Advisory Service. Following it I promised to feed back questions to TPAS about the Guidance Guarantee.

The blog contains questions I want asking , some background on TPAS and its CEO Michelle Cracknell and a call to action which I hope you’ll answer.

TPAS’ problem.

Michelle Cracknell’s diary looks pretty full. If she does no more than meet her speaking obligations over the next three months she will be busy, but these are the months when the jaw-jaw turns into hard law and by April of next year, the queue will be forming for guidance sessions. Michelle knows that delivery is more than public pronouncements.

I suspect that most people looking to exercise their freedoms will do so whether guidance is available or not, so a delay in delivery is tantamount to a broken promise.

With the general election scheduled for a month after the new freedoms take effect, the delivery of guidance has political as well as social importance. We need to know that this is going to work- if all our work is not to suffer collateral damage.


What is needed!

We want answers to questions – now! Many employers are preparing benefit statements which will be their final communication before April. For many employees this will be their last regular announcement. Insurers too are awaiting the details that will need to be incorporated in their wake-up packs and advisers with client in the zone need to be organising themselves in advance of GG Day.

How TPAS can help

With so many speaking engagements, Michelle has the opportunity to help. I am not sure whether she will be allowed to speak for the Treasury, but till the Treasury can speak for themselves she has become the de-facto spokesperson for the Guidance Guarantee.

She looks a little tired of telling the same people the same things. I spoke to her after her session at CA Summit and found her desperate for feedback. She’s asking what people want to know about the Guidance Guarantee.

How this blog can help

This blog can help as I know many who read this will be expecting to advise off the back of the guidance and some will even be hoping to help deliver the guidance itself. Others will be in the happy position of being able to enjoy the new freedoms.

To kick things off, here are ten questions I would like to ask – knowing that many cannot be answered till the Treasury delivers a formal announcement on delivery.

  1. What will guidance say about the risks of investing in an annuity?

  2. What will guidance say about the risks of drawing a pensions through income drawdown?

  3. Will guidance be bespoke and take into account individual circumstances (e.g. will there be a basic fact-find that governs what is said?

  4. Will guidance deliver specific mention of the opportunities to purchase extra state pension (especially for those close to state retirement age)?

  5. What will be the line on defined ambition? Will mention be made of further options that may be available from 2016?

  6. What will guidance say  about tax?

  7. Will guidance talk about the risks of living too long and of long-term care costs?

  8. Will guidance talk about property , equity release and risks about inheritance?

  9. How will advice be signposted and what directory of advisers will be used?

  10. What will be the options for “one to many” group sessions and how will they be delivered?

There are lots of other questions I’d like to know- (what is the Guidance Guarantee going to be called in future- how will the levy to pay for it work- what are the latest estimates of take-up and  will an employer (or union) prepared to pay for financial education for staff get  an incentive for doing so).

But these are second order questions. The leaked results of the L&G survey on guidance take-up are already in the public domain. The marketing and take-up of the Guaranteed Guidance is a matter of speculation, it does not- in itself impact on the offer to those people benefiting from (and vulnerable to ) the pension freedoms.

These second order questions are nice to know, the questions about what people will get in sessions are material to the management of the communication of 2015 to our clients/members/friends.


How you can help!

If you want to post your questions on this blog please do so. If you want to post them on the threads on which this blog appears, please do so, and if you want to write to me at , please do so.

I would like to build up a document of ” asked questions” which I can deliver to Michelle , which she can deliver to the Treasury;  - and I’d like to do this , this week (e.g. by the 19th of October).

So please put your fingers to keyboard and let me know as you read this blog. Unless you ask for the questions to be attributable , they will not be attributed to you.

I cannot promise that questions will be answered specifically, but I can promise they will get to the right people (and if only by Michelle) properly considered.

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Posted in advice gap, Guidance, happiness, Retirement | Tagged , , , , , , , , , , , , , , | 3 Comments

Young People and Pensions

blackbullion logo

This is a blog by Vivi Friedgut of @blackbullion; she is also responsible for the picture and its contents!


Pensions don’t make for the most thrilling conversations. Like verrucas, funerals or the dream you had last night, talking about pensions can be a bit of a conversation killer, and most people find them a drag to think about.

When you’re in the ‘prime’ of your life, thinking about getting older and saving your money for when you do probably isn’t top of your priority list.

Plus it is hard to make pensions sexy – and it’s hard to get young people to engage.

While the Centre for the Study of Financial Innovation found that although 76% of young people agreed that pensions are important, just 30% are contributing to one. Worryingly, of those who do contribute, 42% have no idea what type of pension they are paying into.

But the pension represents a significant pot of money, a significant investment in your future so it is worth a little bit of your time.

So to the basics;

Pensions have been going through a bit of a shake-up. The government believed the previous system was getting too complicated and opaque. They decided pensions should be easier to understand and more transparent. Here are the key facts:

1. Until recently it wasn’t a requirement to pay into a pension scheme. However due to a chronic lack of retirement savings (less than 1 in 3 UK adults are contributing to a pension) the government brought in something called auto-enrolment.

2. Auto-enrolment means that every employee must contribute a minimum of 4% of their salary.

3. Auto-enrolment means that all employers are forced to offer their employees a pension scheme. Larger firms have started doing this, and all employers will be legally obliged to follow by 2018.

Remember those terrible “we’re all in” adverts? Basically you save a bit into your pension, your company saves a bit into your pension and the government contributes a bit too.

4. New rules announced in the 2014 Budget mean that once you reach 55, you can start accessing your pension pot, taking as much or as little as you like, whenever you like.

5. The Basic State Pension is unlikely to give you enough income to see you comfortably through retirement. In the current tax year, the most you’d get per week is just £113.10 (or £180.90 if you’re married).

(For more info check out this government fact sheet about changes to the pension scheme)

Young people today are transitioning into their adult lives in the aftermath of a crippling recession. High youth unemployment, lower wages, massive debt and soaring rent and mortgage prices mean that -more than any generation in the past – they need their pension savings to go further or they be doomed to face an old age of further hardship.

An investment in your future is the best investment you will ever make so, if it’s not something you’ve thought about yet, or you’ve been trying to ignore as an irrelevant nuisance, now’s the time to get educated. A five minute brush-up on the main points to consider and perhaps a quick conversation with your parents about their plans for retiring – isn’t such a bad idea and will pay dividends in the future.

Posted in advice gap, annuity, corporate governance, dc pensions, NEST, pension playpen, pensions | Tagged , , , , , , , , , , , | 1 Comment

Tiny steps towards better DC outcomes- #CASummit14

tiny steps 3

Having spent 36 hours in the company of Life Co “strategists” and their counterparts in the IFA and EBC communities, I can now try and make sense of where “heads are at”.

The mood has changed.

Two years ago, the conference was 9 months into the post RDR regime, the concern was getting paid. Twelve months on, the conversations were about auto-enrolment and the cap on workplace pension charges. This conference was about the pension freedoms, at retirement outcomes and the employee value proposition.

Andrew Warwick-Thompson of the Pensions Regulator joked that what the industry might need is a return to having three Pension Ministers a year (changes being confined to ministerial appointments).


Auto-enrolment – a bird that’s flown (for corporate advisers)

For the large advisers represented, I sensed that auto-enrolment was a bird that had flown. For the most part, the advisors at this summit have moved on and seemed disinterested in the remaining 1.2m employers who have still to stage (let alone the 200,000 new employers born every year). This was a problem for accountants, IFAs and providers not for them.

Pension Freedoms – a fresh corporate dilemma

One delegate asked why he should worry about helping smaller companies who could not afford his fees when the opportunities to advise companies on easing employees out of the workforce was so much more remunerative.

The opportunity did not appear to be to provide individual advice. Another adviser asked whether he could make money from those with “only £30- 80,000″ in their pots. The larger pots have been managed by these guys for years and the worry was that they would have a bunch of small-pot holders thrust upon them.

Corporate advisers – by definition – advise corporates. The challenges of the guidance guarantee about delivering guidance – and maybe advice to individuals. But the impact of the pension freedoms has been felt by corporates in reminding them that the outcomes of the workplace pensions they have spent years funding, are largely dependent on the decision making of their employees as they exit employment.

The point was made more than once that when employees de-couple from the mother-ship,  the success of the pass-on from work is largely dependent on getting the retirement income decisions right. So employers have “skin in the game” again. They may not be guaranteeing retirement outcomes as they did with defined benefits, but they are still implicated in the success of the process.

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Solutions to the dilemma of the squeezed middle still some way off

But while advisers and providers realise that the financial fate of employees at retirement is now “their business”, nobody seemed to have found a mass market solution. The debate on collective solutions descended into an unedifying barrage of abuse hurled at CDC. Any further mentions of CDC was met with laughter , it is clearly not an idea for which this community is ready.

That said, this community was not ready for the RDR, the OFT report, the Further Measures for Savers and most of all the Pension Freedoms. The DWP and those who are fiends of CDC should not be dismayed!


Advisers still not focussing on what makes for good DC outcomes

Our group conducted with one life company a game where we had to choose from a variety of attributes of a good workplace pension to establish five things that we could agree “made for a good workplace pension”.

I had to feel a little ahead of the game as I see the decision making of hundreds of employers and know that the top six attributes they decide on are “investment solutions, durability, employee support, at retirement support, HR and payroll assistance and cost”.

Five out of the six attributes were on the table as choices- the one that wasn’t was “durability”, by which we mean, the capacity of a provider to sustain providing the five attributes over time. This is really the fourth dimension of a proposition and to me is measured by the commitment of the provider to manage the scheme in a sustainable way. Duration is ultimately measured by the quality of a scheme’s governance.

What was interesting was that the choices made by our group as to what made for a good pension were not made on the basis of good governance and best member outcomes but on what would prove most attractive for the employer at the point of purchase. These attributes included the bells and whistles of benefit platforms, apps and most crucially a low headline management charge.

The value of a workplace pension is more than what sells it!

In these two areas of discussion, I found a contradiction that I think besets the providers of workplace pensions and their key distributors.

Employers are now having to think more about the outcomes of the pensions they establish for their staff (and about those they didn’t but underpin their retiree’s “pot”).

But employers still want to differentiate their workplace pensions by their capacity to be valued by members at point of sale. Advisers see the value of workplace pensions as what they can add to the employer value proposition at the point of entry and focus on member engagement tools to the exclusion of all else.

I argued very forcibly in our session that the priority in decision making must shift.

A low AMC is not the same as “value for money”.

Nowhere is there so much need for the argument to shift as in the understanding of the simple formulation “value for money”.

Employers are taught to concentrate on the annual management charge as the measure of cost. However, we know that many costs that members meet are not in the AMC, they are met from the net asset value of the fund and cannot currently be measured because they are hidden.

So the AMC is an imperfect measure. However it is an easy measure for employers to explain to their staff and the equation of Low AMC = Good Pension is still being used by many employers and advisers as a proxy for good decision making.

Advisors (and providers) need to spend time reading the FCA consultation paper on IGCs and better understanding the role of on-going  governance in ensuring value for money.


The employer and the adviser value proposition

The AMC is valuable to an employer because it is something that an employer can influence. By selling itself to the market as a distributor of pensions, an employer can negotiate a lower AMC and advisers, as brokers, can help in this process. The typical analysis of the value of using a corporate adviser, usually comes down to the capacity of an adviser to help in bringing down charges and the employer value proposition is often measured by the extent to which this has succeeded.

Unfortunately, if the impact of squeezing charges is to reduce the quality of the five metrics that make for good member outcomes and to further reduce the fourth dimension that ensures the scheme remains high quality in these respects, all that driving the cost down achieves is lousy outcomes in every other respect.

The value proposition shifting from point of entry.

For the first time that I can remember, the corporate adviser is going to have to become accountable not just for the value of the proposition at the point of sale, but for the outcomes of the workplace pension at the end of the member’s career.

This is the endpoint of  process that started with the RDR and is now moving towards completion.

Advisers cannot be rewarded with a fat commission on day one and then be seen no more -RDR has seen to that.

Providers cannot walk away from the on-going management of a workplace pension, the OFT report, the DWP command paper and the Pension Freedoms of the budget have seen to that.

In short, the interests of employers, advisors and providers are now aligned -they are to ensure good outcomes for those in these workplace schemes over the lifetime of the scheme (perhaps extending into retirement) .  This is good and at last brings DC plans into the same space as DB plans, who knows- actuaries may start treating DC seriously !

There is still a lag in understanding the importance of the IGCs

The importance of on-going governance has yet to properly embed itself. In 36 hours in the company of advisors and providers, I did not have one conversation about the role of IGCs, how they would interact with employers and advisers and what role advisers and employers would have on improving governance through them.

When IGCs were mentioned, they were mentioned in passing as a consequence of the OFT report, not as something that was integral to the delivery of sustained quality scheme management (in respect of what we eventually agreed mattered (investment, at retirement, administration, communication and cost efficiency).

I hope that these will be the matters we will be discussing at #CAsummit15.


Next (tiny) steps.

My estimate of this conference is that the mood has changed. Advisors and providers are no longer angry and confused, they are now concerned and confused. Strategically they have not generally grasped the importance of governance and are still too wedded to selling the employee value proposition rather than managing good member outcomes.

But we are definitely getting there. We are now on the move towards better governance and lets hope we are just waiting for the lag between what providers and advisors say in public and what they say behind the closed walls of conferences such as this.


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Posted in advice gap, annuity, auto-enrolment, dc pensions, pensions, Retirement | Tagged , , , , , , , , , , , , , , , , , | 1 Comment

Why we have no time for “Banker Immunity”.



We have not seen bankers marched in handcuffs from their desks but now it seems we might.

The regulators have put-out a consultation paper that seeks to pin accountability on Directors (including non-executive Directors). A good friend of mine is a non-exec of a major British Company and I very much hope she will remain one. If she feels she is presiding over a criminal enterprise she should resign and whistle blow. If she is working to put that organisation right (which I think she is) then her actions must be unimpeachable. But if she is complicit in criminality, she should face criminal prosecution.

Bankers claim that this proposed regulation is a knee-jerk reaction from jealous outsiders who haven’t made it to their party.

Bankers claim that the removal of “Bankers Immunity” might stop talented individuals coming to the party

Bankers claim that those who have spent years partying might find themselves carted off to jail because they cannot help themselves.

The British Public will have limited sympathy for the plight of senior bankers who are being faced with the options of shape up or get nicked. They are fully aware that most senior bankers have in the vaults a catalogue of misdemeanours under lock and key.

The institutional argument is that should the boxes be unlocked, the bankers arrested, the pillars on which our community is built would crumble bringing down the building.

The British Public prides itself on cleansing institutions of bad practice. We have a police force that is regularly purged of rotten apples (often for crimes of many years passing). Politicians have to live with the legacy of their decisions.

And stepping down a few rungs, do we call an amnesty on “benefit cheats” because their sins are in the past?

It is not just Bankers who have had immunity, it is Banking. The cleansing of institutions such as our police force and Westminster, has restored confidence not just in the governance of our society but in the ability of society to call our governors to account.

Bankers seem to be above the law, not just the law of the land (as imposed by the courts and devised by parliament) but the law of the populace, as administered by the media (including the social media).

That young and talented people would not joining Banking for threat of prosecution is an indictment on banking, not on the proposed change to Banking Immunity. Would you not take a job in a supermarket for fear that if you were caught stealing stock you would be prosecuted? Have our leaders stopped wanting to be MPs because their expenses are under scrutiny and misrepresentation threatens jail?

The whole case for Banking Immunity is based on the contribution of banks to the British Economy. But if the British Economy is supported by pillars such as rotten bankers, we are storing up troubles for the future.

When we discover structural problems in a motorway flyover, we close the flyover. The resulting traffic chaos is regrettable but unavoidable. It is better than losing lives if the bridge collapses.

This is the analogy I would draw with our banking system. It serves us well but it is flawed, to sort it, we may have to take a step back now before something awful happens.

The stakes are very high. The leverage still in our banks means that a banking collapse would still hurt our economy. We know how hard by looking back over the past 6 years of austerity.

As with pensions, so with bankers – we need a cultural shift in stakeholder value so that shareholders , management and employees recognise the value of the customer. Treating Customers Fairly must be more than the patina created by television adverts, it has to be at the heart of the bank’s culture.

If banks were proud of their behaviour, they would not fear the loss of Banker’s Immunity.

They would shout “bring it on”.

Banking regulation must be used to change banking culture because , left to their own devices, bankers cannot change themselves. The disruption to banks will be considerable (two Directors of HSBC have resigned at the prospect), but like the motorway flyover, remedial work is overdue and cannot be put off any longer.

Posted in Bankers, Fiduciary Management, Financial Conduct Authority | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

Do you want to be a Pension PlayPen Agent?

hi res playpen

If you fancy helping your clients to get the right workplace pension to suit their payroll and provide best outcomes for their staff, you should register as an agent at .

Helping your clients to use our service doesn’t need skill and knowledge on your part, it just needs some basic skills managing data into CSV files to assess a workforce and the numeracy to explain the cash-flows from the various contribution options available for auto-enrolment.

If you’re reading this blog, we reckon you’re 99% certain to possess these!

The tough part, finding who will offer a workplace pension and working out which is best for your client’s circumstances is done by us.

We also provide an actuarial certificate to demonstrate your client has followed an approved process and a 40 page report documenting why your client chose the workplace pension they did. We even introduce you and your client to your new provider.

We promise

1. The service works (a full money-back guarantee if it doesn’t – NO QUIBBLE)

2. A fixed price of £499 (plus VAT)

3. Volume discounts for super-introducers

4. Help if you get stuck along the way.

We’re winning awards every month for what we do and we want you to share in our success. So watch me on this video and  sign up at

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To the Pitch Final we shall go – @PensionPlayPen – #thePitch14!

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Thursday October 23rd is another red letter day for Pension PlayPen.

By day we are Pitching to be Britain’s #1 start up in 2014, by night we are up for a brace of awards at the Grange Hotel competing to be Payroll’s #I auto-enrolment technology provider and technology innovator.

Proving ourselves to Payroll and Pension people comes with the territory but we’re really exited to be in with a chance of being Britain’s number one start-up!

There are 200,000 businesses born every year and to be judged one of the 30 best is mind-blowing (forgive the X-factor hyperbole). The judges are tough including the ICAEW, AVG (who protect my computer and hence this blog) and Sift Media- the Bristol based business publishers.

We’re going to have to shoot a video, I’m going to have to explain our cash-flows and income projections and somewhere along the line I’m going to have to get in front of an audience of dragons with 1/30th of a chance of winning £10,000.

Of course future, past and the current generations of start-ups are potential customers of Pension Play Pen and it’s salutary to remember that 70% of the businesses we’ll be competing with (including ourselves) won’t be in business by our staging point in 2017.

The best thing about the Pitch is that it’s there to reduce the odds of us failing and more importantly the chances of our achieving what we set out to do. Since we set up Pension PlayPen to restore public confidence in pensions, we’ve set the bar pretty high and so we’ve got to go for it- even the top 30 isn’t good enough- we need a number one smash hit!

So wish us good luck and watch out on 23rd October for tweets marked #thePitch14, you never know- you might just see @pensionplaypen top of the Pitch parade.

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In defence of genius.

Derek Benstead

Genius is not just misunderstood – it is persecuted.

Those who didn’t get Copernicus, Galileo, Wordsworth or Darwin did not ignore these genius’, they set out to do them in.

Bob Dylan when he laid out his Highway 61 album was called “Judas” by his fans and Derek Benstead seems to be coming in for the same kind of treatment for his ideas on CDC outlined last week on this blog and previously in Financial Adviser.

Derek’s enlightened views on how to build a new way to deliver pension benefits, synthesizing the best of DC and DB have come in for some harsh comments

Ok so Derek won’t be burnt at the stake and in the order of game-changers, re-discovering a system of wealth distribution that was only buried 25 years ago does not win Derek a Nobel prize, but the tweets tell a story.

The story is that in the face of rational argument, certain people turn to abuse when confronted with an alternative to their value system.

And when the argument is as clearly laid out as it was by Derek Benstead, it creates a threat that can only be countered by violence (albeit of the tweet variety).

Derek is not suggesting that either DB or DC are abolished, he is suggesting that a new way of doing things (in fact a way that worked quite well last century, is revived).

I am not a genius, Benstead is. I am his impresario, making sure he takes the stage where needed and heard by the right people. I am happy to say he is being heard by the right people.

We are not firing any insults back to those who vilify Derek and those who understand what CDC is about. That would be pointless.

But when I tweeted this morning.

this blog was what I meant(apart from mis-spelling Galileo!)

Genius’ are rarely respected, they challenge received wisdom and make people feel uncomfortable. They are heralded later, usually too late. The Origin of Species and the Lyrical Ballads were as vilified as Highway 61 Revisited at time of publication. These were some of the game changers that allowed our culture to move on.

Which is why politicians, business leaders and all those who care about restoring confidence in pensions should get behind the visionary Pension Minister we are lucky to have at the helm of our ship and state and see this CDC project safely to port.


Posted in actuaries, advice gap, CDC, David Pitt-Watson, dc pensions, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , , , , , | 1 Comment

CDC designed by an enlightened actuary -Derek Benstead!

hello pension


When I started out in insurance my sales manager told me: “Don’t sell a solution until you’ve understood the problem.”

So far, collective defined contribution is a solution that is so short on detail we can only suppose what it will look like and how it will work. As CDC schemes will not be opening their doors until summer 2016 at the earliest, many people consider that too late, and are asking: “What’s the point?”


However, this article will explain it is not too late for CDC to help individuals and companies. It uses three case studies to explore how CDC could be successful, and runs through some of the actuarial ideas behind the solution.

But before we look at the solutions, let us try and define the problem. The problem is neatly summed up in an email I received from an IFA friend: “Who would want to give advice to most retirees?”

Small pots are best cashed in, big pots can go to drawdown. But those in the middle are just too difficult to call. Should the investor cash in and be left with nothing? Buy a pitiful annuity? See savings eroded by the costs of drawdown?

An adviser would be lucky to avoid a mis-selling claim whatever they decided to recommend. From April 2015 advising ‘those in the middle’ will be fraught with risk, and there is no certainty of earning a fee.

Without annuities in the toolbox, and with drawdown too expensive, those with less than £100k in the DC pot have few options and less advice.

The ‘squeezed middle’ needs a non-advised product that they can understand. CDC is designed to be that product. Let us look at how it might work.

Case study 1: Gary will be 55 in 2016. He currently has £60,000 in four DC pots. He has no intention of stopping working, but he is worried that he may lose his job or have to work on a zero-hour contract with less certainty of income. For now Gary wants to roll up his savings. He knows he will need them to provide him with an income but he does not know when.

Gary wants a simple, flexible solution that will give him a decent income from his investment. He decides to transfer his pots into a CDC scheme.

Case study 2: British Ball Bearings (BBB) employs an ageing workforce – about 30 per cent of them are over 50. The company wants to downsize the workforce but cannot force old workers to retire. It needs to make retirement more attractive.

Case study 3: Marigold Underwriters Ltd fund a ‘legacy’ defined benefit plan for long-serving staff and a group personal pension for newer hires. The new staff feel they get a worse deal.

When BBB asks its staff about retirement, they want advice. So BBB approach an adviser to run seminars for the over 50s.

At the sessions the options are laid out; the cash option is discussed. Many, especially those with debts, want to cash out. Those who have large pots are encouraged to look at the flexibility of individual drawdown. Everyone is offered membership of a CDC arrangement which the company agrees to offer as an alternative to the existing workplace savings plan used for auto-enrolment.

There is common consent that all staff in future contribute to a CDC plan which offers something ‘in the middle’.

After agreeing on a CDC solution, the DB scheme closes for future accrual, and arrangements are made to transfer the GPP into the CDC plan.

Solution: Gary, BBB and Marigold need a common solution – none have enough buying power on their own. Could one collective arrangement deliver an alternative for Gary and BBB’s staff, and satisfy both the DC and DB memberships of Marigold?

All the building blocks are there: the multi-employer master trust for proper governance; suppliers to meet every administration and advice need; and a pensions regulator.

What is missing is a simple and effective funding strategy that makes sure the money never runs out and that everyone gets fair shares.

I asked one of my company’s most brilliant actuaries, Derek Benstead, for his plan for the investment and funding strategy of a collective DC scheme. His response was bold, simple and seemed intuitively right – so here it is:

1) Put the contributions in an index-tracking UK equity fund.

2) Use an actuarial valuation to set target benefits of equal value to the contributions. The assumed rate of return in the valuation does not need to be debated, it can be the dividend yield, which can be checked daily in the Financial Times.

3) The annual increases to the target benefits will follow dividend growth.


The pension outcomes will, for better or worse, reflect the economic performance of the UK. CDC pensions will neither fall behind the wealth of others in the economy’s good times, nor be an unsustainable burden in the economy’s bad times.

Pensioners continue to share in the performance of the economy after retirement. They do not have to buy an annuity, which would lock them into the low guaranteed returns of bonds.

The target benefits have been set up to relate closely to the income generated by the assets, the reverse of the well-known process of matching the assets to the liabilities. The funding and investment plan is stable and should not need extensive advice and reconsideration at each valuation.

The same actuarial valuation which sets up the target benefits for the contributions coming in can be used to calculate the transfer values for members wishing to leave the scheme. Only one actuarial valuation is needed. The target benefits of a CDC scheme should be set up without bias – that is, a best estimate plan. In the probability terms used by the Pension Schemes Bill, the target should have a 50 per cent chance of being delivered. To set a higher probability would mean setting a lower target, which would be unfair on the members while the scheme is growing.

If the scheme later shrinks, there may be a windfall to the members at the time. Whatever benefit probability targets are set in regulations, CDC scheme trustees should nevertheless have a best estimate plan.

A CDC scheme can deliver an income for life based on the performance of the economy. Running a CDC scheme should be easy. This may sound like ‘fantasy pensions’, such a simple model sounds pie in the sky. But most good ideas are simple, like the changes in the Budget – and the Budget cries out for fresh thinking.

We now have a draft Pension Schemes Bill which can allow a scheme based on these principles to work. George, BBB Marigold and many others like them have the possibility of collective benefits that will help restore confidence in pensions.


This article first appeared in FT adviser

Posted in actuaries, advice gap, auto-enrolment, dc pensions, pensions | Tagged , , , , , , , | Leave a comment

Don’t get fooled by the phoney pension giveaway


The phoney give-away

The most accurate measure for the success of private pensions in the UK is the replacement ratio; a measure of what percentage of people’s pre-retirement income is replaced by savings specifically for retirement.

Steve Webb and the DWP are beginning to chart the nation’s progress from historically low levels of replacement (following the near collapse of the private sector defined benefit pension scheme) to something like adequacy.

Even by the most optimistic forecasts, any recovery will take a minimum of 20 years and though the new system of auto-enrolment for all and a return to a proper basic state pensions is likely to mean a fairer pension system overall, currently there is a huge gulf between the pension haves and pension have nots.

For the vast majority of middle Britain, there simply is insufficient in private pensions for George Osborne’s vision of inheritable pension wealth to mean anything. There is more capital tied up in most people’s garage than their pension.

Organising people’s decision making from 2015 onwards around the inheritable value of the pension pot may be realistic for the top 5% of DC savers for whom the annual allowance that can be paid into pensions (£45k) and the Lifetime Allowance that can be built up £1.25m) are meaningful figures. But most people struggle with the auto-enrolment proxy of 4% of salary and the average pot is £30,ooo, about 1/40th of the maximum allowance.

So George is kidding us and for those in the pensions industry trying to get some sense into people’s financial planning, it is deeply unhelpful for the Chancellor to be parading tax hand-outs  for the super-rich as incentives for the pension poor.

We are not pension affluent, as a nation we are pension poor and we need to look at other ways to solve the problem than kidding people otherwise.

Corroding the good work of the past five years

There is another way of approaching the pension problem. It is not as sexy and it may not be as politically attractive, but it is the responsible way.

The underlying problem facing the nation is that we are living longer, we are not getting wealthier in retirement, we are getting poorer, having to work longer , facing the uncertainty of long-term care and the ignominy of decrepitude without the means to be self-reliant.

Those who die in the first few years of retirement (and 75 is still pension young) may give their kin a fillip (estimated at an average extra legacy of £500) but they will be few in numbers, only a few die young.

To qualify for this extra legacy , you must be planning to die young and risk living long. For you will have to keep your money invested in your own pot. It looks unlikely that you will get any benefit from the Chancellor’s generosity from any form of collective pension-(annuities, defined benefit or collective DC).

That is because all three of these means of receiving a pension are based on a mutual pool which works by people collaborating and putting aside their obsession to beggar their neighbour.

An unfair policy which will only benefit the  “pension super-rich”

This might seem obvious and it would be were we not so dead set on aspirational wealth. The idea of individual self-reliance is conceptually attractive, it plays well at conferences, with the media and at the hustings.

But there is a dirty underbelly  to the “I’m alright Jack” world of George and his right wing associates. For them it’s every man for himself and bugger the consequences. The consequences are seldom felt by those in power, they are inherited by those who have no power.

At a time when Defined Benefit pooling is on its knees, annuities “a dirty word” and the new-pooling of CDC still in gestation, the Chancellor’s craven use of populist pension policies to see off UKIP and secure political brownie points with aspirant Britain is nauseous.

The obvious solution

There is a very simple way of taxing with the transfer of wealth from generation to generation, it is inheritance tax. Inheritance tax, were it to be applied to pensions would only impact the genuinely wealthy. It would not give an exemption to those super-rich under 75 , it would tax them on their pension wealth, it would give the same exemption to those with total wealth below the IHT threshold (currently £325,000 for singles – £650k for couples)

By using inheritance tax to determine who paid tax when people die too soon, we would have a system that was fair across DB , DC and DA, the residual values of “pooled” pensions are of course zero, this means people inherit nothing but get no tax-bill. The residual value from individual drawdown will be easily valued and will only be taxed where the overall value of the estate is sufficient to leave a meaningful legacy to the next generation anyway.

So what does this mean?

George Osborne is, by exempting DC in drawdown for those dying under 75

  1. building in unnecessary complexity into a tax-system which is fit for purpose as it stands(IHT)
  2. creating an unhelpful bias in the guidance system towards individual drawdown and away from pooled solutions
  3. kidding the population that it is pension wealthy (when it is not).

Some good people have praised the Chancellor for his giveaway, people that include Ros Altmann and Malcolm Mclean, but I think they too have been fooled by George’s blandishments. The £150m pa giveaway will be focussed on a small band of high-net-worth individuals using drawdown who have the misfortune to die before they are 75, for the rest of the population , the £150m will pass them by.

Don’t get fooled by this tax-break, it is almost certainly not going to break in your direction. Let’s get on with the business of restoring confidence in pensions through better savings, better products and better education and not be diverted by political shenanigans from a Chancellor who should know better.

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Annuities get another kick in the goolies


What’s the story?

The Chancellor will announce in his speech at the Tory conference that he will put a stop to the 55% tax on pension pots not spent at death.

The Treasury announcement on what detail we so far have is here.

If you die before 75 your nominated beneficiary gets your pot tax free

If you die after 75 your beneficiary pays tax on your pot either at his or her marginal rate (if its paid in instalments) or at 45% if they take it as a lump sum. The intention is to move to rationalise this by 2017 into a single system based on marginal rates.

What’s the point of the changes?

The point of the 55% tax was to stop pensions being used as a tax-shelter for the uber-rich who don’t need any more income in retirement and to encourage people to insure against old age by purchasing longevity protection (aka a pension annuity),

But like annuities themselves, the Chancellor no longer sees the point.

With staggering percipience, the BBC report that Osborne will  say

“People who have worked and saved all their lives will be able to pass on their hard-earned pensions to their families tax free.

“The children and grandchildren and others who benefit will get the same tax treatment on this income as on any other, but only when they choose to draw it down.

“Freedom for people’s pensions. A pension tax abolished. Passing on your pension tax free.

“Not a promise for the next Conservative government – but put in place by Conservatives in Government now.”

The small print will emerge in the Autumn Budget. A price tag of £150m a year will attach to this giveaway, to be shared by around 320,000 inheritors a year (a tax saving on average of £500 per pension pot).

There’ll be immediate pay-back if it leads to Conference talking about popular budget reforms and not defections to UKIP.

It will certainly go down well in the City who will see this as another boost to the “wealth” industry and a kick in the goolies to those advising on pensions – whether annuities, defined benefit or defined ambition. It will do nothing for the sale of Lamborghinis.

What sceptics will be asking

It seems to me a policy that begs further questions;

1. Is this really a hand-out (as it seems at first sight) to the filthy rich?

2. Is this part of a wider move towards self-funding of long-term care?

3. Is this just a gimmick that masks the horrible inadequacy of pension savings and the probability that most people not buying an annuity will outlive their savings?

4. Will death benefits become another reason to want to “liberate” DB  (and in future DA) plan benefits?

No doubt these will be the questions Rachael Reeves and Gregg McClymont will be asking from the Labour benches.

What this will mean in practice

For me, this tax-change is headline grabbing but not substantial. The Chancellor is taking a bet on feckless behavior by the British pensioner at retirement, the savings to the tax-payer are dwarfed by the tax-take on pension busting by those “taking it all at once”.

So the chancellor is already relying on people behaving in their worst financial consequences, this measure panders to the shallow optimism of those parts of the financial community who see pensions as wealth rather than insurance. It is irresponsible

The tax-change could lead to bad social consequences, especially between those in a family who would benefit from annuity purchase (the people who own the pension pot) and those who won’t (those inheriting the pot).

If you of an age, ask yourself how you would explain to your kids that you’d just signed away their pension by buying an annuity.

If you are young, ask yourself how you’d react to hearing of plans by your parents to swap your pension inheritance for an income stream that ended when they did.

Such questions do not feature in the wealth manager’s list of considerations, (for it is the wealth managers not those insuring against poverty who will applaud the Chancellor).

The real winners

It will be the readers of the Mail, not those of the Sun (or those that cannot read) who will be cheering this giveaway. But the real winners will be those with massive Self Invest Personal Pensions for whom DC pension plans are primarily a tax-planning wheeze.

I worry that this is how UKIP impacts policy, let us hope that the “I’m alright Jack” self-sufficiency of middle England is not just a chimera. Middle England is not alright when it comes to retirement income and to suggest that pensions wealth is likely to cascade down the generations is to hide the reality.

The wrong message

Most of middle England is debt rich, housing rich and income poor and this policy does nothing to help people plan for old age; it is a kick in the goolies for “pensions” and a kick in the nuts to those trying to deliver financial education responsibly to those in, at or approaching retirement.

So for all the applause it will receive at the Conservative Party Conference, this giveaway leaves me with a pain in my lower stomach.

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Ros Altmann on why the over 60′s are missing out on “free pension money”


Ros Atmann recently told me she wished she could blog like me, having read this blog, I wish I could write like her!

Huge numbers of over 60s are opting out of pensions auto-enrolment, losing their employer contribution

Budget pension reforms make pensions a no-brainer for most older workers as they can simply take the cash if they want to

Need for financial education and advice greater than ever


Figures just released show that nearly all younger workers are remaining in their employer pension scheme‎ after being auto-enrolled, but many older people are opting to leave.

According to NEST (the National Employment Savings Trust) 28% of over 60s are opting out of auto-enrolment, while only 5% of under 30s are turning away from pension saving.

As this week marks the second anniversary of the start of auto-enrolment, it is certainly encouraging that so many are staying in, however it is worrying that the older workers, who will benefit soonest from their pension savings, are not taking advantage of the free money from their employer.

So why are so many older workers deciding to opt out?  I can suggest some possible reasons:

  1. Fear it’s too late to put money into pensions: Many older workers may not have any pension savings at all and may feel they have left it too late.  Perhaps they have always heard that it is best to start saving early, so they feel they cannot benefit, while younger workers still have many years of saving ahead of them.  However, it’s never too late to save and auto enrolment is a very attractive proposition for most people.  Indeed, especially for those who do not yet have much pension saving, staying in auto-enrolment should be beneficial.
  2. Don’t realise that auto-enrolment means ‘free’ money:  Under the terms of auto-enrolment, every £1 that workers contribute to their pension immediately doubles to £2 (less charges) – with the extra £1 coming from their employer and the Inland Revenue tax relief.  There is no other savings product which doubles your money on day one.  Those who opt out are rejecting ‘free’ money.
  3. Don’t realise the Budget reforms mean they don’t have to buy an annuity and can spend the money freely:  Perhaps the over 60s don’t realise that the Budget changes mean they can double their money and then should be able to take the cash out and spend it after April 2015.  As they will no longer have to buy an annuity, or drawdown, they will usually be better off if they stay in
  4. Fear of means-testing penalties:  Some older people may be concerned that having money in a pension will affect their ability to claim means-tested benefits.  Certainly, before the pension freedoms announced in the Budget, this could have been an issue, but under the new regime anyone affected should be able to take their money out and spend it, and they will also have the employer contribution to spend as well, which would otherwise be lost to them, so they are better off staying in.
  5. Already have good pensions:  Perhaps many of the over 60s think they already have good pensions in place, so they don’t need any more.  However, even if they have other pensions (unless they have reached or are close to the £1.25million lifetime limit), they would normally be best advised to stay in as they are turning away free money by opting out.
  6. Distrust pensions: Perhaps the older workers distrust pensions so much, after hearing about or experiencing some of the scandals in recent years and this has put them off pensions altogether.  Younger workers may be less directly affected by these.  It is also the case that new-style pensions are much better value than many older pensions.
  7. Can’t afford pension contributions:  Some older people may feel they need every last penny of their salary and cannot afford pension contributions, however, it is difficult to imagine that so many more older people are struggling than the under 30s, where opt out rates are so much lower.  Therefore, this is unlikely to explain the large age differential in opt out rates.
  8. Don’t believe the reforms will last:  Maybe the older workers are more cynical than the young and don’t trust the Government to leave the pension reforms in place, fearing that the freedoms will not last.  They may be afraid of being unable to take the money out, or being forced to buy particular products again in future, having seen so many pensions policy changes in the past.

So, if they don’t trust pensions, or don’t trust Government policymakers, this could explain the high opt out rates.  It will, therefore, be important for Government and employers to help their older workers understand the benefits of pension saving and the risks of opting out of auto-enrolment if they want  to reach those coming up to retirement soonest.  Improving financial education would clearly help too.  Of course, anyone who is unsure about their position would benefit from taking independent financial advice, but for most older workers, the employer contribution coupled with the Budget pension reforms make pension savings a ‘no-brainer’.

Assuming nothing else changes!

Posted in accountants, annuity, auto-enrolment, Flump, pension playpen, pensions, Pensions Regulator | Tagged , , , | 6 Comments

“My pension offer” – explaining CDC to a confused public!

John Ralfe

Confused or confusing?

John Ralfe has been expressing his frustration that none of the CDC champions have made him a two page offer to tell him what a CDC pension offer might look like.

I’ve not done this yet, partly because I’ve been thinking about it and partly because I’ve wanted to hear from others more expert than me on what I might be able to say.

But I think it’s right to hold yourself a hostage to fortune and rise to this challenge, so this is what I’d want to read before I invested my DC pension savings in a DC Scheme.

Mr Plowman

Thanks for your enquiry.

I am the proposition manager for this CDC pension and this is my proposition to you. It is the same proposition I make to all prospective members as this pension plan does not pay inducements to some and charge commissions to others.

My offer to you at your age (60) is to pay you a pension of £1,000 for every £20,000 you invest in my plan. For every £1,000 you give me , I will offer you a pension of £50 a year for the rest of your life.

It is my intention to increase the pension I pay you every year in line with inflation (as measure by the consumer price index.

These pensions assume you do not want a pension to continue to your partner, spouse of any other dependent, I can give you an offer for these options and this will depend on their ages.

I want to make it absolutely clear that I am not guaranteeing you these amounts in year to come. It is likely that at some stage I will have to reduce  your pension. Based on our financial modelling, I would have to have done this three times in the last 100 years; at the time of the Great Depression in 1931, during the Second World War and during the Suez Crisis in 1956. The nearest we’d have come to cutting benefits since then would have been the Banking Crisis of 2008. You may have heard that in Holland some similar funds actually did cut benefits by up to 7%.

My estimate of the amount I can pay you is based on educated guesses about how things will be in the future. I have much more confidence that these guesses will be right over the long-term than the short term. I have very little confidence that I will be right year are after year. In fact I  predict that I will be too optimistic 50% of the time and too pessimistic 50% of the time.

The good thing is that I can afford to be wrong within certain tolerances. It is only when I am out by a wide margin that I will have to reduce benefits. I estimate that on average this will happen once every 40 years.

The rate I am offering you is around a third more than you can currently get from a comparable annuity. You may think that this is a little over-optimistic but there are sound financial reasons for this rate being higher.

Firstly the cost of guaranteeing you benefits is very high and probably accounts for half of the extra pension I am offering you. The reason guarantees cost so much is that not only do those offering them have to set money aside (reserving) but the investment strategy to back up the guarantee will not offer the same long-term returns as I can hope for.

Secondly, I am able to treat you as one of thousands of people in my plan and your money is pooled with the money of thousands of others. The economies of scale I get from you all means I have lower costs and can pass these on to you through a better rate.

What is more, I do not have to worry about you living too long as an insurer offering an individual annuity has to. Your life expectancy is part of a big pool of life expectancies I have to manage and I am able to allow you to insure each other. This pooling is very efficient, again I do not have to set aside money for you as you are insuring each other!

So there is nothing “magical” about the better rate that I offer, it is achieved by treating you as one of a large crowd and it comes because I am guaranteeing you nothing.

Having read this, you may be reconsidering investing in my plan. If you really value the guarantee or want the freedom to invest as you like, you should look at other options.

There are one or two other things I’d like you to know about my offer.

Firstly, I promise to treat you fairly if you decide you want to leave my plan. You can take your money from me and reinvest in an annuity, invest in a drawdown plan or go and buy your Lamborghini. I won’t try to stop you by placing transfer penalties and you’ll get a fair share of the fund based on your initial investment and how the fund is faring. If the fund is faring worse than I’d hoped , you might find that the fair value is depressed and if it’s doing better , it may be slightly better than you’d expect.

Your expectations should be based on using the calculators I will provide you with which will show you what I think the normal transfer value will be. Your transfer will only be lower or higher than the normal transfer funds in extreme circumstances.

Finally I would like to say a little about how we pay you your pension. There are two ways in which you can receive your payments “taxed” and “part taxed”. The taxed version assumes you have taken your entitlement to a “tax-free lump sum” and I will tax your pension under PAYE as earned income at your highest marginal rate. The “part-taxed” version assumes you haven’t taken your tax-free cash and I will pay you a quarter of your monthly payments “gross” of any tax with the rest fully taxed.

The choice you take should be based on whether you need your cash early or are prepared to wait, waiting will be more rewarding as you will have part of your money invested tax-free for longer.

The decision you take shouldn’t be taken lightly. We would like the opportunity to talk further with you about our plan and you can call us to discuss how it works, mail us or look at our proposition in more detail.

I hope you have found this explanation helpful and that you feel it properly explains why I run the pension the way I do. Thanks for your attention and engagement.

Yours sincerely

A Friend of CDC

This article first appeared in

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The value of regular savings

man from pru 2


60 years ago, a revolution happened in the savings industry- it was the “standing order”. The standing order became the “variable direct debit” and people were able to establish regular savings plans which worked like magic, taking money from your bank account without troubling you at all.

My mother used to buy me savings stamps from the post office which I stuck in my savings books and a man from an insurance company used to call at our house and take money from my Dad. I remember these things from childhood.

But when I was 17 I got an evening job and started saving with Sun Life of Canada £10 per month into a maximum investment plan, this was by direct debit and the policy matured ten years later and paid off my first big self-employed tax bill.

A man , not much older than me, came to our house and he spelt it out to me over the dining room table. I remember that meeting so well. He set up a standing order for me, it was from the bank account my mother had made me set up when I started bringing home cash from working with John Heanon, felling trees.

I have always considered the direct debit or standing order as the most valuable part of a savings plan and I now consider the capacity of payroll to make deductions on my behalf into ISAs, pensions and even credit union savings accounts, as pretty wondrous.

What you don’t see , you don’t miss and it’s been part of my financial DNA to save 10% of my salary since the man from Sun Life of Canada suggested I did so in 1977.

As I’ve got older, I’ve discovered the value of saving into equity funds. The value of some of my savings (those that weren’t blighted by high charges) are now- 20-30 years on , out of all proportion to what I paid in. Even taking into account inflation, I have done really well by saving into share-based plans.

Part of this was because of great months when I bought when shares were depressed, thank goodness I did not panic and stop saving in 1987 (a few of my clients did).  Again, I heeded the things I was told about pounds cost averaging and kept my nerve.

All this doesn’t make me Warren Buffet, but it proves to me that the simple lessons that I was taught when in my earliest years and through my teens were worth listening to.

When I sold savings plans, I told people that saving between 5 and 10% of their earnings into a plan would build them a vast capital reservoir by the time they got to their fifties. Relative to some people, I don’t have vast capital, but I have capital to meet emergency needs and the means to pay myself a proper income when I wind down from work.

I worry that the simple messages I was given are obscured today by over-elaboration. I hear talk of financial education including detail about swaps and options, of people being taught about the properties of different types of bonds – of understanding the meaning of a yield curve.

Other people fret about debt, especially student debt- I saved to pay off my debt (to the taxman) and I suspect that good savers do not get into so much debt- they know the value of financial security.

Other give you sage tax advice, suggesting that tax is the primary driver for saving and that you should time your saving to mitigate tax.

Nothing- to my mind- replaces the importance of regular saving, and saving meaningful amounts- at least 5% and better 10% of gross income. If you do this, you won’t go far wrong.

man from pru

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What’s that coming over the hill…? NAPF CDC DEBATE #Fail

whats that coming over the hill


The NAPF CDC Debate

The debate on how we organise our retirement incomes from our pension savings was not progressed at the NAPF’s CDC focussed pension connections meeting last night.

A half filled room witnessing a debate between two “Pale Male and Stales” was never going to set hearts beating and predictably we got a peremptory dismissal of CDC as “magic beans” from one participant and a limp eulogy for a vision of pensions that faded in the nineties, from  the other.

That I can’t report names is because there was, apparently, a no-tweeting, Chatham House policy in place. For the sake of the participants this is just as well. The world outside the NAPF’s offices would have fallen asleep had they been forced to sit through that drivel.


What’s that coming over the hill?

To address the question in hand …

CDC has a natural place among the pension options available to those with DC pots and past 55.

If set up as a Regulatory Own Fund (Rof) like the PPF , a CDC scheme will be able to take your various DC  pots as transfers and offer you a lifetime income stream in return.

Pound for Pound, the offer will be higher than annuities (though it will not be guaranteed).

Unlike using an individual drawdown policy, a transfer into CDC will not require you to do anything to monitor and manager your income, you will not be required to take investment decisions, you will hand over the reins to fiduciaries who will do that for you.

Wrong monster – John

“Fiduciary” is a latin word meaning “those who we trust”. CDC relies on us trusting others to do what they say. The chief tactic of those who attack CDC is to deny that we have any trust left. And yet millions of working people trust fiduciaries to pay them pension benefits. Were trust to be taken away we could label all defined benefits schemes including the state pension and the unfunded and funded taxpayer sponsored Government schemes no more than Ponzis.

The reality is that we all trust experts to pay us pension benefits, even the experts trust other experts because no pension expert can be expert in everything. Pensions are about future promises many years hence- without trust there can be no pensions and without pensions , we have no financial security.

CDC is the trusted means by which those who want a decent retirement stream from a trusted source will spend their retirement savings.

Wrong hill – Hamish

CDC is not going to work as a mainstream alternative to DC accumulation. Not because it cannot do so, it can. But we have a fit-for-purpose means of building up capital prior to spending it which is working very well. Ripping out your kitchen a couple of years after installing it isn’t the answer and ripping out workplace pension schemes no sooner than you’ve converted them for auto-enrolment isn’t the answer either.

There may be a purpose for CDC as an accumulator later (think New Brunswick) but that’s not on today’s agenda.

Where employers are concerned is at retirement. They have worked out that we have gone from an at retirement regime where we gave no choice (annuities) to one where we give people freedom to choose options many of us have no wish or ability to buy. I don’t want to swap retirement security for a Lamborghini and I don’t want to spend hours worrying about the investment of my saving and how I cope with living too long.

There are many people who will want to self-manage their savings but I’m not one of them and I suspect that in their heart of hearts, most people, were a fiduciary solution available, would choose it.


Another chance goes a begging

What is so frustrating about debates like last night’s is that they force people who are interested to listen to people who aren’t interesting. The PMS brigade must move on and allow some fresh thinking.

Employers, Trustees, Master-Trustees, IGC,TPAS, MAS and any other agencies sign-posting people at retirement need a safe-harbour option for the people who don’t want to do it themselves , who aren’t reckless but ordinary decent folk wanting a long-term income stream in retirement.

The vast majority of DC pots and the majority of DC capital is not in your employer’s scheme, it is in schemes from past employers or in your personal pension you set up yourself. What use is your current employer to you with regards to this money?

The NAPF and those who speak for it continue to couch the debate in terms of  the employee/employer relationship but in truth it’s not. At retirement you are on your own, standing looking up the road to see what’s coming over the hill.

Let’s make sure it’s the right kind of a monster on the right kind of hill.


This blog first appeared on  .. a bit male- not pale or stale!


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Auto-enrolment; – tPR’s despatches from the trenches


Auto-enrolment is like Flanders in 1914.  Those wishing to see universal adoption of workplace pensions within Britain’s employment structure are digging in for an onslaught that has barely begun.

Our Ypres’ and Passchendaeles’ are yet to come. We are still in the phoney war.

staging profile

The latest update from the Pension Regulator on the progress of the grand plan to enrol 11m of us into workplace pensions makes interesting reading both for what it tells us, and what it cannot tell us.

what's happened so far

What it cannot tell us, but we need to know, is how many of the April 2014 stagers have now declared their compliance. Unofficially, we believe the number is 93.6% but this has not been officially release. TPR are sanguine as they know a large proportion of the missing numbers relate to employers with multiple payrolls, who may have declared overall compliance and not itemised compliance per payroll. They also think that some employers enrolled employees into Local Government Schemes and have not been verified by providers.

It is to the Regulator’s great credit that it is facing the challenges of information candidly and sharing its numbers as best it can. There may be shortcomings in its intelligence but they are minor.

I am encouraged by the Regulator’s willingness to involve itself in the nitty-gritty of data transfer and help the market to get through the capacity crunch signalled by the alarming purple lines that dominate the staging horizon from the end of next year.

The Regulatory framework that governs workplace pensions is in a mess.

I am not  happy with the Regulatory position on the pensions into which these 1.3m employers and 11m employees will be invested.

While we may remain compliant in terms of the administrative process, are the pensions into which we are investing improving?

The answer is that we do not know and in terms of  Regulation, advisory capacity and employer empowerment, we seem to have hardly dug in at all.

For example, we do not know  how many of the workplace pension schemes established to date are compliant against the minimum standards to be implemented in 2015.

More alarmingly, we don’t seem to have a regulatory framework in place that can give tell us what compliance (let alone best practice) looks like.

There is here a Regulator problem (more than just a regulatory problem). The voluntary framework that governs occupational master trusts (which are increasingly becoming the preponderant workplace pension) appears to be changing. Here is the vision as outlined by tPR earlier in the year


Here is the triangle as it was presented to Friends of Auto Enrolment on Thursday of last week.

TPR framework

Anyone trying to make sense of the Pension Regulator’s position with reference to these diagrams is in for some difficult hours of study! I have to put my hands up and admit defeat!

It’s not all bad..

On a positive note, it is good to see the idea of member outcomes being re-introduced at the top of the mix and its good to see the Pension Regulator reminding us what makes for good DC outcomes

Good member outcomes

But the rest is hapless

Behind these six elements are the woolly “principles” and behind them the 31 characteristics by which no adviser can educate nor any employer choose or review a scheme.

The ICAEW’s MAF document has much that is good about it, but it has not been designed to integrate with the workplace pension system going forward. It is not joined up to the DWP’s minimum standards (see below)  and is inconsistent with the IGC proposals. It is a bit of a white elephant.

So where is all this leading?

It seems that voluntary compliance against this uber-complicated governance structure has become an end in itself. If I’m right, then  the MAF will become no more than an upgraded version of  PQM , at best a  pensions equivalent of IS 9001,

This statement that appeared in the Regulator’ slide-deck suggests that two years and 4.4m people into auto-enrolment, we are only at base camp and that many of the mountaineers are climbing another mountain!


Good for Peoples Pension, but what does this say to the person in a Standard Life GPP?

This framework is too late, too complicated and totally fails to help those of us trying to advise, to do our job. How can we engage, educate and empower in such an environment

This  a voluntary code looks set to become a marketing badge rather than the DNA by which a pension scheme is run.

By contrast, the FCA’s IGC proposals , which adopt “value for money” as the central theme, are understandable, meaningful and mandatory.

I cannot see how a voluntary code for master trusts and a compulsory code for contract based plans sits within an overall framework based on the Pensions Acts and the DWP’s Minimum Standards. In a world where every company has, by law to have a workplace pension plan, such widely differing governance systems for GPPs and master trusts only serves to confuse.

Is this MAF any practical help today or from April 2015 ?

From April 2015 we are being asked to  apply the DWP’s minimum standards with reference to the master trust assurance framework and I cannot see how we can. Two out of the three leading master trusts have charging structures that are openly non-compliant with the 0.75% charge cap (NEST and NOW), others such as Friendly Pensions have followed suit.

The skill and knowledge needed to properly understand the costs that members meet from the Net Asset Value of their fund isn’t addressed by the ICAEW’s MAF, indeed any reading of the MAF and the IGC consultation would not suggest that their two authors had ever met.

In conclusion…!

All of which supports my earlier call for us to merge at least the DC divisions of these two Regulators.

So much for Regulation on workplace pensions -what about advice?

Coming back to the state of auto-enrolment, which of course is a different issue than the state of workplace pensions, the Pension Regulator’s enforcement team have some interesting research on who smaller employers are going to turn to for help on the staging of their workplace pensions.

Who will employers turn to

The obvious conclusion is that accountants are increasingly going to hold the keys to auto-enrolment. The 74% of micros who claim accountants as their gurus are almost all going to be looking for a one stop shop for both auto-enrolment and payroll services. Infact the 78% figure is simply a reflection that most micros outsource payroll and HR to a business services manager who effectively runs the back office. So how ready are the accountants?

Accountants 2

Most accountants are intending to offer the administrative services, but when we look more closely at the services offered or planned to be offered by accountants we discover that they are mechanistic and relate to the integration of HR and Payroll systems and compliance with regulations.

Accountant intentions-tpr1

When it comes to the more pension related activities which touch on member outcomes 60% of accountants have no intention of getting involved.

All of which leads me to believe that the problems we will have with auto-enrolment are only being partially addressed.

With the regulation of workplace pensions being split between two regulators with radically different governance frameworks, with IFAs showing little appetite to involve themselves in the business of choosing or reviewing a pension, who will be “expert”?


So who is going to advise?

The Regulator would like advice on pensions to only be given by those with skill and knowledge (though no definition of what makes for a skilled or knowledgeable person has been put forward).

We know that this advice – so long as it is confined to business to business conversations is unregulated

workplace advice

In theory anyone can advise, but without any clear direction from the Regulator , no reward from the workplace pension providers and no incentive on employers to take advice, it is no wonder that the advisory market for SMEs and Micros looks as shrivelled as a salted snail.

And are we any closer to empowering our employers?

With such confusing information on what makes for a good pension and such vagueness as to who should be offering advice, it is likely that the OFT’s observation that


will continue to apply.

Until we can find a way to get Regulators to engage, advisers to educate and small employers empowered to make good decisions on behalf of their staff, the “buyer side of the DC workplace pensions market will remain auto-enrolment’s weakest link.

Despite these headwinds, we at remain confidant that a way forward will be found, we just wish we didn’t make life so difficult for ourselves.

Mind you, by comparison to the strife of our forefathers, we can count ourselves very lucky. I am confidant that by 2018 , as we did by 1918, we will win this (not so bloody) war!

Our trenches are imaginary, our struggles mental and the stakes we play with a whole lot lower, so we remain playful!


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Telling it like it is – a Jamaican perspective on annuities



Following on from a recent article on annuities, I’ve got some interesting feedback, including a remarkable post on the Pension Play Pen linked-In group from Magdalena Cooper de Neuze who is an insurance broker in Jamaica

I hope that those who are thinking about the Guidance Guarantee, either as Trustees of DC Plans or as potential members of IGCs or within Government , can spare a few minutes to read the comment which explains in simple terms how people can understand annuities.


I disagree that annuities are not understood by most people.

What has been difficult for professionals is that they do not make the immediate link in their presentation between saving for retirement and the income which is paid through an annuity. What we have done consistently is to replace the word annuity with ‘pension’.

We have done this for so long that we do not know the word ‘annuity’ and how to use it in our professional discourse with our prospects and clients. We need to start saying that its the annuity which provides the pension i.e. guaranteed lifetime income.

In fact yesterday I had to do some explaining to a gentleman who had no knowledge about annuities and by the time I had completed my discussion with him he knew the word annuity and what it meant. I guess that if I am asked to give his name and contact number someone can call him to test what I have stated!

I am a firm believer that professionals must use their terms and explain to the non-professionals. But professionals cannot be using the same terms as the public! Yes, the word annuity may be difficult for some people to pronounce BUT when they realize that it provides a guaranteed lifetime indexed income they start to pronounce it very quickly and correctly.

As professionals we need to take responsibility when situations like this arise and work together on how to resolve it i.e. how to explain it better to the public. Mr. Tapper you posed a great question and comment.

I am also of the opinion that the explanation of the various annuity options which are available at retirement (disability, old age and death) are not well explained by professionals to clients.

I do believe that the selecting of an annuity option is a very important event in one’s life and really needs a specialist to assist the client to make an informed decision.

It is not a quick and ready selection without certain facts of the client being discussed. I have developed my own approach and questions which I ask before the client signs off on their selection.

I take about an hour with a client who is making this decision. If its a wind-up of a Superannuation Fund I make group presentations and allow for many questions so that the Plan Members can understand what annuities are all about when a fund is being wound up.

There are times when I ask Plan members to invite their spouse or adult child. I recall one presentation and an employee remarked ‘why didn’t the initial person who sold them the Superannuation Fund advise them of the end result i.e. annuities’.

So I think we have a lot of work to do to communicate what we do in offering retirement savings plans to the public. Our most important work today is to find ways to communicate annuities effectively and to demonstrate how others have been benefitted with not only their own income needs but also how an annuity provides for generational wealth through guaranteed income.


If anyone would like me to share Magdelena’s profile with them, please contact me at

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I’ve just been (pension) geeked!

hello pension

Yesterday, as you probably weren’t aware, was national pension awareness day. I tried to tell you  in my Pension Play Pen weekly announcement but did you engage? I thought not

September 15th was decreed so by the Pension Geeks among whom is pension evangelist Ralph Turner (former Grumpy Old Pensions Man) and a fellow called Jonathan Bland – who I hadn’t met before last night.

Last night I was pension geeked. My laptop proclaims that “Henry Tapper is a Pension Geek”, I have new even geekier glasses, my flat is full of pension geeks balloons and my rucksack is full of geek wristbands. This one modelled by friendly actuary Peter Shellswell (no – not the ape).

Which one's Peter? (hint- dodgy fangs)

Which one’s Peter?
(hint- dodgy fangs)

This full onslaught on what remained of my credibility occurred when I was most vulnerable. An eight hour strategy meeting with First Actuarial, replete with a wonderful hour long discussion of GMP equalisation had softened me up , so I little resistance in me when I arrived at Jamie’s wine bar, Bow Lane.

But Jonathan Bland (chief Geek) would have got the better of me, even had I been on form. The lad’s tale- that he converted to Pensionanity while lying on the beach with his missus this time last year, was the theme of the evening. Like Saul on the road to Damascus , he was struck down by the awesomeness of spending money on his future!

This Damascene moment turned him from a Disney-trained animator into the Geek he is today.

Chatting with Melancholic Mike of Peoples Pension, it became clear that Jonathan is a bit of a whizz at animations.

An inspection of revealed a cornucopia of pension goodies on which I could feast my eyes and wiggle my fingers.

I had no need to be made aware of pensions, but I was needed waking up to this stuff!


Mike reminded me mournfully, that if I didn’t watch my laurels, could go the way of (still a great site) which he runs. Pension Geeks could overtake me and render me obsolete.

Mike reckons without my inate capacity to collaborate. If you can’t beat ‘em, join ‘em!

So my next move is to send Jonathan Bland and all who geek with him, social media greetings and extend the warm hand of friendship across my entire bandwidth!


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Making sense of the Budget’s Pension Changes


Everyone knows that the changes in the taxation of pensions announced in the budget and now working their way into law – are going to make a big difference. But just how will they affect you and what can you do to make sure you are a beneficiary of change and not a victim?

From April 2015, anyone over the age of 55 will be able to choose to take their pension savings as a lump sum and not as income. So you could take all the money you’ve saved and pay off your mortgage, have a huge bank balance or even invest in a Lamborghini. According to numbers released by the Treasury, this is exactly what the Government expect many people to do. Which is why the Government expects to make money out of these changes. Because taking your money all at once will come with a big tax bill. You’ll still get your cash, but some or all of it may be docked anything between 20% and 45%- depending on your “marginal” rate of tax.

One way of making sense of the budget’s pension changes is to think of it as an elephant trap into which a lot of us will fall, because we are so eager to get our hands on our savings, that we miss the tax consequences and like the Elephant in the hole, find ourselves unable to get out of the mess we get ourselves into! The Treasury never gives money away, without the expectation of getting it back.

But you don’t have to be a victim. Infact, if you are a little bit expert, you can make tax savings from the budget pension changes. Instead of taking your money all at once, you can time how you take your money to pay less tax. By using your pension savings when your other income is low, you may be able to avoid paying your normal rate of tax on some or all of the money you draw against. So another way of making sense of the changes is that the Chancellor is looking to reward you for being prudent and managing your retirement savings prudently.

But there is a third way of looking at the budget changes which may make more sense than either of the first two. It involves thinking about investment – and thinking about it from the Government’s point of view. At present, most private pension savings is used to buy annuities. Annuities insure you against living too long and they do so by investing your money into Government Bonds (lending money to Government). The other way of investing is to through buying shares in companies. The long-term investment of pension funds into shares is what has kept the stock market flourishing since the Second World War, but this source of funding for companies is drying up as company pension schemes stop investing.

In our view, and it’s the view of most pension professionals, the budget’s pension changes are going to stop people buying annuities and keep them invested in shares. Those who take their money at once will benefit the Inland Revenue, those who stay invested in shares will benefit the private sector. Annuities weren’t just unpopular with the population, they were unpopular with the economists!

There is a final piece of the jigsaw which needs to be put in place. If you take away the default investment (annuities) and don’t help people with the choices they have to make, you risk being seen as a Government who at best was irresponsible and, at worst was actually mis-selling pensions. Which makes sense of why the Government are putting in place the Guidance Guarantee which offers everyone free face to face guidance on their future choices. The intention of these sessions, which will be paid for by the financial services sector, is to ensure that people who use the Guidance aren’t victims but beneficiaries of the budget’s pension changes. Let’s hope that this strategy works and that people take Guidance, take good decisions and make the budget as sensible as it should be!



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How much should I spend on retirement?

People get frightened by this question – they shouldn’t! The simple answer is that we all pay into a national pension scheme through national insurance and you can find out what you’re likely to get from the State we completing a simple online form using this link. Finding out how much you get from the State is the first stage in answering the question – how much should I spend?


For most people, the thought of being reliant on state benefits in what will be “the longest holiday of our lives”, isn’t thrilling. Most of us will want to spend some of what we earn on our later years and auto-enrolment will mean that it’s a whole lot easier for us in years to come.

In case you don’t know about auto-enrolment, it’s the way money is automatically taken from your pay and put into a workplace pension chosen by your employer. The amount that goes in depends on your earnings and is generally around 3% of what you earn above £5,500.

For many people, the state benefits combined with the amount they save through auto-enrolment will be all they get from pensions. But will it be enough?

When we talk to groups of employees and give guidance sessions on retirement savings, we get people to think of their financial future in very simple ways. Understand your debt and aim to get yourself “debt-free” in later years. It’s nice to think of retirement as a time when you don’t have too many financial obligations. The less debt you have in retirement, the less need you’ll have for an income


When you’ve got your debt sorted, it’s easier to understand what you’ll need to live on. One way of looking at this is as a “the amount of income you’ll have to replace from earnings to savings”. The old rule was that you needed around 2/3 of your final salary from private pensions (with the rest coming from the state). But things have moved on a little since the fifties and sixties when company pensions started up. For starters, we tend to work longer and when we retire we often continue to do some paid work. That’s good because it means the amount of income we need to replace may be less than 2/3’s.

The not such good news is that while we may not need to replace all our income (especially if we continue to work and are debt free), the cost of replacing income is a lot higher than it used to be. This is because we are living a lot longer than we used to. Most people don’t think they will live as long as they do. As actuaries, we are always asking people to understand the impact of living longer- income has to be paid longer- savings don’t go as far.

This is one of the reasons that pensions have become so expensive to buy. If you’d like to find out how long you’re likely to live, you can press this link which will take you to our Death Predictor. You’ll be surprised at how long it will tell you – you’re going to live!

So once you’ve worked out how much income you need in retirement (to replace earned income with income from savings), then you can start to work out how much you should be saving. Please don’t be frightened into thinking you need to be saving huge amounts, saving regularly over time can mean you can build up a decent capital reservoir which you can either exchange for a pension (an annuity) or drawdown as an income while keeping access to your capital.

Age UK have a brilliant website which gives free and impartial advice on what you might get from your pension savings. We find that people we talk to, trust this site because it’s independent of any pension providers and doesn’t link you to any commercial provider of financial adviser. There’s plenty of time to go to commercial sites once you’ve got the basics sorted – so try their pages here and then move on.

You can get a pretty good idea of what you need from the modellers on the Age UK site and a good idea of what you’ll have to save to meet your needs. But to get the most from your savings – in terms of investment, tax-planning and the complicated choices awaiting you at retirement, you’ll probably need to pay for someone to advise you.

I can’t advise you, and you probably wouldn’t pay me if I could. But I can give you a very simple answer to the question I posed in the title of this blog. The amount you should pay into your pension scheme is “as much as you can!”

This post first appeared in

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A beginner’s guide to annuities


Annuities haven’t got a very good name at the moment. They are blamed for many problems which are not their fault. One problem with annuities is that most people don’t understand them! Another problem with annuities is that people have bought them carelessly without understanding what they have bought. A third problem with annuities is that they are solving a problem that most people don’t recognise exists, that most people are going to live a lot longer than they bargain for.

The annuities I am going to talk about in this article do a very simple job, they are called “purchased life annuities”, because you buy them for the rest of your life! The deal is this, an insurance company takes a view on how long you are going to live and then works out a sum of money it is going to have to put aside to guarantee it will pay you this amount till you die. It then tells you how much it needs from you to pay you an income.

So supposing I am 60 years old and a man and in pretty good health, the insurance company might work out that I can be expected to live another 30 years, and if I want the money to be paid to my wife after I died, 35 years. For every £1000 p.a. that I want paid me, the insurance company might demand £30,000 from me, being the amount they expect to pay-out. Except it won’t cost them that much as they can get interest on the money I give them which can go some way to offsetting the cost to them of the guaranteed promise. So they might discount that £30,000 to £20,000, reckoning they can get the rest in interest. This is how insurance companies “price annuities”.

Now there are all kinds of wrinkles that effect the price. Your state of health for a start, the insurer should be looking at whether you have an unhealthy lifestyle (smoking, drinking etc.) ,whether you have a history of early death in the family and whether you have any medical conditions that make you likely to die sooner than the average. All of this will bring down the cost of paying you your £1000pa. The insurer can tell a lot from where you live (some Chelsea postcodes have a 17 year longer life-expectancy for residents than some postcodes in Tottenham! And it’s nothing to do with football!).

And as well as health, there’s the question of what you mean by “£1,000”. If you want that £1,000 to keep pace with inflation – then it’s going to cost more. If you think inflation will be 3%pa it might cost 15% more to link that £1000 to inflation, but if you think it will run at 5%, that 15% could go up to 25% more. And this uncertainty makes it even more expensive, because the insurance company has to put money by in case inflation is 7% or even 10%. This process of “putting money by” or “reserving” as insurers call it, is a menace! There are a stack of EU rules about reserving that are designed to make sure an insurance company does not go bust, the trouble is that they mean the cost of an annuity is a lot higher. The extra security of UK annuities makes them almost 20% more expensive than the equivalent America product.

UK Annuities are amongst the most regulated and therefore among the safest ways of investing your money, you can find anywhere on the planet. The trouble is that that safety comes at a price. People considering buying an annuity need to consider whether they want to pay that price and make absolutely sure they get the price down by fully declaring all their medical problems to encourage insurers to drop their prices. People buying an annuity should take quotes from every insurer in the market and they should think long and hard about whether it’s right that the annuity ends with them or whether a spouse, partner and even the kids need some protection if they die early.

As you’ve probably worked out for yourself right now, buying an annuity, like buying a house of a business is not something you do without taking good advice. Many people will need help not just working out what kind of annuity to buy , but when to buy it. You may not need the guarantees now, when you are relatively young, but in ten or fifteen years’ time, things may be different.

So if you’re a beginner- don’t buy an annuity. The people who should be buying an annuity should be experts! A good adviser can make you an expert, you can make an expert of yourself, but if you use your pension pot to buy an annuity and take the first offer that comes your way, more fool you!

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Fear of feedback

Everyone knows what social media does. For every blog there are comments, every forum has its threads, some twitter conversations last for weeks. It is the interaction between author and reader that makes it distinctive. The “Letter in the Times” would look like this if someone pressed “print all”.



And in amongst the cheap jibes and the flaming , will be the genuine comments that take the debate forward, that ensure that the original idea is grounded in popular acclamation or consigned to the virtual paperbin – junk.

We are keen to leave feedback – good and bad. But the impulsion to complain is stronger than the impulsion to praise. Most feedback appears negative but its very existence is a testament to  engagement , no feedback is most dangerous – the parrot may be dead.

So organisations that establish digital services which allow people to read but not comment are running risks that are latent rather than evident.

Let’s say for instance that you run a 30 second video clip about you on You Tube but disable comments. That clip may find itself the subject of derision on any number of sites, you have no control of the content- the comments are with the threads that have sprung up elsewhere- such is the risk of virality!

The loss of ownership and control is compounded by the risk of dereliction. I am currently working on a couple of projects that involve databases which aim to be inclusive and comprehensive, designed to bring choice to the market.

Neither wants to include a feedback system (though there’s functionality for trip-advisor style rating and of course verbal feedback). Without the promise of a qualitative aspect to the listings, the listings will present choice with no direction. Filters can narrow choice but without feedback attaching to the choices, there is no referral system, no means to choose.

Similarly, those who have choices have nowhere to record their experience – good or bad, the natural wishes of people to comment (whether in person or anonymously) are strong. The drivers may be cathartic- to purge a bad experience or exuberant, to share a good one- but these expressions are always typically driven by a strong emotional  response.

Without these emotional responses, the information we post is derelict.

And this is the problem. The fear of feedback is that feedback is rarely measured and objective, it is nearly always emotional and biased. The fear is that the bias will be in the wrong direction and that the wisdom of the crowd may not be the “house view”. Worse , it may lead to litigation.

Without feedback, the information is derelict but with it, the information changes. Reading the comments I will re-read the original posting with new eyes.

Fear of feedback is more than a distrust of one’s public, it’s a distrust of one’s own position. The insecurity that leads to wanting to create a static piece of information stems from a fear of change, both in the perception of the post and of the person posting.

In one of the cases I am working on , I asked the question “what’s worrying you about feedback”.

The answer was fear not of the feedback but of the impact of the feedback on the project

  1. Those advertising would withdraw their listings
  2. Those sponsoring the project would withdraw funding
  3. People would take the comments as advice (with legal liability for the consequence resting with the owners of the database.

To which the counter-arguments are

  1. Those advertising have nothing to lose by being listed – if they are not liked they know how to change
  2. If those sponsoring the project are concerned about the commercial value, they should recognise that the comments are the project’s value and without them it risks dereliction
  3. A simple legal disclaimer, distancing the project from any comment is sufficient to mitigate legal risks to an acceptable level.

Of course a static site is easier to run, it does not need moderation and it will have no complaints (on the site). The complaints will appear elsewhere!

This sign appeared un prompted on the side of my tenement

No stupid people

Just a power-point slide, printed in colour and laminated, half an hour’s work!

Authority no longer sits with those with a title, it is bestowed on those who engage constructively and evidenced by feedback.

Those in authority have everything to lose by social media but everything to gain. Even if you reach the top, you need to be constantly revalidated. That is why Boris Johnson is doing such a great job- he is constantly asking for (and getting) feedback from those around him.

Without submitting ourselves to the judgement of others, our authority has no legitimacy. This is why we cannot fear feedback, we have no choice but to enjoy it.


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I was so much older then (I’m younger than that now)

ytfc kids

Thank goodness for kids- kid journalists for a start.

There is a gang on young journos who actually give a damn about the pensions they are in and are prepared to engage and educate themselves about what makes for a good pension.

I came across this on twitter yesterday

What I love about the article is that it is written from the heart. Kids (by which I mean anyone under the age of 30) seem to care much more about the quality of the pension they are in than people like me – for whom the damage of poor questions may have been done.

Speaking to Michelle, who wrote this article, it was clear she was keen on  her employer’s workplace pension and shocked to find that most employers hadn’t got a clue why they had chosen the pension scheme they had (for their staff).

This reminds me of something I wrote on a post in accounting web recently.

There comes a point when auto-enrolment becomes something that companies want to do,we haven’t reached it yet! But when it is as easy to pay people in pension contributions as it is in cash and when the pension contributions are valued as  part of total pay, then we might be getting there!

I hope that more young staff asking their bosses as to exactly why they chose the workplace pension they did. It is simply not good enough for employers to take this decision lightly.

I stood in front of 50 SMEs the other day and pitched to them. None were older than 40 and most were kids. Everyone cheered at the end, it was great to see entrepreneurs getting into the idea that they could make a difference to their staff’s pension funds!

It depresses me that we talk about pension as “risk” and advertise auto-enrolment by means of “fines” that tPR could dish out for non-compliance.

This is not what you’d do if you were a kid. If you were a kid you would be looking at pensions in terms of the awesome opportunities they gave to invest money cheaply, save tax and build a capital reservoir to spend in your old age.

We must exercise this love muscle that drives people’s decisions to join and stay in a pension.

And we mustn’t allow kids like the ones I’ve mentioned to end up old and jaundiced.

The statistics suggest that auto-enrolment opt-outs are much lower among the under 40s and much higher for the over 50s. Opt-ins by  non eligible are highest among the under 22s.

In pensions , the child is father to the man. I am slowly closing in on my second childhood!


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Safe, stable, regular and for life

I had lunch with Mr Sipp yesterday. Mr Sipp is John Moret and he has done more to pioneer the new pension freedoms than anyone else. I think the dodgy curry and glass of house white I bought him scant reward for the insights he gave me.

The title of this blog reflects the original aims laid down by the then Regulators for income drawdown. John reminded me of them.

Safe- money must be invested in assets that won’t go down the swanny

Stable- income arising from investment must be consistent from payment to payment

Regular- distribution of income should be able to mirror how we get paid when working

For life- an estimate of mortality should be used when modelling the drawdown.

Of course, all this became formalised in what became known as GAD rates, where the freedoms were circumscribed and it wasn’t till the advent of Flexible Drawdown a few years ago, that these restrictions were lifted (and then only for the pension rich).

John’s point was simple;- “safe,stable, regular and for life” appears to be what people want as an income in retirement.

By taking away the need to buy an annuity, live within the GAD  guidelines or have an a priori retirement income of £20k pa, the Treasury have said that there is no further need for intervention in terms of controlling behaviours. It could be argued that it’s done away with consumer protections because it thinks that consumers get it.

As I am writing this, I am sitting in a meeting of the Financial Services Forum hosted at the offices of DMG Media (the Daily Mail).

According to the Mail, 50% of its readers are behind the Guidance Guarantee initiative (a  huge approval rating) but only 10% say they’d trust the guidance. Understandably, people aren’t going to say they trust something they know nothing about. I’d be interested to see these questions re-polled in a year’s time.

If the Guidance simply concentrated on the four features of a retirement income stream, “safe,stable, regular and for life”, I suspect most people would feel very comfortable.

Would you have an alternative to wanting your retirement savings being safe? But what do you mean by safe?

Would you want other than a stable income -but what price would you pay for absolute stability?

If you don’t want a regular income, how are you going to plan your day to day expenses.

If you don’t want an income for life, what’s plan B if you live longer than you expect?

Sometimes the old ideas are the best. Whoever came up with the formulation “Safe, stable, regular and for life” is probably in retirement now (on a gold plated pension I hope!).

What we now have to concentrate in providing people with confidence in the products that they are offered. If annuities are not the answer, are drawdown products?

I worry about the capacity of people to manage their savings as “safe, stable, regular and for life” using individual drawdown and I don’t think that annuities are a suitable investment or insurance for middle aged people.

“Safe, stable, regular and for life” seems a pretty good sales pitch for CDC.



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A tale of two Cities

Law SocietyCity of London




Have you ever turned up at a place and realised you shouldn’t be there – but stayed anyway just to see what it was like?

That’s what happened to me yesterday. I went to an event about the “Future of the City” in Evershed’s posh offices near St Pauls.

The event had been organised by Policy Exchange and the Law Society so it was full of policy wonks and lawyers…and bankers.

Apart from a hatful of ABI-tes, I couldn’t spot anyone with an interest in pensions so I snuggled down and listened to the great things we were up to in Brussels and New York and Singapore making sure that London remained top-dog among financial centres and a jolly good place to live.

Having been told yesterday by Lib-Dem MP for Solihull Lorely Burt (don’t say it with a lisp), that Solihull had been voted the happiest place to live in Britain, I was sceptical of some of the claims for little old London!

London is certainly a jolly good place to live if you have money, and there was a little disquiet expressed about London having 5 of the poorest boroughs in the country (mostly on the outskirts of the City itself).

People like Will Hutton and Boris Johnson’s economic adviser Dr Gerald Lyons made me feel excited to be back living and working in London. Everybody was a bit spooked by an opinion poll that suggests that the Jocks may be off after all and there was much conjecture about what this would mean for us little Englanders left hanging on the fringe of the Eurozone. Other people were frightened about the deliberations of the European Court of Justice that might bugger-up London from trading Euro-denominated derivatives and there was general concern that we kept tabs on Johnny Foreigner who was coming down the Amazon, out of the Paddy Fields and into the financial markets with alarming energy.

After about 4 hours of this stuff, we all adjourned to a bar set up by Eversheds for a few stiff ones before doing battle in the final session on “Financial Regulation”.

With tongues loosened by such libations, the final debate which didn’t wrap up till 7.30, was a Grand Guignol , delivered in polysyllabic streams of consciousness by strategists high on the fumes of their own intelligence.

Grand Guignol

For the record this was the line-up

Chair: Sam Fleming (Financial Times), Chris Allen (Barclays), Anthony Belchambers (Cross Border Regulation Forum), Mark Boleat (City of London), Hugh Savill (ABI).

I have to take my hat off to them all. Male and Pale they were but never stale! Boy could they talk and boy could they fight!

These bankers are schizzo. They have had to wear a public and private face so long that they have developed split personalities.

One face is their City face, where they assume their mantles of masters of the universe, controlling the flows of capital around the globe and ensuring that the politicians understand the implications of their banking decisions.

The other is the public face, where the public moan about being ripped off by PPI, Credit Derivatives and Libor, where financial advice is substituted for “sales target practice” and the consumer is commoditised into “banking hall foot-fall”.

Me and a bloke sitting a couple of rows back tried to point out that what they’d been banging on about for 60 minutes would not play too well  to the consumers, I felt like Swampy and the rows of suits that surrounded us seemed to turn into police uniforms. Would we be kettled out of Eversheds?

But no!  Once we’d got our initial kicking, sense appeared. One chap more or less admitted to me that  “for big-boy bankers to be masters of the universe, little-boy bankers are going to have to stop misbehaving and spend a little less time on the naughty step”.

As I walked out into a late summer City evening, I cogitated on the two cities. The City of London is controlled by the likes of Mark Boleat, they make the money that makes it the most prosperous square-mile in the world. But there is the bigger City we call London but is really a massive conurbation of diverse ethnicities, living standards, religious and cultural beliefs.

London cannot do without the City of London but the City of London needs the great sprawling metropolis that surrounds it – on which it feeds and onto which it defecates its largesse.

It really is a tale of two Cities and I’m glad I’m a part of both.

two cities



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What payroll can do to keep away the loan sharks.

loan shark

We all know the sharks that swim in financial waters preying on the weakest and driving them and their families into deeper debt with all the social and health problems that “deep debt” brings.

And I’m sure that if it were within our gift to give the people we operate payroll for, a better option than the 1000% + payday loans, we’d be keen to help.

So when I got an invite from Ceridian to go to Westminster and hear Lindsay Melvin of the CIPP and Treasury minister Andrea Leadsom talk about how payroll can work with credit unions, I rearranged my diary.

And I’m very pleased I did.

There are a number of studies both here and abroad that show that those with acute money problems can’t focus on their work and are less productive as a result. There is a commercial argument for employers to pay attention to this area of staff welfare and many good employers do offer confidential counselling where it is needed.

But the chronic problem with debt can only be solved by getting people to be “money saving experts”. Regular saving can create a capital reservoir that pays for the boiler blowing or the washing machine breaking down. But many find that organising themselves to save is hard. That’s why Christmas clubs exist.

Since the introduction of auto-enrolment, payroll has helped over 4m employees to save regularly for their retirement. The payroll industry had no choice in this and I’m sure that many reading this article will say “small thanks we get for it”. I work in pensions and I know that payroll did the heavy lifting and those I work with right up to the Pensions minister know it too. And there’s none of us who wouldn’t want to praise you for making AE work.

To throw at Payroll a further challenge of organising payroll saving into credit unions may be an “ask too far”. But it’s a challenge that payroll should accept. There is a triple win if we can get payroll saving to credit unions into our DNA.

  • Employees get a means of getting short term security and the back up of access to a much cheaper form of finance if they get into trouble.
  • Employers get to help staff stay away from the sharks, so increasing productivity
  • Credit Unions get a reliable source of funding and a more creditworthy customer.

The CIPP has recently completed a survey of 2000 low-paid employees (the average income working out at just over £16,000). The survey asked

“if you don’t currently save for a rainy day through your payroll would you consider doing so if offered by your employer?”

41% of respondents said yesterday and a further 24% thought they might do.

I personally save into a credit union, not out of altruism, but because it gives me a good return. I found out about them from Martin Lewis

But it makes me happier to know my savings are doing good , than lining banker’s profits and I’m sure many of you will feel the same way if you set up a credit union savings option from your payroll.


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“Savers who cash in their pensions face charges of up to 20%”

which 4


I repeat the Daily Mail’s headline which is absolutely accurate.

I am glad that they did not use the word “penalties” as this implies a non-contractual lock-in being imposed by insurers. This is not what is happening. Insurers are only applying the rules in the policies we took out in the 70′s, 80;s and 90′s but as Ruth Lythe puts it.

“Most savers will not even be aware the charges exist as they are buried in the small print”

I spoke with Ruth during her research for this piece. She’d picked up on my piece earlier in the week in which I explained just how easy it was to take more commission from a pension policy just by filling in a couple of boxes to your benefit and not the clients, I even admitted to having done this myself. The article’s here

Of course the “reason why” letters always had an explanation for extending the life of pension contracts (and thereby creating early surrender charges) which meant that compliance officers gave such bad practice a big tick. The various regulators were comfortable as long as the boxes had been ticked and the whole charabanc moved on from one record quarter to another.

Who do we blame?

It was not just the guys who sold the policies who got rich, it was people further up the pyramid. Blame needs to be shared but it cannot be ducked.

The comments from Daily Mail readers suggest that they are not particularly interested in pointing the finger at any part of the process or to any particular person- the whole stinking mess is to be avoided.

I remember talking to journalists about this problem in the 1990s and explaining how the policies we were selling then would be maturing in the first three decades of the next century. It was hardly newsworthy. Though journalists could understand what the issue was, they couldn’t make copy out of it and so the practice carried on – unhindered by consumerists, unreported by journalists.

One brave soul in the Mail’s comments tells another reader he should have paid attention to the small print. No doubt he was one of the ones who did and bought wisely (or luckily). But people have got to learn to be better buyers before we can solve the problem of mis-selling.

Who do we praise?

Martin Lewis makes “money-saving-experts” of his readers and teaches them how to buy simple things better. He teaches techniques of bartering, how to use Maths to work out which is the better deal on butter or soap powder, he teaches people to fight back when they have been wronged.

I take Martin as my hero and my website, sets out to make better buyers of small employers who are buying pensions on behalf of their staff. This blog is part of that process.


Are things any better today?

But there are headwinds. We need professional advisors, accountants, financial advisers and the finance specialists within these companies to step up to the plate and become “skilled and knowledgeable”, purchasing with precision.

Instead we get discouragement from a trade body and a pension regulator

Although giving advice to an employer regarding their choice of pension scheme and/or fund is currently unregulated, TPR believes that people without the right skills and knowledge should not be giving advice or expressing an opinion on this and we recommend sticking to fact based communications on this matter.

“There is also a risk of blurring the edges and straying into the regulated advice space, if the individual representing the employer is or will be a pension scheme member, as they could be investing their own money into the pension scheme.

“We believe that the ICEAW have published a handbook which advises their members against giving advice or guidance to employers on the choice of pension.”


Is the new regulation any better?

The regulator has swung through 180 degrees. From the laissez-faire of the 80′s and 90′s to the prohibition of advice from anyone with the chalice of “skill and knowledge”.

I wrote a comment on the thread of the accounting web article that contained that statement and print it in full here

The problem with using a phrase like “skill and knowledge” is that it is absolutely meaningless. I work for a firm of actuaries that have skill and knowledge coming out of their ears, but most actuaries have no means of applying it to 5 man companies trying to choose a workplace pension!

You can have level 6 qualifications as a financial adviser and still not understand how hooking your payroll up to that provider is going to cause problems, you can’t learn the skills of understanding a company’s needs and matching them to the right workplace pension.

The Pension Regulator is “risk-based” which means he would like minimum scope for litigation. The Regulator would like factual presentation without “opinion”. This assumes that employers will be able to look at pensions data and make rational decisions by properly comparing the propositions of NEST and AEGON and NOW and Legal & General.

This is simply beyond most employers., THEY NEED OPINION, they need simple statements like “look- if your average age of employee is over 45, NEST doesn’t look a great deal” or “Legal and General works for employers who want x,y and z”.

Organising all those nuggets of information into one place and then using technology to produce messages which say “employers like you choose x” is very difficult , expensive and risks failure. But it’s what the 1m plus SMEs and micros still to buy their workplace pension need.

Steve mentioned that they can get all this information and come to a decision  (with a thick 40 page actuarial report recording how they got there) £500. He’s right –

If small practices are going to get involved- (and if they don’t who will?), they cannot take the risk of choosing a pension on themselves, they should tell their clients to use a repository of skill and knowledge and get them to click that link.

We can’t all be skilled and knowledgeable, but bosses can be better buyers!

Until we can find a way of making those who buy the pensions for us “good buyers”, pensions will continue to be bought without anyone reading the small print. We need proper information that genuinely helps the 1m employers to take sound decisions for their workers and we need it delivered in a way that suits us in the second decade of the 21st century.

I put my hands up- as a financial adviser between 1984 and 1995 I was part of the problem, as a social entrepreneur in 2014, I am part of the solution.




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Is an annuity an investment product? Perhaps not!



I have been worrying about a presentation I have to deliver to an investment group on the value of annuities.

I have long felt that annuities are a rubbish investment and UK annuities a particularly rubbish investment.

My confidence fell still lower when my chum Alan Higham started tweeting me some heavy doodoo.

Alan wasn’t just talking big- he’d done the maths.

And he carried on….

This last tweet turned a light on in my head.

If the underlying securities which back your annuity are the same in the UK and the US but the income from the US annuity is 20% higher, either UK annuities are considerably less efficient or there is a greater degree of security from our income streams.

15 years ago, I spent some time with Mike Orszag who’s now Head of Research at Towers Watson but was then researching annuity costs at Birkbeck. He concluded that the UK annuity market was efficient, relative to other annuity markets. You can read his research (which has been updated but makes the same conclusions) here.

Last year I went to Kingswood to visit Legal & General who showed me the accounts behind their individual annuity book. L&G are not making huge margins and their business is efficient.

So how can we account for the differential between UK and US annuity rates?

The answer (for me) rests in perception. Annuities are not investments, they are insurances. The pension annuities we purchase are specifically an insurance against us living too long.

Insurance is unfashionable and investment is sexy. Insurance is boring but it brings peace of mind. Investment is flashy and doesn’t! The two concepts are faces of the same coin and many investments are sold as an insurance (against for instance inflation). Sadly annuities have been sold as investments (and they really don’t stack up well).

I could go off on a long tirade against the damage done to the UK annuity market by EU Solvency II and other regulations including the infamous gender equality rules – but I won’t. These regulations are what make for the 20% differential  between US and UK annuity rates but they are the symptom not the cause.

America has a history of institutional failures within financial services, Fanny Mae and Freddie Mac, Lehmans and Bear Stearns and the Savings and Loans crisis all resulted from “under-prudential” financial legislation.

We cannot have our cake and eat it. If the price to pay for guaranteed annuities is the reduction in yield occasioned by reserving under solvency II, it is a price worth paying- if what you are after is an insurance.

My mistake- and I count it as such- is in confusing an annuity with an investment.

The 2014 budget reforms have cleared my foggy brain. If I want to invest, I use flexible drawdown and flumps, if I want to insure I use annuities and if I want something in the middle , I use CDC.

And I think I know what I’ll be saying when I talk at the Investments Network meeting on 16/17th October




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Does anybody care what you think?



I bet you’ve sat in an exam hall , or been asked to complete a questionnaire or stared at the comments box below an article you’ve read and gone “nah-better not”. The rubric is that “your views matter”, but do they really?

Because on these “one to many” responses, you are going to be judged, and while the upside is unclear, the downside is immediately obvious, your opinion doesn’t matter to the examiner, the pollsters and the readership; nor do you. Best stay quiet – best not show off.

I’ve just completed 31 questions asked by the FCA on a consultation about Internal Governance Committees. I’d looked down the list of people who’d be interested in responding and found I could respond as Pension Plowman (workplace pension holder), Pension PlayPen (workplace pension search engine) or as First Actuarial (workplace pension analyst).

I was asking the same question as you “do they care what I think?”

But to answer that question , you have to know who’s asking it. It turned out that the bloke organising this was someone I know , Jonathan Reynolds – who’s a nice decent guy.

This is what the blurb said

We want to know what you think of our proposals.  Please send us your comments by 10 October 2014 in writing or using the online response form on our website.
We will consider your feedback as we finalise the new rules. We intend to publish the rules in a Policy Statement in January 2015

So Jonathan was asking me (Henry) to feed into the final rules that would govern my retirement savings plan, and those of my colleagues and clients. Oh and to the 1.2m customers who might rely on and the 6m people still to be auto-enrolled.

Now this is a specialist interest of mine and I wouldn’t be expecting too many clicks on that online response form link . But I thought I’d tweet the link with a bit of encouragement anyway.

Because whether you’re weighing up whether your company or organisation should respond, or if you’re thinking about whether you’ve got something to say, then you almost certainly have. And even if you don’t say anything original, or say something stupid, you are not going to be doing any harm.

But this is where it gets a bit tricky, because you don’t know who is judging you and you don’t know where it will end. I remember when I was a junior meeting Barbara Castle and telling her that SERPS seemed much more sensible than contracting out of SERPS (to me). And she quoted me in the House of Lords and when the PR firm who monitored mentions of Eagle Star picked up on this , I was invited to see the Head of Government and Industry Affairs who demanded to know what business I had speaking for the company like that.

And of course he was right, I should have said, “the views expressed are my own and not necessarily those of my employer”.

But that was then. That was when we didn’t have senior civil servants washing up your tea mug , or @greggmcclymont sorting out labour policy on @twitter or Martin Lewis getting PPI redress for 4m policyholders from a link on

This is now, and now is Open Government, social media and the empowerment of your voice. Your submission, when it arrives at the FCA, looks exactly like Standard Life’s or the ABI’s. Judging by the feed back published in recent paper (you are as likely to see an individual or at start up like Pension PlayPen quoted as any of the big players.

Now knowing some of the people on the other side of these submissions, I am confident that you will be heard, your opinion will count – and just because you have responded -because you did give a toss- your opinion is that much more valuable.


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Freddie Flintoff’s fabulous comeback; T20 Finals Day


The Blast Finals Day held at Edgbaston is the best value major sporting event of the summer. For £50 you can get a full 11 hours of cricket and a bunch of support acts including the magnificent Mascot Race, a heap of local bands playing on three stages and the awesome spectacle of the Hollis Stand- packed with revellers assembling beer snakes, racing up and down the aisles in fancy dress and singing Sweet Caroline (too many times).


Yesterday’s event was won by the Birmingham Bears (aka Warwickshire and our hearts were won by Andrew “Freddie” Flintoff. We were fortunate to be standing adjacent to Flintoff , as he made his way out. Not a perfect shot – but I wasn’t the only one!



To my 16 year old son, this was extroadinary in itself, but what was to follow will remain a sporting memory for both of us. All afternoon the Hollis had been chanting “ooo Jimmy , Jimmy” and he’d opened the bowling.


After an over of spin at the Pavillion end, Fred was on. His first ball deceived Ian Bell who played through it too early and skied a catch to Parry at long on. Parry snaffled it- right in front of us and Freddy had his wicket. It was a great catch and there were great celebrations.

Twice in the Bears’ innings I was able to glance at a scoreboard to see A Flintoff and J Anderson bowling in tandem.




But that was not it! With Lancashire falling ever behind the run-rate and Woakes recalled for the coup de Grace, Freddie arrived at the crease. After a couple of sighters, he launched two massive sixes into the crowd to leave fourteen off the final over. Sadly the faiy tale did not quite happen and Lancashire fell four short as Freddie lost strike and his partner could only hit two of the final six needed off the last ball- but it had been a great final- Freddy’s final!


Earlier this summer I had been able to watch Nick Faldo and Rory Mcilroy play adjacent greens at Royal Hoylake. It seemed an appropriate handover. Watching Freddy handing over the crown of popular acclamation to Jimmy Anderson had a similar significance. I’m of an age when the inter-generational transfer is happening as my son becomes an adult (and a very nice bloke).

This final is great because of the people and though it is not on terrestrial TV, it is – as an event- the better for it. Sky revenues keep down the price of tickets making this an event for the cricket enthusiast, most of the boxes that line the West and North sides of the ground were empty but otherwise Edgbaston was packed. Packed with real fans.


Ironically, giving the event to mainstream TV would probably force it into the mould of the TCCB events that are so sanitised that they have lost the carnival atmosphere the T20 Blast retains. This was like Notting Hill – an event I’m off too today.

Freddy and Jimmy are only the half of it. My team- Surrey- were pretty poor other than for Jason Roy’s magnificent 58 and the usual whole-hearted performance of Batty and Ansari. Hampshire came and went but in the event Porterfield (my performer of the day) , Bell and the Birmingham team brought pride to Edgbaston and Warwickshire cricket and no-one could begrudge them the NatWest trophy.



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Rory throws a shape- the Road to Dubai ends here!



Bored with the sound of the Dubai ocean beach club we took a taxi to the golf – this is what we found.

Our highlight? Standing next to Shane Lowry when he got his hole in one at the 13th.

It was Stenson’s day, but Rory threw the best shape.


IMG_0645 IMG_0672 IMG_0689 IMG_0693 IMG_0698 IMG_0704 IMG_0706 IMG_0722 IMG_0756 IMG_0761 IMG_0770

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What we think about the Pension Regulator’s Proposal to publish a workplace pension Directory


Pension PlayPen’s response to the Pension Regulator’s Consultation Document

Helping small and micro employers identify a pension scheme for automatic enrolment

Why Pension Play Pen is engaging with the Pensions Regulator

The Pension PlayPen runs for employers and their agents who are looking to establish a new workplace pension in advance of auto-enrolment.

Using a number of rules based algorithms, we aim to match the demographic of the employer’s workforce, the contribution structure and the operational capabilities of the employer to workplace pension providers.

We rate 24 workplace pension providers against six metrics; – cost, investment governance, at retirement capability, member engagement, payroll and HR assistance and the durability of the proposition.

By combining the algorithms that influence the weightings of the metrics on an employer specific basis, we are able to provide a league table of what, in our opinion, are the most suitable pensions for each employer.

Our ratings and the rules of the algorithms are adjusted by primary research conducted by First Actuarial, this includes research on the providers and research on what payroll experience dealing with the providers we research.

The scope of our service is intended to be as wide as possible, we do not claim to be whole of market as there are offerings which we simply see as too weak to merit our research and providers who are unwilling to undergo our research, but we believe we offer the most comprehensive service of this type in the UK and with over 500 employers having used our system since we opened in 2013, we are the most used.

The only providers we will not research out of principle are those that are only available for the clients of certain advisers. We are pleased to see the Pension Regulator adopting a similar stance to its proposed directory.

In July we submitted a response to the Regulator on its private consultation on employer choice. We hope that this has positively influenced this latest consultation.

This response is intended to inform the Pensions Regulator through our experience and hopefully lead to a better outcome from the Directory – the implementation and maintenance of which we support.

Specific suggestions resulting from our experience

Criteria for inclusion

We are happy with the proposals that the Provider must have proved it is offering a qualifying workplace pension scheme, we assume that this will require some validation by tPR, self-certification of this is not enough. From April 2015 the qualifying rules will be tougher and should we at Pension PlayPen see any provider on the list which , in our opinion, is not following the qualifying rules, we will be asking why it is included in a very public way.

We are happy too that the Directory is not used as a promotional tool by providers, TPR have always said it should not endorse one provider over another, purely for promotional purposes.

We are not happy with the criteria that a scheme must

accept without qualification any employer regardless of the

amount paid to their workers (individually or on average)

or when their staging date is

Don’t refer to “schemes”

Firstly, we question the use of the word “schemes” to refer to workplace pensions. Schemes is a word that refers to occupational pensions, it is rarely used of group personal pensions which are referred to as plans. Using “schemes” suggests a bias towards workplace pensions operating as occupational schemes (using multi-employer master trusts).

PROPOSAL We propose that TPR replace all mention of schemes with “workplace pensions” to avoid this bias.

The universal acceptance criteria is wrong

The right for a provider to turn down business for commercial or ethical reason or any other reason is fundamental. Only NEST do not have the right to turn business away (and even NEST has money laundering checks-insisting on a UK bank account for contribution collection).

Any workplace pension provider who agreed to this criteria would be making a statement about its lack of controls which would be to its detriment. Were an employer to insist on its right to contribute to that providers workplace pension based on its inclusion on the Directory , then the provider could be putting its brand, its commercial obligations to stakeholder or its membership and even its core principles in jeopardy.

Providers should not be asked to compete with NEST in providing a public service obligation and the logical conclusion to this argument is that only NEST should be included in the Directory. If it is a Directory of one then it serves no useful purpose.

We note the qualification that a provider might exclude an employer who didn’t consent to to

adhering to reasonable T&Cs, but what employer wouldn’t accept T&Cs at outset? By the time wilful non-compliance is discovered, it is too late!

The inclusion of this criteria in the Directory should lead to any sensible Provider boycotting the Directory. We have a system in place at which allows reasonable exclusions for business. Some workplace pension providers exclude on the size and shape of contributions (including average contribution per member). Some providers will only accept business after sight of a workforce assessment and a statement of the contribution structure to be employed.

By way of example, the Pensions Trust’s rules for Smarter Pensions exclude the use of minimum contributions against band earnings.

Some exclude on certain industries (being industry specific providers) and some exclude employers who won’t contribute digitally or accept electronic communications.

Finally many providers, quite properly, will not accept “shell schemes” where employers request the set-up of a scheme, a long time from staging, in hope of avoiding a capacity crunch. This practice was ruinous to many providers during the introduction of stakeholder pensions and we see a criteria that forces them to accept business that may never materialise but has a cost to set-up as unfair on providers looking to protect themselves “second time around”.

All of the exclusions we accept are perfectly reasonable, they are designed to ensure a proper market where there is proper differentiation and proper choice.

The proposal only to include providers on the Directory who do not make these exclusions will lead to the Directory being too small, insufficiently diverse and potentially it could lead to problems for those providers who – for marketing reasons – accept the criterion against the interests of shareholders, members, other policyholders and the underlying principles of the provider’s governance structure.

PROPOSAL – TPR drop this criteria and replace with “workplace pension providers are included provided they will publish those exclusions they make to underwrite employers participating in their workplace pensions”.

PROPOSAL- The link to the Provider, offered from the Directory should take the employer or agent to a “landing page” which specifically states the underwriting criteria of the Provider as described by the provider (and scrutinised by the Pensions Regulator

Duration of the Directory

The Pensions Regulator (TPR) has been here before, it published a list of Stakeholder Pension Providers which was not a success. It is shocking that this list can still be accessed

Most of the providers on this Directory are no longer offering schemes, many withdrew over ten years ago. Most providers listed are no longer trading under the style represented under the Directory.

TPR’s proposal to take down the list from the end of initial staging in 2018, makes sense in this context, but this supposes that staging will end in 2018 and the need for the Directory will be over at that point.

It won’t end, there are some 200,000 new employers born every year (a number sourced from TPR’s previous paper). We cannot see any reason for the Directory to be taken down in 2018.

PROPOSAL The Directory should remain up so long as their is need for it and resource within TPR to maintain it.

General comments on choice

We recognise that TPR are looking to use this directory to whittle down the number of candidates for an employer’s short list and to exclude from general consideration a number of marginal players.

We do not think this should be done on the criteria of universal acceptance of employers, rather than on a criteria of transparency. Most providers who are unsuitable for the Directory will fall foul either of the new qualifying rules in April 2015 (and the Directory is one way to enforce them) or by our proposal that these providers explicitly state their underwriting criteria. Other providers who are vertically integrated to a degree that they do not offer their product on the open market and require the employer to be an advisory client, have no place on the Directory.

So we think that the Directory is a good idea, that it will help small employers and that it is a starting point for good employers who want to make the right choice.

It is however a starting point and not an end point.

PROPOSAL; we recommend that the Directory makes it absolutely clear that the Directory is not in itself a compliance tool. Inclusion on the Directory does not mean that the Provider is suitable for the employer and greater due diligence should be taken before choosing a workplace pension.

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The Strop Suite – OMG!


We flew overnight to Dubai, missing the GB Entrepreneur Awards, for which Pension Play Pen had been shortlisted.

“Dubai is a shit-hole (I want to go home)”

Well that’s what I was singing on the bus as we moved from traffic jam to traffic jam through an Ersatz mix of fake this and fake that. What a dump this place is!

I wasn’t that impressed by the Movenpick hotel, which is handily placed next to an oil refinery, The Missus wasn’t much impressed to find we had no room when we arrived 7am UK time.

So she went strop ballistic and this is the result.

OMG – Strop suite!


Possible the worst view in the world

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The true cost of pensions; UK vs Netherlands – guest blog from Emma Craig of KAS Bank

true cost


Yesterday the Financial Services Consumer Panel released a paper outlining key issues for long term savers created by opacity in the true cost of investing in pensions. As auto-enrolment of workers into (predominantly) Defined Contribution pensions continues apace the impact of under-reported costs comes increasingly to the fore. Research showed that over a savings lifetime an annual charge of 1% could reduce the value of an individual’s pension pot by 24%. Whilst the charge cap of 0.75% has been recently introduced to combat the charges issue, the panel found that many costs – particularly transaction costs – are not measured within this cap, leaving the consumer still exposed to this risk but without sufficient information.

In contrast to this, the Netherlands has been seeking to establish the true cost of investment for savers for several years, and there are lessons that the UK can learn from this. In January 2014, the Dutch regulator (DNB) presented the results of its recent investigation into the management fees of Dutch pension schemes. In the report, Dutch pension funds were obliged to report their investment costs broken down by asset class.  Although according to the DNB, transparency around asset management fees has generally improved, 28% of schemes in the sample could not sufficiently extrapolate the impact of fees on their portfolios. The DNB has condemned this as ‘unacceptable’ and, in contrast to fee-capping on this side of the North Sea, the DNB is considering a tough love approach to the problem, which would entail high penalties for schemes which fail to properly disclose management costs.

And where the Regulator goes, at least in the Netherlands, the industry follows and Pension Funds have been increasingly hungry for data, and not just cost data. It is not unusual for Pension Funds to demand of those who manage the data, the Custodians and Fund Accountants, information on costs segmented by asset class, manager fees vs transaction costs (including the transaction costs of bond trading segmented by type of instrument), and so on. This is a level of detail that is unprecedented in the UK environment either in the regulatory space or the pension space. The Custodian Fund Accountants in the Netherlands, such us here at KAS BANK, have responded by creating tools to enable Trustees to digest all of this data. What’s more there is no mention by Asset Managers of NDAs, the Dutch Regulator demands the data after all!


true cost 2


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A miserable device; – guest blog from Ralph Frank

A miserable device

Members who cease paying into defined contribution pension arrangements often pay higher management charges than their colleagues who continue to add to their savings. This two-tier charging approach is euphemistically referred to as the ‘Active Member Discount’ (“AMD”). I guess the term ‘deferred member penalty’ failed the focus group tests, despite being a more accurate description. AMDs have been around for many years but came to prominence in the Office of Fair Trading’s (“OFT’s”) seminal ‘defined contribution workplace pension market study’ published in September 2013. The Study concluded that AMDs may lead to consumer detriment. The OFT also proposed banning the use of AMDs from schemes used for Auto Enrolment.

The most recent ‘Better workplace pensions: Putting savers’ interests first’ Consultation Paper, and related draft regulations, from the Department for Work & Pensions (“DWP”) has taken-up the OFT’s proposal, albeit to a limited extent. The Consultation Paper proposes that the ban on AMDs only applies to the savings of members who make a contribution to their Auto Enrolment compliant scheme after April 2016 rather than all savings made under Auto Enrolment (let alone all defined contribution savings). The reduced scope of the ban is explained by the DWP as “supporting the roll-out of automatic enrolment through minimising the disruption to existing schemes”.

The ban on AMDs, even in its limited form, is a welcome first step. However, it feels like an opportunity to widely reduce the risk of consumer detriment has been missed. The OFT famously found that “the buyer side of the DC workplace pensions market is one of the weakest that the OFT has analysed in recent years” and “competition alone cannot be relied upon to drive value for money for all savers in the DC workplace pension market”. Both providers and purchasers/savers should not have to rely on Government intervention to address predatory practise – although such State support would be welcome in this instance. I am aware that some selection agents/advisers raise concerns with their clients about providers that continue to include AMDs in their offerings (perhaps alongside the use of premium-rate numbers for customer call centres and other measures to redistribute as much of the saver’s retirement assets to the provider as possible). Purchasers do have access to alternative providers that are more even-handed in their treatment of savers.

The Consultation Paper’s response period has now closed but the draft regulations are still subject to the DWP’s review and subsequent parliamentary process. Here’s hoping that more is done to eliminate AMDs ahead of the regulations taking force in April 2015. Even if the proposals in the Consultation Paper do not change, what’s stopping providers from exercising enlightened self-interest and treating savers’ equitably by eliminating AMDs (in all cases)?

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Disclosing costs – we are almost there!


The Financial Services Consumer Panel have issued a damning condemnation on the £5tr British Funds Industry for failing to tell people what they are paying for and how much they are paying when they invest their money in British Funds.

You can read its discussion paper here.

If you’ve been reading recent blogs, you will remember that I had been asked to speak with the IMA on this (by the IMA). That meeting was pulled the day after I published my frustration with them and the day before we were due to meet.

In my blog this morning I talked about the need for DC trustees to get to the bottom of what their members are paying on their funds. One senior independent trustee was complaining that trustees were being asked to succeed where the NAPF and IMA have failed.

It is not enough to complain that we have not succeeded in the past. It is now time to put the failures behind us and press on, as the FSCP are doing and as Cass Business school are doing.

The pressure on the IMA and its members to do the right thing is becoming irresistible. Soon the DWP and FCAs requirements on Trustees and ICGs to publish the cost of the funds they offer to us will become law.

The sad reality is that almost everyone is to some degree in the pocket of the fund managers. Whether through advertising, corporate hospitality, commission or simply the old boy network, we have become afraid of the managers and their money.

Except it isn’t really “their” money, it is our money. And it’s time we were told what they are doing with it!

Then perhaps we will be able to shut up!

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Does Generation X really trust the Internet?



I laugh at my Mum who goes to Shaftesbury library to find out what to do. She’s 84 and you’d have thought she’d have learned how to use an iphone by now.

I mean my 17 year old kid can tell how many minutes he has to wait at the bus-stop.

Moral – he who judges this way is a poor father  and a worse son,


My mother was brought up in a world where you found information in the Radio Times or the newspaper. Even for me digital resources were restricted to directory enquiries and teletext. But these information sources were definitive

Will there be authorities in the future or just a hierarchy of informational sources?

When I want a restaurant in London, I can turn to a number of online resources to give me reviews from professional diners, amateur enthusiasts and the great unwashed (of which I am one) who occasionally remember to rate the experience we had with the booking site we used.

Information is now relative. I phoned a restaurant to make a booking today, they had left the phone un manned- the voicemail wasn’t working- I held for 15 minutes because I didn’t trust the online booking system. When I got through I was scolded for my lack of trust.

I booked up for Broadband with BT. A lady phoned me from India to say I owed another £130 because I hadn’t got the landline connected. I referred the matter to their customer service team in England; I was right, the internet was right and Mumbai was wrong.

We have no authorities , we can take nothing on trust.


What does this mean for financial advice? If all information is relative, doesn’t this mean advice is relative too?

We take nothing on trust?

No – there are trusted sources- there are people on our side – Martin Lewis – Paul Lewis -Ros Altmann.

And then there are the computer algorithms. Here’s Ian Brewer who glories in the title

Award Winning Remote Financial Advice Distribution Specialist and Innovator in changing Advice Distribution

I think there’s a real deep truth here, we are more candid with the machine, even when we know there is someone or something on the other side of the screen analysing what we input”

You can’t fiddle an algorithm?

Maybe my Mum’s right, maybe Ian’s wrong, maybe we should trust nobody or nothing.

But will we ever get things done like that?

My Dad sits at home and complains that nothing is like what it used to be. I worry that many people in their 80s will have his problem.

There’s just nothing left for my Dad to rely on.

Somehow we’ve got to get trust back into the system- the advisory system. We need our websites  to be as authorative as or

Maybe the first wave of robo advisers – Nutmeg and the like- are the advanced guard. They may have arrived too late for my parents but for my 17 year old son they’re the obvious means to transact.

It’s people like me who I worry about.

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There’s no silver bullet, to beat the DC blues!

silver bullet

There is no silver bullet

The way that investment consultants talk about DC, you’d still think there is some silver bullet waiting to be loaded into the gun, to shoot away the DC blues.

The DC blues cannot be cured by a silver bullet from the investment community, they will be cured over time through engaging companies and employees in the need to contribute realistic amounts to meet retirement needs, by education on what individual responsibilities are to their retirement saving and empowerment of people to take decisions in their own best interest,

I do not exclude investments from the process, but I want to put some perspective on the subject. The percentage of today’s retirees  who can articulate the investment strategy they have adopted can be numbered on one hand – or one digit of the hand!

We can only engage-educate and empower

I know those who devise investment strategies for DC defaults and construct the universe of funds into which members can choose to invest are conscientious and well meaning, but for most people , your theories, your strategies and the implementation of those strategies are the least of their worries.

Here are three things we can do to help people invest the contributions they make to their retirement funds.

1. Engage; there are only three things people have to get to grips with- risk, reward and the third dimension time. When people understand they can take more risk and get more reward , over time, they can see volatility as their friend, understand the equity risk premium and get pounds cost averaging. It is perfectly possible to engage people with these simple ideas and get them to understand that investment dynamics should change over time- their time!

2. Educate; once people get the fact that investment strategies are time dependent,then educating them on “what makes for good” is a whole lot easier. We know that there are some immediate wins, keeping costs down and only spending money on transactions when there is a good reason to do so is an immediate win. Warren Buffet says that his ideal investment is one he can hold forever is right. There is much we can educate people about, but keeping it simple is what’s wanted and what’s needed

3. Empower; most people do not want to make decisions on investments but they want the power to reject rubbish if rubbish comes their way. Whether you are an expert fiduciary or a total novice, you should feel you have the right to ask dumb questions and if necessary say no. It is when people are powerless, as they felt they were when buying an annuity, that things go really wrong. Empowerment for some can be no more than this negative capability –  “I could have said no if I’d wanted to..”

If we simply stuck to these basics, we would have done much to restore people’s confidence in what is going on.


DC blues

A man who knew the DC blues



Engaging – educating and empowering the fiduciaries.

There’s a second level of sophistication which investment consultants need to work at.

This is a level that addresses the needs of IGCs and Trustees to state the principles by which they invest and properly explain why they have taken the investment decisions they have on behalf of policyholders and members.

At this level we can simplify things a lot. There are only three big decisions that need to be made

  1. The structure of the investment administration – do you use the target dated, the conventional lifestyle or a behavioural approach – such as Dimensional employ.
  2. The common investment destination- are you employing a whole of life strategy or simply investing for part of the life journey (accumulation or decumulation). If the latter – what is your strategy pointing at (annuities, drawdown or cash)
  3. The management of the money- who are you delegating the responsibility to manage money to.

Right now, investment consultants are tying themselves up in knots trying to get default strategies worked out that can act as silver bullets, pleasing all of the folk all of the time. Inevitably they are trying to employ their skills learned in the DB classroom so there is plenty of talk of “treage”, glidepaths and the like. There is a misconception that the new pension freedoms will mean a free for all and that the guidance on offer will be enough to make people their own CIOs.

The truth is that unless people know what they want, they cannot make informed decisions on the funds they need. And only a very small number of people will fully engage, get properly educated and empower themselves to make appropriate decisions. Statistics suggest that this is around 10% of the population.

The best we can do is not second guess

The rest of us simply don’t know and want to keep options open. I am currently in a scheme where the default fund is a conventional lifestyle strategy that assumes I will buy an annuity in 7 years time.

I would argue that if a fiduciary made this assumption it was a reckless assumption, and that the investment strategy employed was reckless in its conservatism. I do not need or want an annuity and I suspect that most people (having gone through the engage-educate-empower continuum) would want an annuity either. Annuities provide too much certainty and not enough income for someone with an average life expectancy at 60 (my default retirement age).

The prudent person

We need a new construct – something like the concept of the “prudent person” who is the imaginary figure who has gone through the “engage, educate,empower” continuum and is making an informed decision about his or her current and future circumstances and how to finance them.

The entire DC investment strategy revolves around this prudent person, there are outliers, the 10% who will make their own choices , those so in debt or income poor that it only makes sense for them to cash out their pensions and those who cannot abide any degree of uncertainty and will be insistent investors in annuities.

But for prudent person, the retirement income strategy will be all about meeting the bills and having that bit extra to have happy reclining years.

Meeting the needs of the prudent person

It is not too hard to devise an investment strategy that meets these needs, it is a strategy that provides value for money by only incurring cost where that cost adds value. It’s a strategy that  allows for a regular income, makes sure there is scope to draw on capital from time to time and provides some protection against extreme old age and decrepitude.

People will say that this vision for the prudent person does not offer great freedom – that it circumscribes ambition within a very narrow band of variables and they would be right. The freedom in my vision of the prudent man comes to people who have engaged- got educated and become empowered. Every one of us has that option and many of us will take it.

Empowerment is about the right to say no without having to.

Empowerment- the end product- is the power to say “no”, to reject the concept of the prudent person and choosing to be an extraordinary person. But you ask 100 people if they want to be extraordinary and most will say “no” and of the remainder, only a handful really mean it. Most of us, when the chips are down, want to be the prudent person and we should not blame ourselves for that!


Common sense for the “solitary man”

In summary, what is needed from the investment community is some common sense- a sense of what it is to be a common person – a prudent person – what Neil Diamond called – “a solitary man”.


Knowing what is common- prudent- ordinary, means we can plan around that and while we need to give options for the extraordinary, we should invest our efforts in engaging , educating and empowering the outliers to take decisions for themselves, not trying to second guess their extaordinariness!

If you want to rid yourself of the DC blues don’t

bury head here

just listen to this!





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