I smell a (pensions) rat – what can I do?


rat

An advert appeared yesterday on the Pension Play Pen Linked In Group. I am deeply suspicious. If you’re in our Group, you can see it here

The organisation – Save My Pension is offering a “route to market” with the message from its Director Danny Smith 

I have meeting availability in London Central on Tues/Weds next week to discuss our pension route to market, process, systems and commercials. Availability is tight so please let me know as soon as possible

Nothing wrong with this… if I had the first clue about what was on offer, I might be interested. I checked out Save my Pension (a trading style of HCL consulting). They are lead generators.

This is what their company page told me..

We provide a free service to help you take control of your retirement provision.

We can;

Help you trace your preserved (also widely known as frozen) pension and, once located, provide you with a free review of its current status – Amount, charges being applied and the performance of your fund.

Whether you use our tracing service or already have all your information about your preserved pension we can provide you with details of an alternative occupational pension scheme you can compare and (should you decide) transfer your preserved pension(s) to.

Want advice on what to do with your pension? We can put you in touch with an independent financial adviser who will provide you with the advice you need.

So what is this alternative pension scheme? It is an occupational pension scheme called Audax. Audax has a sponsoring employer – a shell company called Refined By Ltd, situated close to Save my Pension’s Preston offices in Lancaster.

Because Refined By Ltd. sponsors the occupational scheme it is regulated

The Scheme is a Registered Scheme with HMRC in accordance with Part IV of the Finance Act 2004 under PSTR number 00817080RY.

The Scheme is registered with the Pensions Regulator in accordance with the Occupational pension Schemes (Scheme Administration) Regulations 1996 and Pensions Act 2004 under PSR number 12010036.

It has legitimacy though there is nothing substantial about the use of the word occupational.

The trustees of Audax are Audax Management, the investment managers a firm called Gallium (based in Sevenoaks) .

On closer inspection Gallium are involved in establishing UCIS investment structures and are involved in a wide range of activities – listed on their website. They are not investing the money, they are providing the structure for Audax Management to invest the money.

There is nothing about Save My Pension,Refined By, Audax or Gallium that I can point to as illegal. They have multiple registrations with the FCA and Gallium employs respected advisors and auditors.

However, I am  far from satisfied with my due diligence;

Audax Management Ltd has been in existence for 8 months (company no 09197665). It is one of 2700 companies at its registered office- there are no details about its Directors or officers and it is the trustee of the pension.

The administration of the pension is through Gallium though the transfers seem to be operating through an IFA in East Sussex called Absolute Financial Management (trading as Blueprint for the purpose of administrating transfers). Blueprint shows as its Director – Mark Eaton – Mark is also a Director of Absolute Financial Management, BluePrint is registered at the same address as Audax.

There are many ways to provide yourself with financial security in retirement. I strongly suggest you stick to the trodden paths and think very hard about using services such as those outlined above.

Transparency is key to this and I am very concerned that people should know what they are doing. The alternative investment strategy suggested on the Audax website do not encourage me.

The Trustee has identified legal financing schemes as a potential alternative investment that satisfies the investment principles.

The UK legal system is an established market place from which many other legal systems around the world take their lead.  The demand for funding in legal markets is growing and is unaffected by the core financial markets.

Nor am I greatly encouraged by the statements about the core strategy

The Scheme will invest in Multi-Manager investment schemes and products that are provided by, and managed by, leading investment houses and banks

Who the people are in Audax Management is not clear, they have no footprint on the web.

As to what all this costs the consumer, we are left only with the most general statement of intent, that it intends to achieve an investment return of 5% after fees and charges.

There are risk warnings, don’t expect to see a transfer value equivalent to what you paid in if you change your mind.

You may transfer out of the Scheme at any time, but please note you should consider investment in the Scheme as a long term investment. The Trustee would prefer Members to remain invested in the Scheme for a minimum of five years to allow the Investment Manager to build a diversified investment portfolio for all Members.

I hope this is not the route to market chosen by any of the members of our Pension Play Pen.

I don’t think Audax or Gallium are offering anything that gives me the remotest confidence. I can see Gallium use UCIS as an investment structure and know these have been disastrous for many private investors because of the lack of security offered by this vehicle. I can find out nothing about who Audax are – and what credentials their managers have. All that you have is a statement of investment principles that looks like it has been cut and pasted from any one of a thousand templates on the web,

But what can be done? I will be sending the results of my due diligence to the Pension Regulator, but I cannot see either Audax or Gallium have broken any rules. I could report these organisations as a danger to the public but I might be sued for defamation.

Operating in the same space with Save my Pension are a host of similar organisations, marketing services that exist in the demi-monde of financial services – Smart Wealth, Mayday Pensions, FirstChoice Pensions, Castle Pension Solutions, Total Pension Review, Easy Review, Pro Money Ltd (Wise Review), Pension Protect Ltd to name but a few.

All offer free reviews, all offer alternative investment strategies and all seem to be fronted by people with a background in lead generation or debt management.

We know where the problem is, we are assailed by offers to work with these people, a strong and determined Regulator must get to grips with these firms and weed out the bad apples.

But we can do little more than hope that such action will be taken. Till then we will have these annoying flies buzzing around our heads. But I fear some of these flies carry viruses which will eat into the savings of those we want to help and in so doing , destroy confidence in the pension system we are trying to rebuild.

I am meeting with one of the Executive Directors of the Pension Regulator at the end of the week and hope that I can discuss this with him.

I smell a rat, and that’s the best that I can do.

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IFAs and actuaries – as easy as “A Cap B”.


IFA

a rigorous analyst?

actuary

Emotional intelligence?

For half of the 30 years I’ve been advising people, I was paid by private individuals to help them take difficult financial decisions.

For the other half, I’ve been paid by employers to help their staff take difficult decisions.

This symmetry was mirrored in my working day yesterday. I spent the morning Chairing and delivering the Keynote address to a conference of IFAs in Walsall. I spent the afternoon preparing and delivering the final address to an actuarial conference in London.

Culturally, intellectually and geographically, the two group are miles apart, but in talking with these two groups have more to learn from each other than could be explained by me either from a podium or on this blog.

My message to the actuaries was that they needed to get back in touch with the people for whom they devised their pension strategies, connect with the way people think outside of Staple Inn (the home of their Institute and Faculty).

My message to the IFAs was that they need to get better organised and present themselves in a more ordered way to allow them to practice their work more effectively.

In essence I found myself asking actuaries to understand IFAs and vice versa.

It’s all very well me saying this, I am neither actuary nor IFA –  but I work for a firm that to some extent bridges the divide -we offer guidance in the workplace and I build relationships with IFAs who want to advise the members of the pension schemes we manage.

I don’t know any forum that allows these groups to meet as equals. I suspect that neither group would acknowledge the other as professionally equal but that surely is wrong.

The emotional intelligence among IFAs is matched by the analytical intelligence of actuaries and the point of my speech (and those of Dr Ian Clacher and Marcus Hurd who spoke before me at the IfOA) was that we cannot provide solutions to ordinary people without engaging with and learning about their needs.

The analytical rigour with which actuaries use data – is too little evident among IFAs. Chairing eight sessions yesterday morning over 5 hours, I could see information going in one ear and coming out of mouths at the coffee and lunch breaks “unprocessed”.

Some kind of synthesis which brings the skill-sets of each group together would be good. But I don’t see this happening too soon.

There is a lingering resentment of actuaries among advisers that goes back to the days of the pension mis-selling crisis and perhaps to the seventies (where advisers were told what to do by the actuaries of life companies).

And too many actuaries hold in IFAs in contempt for their lack of intellectual rigour and for “shady business practices” – a phrase used in my presence yesterday.

Picking up on this “shady business practice” in question, it referred to a criticism of IFAs that they create products that require the ongoing attention of IFAs to work – specifically Flex-Access Drawdown and FLUMPS. As I pointed out to those throwing rocks, this is precisely what actuaries have done with Liability Driven Investment.

In a world where everything from Robo-Advice to Self-Service Actuarial valuations can be accessed on the web, the value of individuals – those in the rooms in Walsall and Holborn-is being called into question. Whether the advice comes from actuary or adviser, it is coming from a human being.

Staring out at the serried ranks of conference goers in the two venues, I realised this was what brought them together- both in their individual groups and in a common purpose. We are all struggling to be relevant , to add value, to compete with the machines we create and operate.

A couple of years ago, I tried to advertise First Actuarial , using an advertisement that I thought might bridge the gap.

FIRSTACTUARIAL_prospect

It didn’t go down well with my colleagues though it was extremely well received by financial advisers who urged me to do more in this vein.

There is a common ground between actuaries and advisers but both are going to have to get out of their current comfort zones to explore it.

Which is why I’ll look back on yesterday as defining what I’ve been about for 30+ years. Helping human beings take decisions needs human beings. People need guidance and advice and ultimately comes from a combination of the intellectual and emotional skills I saw yesterday.

A                             B

Whales and Fish

This charming Venn Diagram shows that whales and fish, co-exist and share things – most particularly water. I would argue that actuaries and IFAs share things – most particularly the desire to help people make good financial decisions.

I’d like to see a little more recognition of A cap B.

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A tax on pensions, no one saw coming.


grim reaper3

The single state pension , coming to a pensioner near you , from April 2016 is supposed to be simple. It will operate under the same rules for everyone. But that doesn’t mean that everyone will get the same pension (as this tale tells), and sadly it doesn’t mean that everyone will be winners

One group that look like losing out are the “lucky” people who were in final salary schemes that were and still are contracted out of the State Second Pension (formerly called SERPS).

When Barbara Castle introduced SERPS in 1978, employers who take the trouble to fund and manage defined benefit schemes could pay reduced rate national insurance for those in the scheme, if the scheme chose to contract out and Guarantee a Minimum Pension for the workers.

After 1988, some of the cost of index-linking was passed back to the employer, although the Government was still there to pay the top-up if and when inflation exceeded 3pc.

But, and this is the important bit, the schemes only had to be funded to guarantee a flat rate pension, they did not need to offer top-up increases on the Guaranteed pension because the State would pay these (and pick up the bill).

What’s the problem?

Under the arrangements that take effect from April 2016, these people won’t get the inflation-linking benefit any more. The Government won’t pick up the bill, and if you want your increases back, you’ll have to do it yourself, either from a drawdown arrangement or buying extra state pension (if you are allowed).

In our low-to-zero inflation age, this perk might not seem valuable. But when it comes to pensions, payable over a period of decades, it really is precious.

If a 65-year-old wants to buy an annual income for life of £10,000, without inflation proofing, it will cost about £200,000. If he wants to buy an income for life starting at £10,000 and then rising in line with inflation of 3pc, it will cost £300,000. That’s the value of index-linking.

At the moment, for those who are retired, the Government’s inflation-related contribution to their contracted-out pension is effectively made along with their basic state pension. For these people, nothing will change under the new arrangements.

But when the Government started the move to a single-tier state pension, no provision was made for making inflation-related payments to those reaching state pension age after April 2016.

Are you a loser?

Very probably yes, but possibly no – depending on the extent to which your company has been paying pension increases on your Guaranteed Minimum Pension. I know of one large scheme that thinks it has been paying these increases by mistake!

I work for a firm of actuaries, we spend a lot of our time exploring just what a scheme is or isn’t paying by way of Guaranteed Minimum Pensions. This exciting game is known as GMP reconciliation and it is played on computers by geeks.

The truth is that there has been so much to-ing and fro-ing between the DHSS/DSS/DWP and the occupational pension schemes, that many schemes are unclear whether they’re paying GMP increases and if so, how much.

The conversations are conducted in earnest nowadays as the end of contracting-out means that matters have to be drawn to a close. Long words such as “crystallisation and cessation” are bandied around, to use a more vulgar phrase “the shit is about to hit the fan”.

With the end of contracting out, the cashflow advantage to companies paying reduced rate national insurance comes to an end. This will make carrying on promising to pay the old benefit promises will become even more expensive to companies and to members.

Either contributions will go up, or the scheme will have to move to a different pension benefit structure- typically a defined contribution structure – at least for future pension rights.

The bottom line is that the end of contracting out is bad news for occupational pension schemes and bad news for most people who have been contracted out via a Guaranteed Minimum Pension.

How big a loser?

How much will they (we)  lose? That will depend on the size of their contracted-out pension, the rate of inflation and how long they live. But with inflation factored in at 2pc‑3pc, actuaries estimate the figure at up to £20,000 for men and slightly more for women, because they live longer.

Is this a cover up?

Well put it this way, if there’s a shred of comfort for Steve Webb, it’s that he’s not going to have to deal with this mess! The DWP have been, at best, economical with the truth, but since Ruth Gilbert broke this story on this blog , following great investigative work by Richard Dyson in the Daily Telegraph, I’ve been having a few conversations which suggest that the DWP have been at best “economical with the truth”.

In a former guise, this would have been food and drink for Ros Altmann, who’d have had a campaign running on this by now. I am absolutely sure that Altmann knows exactly what is going on and probably has the numbers.

It will be an early test for her, how she manages the communication of this little glitch in what has so far been a very successful project. Was this cut pre-meditated or accidental, is it a stealth tax or a bungle? That’s for Ros to assess and communicate.

What is for sure is that the Treasury will look askance at any special pleas for compensation to those losing out from the glitch. What is interesting to me is to understand to what extent state members of state funded schemes (including the civil service schemes) will be protected.

What about the public sector?

To some extent it may be better that “we’re all in it together” , as those in corporate DB schemes may find the cuts unwelcome but not unfair. If there is a sniff of ring-fencing the public sector increases, that may be another thing.

But the bigger issue is that if the cuts impact public sector DB pensions to the extent they do private sector schemes, then we can expect an outcry from unions like UNITE and UNISON on behalf of the millions of workers who have here-to-now had just about everything indexed to the hilt!

 

 

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Is auto-enrolment any more than a tax?


VFM

Speaking in Birmingham last week, former pension minister Steve Webb, commented on how hard it will be to raise the bar on employer auto-enrolment contributions from the current 1% of band earnings to 3%

To raise the bar higher still will challenge the ethos of a free-market Government whose one-in-two-out rule means that any new regulation impacting business, would need two existing rules be lost.

But, as left wing politicians, union leaders and most responsible pension experts are as one in telling us, the current minimum contributions are no more than a start. Were they to be considered adequate, they would be mis-selling the prospect of retirement income security.

There are many ways to collect money from working people and pay that money in later life. The most obvious is national insurance, which at 12% of the band of earnings, dwarfs the impact of auto-enrolment contributions. Just where is all that money going? The answer is in sustaining the welfare system we have in place and the “fund” that sits behind the pension promises we are making to current and future pensions.

During the election , there was much talk of curbing the welfare budget but unanimity that the “triple lock” on the state pension should be maintained indefinitely. This means granting everyone at least 2.5% growth on their pension each year. At the time of writing that is a “real” increase of 2.5% (inflation being zero).

But there is simply not enough being put aside to pay for these generous real increases. According to the Government Actuary’s Quinquennial Review of the National Insurance Fund’s finances, the state pension will move into a theoretical deficit from 2020.

Trevor Llanwarne , the recently retired  Government Actuary, saw the remedy for this deficit as a reduction in future pensions once auto-enrolled workplace pensions were delivering sufficient security to allow this to happen. At a macro level, at least as Llanwarne was concerned, auto-enrolment was in part a bale out for the national insurance fund and might reasonably be considered a tax.


Green shoots of financial empowerment?

But that is only to tell half the story. People have the choice to opt-out of auto-enrolment – something they cannot do with tax and national insurance. The reason for the opt-out is to avoid compulsory contributions which – it is hoped – will lead to an engagement with the savings process, a higher level of financial education and ultimately empowerment among non-savers, to take responsibility for their own finances.

In as much as auto-enrolment has delivered the country 5 million new such savers, it has been a great success. Whether we can hold on to all 5 million as their contributions increase from 1% to 4% of band earnings has yet to be tested, to push personal contributions (by default) beyond 4% is something that no-one yet has formally proposed.

Yet it seems inevitable that that will have to happen – unless that is that Britain’s economic prosperity increases at such a rate that we (like the Norwegians) have money coming out of our ears. This seems unlikely.


Or a tax on immediate consumption?

Assuming that there is no great increase in productivity that allows for wages and pension contributions to grow, it seems that contribution rates can only increase at the expense of real wage growth. There is little evidence that the increased pension contributions that have happened since the start of the auto-enrolment cycle have contributed to the decline in real wages since 2008.

David Robbins suggests that larger employers have offset the increased cost of AE against the cashflow savings of having to pay pensioners CPI rather than RPI increases.

This kind of thinking works well at an abstract level, but I’m not sure that most CFO’s think like this or budget at such a theoretical level

The Government’s latest impact assessment on employers is (according to DWP’s Charlotte Clark) is likely to show that the cost of auto-enrolment has been in line with original estimates. As it’s generally accepted that the costs of implementing auto-enrolment have been higher than those in the original assessment and the level of opt-outs lower than had been estimated, it is hard to understand how this will be. Again David Robbins offers a possible explanation.

The rate that employer’s costs are absorbed by decreases in real wages could be accelerated making the overall cost of auto-enrolment a zero sum game – a pound into the pension is a pound off the wage bill.

Again I remain unconvinced by such theoretical approach.

Such an approach could only point to auto-enrolment being a tax on immediate consumption, something practically the same as compulsion.In Australia, compulsion was introduced in just this way. Instead of wage increases, people had pension increases. This works well enough when there is wage inflation, since 2008 we have had precious little wage inflation.


Headwinds for a new Pension Minister

Ros Altmann, as any new minister should, is approaching the job with circumspection. If you watch the video on the link, you will see how central the success of auto-enrolled workplace pensions is as her measure of  success.

But Ros Altmann faces a lot of headwinds if she is to get people saving to adequate levels using workplace pensions. To recap;-

  1. We have yet to see the bulk of the contribution increases for the first 5 million “in”
  2. The second 5 million are coming from employers for whom pension saving is new – this will be tougher
  3. There is no immediate prospect for wage growth, contributions will impact take home and will not be absorbed by pay increases.
  4. Any attempt to legislate for higher contribution rates will have to get past the one in two out rule.
  5. All this is happening at a time when the state pension is being radically increased under the triple-lock, potentially putting even greater strain on the national insurance fund.

The big challenge of the next five years

As I wrote yesterday, the big pension challenge is not with the 50,000 workplace pensions that have been set up under auto-enrolment but with the 1,200,000 that haven’t. Convincing the employers of the 5m of us who have no access to a workplace pension or a contribution from our bosses, is a huge task. There are hopeful signs.

Resignation is better than insurrection! The mood at Accountex 2015 was different than in previous years, accountants and their payroll departments are accepting that AE will happen and are getting ready

But accountants see auto-enrolment as an unwelcome duty on employment which they will have to implement and manage as the employer’s agents. I do not get any sense yet that auto-enrolment is being embraced for any social benefits or as a benefit to staff welfare.


Turning a “have to” to a “want to”.

Without any obvious economic panacea, the next Government is going to have to persuade employers that being “in” is good news. The emphasis has to shift from “have to” to “want to”.

Employers need mechanisms in place that make the administration of auto-enrolment easy, efficient and without risk.

The VAT – a 20% “tax on a tax” that is currently being charged on AE services, should be waived. AE services should be VAT exempt.

Those employers that embrace auto-enrolment should be praised (as those that don’t should be fined). A Government award for “going above and beyond” as envisaged by the Pension Quality Mark is a good idea.

Above all, the Government must stress the workplace pension itself as a “good thing”, the choice of workplace pension as “important” and their proper management (via IGCs and trustees) a matter of primary interest for both the Pension Regulator and the FCA.

Finally, we must set our hearts and minds in restoring confidence in the savings process by ensuring scrupulous standards in the delivery of everything that we, on the supply side, do – to make this happen.

VFM2

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Do you have to be demented to buy an annuity?


grim reaper

This tweet is not the first time I’ve heard this argument

I heard it several times at a meeting of Financial Advisers I chaired in Bristol this week. The implication is that the fully cognitive can have freedom but the door to freedom closes as your mental health disintegrates.

The hammer blows come thick and fast in later years, you lose your driving licence, you lose your home, you move to part three accommodation and then to full nursing care. And at some point, the plans you put in place maybe twenty or thirty years before and which you have managed carefully ever since are exchanged for the product you have been avoiding.

You can hear the jokes between old folk

“you know you’re on the way out when they sell you an annuity”

grim reaper3

The first assumption is that people with their cognitive capacity diminishing is going to consent to be assessed for the life left in them and that their families are going to be happy to sign away inheritable rights. I see the process as potentially traumatic and while it sounds good in a conference of professional, I doubt that many later life annuities will go through on the nod.

And there is a second assumption within the tweet (above), it’s the assumption that those in mental full health in later years, want the responsibility of managing their retirement savings through a drawdown product. That they want to be worrying about the financial impact of living too long, of pounds cost ravaging, of inflation and of marginal taxation decisions.

There is little evidence that anyone, other than those who advise on these things, has any desire for these freedoms. Indeed these freedoms are not freedoms are what William Blake called

“The mind-forged manacles”

For the financially illiterate, drawdown can be a life sentence of worry. The decision to purchase an annuity becomes an admission of incompetence or worse dementia. What are we doing to the dignity of old age?

grim reaper 4

To me “pension freedom” means the freedom not to worry. Among the hundred or so advisers I listened to on Tuesday, I did not hear any talk of this. All the talk was of the binary decision – drawdown v annuity.

Of course- to advisers – drawdown is something that needs an adviser.

Talk of unadvised drawdown was considered grossly irresponsible , as if clients when they enter retirement should have their car keys taken from and the keys to their front door.

For some advisers, drawdown seems to be the financial equivalent of a wheelchair, which the adviser pushes.

The annuity becomes a terminal bonus (for the adviser), there’s no more need for the wheel-chair, the patient is confined to care and the adviser gets a one off commission for the sale of the insurance policy.

I am  nervous about pension freedoms for myself and for my generation.  Because I know how hard it is  for my parents and their generation, for whom financial decision making is relatively easy.

Many in their eighties and nineties have never completed a tax return, their budgeting is based on amounts paid into their account from insurance companies, pension scheme trustees and the state. There is no need to manage the income, managing the spending is hard enough.

For my generation, it will not be the reassurance of an insurance company or pension fund payment hitting my account, but the insecurity of a balance statement telling me of the risks I am running drawing money at my current rate, of continuing with my current investment strategy, of the inheritance tax implications of my every decision.

I’m sorry advisers, but this is not how I want to live my reclining years.

I don’t want to be dreading the arrival of my drawdown statement, I don’t want to log on fearing bad news, every time I hear the markets are down. I want to know that I can look after my family and enjoy the freedom of not having to worry about all these things.

Which does not mean I want to buy an annuity- thank you very much!

If annuities are for the demented, I’m not going to buy one of them any time soon, not so long as I keep fighting for my cognitive faculties – don’t take my keys away from me!

Why should old folks be sold dud insurance policies – just because they’re screwing up on drawdown? What kind of deal is that?


Target pensions

target pensions

This is why we need a new kind of product that gives me the freedom to enjoy my retirement without my having to throw away the keys or worry about stock markets. What I want is what my parents had, a pension paid out against a target which in good years paid a little more and in bad years paid a little less, but generally rewarded them properly for their hard work and financial prudence over their careers.

I speak with a lot of older people at the moment and ask them about risk-sharing. They entirely get the fact that there are good and bad years for financial markets and when times are tough, they will get less and will spend less. They understand the reverse is true.

Put to my parent’s generation, the idea of a risk-sharing pension which could down a little or up a little but is paid every month, is exactly what they want. Compared to an annuity or drawdown it is precisely what they most people would go for.

Which is why it is so important that we continue to legislate for collective schemes that allow people to be paid these target pensions. I am totally uninterested in CDC as a means of accumulating cash in work, I am now totally focussed on getting a non-advised alternative to drawdown and annuities for the mass market of people who do not want to worry about drawdown and the grim reaper’s regular call – with an annuity cheque.

grim reaper 2

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The tone from the top


GARRETT-COX

Take a close look at the photo above, it’s taken from a Morningstar conference yesterday.

The gentleman on the left is asking the question, the women on the right are listening and the gents on the right – well – they’re just staring each other out.

Why I like working with women and for women can be summed up in this photo- to use a rather out of fashion phrase, it’s about “emotional intelligence”.

The woman in black is Katherine Garrett-Cox who won the Veuve Clicquot Business person of the year this week. the woman in the blue is Helen Morrissey of Newton, I won’t embarrass the gents.

GarrettCox.joeg

Katherine Garrett-Cox

Garrett-Cox was on the radio this morning, waking me up to money. She talked about the tone at the top of British organisations, it is clearly predominately a male tone though that’s changing fast in some industries (fund management seems to be one of them).

The tone in my household is set by my boss, Stella, who is a successful business woman. The career path ahead of her is clearly laid out. She will very soon hit the glass ceiling and will find solace in a plethora of non-executive directors where she will fill a large organisation’s diversity target but be kept from the top jobs – CEO, CFO ,COO etc.

It is very important that the next generation of brilliant women do not get shunted into sidings. They need to be on the mainline. I’m pleased and proud to point out that the pensions mainline sees women at every station!


Yesterday I wrote about the new female-led pension hierarchy. Ros Altmann, Michelle Crachnell, Lesley Titcomb, Charlotte Clark – to whom can be added Joanne Segars of the NAPF and the all-female executive of MAS headed by Caroline Rookes. They set a tone from the top that is likely to be quite different from what we have seen in my generation.

Gender Equality was being held back , according to  Garrett-Cox by “dinosaurs” in the industry. Clearly the dinosaurs that roamed planet pension policy, are either in hibernation of extinct. It is quite nice to work in such a female dominated environment.

michelle cracknell

Michelle Cracknell – TPAS and Pension Wise

SEGARS_manchester_2-Thumb

Joanne Segars -NAPF

catherine rookes

Caroline Rookes – Money Advice Service

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Ros Altmann – Pensions Minister

charlotte clark

Charlotte Clark – DWP

lesley titcomb

Lesley Ticomb – the Pension Regulator

The tone from the top is changing. I am happy as a 53 year old public school male to stand aside and see this happen. Whether the female hegemony continues will depend on the support for this new political management team  not just from us men, but from fellow women.

When Katherine Garrett-Cox was asked on FiveLive this morning what defined the difference in tone with a female at the top, she suggested that women asked the hard questions that men didn’t.

Like why we don’t have more women like those mentioned in this article -as Executive Directors?

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We got scared


voting slip When the pencil was in my hand and I stared at those boxes, I must admit that I was scared. Not that it stopped me from voting for the party that I believed in, but because of the responsibility of participating in a political process so much bigger than me. I have had the same feeling since I was a teenager. We all get scared, but it’s the job of a conservative Government to keep us that way. Big bro Dave is the headboy and though he had a few days where he was a little more animated than head boys usually get, he and his house captains have done their job of convincing us that the knowns are better than the unknowns and the unknowns are pretty scary. And Milliband and Clegg didn’t do enough to convince us we were as safe with them, especially in Scotland, where the SNP – in practice a fiscally centrist party dressed up as “tax and spend”, got it right. They were not only safe, they had a vision. Farage had a vision, which is why he got a lot of people voting for him, it was a genuinely working class vision which appealed to a lot of chippy achievers, like my missus. So when I had that pencil in my hand, there was a little devil behind me ear, prodding me.

“Come on Henry, you’re a public schoolboy, you’ve got property , you earn a lot, come with me , uncle Dave, I’ll look after you, I’ll preserve your privilege”.

For anyone who is or aspires to be a higher rate tax payer the conservatives are the party of self-interest. They are not the party of enlightened self-interest, they are the party of the status quo (as their names suggest). Cameron’s incarnation of the conservative party has nothing to do with the radical politics of Thatcherism (which are represented by Farage). Though Cameron adopted Thatcherite policies- in particular the right to buy, Cameron’s appeal is aspirational.

“With a bit of luck and with our policies, your children can be educated as you like, live in the house that you like and afford private healthcare – we’ll take care of the rest”.

So the hard- working families with joint incomes above £50k do nicely, while Uncle Dave plugs his deficit with cuts (yet to be announced) in welfare. Those cuts won’t hurt, because you won’t know they’ve happened till too late, cutting your capacity to pay for yourself in later life, allowing local councils to be blamed for sky-high council tax that buys nothing (but to plug the holes in local government pensions), persisting with a state pension policy that is deceitful (the NI fund is likely to be bust in 2020) . This is the Tory way of making us comfortable. I suppose I should be happy. But I’m not. I’m really sad that the politicians that were addressing the future are politicians no more- Steve Webb and Gregg McClymont. If life was fair, they would be in the Lords informing whatever wet-nosed Tory we get to run pension policy on what is and isn’t going on.


Five years ago , I spent the days after the election watching in wonder as the doors opened for Steve Webb. The narrow loss of seat by Nigel Waterson, the flirtation with Labour , the coalition and finally the announcement that Webb would do the job.

This time around will be very different. Pension people will need to start afresh with  David Gawke . With Willets and Hoban no more, there is a dearth of experience on pensions within the 332 Tory MPs but at least In Gawke we have a political heavyweight with a track record of getting the better of offshore tax hooligans.

The paragraph above was written in the brief period when the FT had advised David Gawke was our new pension minister- I preserve it for for posterity

A few hours after updating the blog with the news on Gawke   I am even more gob-smacked as Ros Altmann flounces out of the consumer champion role straight in as Pension Minister. Looks like someone lined up for that job didn’t quite hold his seat.


I can’t say I’m happy to lose Steve, but Ros has been a great friend to our Pension Playpen and I’m pleased for her and pensions. She’s gong to have to deal with a few loose ends, but there is sufficient momentum in auto-enrolment for that project to continue. With her there is future for collective DC but I suspect that the carnage that will be visited upon us, when some of the craziness arising from pension freedoms unwinds , will have no immediate end.


There is a price for being fearful, fear comes at the expense of progress. voting slip

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Sturgeon will treat the commons as her House of Lords


sturrock

Well I’m out of here, off to Spain for a few days to watch cars. I’m running away from the grim reality of a Tory party with untrammelled powers, with a department of pensions irresponsibility and with some Treasury minister parachuted in to manage the welfare of our pension system.

And amazingly I not only have a Jock running my football team (see above) , I will have the sweaties acting as my second line of defence against Tory imbecility.

5 weeks ago, I was in Scotland and met a lot os Scottish people who had it in mind to give us a bloody nose for Culloden, the clearances and (for those with long memories) Bannockburn too. I wrote about a chill wind from the north that would keep us honest and it now looks like 56 or so SNP MPs will be sitting in the house of commons.

My mind was set by a conversation with a learned man in the library of Innerperfray. He reminded me that the Scots are a most enlightened nation with historically high literacy rates resulting from an inclusionist policy to learning dating back to John Knox.

Compare that to the intellectual constipation that has stifled the debate down south and you, like me might welcome some fresh Scottish blood in Westminster. We could not a lot worse to listen.

Not that Westminster is the main event for the Scottish Nationalists.

For those Scottish MPs, Westiminster is about as relevant as the House of Lords. It will become, I predict a place of moderation where the SNP will be able to cause considerable mischief. They will be our Lords, either the lords of misrule or or fair government.

They will be directed by a woman, the only woman who will have political power in Britain, but that woman will not be in Westminster, she will sit in the Scottish Parliament in Edinburgh.

labour in a kilt

Amazingly, she will be able to influence the British debate while directing the affairs of Scotland.

For all the triumphalism of the Conservatives, they have engineered this. Whether by deliberate action or by happenstance, they have wiped out the Labour party not just in Scotland , but in Britain, as a party capable of power. In the process they have lost us good politicians like my friend Gregg McClymont.

The ruthless pursuit of power that has led them to ditch principle based policies for short-term vote winners leaves the Conservatives with the opportunity to savage welfare and implement the politics of the Daily Mail.

I am a Liberal, and I remember 1970 when my party got only 6 seats, I was 8 years old then. I have seen good times for the Liberals since then, moments when in alliance with the SDP when I was asked to go away and prepare for Government and moments, such as the last five years, when the Liberals were in Government.

I am very sad for the liberals and particularly for Steve Webb, the nation has not repaid the Liberals for the five years of solidity they brought to Government, they cannot imagine what the alternative would have been. We who are in pensions, know the tangible benefit of having Liberal policy guiding us forward and for Steve Webb’s legacy we should be grateful.

But to return to the Scots, I have hope. In practice, as the IFS have demonstrated through numbers, they are not the tax and spend party they have been made out to be. Their economic policies are in practice centrist, they spend on education but do not overspend (when has a Scot ever overspent).

With a Labour party that will spent the next five years looking as miserable as Milliband in Doncaster this morning, I have little hope. For the Liberals I have no hope. The only hope we have is for our elected lords from the north. They should have power, I hope and believe they use it wisely.

 

public debt

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Five reasons why pensions need payroll.


payroll compliane

 

I have been involved in pension management for over 30 years, the last 2o years dealing with large employers and the management of their schemes. In the past ten years I have seen a shift from in-house pension management to an outsourced approach, a shift from guaranteed benefits to freedom and choice, a shift from pensions as a perk to pensions for and now I see the transfer of governance from occupational trustees to master trusts and independent governance committees.

Despite all these changes, the pension industry is still dominated by the National Association of Pension Funds and a coterie of pension specialists who operate a closed shop.

So let’s ask just what is the future for pension management and what it means for payroll.

  1. The shift from defined benefit to defined contribution schemes.  With most DB schemes closed to further accrual, DB pensions (other than in the public sector) are a matter for finance. They are of decreasing importance to Reward and their management and governance is typically outsourced to professional trustees and consultants. The role of the traditional pension manager is diminished, their skills are concentrated in a few consultancies that will manage out this problem over the next 30 years.
  2. By contrast , auto-enrolment makes DC pensions part of the reward strategy, if only because the law demands. Much more administratively challenging, workplace pensions are managed by payroll. Their value to reward is in the perception of new and current staff (the employee value proposition). The demise of the DC pension consultant following the abolition of commissions means that these schemes now need to be promoted internally.
  3. There has undoubtedly been a loss of trust in company pensions. From Maxwell, through the Equitable and as a result of mis-selling by advisers people are more wary of their pensions and less trusting of those who promote them. Payroll has the trust of staff and payroll personnel are uniquely qualified to tell it how it is.
  4. The qualities that typify a good pension manager are transferrable to pensions – specifically an attention to detail, an understanding of process, a well organised mind and a capacity to work diligently and iteratively.
  5. Payroll can learn pensions more easily than the other way round.

The practical barriers that have kept pensions a closed shop, are coming down but there remain issues of confidence that enforce the status quo. To the list above can be added five myths surrounding the pension function that when recognised as myths, should spur payroll’s ambition

  1. Pension managers need to understand investments; the capacity to advise on investments is no longer a part of the pension manager’s job. While it is important that pension managers have a basic understanding of investments, the pension manager is seldom if ever called upon to give investment advice (and when the call comes- it can and should be resisted).
  2. Pension managers need to be qualified; while many are qualified (usually through the Pension Management Institute but sometimes through FCA or Actuarial qualifications), many are not. Common sense and integrity are more important than formal qualifications.
  3. Pension managers understand Reward and Finance; many do but the club is open to new members.
  4. Pension management is a graduate career; this is absolutely not the case though graduates have had the confidence to continue this myth for decades
  5. Payroll has a glass ceiling for a reason; however this myth developed, it’s time it was dispelled!

There is a great deal of money in pensions (as payroll people know very well) A good payroll manager can command a salary of £70-80,000 but a good pension manager can demand twice that. There is a glass ceiling for payroll but the lid can and will be lifted.

Auto-enrolment is the trigger for change. It has created opportunities for payroll and changed the way pensions are seen in the workplace. If we are all in, then many of the complexities of pension communication fall away.

The shift from in-house managed defined benefit schemes towards Fiduciary Management, dilutes the role of the traditional pension manager.

The hard part of pensions is the management of the various data-interfaces that link members – pension providers – payroll and HR. Payroll understand data transfer and the processes behind them.

I very much hope than in 20 years time, when I hang up my clogs, I am proved right and that the future of pensions is in payroll’s hands.

 

 

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Pensions, benefits and taxes – the political illusionist’s playthings (ace guest blog from Ruth Gilbert)


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Perception is reality.  The reality is perception will drive voting choices. Voting choices will drive a reality which does not match the perceptions. wordsWe think we’re wise to this, but still we get blind-sided and the surprise is rarely a pleasant one. We’ve only ourselves to blame as it’s not fun spending much time thinking about it.  But today I’ve forced myself. A bit of an eye-popper.

Palm-offs and spin on the £2.5bn welfare budget savings so far

State Pension    the majority of the welfare budget

Just yesterday I spotted a palm-off I didn’t know had hit me. I thought I was quite bright. Oh, well.  It was only then did I realize a seemingly obscure element amongst the recent pension changes has made me about £20,000 worse off. It turns out this is the rough present value of the inflation protections I previously would have had for the protected rights elements of my occupational pensions. Which are fairly modest to start with. Richard Dyson, whose Telegraph article alerted me, points out this will affect millions of us who thought at least we know we are with any final salary benefits we still have left.  Not sure if I should feel better or worse to realise the hit on me comes in a bit under average for women.

I thought I knew where I was with my state pension too. In fact the new flat-rate state pension sounded great. David Cameron described it as more generous than its predecessor.  But pension consultant Malcolm MacLean points out in the FT actually overall it’s neutral initially and then less generous in the long-run. When Mr C won’t care about our votes anymore.  And it’ll be fine for him this election, as a November survey showed 79% of us either believed it would be more generous or didn’t know it wouldn’t.

But at an individual level it’s not as good as we thought in the short term either. In fact many people still seem to be in for a nasty surprise when they learn what they’ll actually be getting.

Of course there was no surprise to learn the goal-posts on age would be moved.  But then it was very surprising how NI contributions records would not be worth what we thought. Pity the poor souls who’d only clocked up 9 years, and now too late. They thought they were going to get a third and now zero. Oh well, they weren’t going to get much anyway…so what difference will that make?

And of the 60% of us who will not be entitled to the full rate when it comes out, how many will have understood how much less they would be getting? Best just not to think about it, eh?

Ending “scrounging” – and lives

Well, there was much less of scrounging as a percentage of the welfare budget than we’ve been led to believe. But the hammer to smash that (percentage) nut, has ended more than scrounging. It has ended the safety net for people who really need it. And in some cases lives.   

The DWP have been asked by MPS (and so far refused) to reveal the detail of the reviews they’ve done of 49 deaths related to benefit claim problems.  But these may be only the tip of the iceberg:

suicides

Correlation doesn’t prove causation, but it’s more than likely not total co-incidence.

Joe Ferns of the Samaritans, commenting on these figures has pointed out that men from deprived areas are 10x more likely to kill themselves than their counterparts elsewhere.

At the more visible end of the scale, it’s easy to see the social cost of welfare “reform” as measured by the GP and social worker sanctioned usage of food-banks:

Food bank

Yes, the number of vouchers really has gone up by over 40 times the 25,900 used in 2008/09.

Palm-offs and spin on the £12bn(?) welfare budget savings to come

While we’re rooting around for where welfare budget savings can be made, seeing as Ian Duncan Smith claims they haven’t worked it out yet, let’s consider where the money goes according to the BBC’s view of the OBR figures:

reality check

So more pensions squeezing by stealth or otherwise looks a candidate. The nature of the pensions changes being an attrition over the long term means the hurt to be seen would be more of a slow reveal, but no less distressing to observe, or worse, experience. And we all think “welfare budget” means “scroungers budget”, so we’ll be happy to hear that’s gone down, in blissful ignorance of the hit on our pensions too.

But the BBC Reality check article looking for where the cuts could land says “The Conservatives have already pledged to protect pensioner benefits. So the party is focusing on £125bn of unprotected welfare spending, most of which goes to people of working age.” (Well, in April 2010 before the last election, David Cameron also famously said, “We have absolutely no plans to raise VAT”. Within a year, it went from 17.5% to 20% (4 Jan 2011). 

However, if pensions are indeed protected, then it’s pretty clear to see the cuts will all fall on, well, the poor, the poorly and their carers. Often all the same thing, so at least that’s efficient.

Oh and the other thing is: can we trust it’s only £12bn of welfare that will be targeted?…..

Just a typo: we meant £21bn

Maybe it’s £21bn they’ll really need to go for from welfare if this bit from the autumn statement (near end) is to believed:

“SAVINGS TO THE WELFARE BILL SINCE 2010 AND PROSPECTS FOR THE NEXT PARLIAMENT

95. Economic developments, particularly in the labour and housing markets, together with implementation difficulties, have meant that the welfare savings originally expected by the Government and the OBR have not materialised in full. Welfare reforms that were originally expected by both the Government and the OBR to yield savings of £19 billion have in fact resulted in only £2.5 billion of savings.

96. The Chancellor has said that the sharp reductions in departmental spending that the OBR assume will occur after 2015-16 can be mitigated by further welfare savings: “the composition of the spending reductions would be different from that set out by the OBR because I would have a higher welfare component.” The IFS have calculated that £21 billion in welfare savings would be needed over the course of the next Parliament to achieve this objective.”

Numbers or people?

The scary thing about all this is how it’s just an arithmetical exercise with no regard to the human cost when it comes to making cuts (more positively framed as “savings”). Only when it’s a bribe are we asked to imagine how lovely it will feel. Even though it’s an illusion.

So let’s not be fooled into feeling how much better off we’ll be from the sleight of hand voter bribes “rewarding” hard-working people and homeowners, because it’s not as much as politicians of any color would have us believe.  Conversely the misery of those at the bottom of pecking order turns out to be much worse than we are encouraged to believe.

Still that’s someone else I don’t know isn’t it?  As long as I keep in good health, can find a job and no-one tricks me out of my pension. 

About the Author

Ruth Gilbert is an insurance proposition contractor in life and pensions. Ruth has more than 25 years’ insurance experience, including marketing, proposition design and technical roles. Armed with this experience, a law degree and having run her own website company, Ruth brings a unique perspective to the future of insurance propositions in the UK. 

Whilst campaigning for changes to the protection cover market-place in the UK to become relevant in today’s digital age of consumer power and under-insurance, she is working on bringing improved propositions to market via consultancy assignments and joint venture partnerships.

I suppose no job with Ros Altman for me then.

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Dear Government- “Five do’s, five don’ts” – #pensions


Moses

Pension Minister Webb – (May 2020)

For those slipping quietly into retirement in the UK the political promises are about the revaluation of your state benefits, the payment of your winter allowance and the tax treatment of your savings and income.

Whatever you have done or not done is in the past, you are retiring , winding down from the business of working and getting into the business of spending. Alex Ferguson is reported he’s having problems with all this freedom.

So it appears are the Regulators.

My little pocket book Stella gave me after her trip to Greece reads

“For excessive freedom is nothing more than excessive slavery”

Plato said that

“Pension Freedoms without well-built/well-sold product’s no freedom at all”.

I said that

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I blame Leonard Cohen for this grumpiness. Listening on an early bank holiday morning to the Grumpy Old Git makes me one too – I’ve got the mug to prove it (thanks Oliver- pictured).


Five Do’s

So here are the five things I want from a new Government to cure my ole pension blues!

    1.  The abolition of the lifetime allowance so that people can aspire to a decent retirement income from their pension savings.                                                 Flat rate relief on the way in – yes! Penalties on the way out – no!
    2. Scrap the tax on a tax. Abolish VAT for auto-enrolment services bought by micros unable to reclaim it. 
    3. The duty on employers staging auto-enrolment to choose a pension and explain to  workers why they’ve chosen as they have 
    4. An easement to allow providers to pay intermediaries a fixed fee to onboard pensions. 
    5. A commitment to legislate for collective decumulation schemes to help ordinary people spend their retirement spendings without the money running out.

These changes (most clarifications and reinforcements), I would add a further five things I’d ask a future Government to follow these five don’ts from the tower of the Pension Plowman.

Five Don’ts

  1. No further charge caps on decumulation assets. The cost of decumulating will fall organically if we can introduce collectives, but even before then , we must trust this new more transparent market to do it’s work, even the current cap is unnecessary, extending it doubly so.
  2. No changes to the auto-enrolment staging time-table. The Pension Regulator has alerted all employers to their staging date, many advisory firms are working to that timetable, please do not mess with the planning.
  3. No relenting on the miscreant firms subverting the reputation of pensions by nefarious charges to the net asset value of our pension funds (hidden charges). There is a crack in everything, that’s how the light gets in.
  4. No preferential treatment for NEST , NEST is a good pension but it is only good for certain types of employers. It should not be promoted as a one size fits all solution by Government and it should be called to account for its debt to the DWP.
  5. No change in pension minister ; with the anticipated (temporary) absence for the respected member for Cumbernauld, there is only one politician in this country that understands and promotes proper pension, that is Steve Webb. Whatever Government we have should include Steve Webb as pension minister.

Of course there are many more outside the scope of this blog. To discuss these issues and those you feel strongly about, come to our Pension PlayPen lunch on Tuesday 5th May at 12 for 12.30, the Counting House Pub, Cornhill – 200 yards East of Bank Station in the City.

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Are the conservatives the party for pensioners?


 

conservative-party-manifesto-image-370x229

The Conservatives are due to talk this morning about how they can justify their claim that they are the party for pensioners. Look forward to promises to;

  • Maintain the triple lock
  • Increase the pensioners tax-free allowance from £6000 to £8000
  • Protect people’s assets (houses) from the costs of long-term care
  • Give those in later years the freedom to spend their pension savings as they like.

It’s well known that pensioners are valuable to politicians, they get out and vote. They are also particularly vulnerable to Government decisions on spending – on the taxation of savings and the granting of welfare.

The Conservative’s manifesto pledges for welfare spending show that relative to rival parties and in absolute terms, the Government will be spending less on welfare. While they are not explicit about which parts of the welfare budget is protected, it looks to me that the Conservatives will focus on protecting pensioners with income and assets at the expense of pensioners without income and assets.

So it would be fairer to say that the conservatives will be the party for affluent voting pensioners.

One of the reasons that voters are getting so angry with politicians this election, is that the promises are made in terms of the winners, they do not mention the losers. As mentioned in yesterday’s blog, there are some big losers in upcoming changes.

The £30bn cut (identified by the IFS) in unprotected departmental spending, not mentioned in the Conservative manifesto, could leave departments like the DWP 30% worse off than in 2010. That £30bn is on top of the £10bn cut in social security that is in the manifesto.

The only rabbit that can be pulled out of the hat is to clobber tax cheats who hide income offshore. The Conservatives promise to get £5bn back over the next term is a tired old rabbit and not one Tory HQ will be shouting about to their sponsors ( who tend to have lots of funds but don’t pay much tax).

So I’m very sceptical about the fate of the less well-off pensioners

Because we have economic data from sources such as the OBR, think-tanks like the IFS are able to  pour cold water over these conservative promises.  If the Conservatives are planning to reduce cuts in the next parliament by £26bn more than Labour, pain is going to be endured as much as explicit promises on tax.

The rhetoric doesn’t match the numbers. Nowhere is this more worrying than for those vulnerable to long-term care. Let’s be clear, the NHS is of help to those with acute medical issues (for those in old age that means the threat of death), but it is not in the business of providing long term support to those physically and mentally infirm. The money for this benefit, comes from an unprotected department, the DWP.

So the protection of the NHS, simply puts more pressure on long-term care.

If you make an explicit promise to protect people’s assets (houses) from being effectively repossessed to pay the long-term care bills…

and you give people the freedom to spend their pension savings up front….

and you demand a 30% cut in the DWP budget which is there to provide a safety net…

and you rule out filling in the resulting budget gap with new taxes (see the Conservative promise made this week – “read my lips – no new taxes”)

and you cap the value of pension savings at £1m tipping many long-living affluent pensioners into the poverty trap…

Then you can only draw one conclusion. For the most vulnerable pensioners- those in poverty of heading for it, the Conservatives are not the party of pensioners…

For the poorer pensioners, the Conservatives are the party of pensioner irresponsibility.

The pension poor will be the victims of austerity, spending cuts and depravation.

But they’ll only have themselves to blame- they’re not the pensioners who vote.

The conservatives are the party for the pensioners who vote

If you want to understand the economic arguments in this article, I can recommend you watch this long and taxing video, it may not be as much fun as Question Time, but it gives a flavour of what is being promised and what is not being said.

and again

 

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Do we need another pension commission? #IRSC


IRSC

A call for inclusion from the pension elite?

The NAPF have launched a call for an Independent Retirement Savings  Commission. I went to hear the arguments yesterday morning and came away with a nice booklet but without much more enthusiasm for the idea than when I went in.

The trouble is that the people within the room and the people on the panel were the usual suspects. The contributors to the booklet were the usual suspects, there were no dissenting voices from the pension orthodoxy that has prevailed for years.

It was from these same offices that Joanne Segars spoke some weeks ago with her opening salvo “with auto-enrolment almost over”. Mike Cherry of the Federation of Small Business was at hand yesterday to make sure she didn’t say that again, but for the NAPF and for most of its members, auto-enrolment is now a matter of re-enrolment, the NAPF can get back to discussing knitting patterns.

If you want to see what was said from the audience search #IRSC on twitter.

IRSC2


 

The voice of the excluded? Not in this room

Before coming over, I had been engaging with the concerns of middle aged women who are concerned, confused and angry about how the state second pension might be introduced.

If you want to do the same you can by following this link . You may agree and sign the petition, you may want to look at what a group of campaigners are doing for soldiers who are losing rights to their Army Pension, over 55,000 people have signed that petition.

money saving

If a pension commission were to be inclusive and consensual, it would be to listen to the arguments of those who were doing badly out of our pension system, not those who were doing well.

My impression after 90 minutes of debate, was that an independent retirement savings commission could not do this and should not do this.

I was nearly convinced by Nigel Stanley.


 

 

Nigel Stanley and Mike Cherry nearly talked me round…

Thankfully, Nigel Stanley was on the panel. Nigel announced he would be retiring soon as the TUC’s senior spokesperson on pensions . I wish him the happy retirement he has helped so many people to. Nigel spoke eloquently and passionately about the need to protect ordinary people from pension policy.

Most importantly he pointed out that you cannot take politics our of pensions, how we treat our elderly and how we help people prepare for later years is at the very heart of politics.

Nigel’s idea for a Pension Commission was a means of holding politicians to account, not as a means of collecting data to aid political decision making to be evidenced basis.

He likened his vision for a Pension Commission as something akin to the Low Pay Commission, ensuring fairness for all. He rejected the idea of it being a pension equivalent of the Office of Budget Responsibility.

He called for it to make policy or even to lobby for policy. As a democrat, I can understand where he is coming from.

But while I agree with the need to provide protection for all those for whom the occupational pensions of the NAPF and the insurance policies of the ABI, I cannot see a need for a low paid pensions commission.

Mike Cherry spoke well on behalf of small employers staging auto-enrolment.

For a fleeting moment I toyed with the idea of a commission to oversee the ongoing workings of auto-enrolment, but as I asked the question of  Mike Cherry, I realised that this did not work either.


Another Government body, the Government doesn’t listen to?

As I left, I wondered what was wrong with what we’ve got. Anthony Hilton of the Evening Standard  had asked whether such a Pensions Commission might not be just the latest Government body the Government didn’t listen to.

It was then that I walked away from this idea. What we need is a democratic process that ensures that pensions policy gets created in the right way and is maintained by the right people. We need good civil servants, good politicians and a good process. We have to accept that we will sometimes get bad politicians making bad policy in a bad way.

But the answer to the problem is not to create an unelected pensions commission or an unelected independent retirement savings commission. The answer is for ordinary people to stand up for themselves and those around them, as those who run the campaigns for fairness for our troops and for woman’s rights to the state pension are doing.


Let’s have a debate that stars the audience

Yesterday finished for me with a great debate where the good people of Leeds launched into Cameron, Clegg and Milliband with questions that were searching- sometimes to the point of being rude. That’s how people talk in their lounges, that’s how they talk on MSE and in the comments columns of our financial websites.

As Jonathan Freedland  wrote in the Guardian, the audience was the star.

These voices are not going to be heard by any pensions commission populated by people in the room I sat in yesterday morning. Their voices will be heard through the ballot box and through the ongoing engagement with Government that keeps them honest. You can hear the noise of what Bernard Levin called the silent majority, because they are no longer silent. They are more and more vocal as technology gives them a voice.

We have an apparatus of Government that is highly sensitive, look at the way the Pension Regulator is engaging with auto-enrolment through the various interest groups that are springing up. For goodness sakes, tPR runs a highly successful linked in group! We bombard Steve Webb and Gregg McClymont with our suggestions via twitter, email and face to face.

Ultimately , we have the means to get our point across. The NAPF and ABI have doors open to them in Government, so do the TUC, the FSB and all the other interest groups represented at yesterday’s meeting.

Our political process is strong and we have open Government. We do not need Independent Retirement Savings or Pension Commission. We need good more good Government.

NAPF%20logo%202

 

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Coming to terms with the new politics


on-line

Politicians and the circus that moves around them seem slow to grasp the new reality of this election – that people will vote in crowds rather than congregate around ideology.

Understanding how these crowds are developing is the business of yougov and the social media pollsters. The bookies are learning to follow the trends detected on social media and are catching up with the new patterns. Betting interest now centres on what form of coalition we will have, the bookies know that this is an election like no other, where the predicted outcome is no overall majority 1/10 on.


 

Yesterday’s tax lockdown announced by the Conservatives was an admission that without it, no one would trust them. But frankly with it, many won’t work with them.

So desperate is Cameron to be his own man after the election that he will roll the dice and up the political stakes. Have any of his potential partners been consulted over this? I very much doubt it. That’s because the conservatives are in denial about their chances and far from positioning themselves as a party who can work with others, are putting their next five years on auto-pilot.

Have a look at this graph produced by my extraordinary brother Mince.

It shows the bookies catching up with the academic experts in their understanding of what is actually going on.

As you can see- nothing is going on! One of the strangest things about this election is that for all their noise, the major political parties are unable to move the British electorate’s voting intentions.

In this torpid world, the media can do no more than invent interest by focussing on ever more outlandish stunts. Milliband’s cozying up to Russell Brand being a case in point.

We are now obsessing about the number of likes a party’s Facebook page has got relative to another’s. My brother reports his most popular research is around the number of mentions a politician gets on the BBC.

The harsh reality for Milliband is that he is now in Sturgeon’s pocket. If you read this article (written in Scotland), at the start of the campaign, you’d have felt that chill wind from the north.

The harsher reality for Cameron is that if he blows an outright majority for a second time, his party is unlikely to give him a third chance. For Cameron , there is no option but to throw the dice.

So while Cameron and Milliband bluster, the rest of us get on with our jobs and watch incredulous as politics becomes ever more farcical. Desperate Dave has turned from statesman to tub-thumper, the Edds grovel to every social media opportunity going.

Neither realise that after June it will not be about them. After June it will be about the support they can bring to them from Scotland, Wales and Ireland, from the environmentalists, socialists, English nationalists and the 10% of us who still think the Liberals have a job to do.

What is weird is that neither Westminster of Fleet Street can make a lot of difference. This morning the Scottish Sun came out in favour of the SNP, the Southern Sun in favour of the Conservatives, if there were other Suns, they would undoubtedly tell their stories to suit their demographics.

A reactive media is slowly getting it , but the big guns of the Tory and Labour central offices don’t. They simply can’t afford to.

So long as they continue to isolate themselves , they are running away from the reality. Those who really analyse social media and voting intentions like MJ Goodwin tell us that there is only a one in a hundred chance of Milliband getting an overall majority, the chances for Cameron are higher, but nowhere near as high as the bookies think.

With only seven days to go, I very much doubt anything will change. From now on, it is all about getting the Government you want- and for once- everyone will have a say.

For the views of “just an ordinary guy from Essex”, here’s Russell on Ed.

 

 

 

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What’s the cost of choice?


Toxic-cartoon_2169887b

I and my colleagues are fascinated by financial decisions; who to take out your mortgage with, who to bank with, which ISA to choose and which pension scheme to select for your staff.

Which , Money Saving Expert and the comparison sites are able to list financial products in terms of the interest rates they offer or the stated charges but most of the time, we decide on what we know, what will happen in the first couple of years when the offer is fresh.

So often, what is good today, turns out to be bad tomorrow, the road to financial penury is littered with wrappers marked “special offer” that turned out to be too good to be true.


 

What’s needed is a trusted source which can provide knowledge not information, that can help people choose on a sustainable basis. To some extent, this knowledge is tied up in the brand; for me First Direct is a bank that has delivered me magnificent service over 20 years, at the same time I have banked with Lloyds and RBS who (for me) have been less good. I remember banking with Citibank at one point, they offered me some free airline tickets to join them, the tickets never turned up nor did the Bank.

My experience , added to the experiences of millions of others makes a brand like First Direct a natural choice for a certain kind of person who likes remote banking. I have never met a First Direct Bank Manager and hope I never do!


So both in terms of interest rates and charges and in terms of the quality of service, there is a common knowledge bank into which people can pick and could be summed up as brand. Think Fidelity, Legal & General , First Direct and latterly Metro Bank – think brands untainted by scandal that people say good things about. I could print a list of financial institutions that go the other way- but that would be too long for a blog!


 

Bank accounts, mortgages and ISAs are quite easy, not only are they relatively simple to understand but they are disposable, people to change bank accounts, switch ISAs and re-mortgage and though the experience is not always as easy as we’d like, it is within our financial compass.


 

Pensions are something again. They are the nocturnal beasts of the financial jungle, talked about but little understood, lurking in our financial portfolios with unrealised potential. The simplification of choice at retirement (started with the easy idea of cashing out) has done something to change this.

People want the choice to pay off a mortgage, cash in an ISA or close a bank account. Until recently, a pension was something that was just there, something you owned about which you had little control. That’s changed… as this excellent video shows.

 

We now have choices we never expected but they come at a choice.

An annuity gives security but it comes at the cost of income

Drawdown is good for income but comes at the cost of security

Cash is flexible but may come at the  cost of a tax bill.


 

And to get to the point of having these choices at retirement we need to make choices throughout our life on whether to join or opt-out of the employer’s pension, whether to make extra personal contributions, whether to use the salary sacrifice option and whether to choose funds or rely on the default option.

All of these choice come at a cost. As TS Eliot wrote

What might have been is an abstraction
Remaining a perpetual possibility
Only in a world of speculation.
What might have been and what has been
Point to one end, which is always present.

All of the decisions we take remind us of the choices we discarded. The “what would have happened ifs” persist

Footfalls echo in the memory
Down the passage which we did not take
Towards the door we never opened

Which is why , on the big decisions, it is always worth considering choices and not jumping into things. Because those memories come back to haunt you.


 

Over the next three years over 1 million decisions will be taken about pensions, not just for the decision maker but for the staff that he or she employs.

Those decisions will have a material impact on the choices nearly 5m people have at retirement. Some of those 1m decisions will be taken with consideration, many won’t. All of those decisions will be remembered by those affected.

The cost of taking the wrong decision may have no more than a moral impact, the judgement of staff that you didn’t give a flying f*** about their financial well-being.

The cost of taking the wrong choice may impact the retirement of the person(s) taking the decision.

In extremis, a bad decision could leave staff, employer and even the adviser in such a mess that the only beneficiaries are fraudsters and lawyers.


 

We are not dealing here with decisions can be easily undone. The numbers of people who switch their pensions is tiny compared to those who change mortgages, ISAs ,bank accounts, utility companies. A pension plan is a life sentence.

I find it quite extraordinary that people pay so little attention to the choice of a workplace pension.

By people I mean everyone from the Pension Regulator to the employee enrolled into one with a lot of intermediaries in between.

The difference in outcomes (apples if you refer back to the video) between a good and a bad workplace pension is huge.

http://www.pensionplaypen.com will score all the providers we research and their specific offers to you as an employer on a scale of 1-100. We measure the likely outcomes to staff, based on what we know of the staff and the provider’s offer, we measure the ease of use of the plan to the employer based on what we know or provider and payroll.

It is easy to put a cost on this choice. It is only £499 (+vat).

If you are about to choose a workplace pension, don’t leave the choice to chance, invest a small sum to get the right choice properly documented and certified.

Go to http://www.pensionplaypen.com/register

 

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“Thank God for the cellphone video camera”


could not talk

So spoke the lawyer representing Freddie Gray’s family at a news conference this morning.

“could not talk, could not breathe”

reads the sign on a protestor’s cardboard placard.

I’m not talking about the rights and wrongs of Baltimore- if you want to read about the day of Freddie Gay’s funeral read Mashable.  I’m interested  in the way the protest is being framed, its Vice and Buzzfeed  bringing us the news and its technology that’s doing the reporting,

Progress for black America is happening, in part, not because they can talk (for the most part their is still no voice for their indignation) but from the videos of brutality that are posted and watched by millions.

In “1984” George Orwell had a vision of a police state ruled by video surveillance. Now it’s not Big Brother watching us, but us watching Big Brother.

And it is as if America is having it’s own Black Spring. with technology being used to give those who had no way to talk, a voice,

The camera cannot lie – (well not until someone learns how to photoshop video) and the testimony of the cell-phone and the photos (such as that which heads this blog) are replacing rhetoric as the instrument of change.


 Watch out world

If technology is setting Black America free from its oppression then watch out world! The CCTV cameras that watch me from morn to night keep the streets of the City of London honest, but the same digital records can (and will) be turned on those who work within the offices that line them.

The Banks are finding that they cannot escape the scrutiny of the all watching digital eye, another £19bn. of fines is predicted in a report this morning. The same will be said of the fund managers, brokers ,traders, custodians and other intermediaries who chip away at the net asset value of our savings.

Some may think it distasteful to link brutal oppression with white collar crime, but I am not talking here about the local incidents. I am talking about progress and change – things that happen when you shine the light on things.


 Democratising information and knowledge

Technology was in the hands of the police, but now it is in the hands of those who hold the police to account.

The asymmetry of information that has allowed those who manage our money is now rebalancing itself. In a short-time, customers of the banks, fund managers and other financial stewards they employ, will have an eye to what is happening and those who are under scrutiny had better be aware of that.

Just like the police in every other American town, who will think twice before brutalising those who “could not speak- could not breath”.

Technology sets us free and  boy can it keep us honest.

black lives matter

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Aren’t pensions worth a mention in this election?


gregg

Steve-Webb-MP-006

Osborne

Why has there been so little comment this election campaign on pensions?

When the rabbit came out of the hat in #Budget2014, many thought the freedom of pensions was the Conservatives great “retail offer”. Has Steve Webb diluted its political impact or are the Conservatives getting cold feet?

Auto-enrolment was one of the few unequivocal public policy success stories of the past parliament. Opt-out rates have stayed low, compliance to the complicated regulations has been high and confidence in retirement savings has been increased with the numbers saving privately increasing from 30 to 49%. Why is neither Clegg nor Cameron pointing to this?

The basic state pension has been reviewed, overhauled and simplified so that next year we will have a benefits, which while not more generous, is at least comprehensible. The application of the triple lock over the term of this parliament has increased the value of the basic state pension in real terms – IN A TIME OF AUSTERITY. With the Conservatives being portrayed as the party of welfare cuts- why is more not being made of the improvements in the Basic State Pension?

There are a raft of DC reforms , most importantly around the abuses of DC pensions (commission, consultancy charging, AMDs and the lack of governance of contract based plans. All of these are consumer focussed and, other than they have reduced intermediation, well received. Consumers are getting a better deal out of the workplace pensions into which 4.5m new savers have been enrolled.

Finally, the process has been put in place for a new kind of collective pension to develop. The development is early stage as auto-enrolment was early stage in 2010. I remember many sceptics in 2010 talk about auto-enrolment in the same way as they talk about CDC today.

Those who complain about CDC also complain about giving people pension freedoms. This is totally illogical. If people cannot manage the freedom of drawdown but reject the captivity of rigid benefits (especially annuities), what do these people want but a third way?

 


 

Why is pension a non issue?

While I don’t suppose that pensions policy is touching buttons like the NHS or the fiscal deficit. it is an area of policy about which we have seen genuine changes in the past five years which demonstrate how two parties can work together to take forward policies initiated in a third party (Labour) Government. In truth none of the policies listed above has been opposed by Labour in a meaningful way.

The Shadow Pension Minister, Gregg McClymont has persevered in urging the Coalition to accelerate these policies, release NEST from its restrictions, cap the cost of pension spending and impose more stringent prescription on the charges within workplace pension savings plans.

They support CDC, improvement in the state pension and auto-enrolment (which after all was their idea).

UKIP and the SNP, the new forces in British politics have decided to leave “pensions”out of their manifestos , other than the SNP aiming to protect the state pension age at current levels (which is fair enough looking at Scottish longevity relative to that down south).


Worth mentioning pensions.

In the debates I listen to, I hear a lot of arguing and a lot of moaning from audiences about the amount of arguing.

Politicians seem to be in a vortex of self-defeating recrimination. They point to stark choices with the risks associated of taking the wrong choice being severe.

But in pensions there are no choices to be made, there is harmony, there is success.

It is worth pointing out that where the focus of the politicians is on delivering public good, consensus tends to follow. The coalition has been good for pensions and Gregg McClymont has been a party to the success.

It is very sad that Gregg looks unlikely to be able to participate (immediately) in the new Government. This is an accident of time and no reflection on Gregg or his team. If by a miracle he wins Cumbernauld, he will undoubtedly be the next pension minister and likely to be a very good one.

To those who say that politicians are all the same and that nothing good comes out of Westminster, it’s worth mentioning pensions.

 

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Care or hubris? – How Tesco got in such a pensions mess.


every lidl helps

Every little helps?

The right old mess that Tesco has found itself in , is blamed partially on its mishandling of its pension strategy. How can an organisation with the motto “every little counts” have such a large pension deficit? Come to think of it, what is it doing offering to insure the longevity of an itinerant and anonymous workforce?

By “itinerant and anonymous” I mean workers whose jobs are rarely central to their lives. There are of course a hardcore of Tesco professionals, but those who work on the retail floor are as disposable as the superstores which yesterday’s announcement saw consigned to the bin.

The hallowed halls of the NAPF are portraited by the pension directors of the supermarkets, not just its current chair Ruston Smith (Tescos) but such luminaries as “one f Jef the ref” Pearson (Sainsburys) and  John Ralfe of Boots. Supermarkets have long been suckers for providing pension guarantees and bragging about it.

Those that have stayed clear of insuring their staff’s longevity – Lidl, Aldi and by and large Asda, are the current winners in the supermarket price-wars that have cruched Tesco over the past three years. Walmart’s intercession put a brake on Asda and the wily WM Morrison put a break on Safeway.

While Morrisons got the kudos for introducing a defined benefit scheme for staff in 2012, in practice it was only guaranteeing a lump sum (not a lifetime income) – a smart choice with pension freedoms on the other side of the hill. Morrisons also got the marketing of its scheme right by investing in financial education on the shopfloor.


A victim of its own spin

Of course the corporate argument for these DB schemes  has been spun around the corporate and social responsibility of our supermarket giants. Last century’s philanthropists like Jesse Boot and the Cohens (the co in Tesco) leave their mark in the name but there is a massive gap between practice and reality.

Terry Leahy may have been one of Tony Blair and Gordon Brown’s kitchen cabinet but the harsh reality of supermarket economics comes down to reducing the staff costs to customer footfall ratios, grinding suppliers into suicidal deals and bringing Britain’s transport system to its knees getting stuff around the county.

Then there are those “Finest*” multi-buys.

multi-buy

There are few who look to Tesco as an exemplum of progress. That is why we are all secretly smug at its £6bn write down.


The dead hand of corporatism

Wherever corporate complacency sets in, lazy decisions come home to roost. It is the constant disruption of the status quo that makes organisations like Google hum. I’m humming with content that this blog has just won a thumbs up from google for its mobility (thanks word press) but pissed that I’m going to have to redesign many of the frames of http://www.pensionplaypen.com which are not mobile friendly enough.

Listening to google, I am listening to their customers, my customers of the future. I cannot stand in the way of change, I must bow to it and use it to make my business better. This is what Tesco have failed to do. That the pain isn’t being fealt even more by the shareholders is because the washing is being aired (albeit belatedly).


An Atrophied trade body

Smith-Ruston-Approved-2013-Thumbnail for for press page2

Chair – Ruston Smith of Tescos

CEO - Joanne Segars NAPF

CEO – Joanne Segars NAPF

When Joanne Segars of the NAPF began a recent talk “with auto-enrolment almost over..” the coin dropped. The pensions industry is about the past, it’s about Terry Leahy  and the vision of corporate Britain that prevailed in the 1990s. It has nothing to do with Google or Facebook or even little old Pension PlayPen.

But Tesco started out as a shop in East London, the employers still to stage auto-enrolment include the Googles and Facebooks of the 2020s.

The decision of Tesco to enroll its non-engaged workforce into a defined benefit plan when it staged auto-enrolment in 2012 now looks a monumental act of hubris, one that only three years on is having to be unwound.

The message is clear, the world has changed. We need change in pensions and that doesn’t mean relying on personal pensions to sort out the mess. Personal Pensions have not changed since they were introduced in 1987, they are themselves nearly 30 years old. They do not share pension risks any more than Tesco’s DB plan shares pension risk.

They are simply a receptacle into which employers can discard the risk they used to own, like rusty supermarket shelves are dumped into a skip.


Not just about today- it’s about tomorrow

We shouldn’t wring our hands and look backwards, we shouldn’t accept what we have today is right, we should be looking forward to the future, as Tesco’s successful competitors are doing finding new ways to satisfy customer needs.

We need to care about our customers, and in pension management that means about meeting the needs of our staff. We know what people want, all the surveys say the same thing, people want a regular income in retirement (and not the Lamborghini). Now let’s find a way to provide that, using the collective power of hundreds of thousands of workers, without mortgaging our equity with guarantees.

target pensions

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How pensions restrain public sector pay and services.


public

The latest discussions about how we will manage the nation’s finances are focussing on public sector pay.Nick Clegg tells us that his party will make sure

  wages would rise in real terms for two years from 2016, and then above inflation once the deficit has been dealt with

What is not being said is that real rises in pay trigger rises in pensions as pensions are linked to pay by a tax-payer guarantee.

So of course are the pension contributions that private sector employers make, but these bosses are only obliged to pay a commensurate increase in contributions. The impact of an above average pay rise to a public sector worker will still be felt in up to 50 years time.

Because public sector organisations like the Civil Service, the Fire and Police Services , Local Government, our teachers and NHS staff so not have balance sheets open to scrutiny like public companies. the cost of these pensions can be hidden. But there are calls for this debt to be part of the political debate, most notably from Nigel Wilson, CEO of Legal & General who estimates that we owe our pubic sector pensions £1,300,000,000,000 in future pension contributions (that I hope is £1.3tr!).

Nigel argues that by parking this debt off the National balance sheet, we are fooling ourselves (and in the short-term the markets) of our indebtedness.

Michael Johnson has cogently argued against what he calls a “pension apartheid” with one set of rules for the public and one for the private sector.

I’d argue that we need to base arguments in common sense. As Jonathan Guthrie pithily puts it in the FT

The Treasury airily excludes pensions for public servants from net debt on the basis that they are “contingent” liabilities. This is a half-truth: the notional cost will bounce up and down with discount rates, but beneficiaries are unlikely to waive their entitlements when they retire.

I guess that’s like shoving the tax-bill under the carpet.

I don’t want to do public servants out of pay rises but I’m reluctant to have a debate about their pay, without having a debate about the pensions liabilities that pay rises trigger. Which is me saying at an individual level, what Nigel Wilson is saying at a national level.

The reluctance of politicians to discuss the total pay of public servants (that is salary +pension) is understandable. We have fudged this issue to death over the past twenty years and there are no votes in fudge.

Earlier in the year, I wrote a couple of articles about the state of Dorset’s roads, in particular the closure of a link road between Shaftesbury and Blandford. The closure is a result of a failure to build the by-pass promised to the villagers of Melbury Abbess for the past twenty years. Put simply, there is no money in the County coffers, that money has gone into funding Dorset County Council’s pension liabilities.

Putting aside any arguments about how that scheme is run, the fact is that things are bad in and around Melbury, old people have trouble getting out of the village, local lanes are congested and there is no end in sight.

Dorset may not have a visible balance sheet as Centrica or Unilever, but it is just as constrained by pensions. I choose Centrica and Unilever because they are two (of many) private sector organisations that have managed their pensions – with the consent of their staff – so that they are able to make the investments they need to keep people in good jobs.

We need to de-link public sector pay from the ruinously expensive pension liabilities that they trigger. This cannot be achieved without the consent of public servants themselves. With the help of excellent unions such as Unite and Unison, we can and should have a proper conversation about pensions. The consequences of pensions on current pay levels need to make clear, far from pensions creating freedom, they are holding the public sector back and creating deep societal problems

A blog is not the place for that conversation. It’s saddening to me (and Nigel Wilson) that we are not brave enough to include this conversation in the debate we are having on who runs the country and how.

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Labour in a kilt? – Pensions, politics and plagiarism


labour in a kilt

The SNP’s manifesto is a pretty shameless cut and paste of labour party policy.

If your hit single was covered by your biggest rival and it was they that got the royalties when it went to #1, you’d be pretty sick. If you lost your job as a result, you’d be sicker still.

So my heart goes out to my buddy Gregg McClymont whose policies on greater transparency in pensions are now being touted by the SNP as if they had a clue about what they are talking about.

The Tory party are now bigging up the SNP as Milliband’s puppeteers while pre-populating the House of Lords with a putative peer to lend their department of pensions irresponsibility some semblance of credibility. This is pretty flakey stuff.

Fortunately the Liberals are doing quite well , their support is now in double digit percentages, enough to get them back over 30 seats. Coral have cut the odds of them being part of a coalition from 2-1 to 5-4 making them the favourite to be in power (oddly more likely than either Tories or Labour, for whom opposition of Government are binary positions). Riding two horses in the same race is something that Clegg and Co are pretty good at!

Which is some consolation for those looking for a sensible pension policy going forward. If we have to assume a Gregg-less Labour Party and a clueless Tory party (at least on pensions), my guess is that we are on course for five more years of the sardonic Mr Webb.

In this new world order, the Liberals become a party of free-thinking, a moderator of ideological positions and a confounder of nonsensical policies. Which is precisely why I am a Liberal.

In such an evenly run race – with neither Labour or Conservative looking to have a finishing sprint in them, a dead heat looks a likely outcome. In such a scenario, there are only two kingmakers- they are the SNP and the Liberals.

UKIP is still the party of second place and will have little representation in the Commons, the Greens and Plaed Cymru  will carry some collective weight for the SNP, the DUP look aligned to a Tory/Liberal coalition.

In this two horse race, it is the horse stable in #10 that is conventionally the likely winner. It is the incumbent governing party and Prime Minister which is offered first dibs at forming a new Government so this favours Cameron- should the Tories not get an overall majority.

The bookies have no overall majority at 1/8 (that’s 8-1 odds on!) with a Labour overall majority available at 22-1 and a Tory majority at 15/2.

Any sensible person must anticipate a coalition, I suspect that the only thing keeping the odds on a majority Government as low as they are is the conviction of the party faithfulls.

So this two horse race is really about the riders and trainers. As Cameron likes to point out, the Labour Donkey will be ridden by Milliband but trained by Nicola Sturgeon. But the Tory Donkey may be ridden by Cameron but trained by Nick Clegg!

In horse racing, it is quite common for riders to be “jocked off” if they can’t get their nags past the finishing post in front. This however looks unlikely at this election . The bookies have Milliband the slight favourite to be prime minister from Cameron but it’s 20-1 against these two being elected.

Milliband’s favouritism must be based on the momentum gathering behind Sturgeon and her vision for an austerity-free Britain (something that Labour have failed to visualise).

With the SNP now as low as 6-1 to win all 59 seats in Scotland, Labour in a kilt has (unexpectedly) become a political possibility. My gut says that in such a scenario, what would be best for Britain would be an arrangement that brought the Liberals into a tri-partite pact.

Group hug

If you are interested in this idle speculation, check out the excellent odds-checker which gives all these perms and a whole lot more.

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Scrap the LifeTime Allowance – for hard working people!


hardowrking4

The Conservatives say they want to reward hard working people. I’d like to thing they include me in that number.

They want to appoint Ros Altmann to help us educate ourselves in finances, I’d like to think I’ve been educating myself.

Since I started working, I’ve been squirrelling money from my pay into personal and company pensions month after month for nearly 400 months, that’s nearly 35 years. The result is that I have built up a big fat pot (I brought my pots together in 2013).

I haven’t sunk all my money into bricks and mortar, I didn’t buy to let, I invest my savings in the global economy and I intend to keep invested for years to come.

I intend to keep on working after my 55th year for decades to come and to continue saving as I have always done. I want to provide myself and my family with the security of knowing I am financially sufficient and will not be a burden on them whatever happens to my health, no matter how long I live.

cameron


 

I have a financial plan and it involves me using financial products that afford me tax privileges. I earn well above average earnings and I pay a lot of tax, where there is a taxation promise I expect it to be kept. If I cheated on my taxes I would expect to be punished.

I don’t earn £150k but I don’t have a grudge against those who do. The irony is that despite the spoof headline below, Cameron and Osborne are screwing up the pensions not just of people like me, but the super-achievers who they most fawn to.

HARDWORKING_6


 

 

So far so good. But let’s look at what is happening to my plans. My pot – according to George Osborne runneth over. He started at £1.8m, reduced this to £1.25m and now is telling me I cannot save beyond £1m.  He implies I am a fat cat, but that £1m will buy me a not so big fat annuity of around £27,000 pa  if I want to exercise my freedom to purchase at 55.

That is not what I call rewarding a hard working bloke for working for 35 years, nor is the prospect of having to walk away from pension savings around now (I am 53) what I had planned on doing. Nor is it what we educate people to do at First Actuarial.

I don’t agree with John Ralfe on much, but I do agree that his dictum

“work longer, save harder, save longer”

is fair and honest and credible to the average hard working person.

Two out of three of those instructions are denied to me, or at least I am denied the right to save longer and harder into a pension,

People are instinctively drawn to income (and I am no different). I dread the idea of cashing in my pot, paying 45% tax on a big slug and then sitting on a big bank balance, paying 0.1% interest on which I am taxed again. That is not why I put money into a pension all these years.

Hard working people

I want my £1m++++ to buy me an income, I’m not too fussed that it is guaranteed, I’ll take some chances, but I want to know what the income is targeted as doing to my financial well-being. That is me being responsible to myself and my loved ones and it has been part of my financial planning for the past 30+ years.

I really resent David Cameron and George Osborne pretending they have released pensions from some kind of bondage and that in appointing Ros and funding Pension Wise, hard working people like me should be grateful.

No way!

I am extremely ungrateful for the triple cut in my lifetime allowance. I see no reason why high earners should have their means to catch up on pension planning curtailed to pay for an inheritance tax cut for those with housing wealth.

As a financial adviser (15 years ) and a financial educator (15+ years) I have taught the virtue of saving 10% + of income over a working lifetime to secure financial security in retirement. I have reminded people that you cannot buy a sausage with a brick from your house and warned against the dangers of relying on bricks and mortar to fund old age.]

Every single one of these messages is being undermined by this Tory Government and their miserable and impoverishing 2015 manifesto. Wheeling Ros out to legitimise their personal finance agenda is personally offensive. Ros has gone on record stating that the LTA should be scrapped, so has that other great campaigner Steve Webb.

hardworking 5

We need to restore confidence in pensions and every time politicians tweak the dial on the retrospective tax treatment of our savings, another tranche of savers walk away muttering the words “I told you so”.

Here are  five unexpected consequences of the changes on Lifetime and Annual allowances being proposed by the department of Pension Irresponsibility (and the Conservative Party).

  1. The messaging of the past thirty years is trashed, people will now be told to undo what they were doing – the credibility of the prudent advice (and advisers) is shot.
  2. Many people will unwittingly pay 55% tax on a proportion of their savings, many due to auto-enrolment which they will not know to opt-out of.
  3. Employers and trustees wishing to help employees manage their finances will have to revise communications, withdraw previous instructions and will see their programs devalued.
  4. The hideous complexities of mixed pension benefits, especially money purchase schemes with guarantees will now need to be explained and valued at enormous expense. One scheme I deal with has 14,000 members in a scheme with a GMP underpin that is biting.
  5. While large employers re-enroll, small employers enroll, we grapple with the complexities of DB to DC transfers, people try to work out what pension freedoms mean….. the tinkering on these taxes makes everything worse.

hardworking people7

 

Andrew Neal is a man of good sense. He is an expert political commentator and a man who understands personal finances. He told me and those around me that he would not recommend to his friends and families that they saved for their retirement in a pension because pensions were too vulnerable to political interference. He said this after the 2015 budget and I suspect he would say it louder since the fiddling with the annual allowance announced this week.

I am not for the establishment of an independent pensions comission, we had one before under Hutton and it was toothless and bureaucratic and it slowed things down.

I am pro a consumer champion and pro Ros Altmann- though I hate the political nature of her appointment.

But most of all I am pro-democracy and the voice of the people. So if you have read this article and agreed with me, I’d like you to do something, I’d like you to send an email to ros@rosaltmann.com with the title

Ros – for the sake of hardworking people – tell David and George to scrap the LifeTime Allowance.

cameron2

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“Astonishing” – “yes you are”!


Group hug
Nigel Farage; “astonishing!”

Nicola Sturgeon; “yes you are!”

Last night’s debate provided the best quip of the election so far and it came from Nicola Sturgeon who out Faraged Farage for incredulity.

This of course was Cameron’s reason for not showing up, he wanted to see his opponents wipe out in a demolition derby,

Certainly, the clips we’ll be seeing over the next couple of days are gong to be Farage v Sturgeon, Farage v BBC, Farage v audience which is exactly what we don;t need.

An isolated Farage with the right wing agenda to himself is a frightening prospect. Many of my close friends, including my partner and members of my close family do not think that Farage’s views on immigration , the International Health Service and the EU are extreme, bigoted or wrong.

Infact, the UKIP manifesto as I read it had some really interesting things to say on pensions, being realistic about funding Pension Wise, proposing a flex on state pensions and making pension cold calling an illegal activity.

Farage has a point of view, not my point of view, but a valid point of view.

The sight of four of the five contestants shaking hands at the end of the debate – but isolating Farage, did not play well with me and if that’s the way the left deals with his concerns, Farage will be quite happy. There are plenty of those on the left who can sign up to parts  of UKIP’s value set.

all in it together


 

If I’m unhappy about isolating UKIP, I’m pleased to see a strong left wing alliance developing between Labour , the Scottish Nationalists and Plaed Cymru. Unlike the last election , there is credibility behind the economic arguments to regenerate the country through investment.

We have a proper choice between Milliband’s labour, spurred in its intent by the cold wind from the north and the prevailing consensus of the past five years. It should be noted that much of the austerity that we have been promised has yet to arrive, the cake was baked some years ago but it reaches our tables in the next two years.

I don’t want these cuts, not because they are going  to hurt me, but because they target vulnerable people and because I don’t think that economic targets should be prioritised to the degree that the Conservatives want them to be.

I’m also deeply unhappy about the department of pension irresponsibility ripping up much of the good work we’ve achieved on pensions in the past ten years in the pursuance of a policy of mass debt (sorry property ownership).


 

I hope I’m both radical and consensual- in the true senses of both word. I don’t want to see polarisation of politics with UKIP isolated on the right. I want to see Farage’s views listened to as I want Sturgeon’s and those of the Welsh and Green lobbies.

Whether Liberals work with Labour or with Conservatives, I am comfortable. The polls currently have a combination of these two options co favourites with an SNP supported Labour minority.

As a pension person, I would rather see a coalition that involded Steve Webb and the Liberals than one dominated by politicians who know little about the subject. By an unlucky stroke, all the pension savvy Labour politicians loo

Posted in pensions | 1 Comment

Advance Australia Fair!


aussie flag

I have never been to Australia, I should go I know, but we have Earl’s Court.

My good friend Jim Hennington has recently returned to his native Oz after a few years over here teaching us some tricks on how to keep complex ideas simple. If Jim has his way, life would be as easy and simple as a Mac, he’d make it so.

We keep in touch on Linked In and we got into a conversation this week about the Australian pension system known as Super (Superannuation if you’re a British actuary).

It started out with him sending me this article a precis of which could be

“Australians know Jack Shit about what they’re doing, but they’re happy and proud of what they’re doing and why they’re doing it”.

I responded as any self respecting Pom would by explaining to Jim that his nation was populated by ignorant convicts who did whatever their Government told them to so that they could spend too  much time lying on the beach with a few tinnies dreaming of winning a test series in the UK.

Jim did not rise to the bait but sent me instead this extraordinary message.

 Without a clear objective there can be a LOT of wheel spinning.

Australia has a Financial System Inquiry going on at present. The first recommended action in relation to “superannuation and retirement incomes”
is

Set clear objectives for the superannuation system.

A clear statement of the system’s objectives is necessary to target policy settings better and make them more stable.

Clearly articulated objectives that have broad community support would help to align policy settings, industry initiatives and community expectations.

Jim then refers me to a the source publications; here . He finishes

I remember in the UK struggling to find a clear definition of ‘adequate retirement income’ when looking through all the various UK consultation type papers.

The man is absolutely right. We love the trees , we forget about the wood.

Last night I chaired a meeting of the Institute and Faculty of Actuaries in London. The audience were nervous for most of it as we discussed issues impacting the lives of those who don’t know algebra from an algorithm. The meeting caught fire as we moved to a discussion of hybrid money purchase arrangements complete with GMP reconciliation and the assumptions used in TVAS calculations.

I know actuaries are special needs , but their plight seems to have infected my thinking too. I was ashamed reading Jim’s mail that I had not and maybe cannot articulate what good looks like – as in a “good standard of living when I get older” or a “good way of paying for it” or even a “good thing to do”.

Of course a value judgement like “good” relies on a consensus, which is created by precisely the process that Jim is talking about. As these sheep-friendly cons gather round the barbie and congratulate themselves on their retirement wealth, we wonder whether we can live with the freedoms we now have.

Judging by last night, we would happily adopt the recommendation of Jack McVitie and LEBC and make all financial decisions taken on decumulation monies subject to a 30 day cooling off period. That would be a third line of defence behind Pension Wise and the insurance company grilling to which those wishing to be free are compelled to undergo.

Australia is a confident nation , proud to be young and proud to be free of us. It has clear objectives for what it is doing which people understand. Australians may not understand Jack Shit about their Super but I don’t understand Jack Shit about this computer I’m typing on (except it works).

So the Pension Plowman Election Manifesto now calls for a clear definition of “adequate retirement income” to which we all can sign up to. We need a clear financial goal that says what the unfunded bit (state pension) and the funded bit (pension savings) should add up to.

If we get that far and everyone knows what the minimum height of the bar is, then we can build to set our own private targets.

I guess right now we may still need a few state top-ups to get to that minimum bar , but things are changing, auto-enrolment is changing things and people’s own engagement in their financial futures can change things still more.

I don’t think we need a compulsory system as they have in Australia, but I do think we need the clarity and simplicity of their approach and we need that clear statement that Jim was after when he was over here.

Australia continues to rise- damn it! Australia is irrepressible! The likes of Jim Hennington, David Harris,Vivi Friedgut, John Tsalos and Jo Cumbo are some of the very best people in the whole world.

I am not Australian, I am British – I am different- and bloody proud of it.

But being British doesn’t mean I cannot learn.

If you’d like to find out how Australians are going about offering financial guidance to its population, have a look at this page  of Jim’s website and watch the video on the right hand side. I think the boy’s onto something!

So’s she for that matter..

aussiesheilasmall

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Probably the worst flagship tax ever?


iht

George Osborne says his proposed tax break for high value homes is about “values”, it is no such thing. This policy is about votes.

What is going on with the conservatives on tax? They have become obsessed with the “retail offer”, the giveaway that captures the public imagination and sweeps them into power (without interference from troublesome liberals).

This election’s big idea is being touted as an increase in the inheritance tax threshold to take all but the biggest houses out of HMRC’s inheritance tax net. This of course a return to “wealth cascading down through the generations” and is designed to appeal in a big society way.

But it’s all a bit of a con and it’s going to do a lot of harm to pensions without doing much good for anyone. As Robert Peston asks, “Who wins from Inheritance Tax Giveaway?”.

Of course this policy is brought you from the Department of Pension Irresponsibility (Tory Treasury “thinkers”). It will be paid for by reducing the amount that high earners can pay into pensions and its impact will be to further alienate those who manage our businesses from the works pensions on which everyone else will rely – pension apartheid.

The absurd reality (which will go down like a lead balloon when explained on the shop-floor) is that someone on £40,000 can contribute £40,000 to their pension , but were they able to earn £210,000, the contribution limit would fall to £10,000. It’s totally nuts and the fiscal thinking of people totally detached from day to day budgeting.

You might argue that with the pot being capped at £1m, this is inconsequential but try telling that to those “hard working executives” who are trying to catch up on pensions.

Try telling that to those people who are still in final salary schemes and will find themselves paying tax at a punitive rate to keep accruing and try telling that to the people who manage pensions who have to communicate and administrate this nonsense.

Unfortunately, there is no better news from the other side of the house, as the Labour Party are committed to exactly the same squeeze on high-earners.

The only difference between Tories and Labour is that the Tories are imposing fake giveaways as morale boosters to their hardcore voters and those aspiring to be housing wealthy, while Labour is inventing a “mansion tax” as part of its politics of envy.

It’s a simple choice – snobby or chippy.


It’s not even a tax-cut – just a poxy wealth protection scam.

If you think this is a mindless rant at  the pension hooligans who are behind Tory tax policy, let’s look at the numbers. They don’t suggest any more people won’t be paying IHT on their properties than today.

George Osborne says that increasing the effective threshold for married couples from £625,000 to £1m is going to impact about 11.5% of inheritances.

The last figures we have from HMRC (2010) tell us that only 2.5% of estates were subject to inheritance tax. It’s thought that because of house price inflation, 6% of inheritances are now affected and this will rise according to the OBR to 11.6% in 2019. So all these new tax payers are just ring fencing capital gains for the lucky few.

Even madder, these plans are not going to be brought in till 2017. Using the Government’s own estimates of house price inflation, the tax change will do no more than keep the numbers of houses impacted by IHT at 6% (unless that £1m is going to be adjusted upwards in line with the “swanky house index”).

All this tax giveaway is doing is putting housing wealth into a kind of IHT protected tax-wrapper that rewards the few and panders to the aspirations of the many.

So this is another phoney tax giveaway dressed up as “the big retail offer“.  This is as much about values as Arthur Daley’s lock-up.

Those with housing wealth are going to be bailed out by those with high incomes who will presumably  invest in bricks and mortar rather than in equities and bonds.

I can think of no better phrase for this than rearranging the deckchairs on the titanic. If this is the big retail offer, what about the rest of us?


And pensions pay the price for this foolishness!

Screwing up pensions still further , so that people can feel better about their housing stock is no way to manage a tax system!

Unfortunately, there is no better news from the other side of the house, as the Labour Party are committed to exactly the same squeeze on high-earners.

Both Labour and Conservative policies are sending out all the wrong messages. Pension saving is good for the economy, it creates the conditions for investment, propping up the price of our top-end housing stock does nothing for most of us but encourage us to further indebtedness.

Whether you are robbing pensions to pay for IHT giveaways or for the NHS, you are robbing the wrong pot guys!

Conning people that their housing rights are in perpetuity

Stating  that Osborne  is legislating for

” The basic human instinct to provide for your children”

is a total nonsense. The housing stock is already mortgaged to pay for the retirement income most people haven’t saved for and for the long-term care that the nation cannot afford other than by drawing down on the property.

What’s more, these houses are unlikely to pass across generations, the kids will typically have a row about ownership and the property sold. This is the pattern of property succession that proves that the “provided for” children are rarely the better for their parent’s munificence.

The office of pension irresponsibility chooses to avoid mentioning these harsh truths and is treating us as precisely the gullible fools that fall for pension scams. If I had any inclination to vote for Osborne and Cameron , it is gone.

Pray for Steve Webb, let’s hope he can moderate this madness.

The best we can hope for is for some sanity from the Liberals and Steve Webb, delivering a sensible reform to pension taxation that gives everyone one rate of tax relief and stops these ludicrous complexities dreamt up by people who know nothing about the pension system.

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Why are we so unproductive?


Productivity

News is out that Britain produces in five days what the French produce in four

Robert Peston has written a series of articles on this over the past few days. Here is the gist of it.

on the basis of the figures published on Wednesday, if the productivity trends of 1992 to 2007 had continued from 2008 to the end of last year, output per job would be 15% higher than it is, and output her hour would be 17% higher.

Which means, all other things being equal, each of us would be paid 15% more in total, and 17% more for each standard shift we put in.

Economists argue why we have and are falling behind countries we benchmark ourselves against

1. Productivity growth before the crash was exaggerated by the spurious productivity of banks and City firms that were taking crazy economy-imperilling risks;

2. Since the crash, too many lame duck firms have been kept afloat, under pressure from politicians, preventing the necessary re-allocation of capital from low-productivity firms to better ones;

3. As a nation we’re lousy at innovation and we don’t have enough highly skilled people (compared with Germany, for example);

4. The City is too short-termist and is hopeless at investing in winners;

5. Companies lack the confidence to invest adequately in expensive new kit, and would rather incur the costs of taking on cheap people to boost output, confident they can fire these people if all goes pear-shaped.

I will return to a consistent theme of this blog, that of the financial services industry’s obsession with intermediation.

Chris Radford has written on here about our need to produce better product that does not force us to pay for advice that we can give ourselves.

The Telegraph asked the question “what do I do with a £100k pension pot; I don’t want to pay for advice”. Andy Young and I tweeted the question and got this reply

Suggesting that we might be able to deliver more for less by embracing new technology, meets with (at best) a stony silence, more like active hostility from those who will not embrace change.

Every conversation I have with insurers about pension freedoms ends with hand-wringing about my obsession to give people what they want when they want it. We cling to out-dated service level agreements as if consistency with the past is more important than the challenge of the future.

While PayPal forges a future where a large part of our economy will operate not just without cheques but through mobile phones, pension providers complain about the difficulty of ditching legacy systems.

Complexity is needed to maintain the status quo, the status quo involves high levels of employment but low levels of productivity.

The drivers for change are coming from other countries where the idea of controlling your retirement pot using an app is not fanciful but the reality.

Today I will be discussing with people who have no formal training in Pensions, how we can make end to end processing of that auto-enrolment process a reality for payroll, employer, employee and member. All the innovation in this area is coming from young people who are seeing opportunities to innovate. The resistance to change comes from those clinging to yesterday’s distribution model.

All this will make a lot of people cross, and that is part of the problem. We have a nostalgia for a mythical world where pensions work, that drags us back as we reach for change. I see our pensions industry and weep, that so many people are employed without gain , doing jobs that could be automated freeing them to do productive things like making sure people’s money goes further, is more spendable and provides security and happiness rather than frustration and disappointment.

If this sounds a rant – well it is! We need to change the way we do things, shape up to the world we live in and restore confidence in pensions. Are we really doing that?

 

 

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Auto-enrolment needs payroll and advisers on the same page.


PAge

News reaches me from up north of an abrasive public meeting in which a major payroll disputed the value of financial advice in staging auto-enrolment. I need not name names, sadly it comes as no surprise to hear a payroll software providers feel it can go it alone, nor  financial advisers feel they are being cut out of the action.

It is only a surprise to hear the problem being so clearly articulated

Advisers were disrespected and the conclusion of two independent people who attended and passed feedback to me was this meeting was totally hijacked by (x-payroll) – who implied that (x-payroll) could fix everything and Advisers were unnecessary

The reality is that payroll processing is about as far removed from financial advice as the sea is from the mountain. Payroll processing is about the elimination of manual processes, financial advice is about preserving human interactions. Payroll looks to straight-through processes, advisers look for deliberation, consideration and reflection.

The problem is this..

pension capacity

The numbers of staging  employers from the end of this year, so dwarfs the numbers we have seen so far, that a wholesale change in the delivery mechanism for advice is needed.

Not only are the new employers smaller, they have (by and large) no experience with pensions. The problem with the straight-through payroll process is that it commoditises retirement savings into a step in the workflow. the problem with the advisory process (as we have known it these fifty years) is that it destroys the workflow.

The frustrated IFA wrote me

The meeting was only about (x-payroll), Advisers were disrespected and the conclusion of two independent people who attended and passed feedback to me was this meeting was totally hijacked by (x payroll) – who implied that (it) could fix everything and Advisers were unnecessary

I’ve had dealings with “x-payroll” of late and I can sympathise. It appears to me that x-payroll is making a big mistake!

It cannot establish auto-enrolment for employers by disengaging them from “consideration, reflection and deliberation” on the pension decision. This is where employers will send their and their staff’s money for the next 30 years, the pension decision is of enormous consequence to staff.

This cavalier approach, which I am seeing a lot of among payroll software providers is part the problem of advisers.  They have short-sightedly argued that auto-enrolment is all about payroll for the past three years.  They should have been more careful what they wished for!

There is only one way of squaring the circle and that is to make the choice of pension contribution (including decisions on salary sacrifice, postponement and phasing), the choice of pension provider and the delivery of personnel data from payroll to provider – a straight through process.

So the adviser must be – at least in the staging process – virtual.

If telephone or face to face advice is called for- it must be available – but it needs to be priced at realistic levels. Whereas the virtual process may cost no more than £100, it is hard to see how the equivalent process could be delivered through the standard advisory process for ten times that.

Even telephone support will be beyond the pockets of many small companies who really will need to engage with pensions using online tools.

The paucity of what we call “applied research” available on-line that delivers employer specific advice on pension choices without advisor intervention is conspicuous.

I cannot say it is absent – it is not – and readers of this column know where to get it- but it is not generally available and that is to the detriment of auto-enrolment and to financial advice.

Without it, payroll will properly point to advisers being too expensive, too disruptive and too scarce to meet the demands of 2016 and 2017.

Advisers have had five years to prepare for the problems we are now facing and the majority have done nothing to automate their services to meet the challenge. They must change.

Payroll should not overplay its hand, it cannot advise employers (even by offering a default) without skill and knowledge on pensions. It needs to facilitate advice.

Advisers need to step up to the plate and deliver advice in a way and at a price that befits the budgets of the smaller employer.

Most of all, payroll and advisers need to be talking and not squabbling. The last thing that auto-enrolment needs is staging without advice; nor does it need  advice without staging.

In a recent conversation , the boss of “x-payroll”cited the decision of the Pension Regulator to scrap its plan for a Directory of providers as evidence that provider choice was not part of the employer’s duties. Unfortunately, he is not alone in inferring this. I know this inference was not the intention of the Regulator, but it is an unintended consequence.

It is important that the Pension Regulator restates to payroll software providers and those who use it, that it continues to support measures that encourage employers to make informed choices on workplace pensions.

Otherwise auto-enrolment will become nothing more than an exercise in payroll compliance.

payroll compliane

Posted in auto-enrolment, Payroll, pensions | Tagged , , , , , , | 2 Comments

Should we be trusted with our pension pot?


Freedom

Today’s the day those over 55 can start taking their pension pots as they like;-

  • except you can’t because the insurance companies are closed for the Bank Holiday
  • except  your defined contribution pension provider may not have adapted its systems yet
  • except you should still be in bed
  • and then have a conversation with Pension Wise

Pension Wise

  • and probably take financial advice

Most people are positive about pension saving

Whatever happens over the next few weeks, we’ll have the case study on Britain’s financial prudence/fecklessness or apathy.

This simple video can help you make your mind up about what is best for you

Your 3 pension options in 3 minutes from QR on Vimeo.

The last time we had such a pension plebiscite, we found- to our amazement that – we were all in. Well nearly all!

Those who have most to win from the pension freedoms- certainly from a tax point of view- are those over 50 with no pension savings and little  prospect of retirement income. Ironically, this group of workers has been most reluctant to pick up the free money available from the taxman and their employers.

But too many older workers are giving up on pensions

Amidst all the noise about scams and Lamborghinis, spare a thought for the 23% of the over 50s who opted out of auto-enrolment. You can read the Government’s report on older people’s attitudes to pension saving here.

opt-out rates

People cited

  • concerns about affordability
  • they already had enough in retirement
  • they were too close to retirement
  • contribution rates were too low
  • were thinking of moving employers
  • were concerned about pensions as a means of saving

For the vast majority of the over 50s opting out, it looks as this decision will be a bad decision which will only benefit employers and tax-payers. Almost all these excuses for not saving look feeble, certainly for those who do not have substantial savings “in a pension”.

What’s more, these look the most vulnerable group for whom the time to save is running out and the prospect of long-term poverty in retirement is greatest.

Should we be sending Panorama after these people? Should they be hounded by pension experts wagging their fingers? Should their employers be exposed for allowing these decision to be taken on their watch?

We should not.

We should trust people with their own money. We should trust the free independent guidance from Pension Wise. We should not be pointing fingers.

The upgraded state pension should be enough to ensure that the vast majority of people will not be a burden on the next generation or indeed on other members of their generation.

Most people build up more in state benefits than in private pensions, especially if you count civil service and local Government pensions as part of the state system.

Stop wagging that finger!

finger-wag

The bad mistakes that people make, whether in failing to pick up free money as they work, or in giving back tax relief when they retire or (in the worse case) blowing their money on some idiotic investment, are those people’s to make.

There is a proper system of controls in place, including the guidance from Pension Wise . People want choice but don’t want to take irreversible decisions. For the most part, the choice people will take will be to work longer, save harder and wait till a viable pension option comes along.

Start making pension spending easier!

We really have to bring down the cost of spending our pension savings. The cost of annuities, the cost of drawdown and the cost of advice are too high for people with limited pension wealth. To independently manage an income through the whole of the rest of our lives, we need to (individually) be our own chief investment officer, actuary and pension administrator. For most people that is simply not on.

how long will your pension last?

We need a collective means of spending our savings and the sooner the better. A collective scheme that can be fair to all but which allows people the right to change their mind, gives peace of mind to those worried about money running out and which allows people to have confidence that their later life affairs are being properly minded.

Don’t press any panic buttons.

It took Osborne five minutes to announce but it may take five years to get the new options properly in place. Getting a new pension system in place that can allow people to spend their money through target pensions may not happen much before 2018. This is not because of lethargy among policy makers but because pension policy is complex and every change throws up many loopholes.

We must be patient.

In the meantime

There is much can be done as interim measures. Insurers and pension administrators can improve processes to help people spend their money using drawdown, annuities and the cash-out option, much more efficiently than is happening today.

New technologies make cash payments cheaper and easier. If it is possible to buy a loaf of bread in Kenya with a mobile phone, surely it should be possible in Britain  to draw money from your pension via an ATM (some day soon!).

Freedom – a moral right

We are a liberal society that believe in allowing people to pursue their lives as they wish. We have constraints to protect others, but we know where to draw the line. The line was drawn in the wrong place with pensions. Annuities were killing pension savings and the pension freedoms give people back ownership of their pension pot.

The success of auto-enrolment has shown that people are not financial luddites, given the opportunity to save, they will save. The relatively  high opt-out rates among the over 50s demonstrates how disaffected some older people have been by the pension system.

The task of those working in pensions over the next five years is to restore confidence in pensions. That is a huge and challenging task and it is our moral duty to help rather than hinder that process.

 

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LTA exposes the DC horror-show.


dc horror show

Because I am on holiday, I am reading the Sunday Papers. Someone has bought the Sunday Times which I haven’t read for at least 2 billion years. I’m left with the business pages and two articles by Ian Cowie about how “suddenly pensions are tumbling down”.

This is the story of how George Osborne has made it impossible for hard saving folks (like me) to save enough to buy an annuity of £27,000 or a defined benefit pension of £50,000.

I agree that capping people’s ambition at £27k pa is pretty mean but of course this assumes you buy a proper escalating annuity with some protection for your loved ones.

I also agree that it is absurd that while the £1m Life Time Allowance only buys a proper annuity of £27k, it buys a comparable DB pension of £50k pa.

I even agree that it is absurd that MPs get wonderful DB pensions while most of the rest of us are landed with rubbish DC.

But that’s when a few bells should start ringing in the orderly mind.

Why should £1m buy so much lower a DC pension?

Well – you could argue that an annuity is guaranteed for 100% of its payments while only the first £32k pa or the DB pension has the protection of the Pension Protection Fund. But as the guarantor of the PPF is ultimately the taxpayer as is the guarantor of the MPs and most remaining open DB plans, this point is academic.

Ever since the Government Actuary published his tables that estimated the cost of a pound’s worth of DB pension costs £20 while a pound’s worth of DC pension costs £30, I’ve been trying to find out why.

There are a whole lot of reasons, which include the fact that DC pensions are subject to EU Solvency rules while DB plans aren’t. They include the margin that has to be paid to the shareholders of the annuity insurer. They include too the efficiencies that are created by individual policies rather than he collective structure and payment systems of a DB plan.

 

So while I’m very angry that the Chancellor is again punishing the hard working regular saver (rather than the opportunistic tax-dodger), the real scandal lies in the difference in the conversion rates between DB and DC.

Why isn’t Ian Cowie asking the more fundamental question as to why George Osborne can get a pounds worth of protected pension for £20, when the likes of him (and me) have to pay 50% more for the same thing?

The answer is why most people need DC pensions being paid as DB pensions as they would be under CDC. The answer is not to restrict the amount DC savers can save but to ensure that DC savers can have the same deal as those dished out DB benefits.

When I went to hear Andrew Neal talk about the budget, he made Ian Cowie’s point that he would not be saving further into pensions because of the risks that any future Government would make another retrospective tax-raid on our retirement security.

Andrew Neal also mentioned the unjust treatment of DC savers, relative to DB savers but those GAD numbers are not  there to annoy Ian Cowie, they are there to highlight how horrible the fate of the DC saver is.

If Ian Cowie, Andrew Neal and George Osborne really want to get the tax treatment of pensions right, they would promote the DB way of doing things and accelerate the sift from DC decumulation to CDC decumulation.

But that might involve a little bit more engagement in the fundamentals of funded pensions , than we are getting today.

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The price of choice


fulcrum

It is becoming increasingly clear that the progress of the auto-enrolment project is balanced at the fulcrum.

Until now attention has been focussed on the technical details surrounding the auto-enrolment process.

But we are moving towards a new phase where the primary focus will shift to the point of auto-enrolment, the business of saving money for retirement.

The reason is simple, until now the 43,000 employers who have staged have been familiar with this pension business. From now on, an increasing large proportion of the employers staging will have no experience of saving into a pension , either as owners or on behalf of their staff.

The business of diverting a proportion of the company profits for the staff’s benefit has been the choice of the boss. No longer! The boss has to fork out and what’s more, the success of the enterprise, in terms of the investment of the money, is in the boss’ hands.


 

The pensions industry has been busy rubbishing auto-enrolment as “all about payroll”for the past three years , but soon it will have to change its tune. To me auto-enrolment is more than an inconvenience , it is the main event for the 5m employees who have never been offered a pension.

For these people, auto-enrolment is very much about the pension. The prospect of 8% of a high proportion of earnings being paid into my account, even if I have to wait a couple of years to get up to full speed.


Which brings me on to the one choice the employer really has to make, the choice of workplace pension.

Those who are planning to default thousands of employers into workplace pensions are, in my opinion, making a big mistake.

It is taking the Michael to suppose that people will put up with being palmed off with “it’s all about payroll”. This is people’s money, money that will be available in years to come however people want it.

I don’t think for a moment that employers will pay over 8% of band earnings into something they know nothing about. They may do for a couple of months but sooner or later they will have staff asking exactly what is going on with their money.


So if you are planning to offer the employers you look after a default pension arrangement you need to be pretty sure of why.

You will need an audit trail that tells you why you made the choice that you did and why you didn’t choose other providers.

The price of this choice need not be high. Technology can analyse employer’s needs and put forward suitable providers prepared to make an offer. Technology can provide a digital report explaining why one provider makes sense to you and why others don’t.

The price of this choice is no more than a couple of hundred pounds and if you want your clients to make informed choices , rather than go with your choice, press this http://www.pensionplaypen.com

 

 

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Great news for auto-enrolment as systemsync gets its funding.


Will Lovegrove (with child)

Will Lovegrove (with angel)

systemsync

The news that systemsync has got over £800,000 of angel funding should delight anyone wishing to see auto-enrolment work for our SMEs and micros. It’s going to be good news for payroll software companies and good news for pension providers.


The digital plumber

SystemSync is a digital plumber, providing the pipes through which people’s data can flow so that the right money goes to the right place at the right time. They make sure that the pipes don’t leak or worse rupture, spilling personal data all over the net.

My personal experience of working with Will Lovegrove , the architect of the deal and genius plumber, has been a happy one. So far, he has overseen much of the development work on PAPDIS, working with the CIPP and tPR as well as a group of providers and payroll software houses.

PAPDIS is the file format we hope will become a data standard. to use the plumbing analogy PAPDIS ensures that what goes into the system has the right ingredients, SystemSync makes sure that these ingredients come out the other end of the pipe just as needed.

Will has given of his time for nothing to make PAPDIS happen. I hope PAPDIS will be the launchpad for his wider aim to make auto-enrolment happen for everyone.

Three immediate benefits from systemsync’s work.

The new technology means that there can be an integrated approach to data transfer, reducing risk to payroll software company and improving efficiency. The investment they make in adopting systemsync’s approach is repaid in lower ongoing costs and lower operational risk.

For payroll bureaux, managed and in-house payrolls, systemsync’s plumbing means that data can be exported at a push of a button. The laborious processes of creating CSV files and exporting them manually to pension providers could be a thing of the past.

It means that insurers have data that is delivered to them in a format they can recognise so that they get things right first time. The expensive difficult work of unpicking data errors can be much reduced, IGCs and master trustees should be breathing a sigh of relief.

But best of all, systemsync can now deliver the means to make sure those who work for SMEs and Micros can share in the auto-enrolment revolution just as those who work in the larger companies are doing. Technology democratises good practice and systemsync demonstrate that process.

Democratising best practice

Just as we at pension playpen are using technology to ensure that smaller employers can make informed choices on the workplace pension, systemsync’s software will enable their data managers to provide a quality of service you’d expect if you worked in a FTSE100 company.

No one should get left behind. In all my dealings with Will, I have sensed I am working with someone who is not thinking about how things are, but how they should be. In the Pension Bib meetings, Will has become a touchstone for best practice and has shown an absolute commitment to making sure auto-enrolment is done right.

When I spoke to Will last night, we were clear that we work to the same purpose, to make sure auto-enrolment delivers the best pension outcomes to its participants. While we may be front of  house selling best practice in pensions, Will is busy as stage manager.

While we pour out the ingredients , Will is managing the plumbing.

We should be very happy, grateful and supportive. Well done Will and your team. I hope that your “plumbing” is adopted by all payroll software providers , benefits payroll managers whether in-house or agents and enables insurers and master trusts to continue providing auto-enrolment services for decades to come.

A video and a press release!

Here’s press release announcing the deal and Will’s brilliant take on how auto-enrolment did for the Third Reich


PRESS RELEASE

Systemsync solutions ltd is pleased to announce an initial investment of over £800k from a small group of angel investors to complete product development, and start delivery following commercial launch.

Systemsync solution ltd’s Data Integration Platform, addresses the iPAAS (Integration
Platform as a Service) market, allowing clients to easily integrate disparate IT systems within and between organisations. Being Cloud-based, and including high levels of data encryption,the Data Integration Platform is particularly suited to high volume integration in markets where regulation and commercial sensitivity is key, as well as for smaller and medium-sized organisations who cannot afford the cost and complexity of more traditional data integration solutions.

Systemsync Solutions Ltd was founded by CEO Will Lovegrove and two colleagues as a spinout from their previous business Release Consulting Ltd, which has provided outsourced software development and support services to major music industry clients for over 8 years.

Eight additional staff are also moving from Release Consulting Ltd to systemsync solutions ltd following this initial investment.

Systemsync solutions ltd has the UK’s auto-enrollment pension market as its initial application area. Having identified a significant gap in the market, they started developing the software over 12 months ago and it is now in beta tests with several Payroll Software and Pension

Provider organisations.

The software will enable low cost, easy, safe and secure transmission of millions of individual’s pension data from either Cloud-hosted or Desktop Payroll Software applications to the multiple pension providers who offer workplace pension schemes to UK businesses. As part of developing this market opportunity, systemsync solutions Ltd has worked alongside The Pensions Regulator, The Chartered Institute of Payroll Professionals and major players in the market to define The PAPDIS data standard for this market.

Will Lovegrove said that

“We have worked hard for over a year to create this product and
position ourselves into an initial, large, marketplace. We are very pleased to have attracted several high profile investors for this initial round to take us through to establishing a strong foothold in the market, and much appreciate their confidence in our business”.

The team has been working over the past 5 months with Alwyn Welch, former CEO and
senior executive at Aircom, Parity, Unisys and Cap Gemini. Welch, who has now joined
systemsync as Non-Exec Chairman, commented “ I am really pleased to be joining Will and his team in this very exciting company, building an iPAAS product that has application across many sectors”.

For further information please contact:

Will Lovegrove, CEO, on will@systemsyncsolutions.com or 07515 721603

Alwyn Welch, Non-Exec Chairman, on alwyn@systemsyncsolutions.com

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We need a tank to get us across this battlefield!


tanks

It is  a truism of current pension policy that the DWP deliberates and the Treasury pulls the trigger.

The Treasury approach certainly attracts headlines but will create casualties “through ignorance, weakness or our own deliberate fault”.

Nowhere will the blood be spilt as it will be post April as the entire population of those who have ever reached 55 with a DC pot will be in a position to release some “sexy-cash” from their pensions.

How “Sexy-cash” has been turned from evil inducement to healthy incentive

Sexy-cash is not my term, it is a term used by Steve Webb to describe the cash inducements that were used to lure people away from the guarantees in their DB plans. Only a couple of years ago, the idea that cash inducements might be used as a means to freedom would have been laughed out of court.

Add to the 6m who are in possession of an income secured by an annuity purchase, the 400,000 reaching 55 this year and a proportion of those yet to draw their DB pensions (up to 8% of those in funded DB (Hargreaves Lansdowne) and you get an idea of the carnage that could ensue.

The problem is that while we’re all dressed up- we have nowhere for our money to go.

There are not enough financial understand  (see my article on this, this week)

There is not enough advice

There is no obvious product for the silent majority of us who have no wish to buy annuities and no capacity or appetite to manage our own self-invested income drawdown arrangement.

Redington have been writing about the shift in responsibility from collective to individual

Redington

We are like the young men of England and Germany marched off to Flanders from 1914. We might think this is collective endeavour but once the whistle blows it’s every man for himself.

George Osborne reminds me of General Melchett ordering his men out of the trench into the teeth of enemy gunfire. Except Blackadder was a comedy.

budget


This battlefield needs tanks, this ship-wreck lifeboats!

In the face of the carnage to come, the bloodbath created by the office of pension irresponsibility (the name by which the Treasury should be known) , we need a lifeboat , or to extend my analogy, a tank behind which we can hide.

We need a middle way product between drawdown and annuity that looks like a pension but has property rights so people can move into an annuity, into drawdown, or just cash out.

We know for research done by Aon  and the DWP that around 70% of us, when asked what we want from our pension pot , describe a pension.

The only way that we can offer more than an annuity, without the uncertainty of a drawdown is through a non guaranteed target pension – what is referred to as CDC.


Unless we have a clear purpose for CDC- we should mothball it.

But with the print still wet on the Pension Scheme Act that allows CDC to happen, Dame Ann Begg, Chair of the DWP Select Committee on Pensions called for a halt to work on the secondary legislation on CDC.

She also calls for a review of just about everything else going on right now which is like trying to direct the traffic at Spaghetti junction!

I am not overly concerned by calls for policy changes within 50 days of a general election, all now is just political posturing, but I am concerned that Dame Ann Begg, who is an extremely able politician, has not had the opportunity to understand just why CDC is so relevant to the problems we are and will face.

Those of us who are Friends of CDC (and we are meeting the DWP next week to discuss this issue) need to be absolutely clear about the relevance of our product.

We must dispel myths we have created and allow to malinger to the detriment of CDC and our pension system.

CDC is not a means to replace DB (though it could be used to de-risk the most derelict schemes as it has been in Canada (New Brunswick).

Nor is CDC a means to replace DC workplace pensions (which are working very well thank you)

CDC is the tank behind which we can move across the battlefield

CDC is the tank behind which we foot soldiers ,out of our trenches, can move forward. CDC is a means for us to receive more income from our pension pot than we can purchase from an annuity and more security than we can extract from income drawdown.

CDC is a means of collectively insuring ourselves against living too long, while offering those who do not want to join the pool to bet individually underwritten for an enhanced individual annuity.

CDC is a means of having something that works like a DB pension but with the option of cashing out at any time.

In short, CDC is the answer not the problem. To stop working on CDC would be as crass an error as IBM ignoring personal computers or Nokia not building a smartphone.

The reason that Dame Ann Begg and the DWP select committee see CDC as a luxury that can be mothballed is because they have not been misled about what CDC should be.


But CDC and employers don’t mix

So let me make this absolutely clear. CDC is not going to work as an employer sponsored product. That is because employers do not want to participate in any pension where there is a risk (however remote) that they might be responsible for the member outcomes.

CDC will not work if employers have to pay into it or even be deemed a “participator”. Nor will it work as a group of personal pensions. The two existing pension structures which dominate private pensions are simply not fit for the purpose of clearing up the carnage of pension freedoms.

We don’t just need CDC, we need CDC in a new pension product that has the collective properties of an occupational pension scheme but the separation from the employer of a personal pension.

Into such a structure can be tipped the proceeds of our DC saving. Like the farmers in a European commune bringing their grapes to the collective vinery, we can exchange our money for pension.

The structure I am talking about actually exists, there is a statutory instrument on the DWP’s statue books which allows a Regulatory Own Fund (ROF)to be created for undefined purposes. As I understand it, a ROF is no more or less than a super trust like the Pension Protection Fund, set up by Government for the public good.

The ROF is my tank, or my lifeboat if I want to switch from the battlefield to the shipwreck.

CDC is the means of salvage and- much better- the means of salvation.


The simple solution to Dame Ann Begg’s problem!

You may wonder why Dame Ann Begg and the DWP Select Committee do not know about all this. You would be right to wonder- I wonder too. I don’t understand why many of our Friends of CDC keep peddling the idea of CDC as a replacement for DB or for workplace DC. Nor do I understand why they want to make CDC employer sponsored.

CDC – to work – must have nothing to do with employers. All employers need to do is signpost Pension Wise, or in extremis, explain that CDC exists.

All the Government needs to do is to allow this paired down vision for CDC to be created through secondary legislation created within the DWP by their excellent policy team.

So long as CDC is targeted at the problem – the carnage of pension freedoms and not the success story (DC workplace pension saving schemes), it is hugely relevant.

If it is billed as an alternative to employers to DC and DB, it will be irrelevant and should be binned.

It is as simple as that.

tank2

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Dissemblance and dissolution


2015-03-14 14.09.51

The stone walls built from the Abbey pulled down in the dissolution

 

 

Britain’s most famous advert was produced by Ridley Scott for Hovis, it put my town Shaftesbury on the map for many people. A fake Hovis loaf still sits at the top of Gold Hill

hovis

up which the young lad pushes the bakers bike and at the bottom of the hill is Folly Cottage.

Folly cottage

Shaftesbury is full of such dissemblance. As reported yesterday, its parish of Cann and Melbury is patronised by St Rumbold a 3 day  child who came out of the womb preaching and the town’s fortune in the Middle Ages centred on it having the bones of St Edward King and Martyr. St Edward was sanctified by being murdered by his mother aged 9 and his bones transported from Corfe to Shaftesbury to protect them from Viking raids.

So you can see Shaftesbury as a town that has built its reputation on dissemblance. That brass band that plays over the advert ensured that Hovis was as popular up north as it was for those down south who identified with the West Country voice over.

Art is seen by some as dissemblance and others a way of seeing things another way -Ridley Scott’s way or the way of Medieval Ecclesiastics.

David Hockney, in a fine documentary on BBC2 last night talked of painting water as an opportunity to see what appears on the surface or what is going on beneath and “painting water” is a good metaphor for his art.

Alan Higham, who seems to delight in my epithet “evergreen moaner”, picked up on the part of the blog yesterday “beneath the surface”

While everyone has been going on about pension freedoms, people in the public sector have been continuing to accrue guaranteed benefits at a rate that those who pay their wages and pensions cannot afford. Yesterday, I gave as an example, Dorset County Council’s failure to build a bypass around Melbury Abbas, something that could was proposed 20 years ago. Now – the main road into the village is impassable and the Stour valley looks to de disrupted for years.

The drain on public finances of paying disproportionate pensions to those who control public finances is a scandal that far outweighs “annuity mis-selling”. It is plain misleading, to suppose that this problem doesn’t exist.

I guess that up until the dissolution of the monasteries, ordinary people in Britain put up with the stuff and nonsense of 3 day olds giving sermons and 9 year olds being sanctified for being murdered. I suppose that Ridley Scott’s career was made by pretending that Gold Hill and Hovis were the answers to a country riven by post-war blues.

But the monasteries were dissolved and the wall along Gold Hill is largely made of the stones taken from the dissolved Shaftesbury Abbey. The bones of St Edward King and Martyr now languish in a Maltese Bank Vault (still on sale to any branch of the true church prepared to suspend disbelief).

At some point, someone, Michael Johnson maybe, will be able to explain to ordinary people and extraordinary politicians, that having guaranteed pensions for those who Govern and workplace savings plans for those that don’t is about as tenable as the system of indulgences that supported 16th century monasticism.

They discovered this in Canada and have started moving to a fairer system using CDC. I suspect that at some time, incidents like the closure of Dinah’s Hollow in Melbury will convince us that Government pensions have to change and change properly. We wouldn’t want them dissolved.

piers_1

 

For a great program on the LGPS which appeared on radio four this Sunday (March 15th) click here . the program features contributions from favourites on this blog including Michael Johnson and Dr Chris Sier as well as some not so favourite contributions.

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It’s all about Steve Webb – stupid!


PPI

Pensions Question Time at the PPI

Last night the Pension Policy Institute held a meeting to discuss the impact of next week’s budget on pensions. Expertly chaired by Paul Lewis, it turned out to be a meeting demonstrating the paucity of thinking available to Government if Gregg McClymont doesn’t win his Cumbernauld seat.

As well as our pension minister, the meeting heard from David Gauke (Conservative) and Stephen Timms (Labour). I do not want to criticise two hard working MPs, but frankly they are appeared like minnows to Webb’s leaping salmon.

There were two moments of great humour;- the first where Steve Webb asking Paul Lewis whether he could speak –  “or if we were returning to business as usual”.

The second;- Paul Lewis suggesting that for the conservatives to be outright winners and have the pensions brief to themselves, it would be under Prime Minister Boris Johnson.

After the meeting Jo Cumbo was tweeting that she had some pension intelligence from the Scottish Nationalists, that is how fluid the political climate has become.


 

Life after Webb

The watchword for post McClymont labour would be “consensus”, which could be rephrased “outsourced policy”. All pension decisions would (it seemed) be outsourced to David Blake and Debbie Harrison of Cass Business School who would be used as human shields to hide the paucity of thought on display elsewhere. Much as I like David and Debbie, they are not elected and represent a strand of left-wing thinking peculiar to Cass. Though we have contributed to their reviews, I am not comfortable with such a style of Government that abdicates responsibility for decisions and lacks all conviction. The only thing that Stephen Timms speaks about with certainty is that everyone should be paid the living wage. Noble as this sentiment is, it is not a pensions policy (unless we consider the living wage as total reward including employer contributions).

As for Conservative thinking, it seems to be about everything but pensions. When asked the question “how would you support employers to pay attention to their staff’s pension”, the line seems to be “wind up the staff – or in Treasury speak “apply a bottom up approach”. Similarly, market forces, rather than Government intervention can sort out the chaos that will follow the introduction of the freedoms. The departure of Mark Hoban from parliament looks a sore loss.

I dread to think what Nigel Farage would do to the carefully wrought plans for auto-enrolment; if he can chuck out 30 years of consideration of diversity legislation, why not can further roll-out to SMEs as “red-tape”.

poppies

Pension Policy – RIP?

 

 

Life with Webb

Despite Paul Lewis’ best endeavours to get David Gawke or Stephen Timms to say anything meaningful, the absence of Chatham House rules, the yet to be published manifestos and the manifest ignorance of two out of the three speakers, meant that this was the Steve Webb show (pt 63).

Webb claimed to have been castigated for not promoting the liberal cause more assiduously.  Frankly Steve Webb is the Liberal cause, if the party could re-model itself around his value set, speak with his candour and enthusiasm – it would run rings around the opposition- as Steve did for an hour and a half yesterday.

Pensions should not be a political football. The journey from becoming an eligible jobholder till dying will (statistically) be at least 70 years. Put another way, if we start saving at 22, we can expect- based on current mortality to live past 90.  If mortality trends continue as they have done the last 150 years, we will see 60, not as the beginning of the end, but the fulcrum of our financially independent years.

In this context, the management of our national strategy to ensure adequacy of income in later years, should not be subject to whether Gregg McClymont gets elected in Cumbernauld (I’ve a good mind to go up and help him this weekend). Nor should we hand over the keys to the Minister’s office to MPs who clearly have little appetite and less competence.

What yesterday’s meeting told me is that Labour and Conservatives have no leader to put forward who has the knowledge, passion and conviction to match Steve Webb. For the past five years we have been blessed not just with the Pension Minister of the century but with the leadership of a man who has been selected by his peers parliamentarian of the year.

It would be a good thing, whichever party is elected, to keep the pensions brief with Webb. If Webb does not get re-elected (perish the thought) then kick him upstairs and give him the brief from the Lords (as a cross-bencher).

Pensions under Webb!

 

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An escape plan for pensioners or pension schemes?


cat

This from Jo and Jim at the FT

Radical plans to give millions of existing pensioners new flexibility to sell their annuities for cash are under serious consideration by ministers ahead of next week’s Budget, building on the far-reaching reforms of the pensions system announced last year.

Jo Cumbo’s sources are Treasury sources, having found one rabbit in  the hat, it looks like they’re going for the cat.


 

Scalping annuities – a victimless crime?

This is the political equivalent of a “victimless crime”, there is no market interference , only a removal of previous interferences and a destigmatisation of the currency of death.

It may seem bizarre that there’s demand for income that’s life-dependent but there is. Like bookies with too much money staked on people dying tomorrow, our financial markets are short on immortality. They need healthy annuitants and their income streams to balance their books.

So if you go down to the financial woods today, don’t be surprised to find a bunch of insurers , reinsurers, pension scheme trustees and bankers, only too happy to offer you a price on your life. Infact they are circling for your money like a scalp for your ticket.

Collectively we’re short on immortality


 

A ticket for the wrong gig?

And the chances are , if you’ve bought an annuity, you think you have a ticket for the wrong gig. If you bought your annuity ten or fifteen years ago, you will  be pleasantly  surprised by the deal you are offered, you bought into the market when there were expectations of interest rates remaining high.

But if you bought your annuity recently, you may be in for a nasty surprise. Even discounting the payments you’ve already had, you won’t find yourself being offered the money you paid for the thing.

Unacceptable spreads?

Part of this is of course to pay for the costs of trading and the margins of the sale. As those evergreen moaners Higham and Ralfe put it

But the debate about whether we should have a second-hand annuity market goes deeper than talks of fleecing, the Treasury are simply extending the liberalisation they started when Osborne told us we need never buy an annuity again.

Where will it end (snorts the actuary)?

And if you can release people from the bondage of the annuity, you can release them from their final salary  pension (I am sure that the school shop will be only too happy to take back that uniform). Why stop there – why not pay out the basic state pension as a lump sum based on GAD rates, or better still as the sum of your national insurance contributions with a bit of interest on the top?

I am sure that Steve Webb lies in bed at night with these mischievous thoughts jumping up and down like sheep over the stile.

And Webb, Parliamentarian of the year, cheeky chappy from the black country is having a good old laugh at all our expenses – as you would.


 

Stevie Webb- having a laugh!

Far from being appalled, Webb- and I’m right with him here, is crying “bring it on- let’s have a debate about pensions that people can understand”.

If we can find a price for a second-hand annuity, we can find a price for that DB pension and the State Pension , and when we know what people are prepared to pay for these things, perhaps we’ll be a little a bit more serious about cherishing them.

Infact, if we knew the value of these pensions, with their guarantees, we might ask more questions like-

“how much could I get without the guarantee (CDC) and how much would I need to have to manage my own pension (income drawdown)”.


 

Lighten up – the Cat in the Hat is back!

This is, I hope, the reason for the FT being fed this stuff as we start the glide path to May’s election. For Osborne, this is about ensuring the debate on Freedoms does not descend into a bitch about Pension Wise and advice and guidance. For Webb it is about his life’s work, getting people to pay attention to their pension.

For the pension industry, it is another chance to shoot itself in the foot by stifling debate, or it is a chance to come out and shine (as usual Ros Altmann has seen the bigger picture).

I’m with Webb and Altmann and strangely I am with the Treasury. We need a national debate on pensions, on pension risk and on how we fund our old age- especially the unhealthy long-tail of decrepitude.

Last year we had the rabbit, this year we have the cat, that hat has a few more surprises yet- I’ll be bound.

In the mean time watch the Human League sing “Dreams of Leaving”, a song that has haunted my adult life and should be the soundtrack to the pension liberation debate.

 

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An alarming gap in pension regulation


free money

As we trundle towards the end of a parliament , of a financial year and of a pension tax regime there is a gung-ho spirit about. The Pension Schemes Act received Royal Assent and the major projects are all intact. None has failed yet.

Yet we know the big challenges fall beyond the scope of this Government, pension freedoms will be exercised the other side of a general election as will the auto-enrolment stagings of the vast bulk of our employers. Enforcement of the further measures protecting savers into workplace pensions resulting from the OFT report will be the job of  new Ministers and their regulators.

The potential for the ball to be dropped is one thing, but the absence of rules surrounding the playing of the game is another.


 

It’s been remarked upon that much of the detail surrounding Pension Wise has yet to emerge and April 6th is nearly upon us.

What has got less comment (though plenty on this blog) is that at least a million employers are set to start pension schemes for their staff without the least knowledge of what they are doing nor guidance as to what to do.

While we have the (barely used) master trust assurance framework in place for trustees, and IGCs in place for contract-based providers, employers have virtually no guidance on what to do.

020415_0742_WhatcanWest2.png

 

It is just as well that guidance on pensions is unregulated as there are precious few regulated advisers in a position to advise and those who are advising are generally recommending products they manage.

Employers are being asked to choose a pension but are generally being offered little or no choice. It’s NEST , or at best a choice of NEST or NOW or People’s. At worst it is the home-brew solution of an adviser. The independent in IFA seems, in this market at least, a distant memory.

Whereas the first five million auto-enrolled are in pensions which were advised upon and purchased with a degree of diligence, the next five million look like being enrolled in auto-purchased plans about which no-one knows very much.


These are precisely the conditions in which the scamster prospers with low levels of knowledge among those purchasing and low levels of regulation of the purchasing process.

Thankfully, the most foolhardy suggestion, that of a Directory that would have legitimised bad practice, has been dropped. But there is nothing to put in its place -yet.


This is where those who care about the purchasing decisions made by employers on behalf of their staff should be stepping into the regulatory breach. It is now becoming clear that traditional regulations are not fit for purpose, the 6 Principles and 31 characteristics of a DC scheme, put forward by the Regulator are of no purpose. The Master Trust Assurance Framework is neither adopted nor promoted, it is gathering dust on the shelf. There is nothing currently coming out of Brighton to suggest that SMEs and Micros will be protected from their own ignorance.

OFT

 

Other than the obligation to “choose a pension”, there is nothing in Regulation to suggest how this should be done, what makes for a good choice and how that choice should be communicated to staff.

This last point is of particular importance. If we are to have any hope of improving understanding and member behaviours, we need people to be confident into what they are saving into.

Most people who are enrolled have no understanding of where their money is going nor why it is going there. Nor will the people who chose the pensions!

This ludicrous state of affairs is happening because of the absence of any accountability for this part of the process within Government.

The FCA will say that this is part of the DWP’s remit. The DWP will point out that this is a distribution issue and that the distributors are FCA regulated (if regulated at all). The Pension Regulator for auto-enrolment , points to the Pension Regulator for DC schemes who points back. The Treasury is busy elsewhere.

So we trundle on

  • An accountant stands in front of 150 IFAs at the AE invitational in London and states that he is recommending a default pension solution to his clients – no questions are asked.
  • An accountancy network choose a national IFAs master trust solution for it’s 4000 members, no questions are asked.
  • NEST pleads with advisers to recommend its product on its investment merits, no questions are asked.

This is the consequence of allowing the investment of people’s salary to fall off the auto-enrolment agenda from 2012 to today. Since stopped paying attention to the pension, concentrating on middleware and AE compliance, we have lost sight of the wood.

Thankfully, we seem to be awakening from the era of “pension agnosticism”. We can either return to a system of independent advice where employers pay to learn about pensions, or we can have a free for all where advisers and conventional providers compete in a land-grab for as many of the remaining 1.2m employer’s business as they can get.

The question is whether we get a referee or whether this turns into an unseemly bunfight, whether there are rules that govern good practice (which are kept) or whether it is every man (and conman) for him or her self.

We have about six months to get ourselves sorted on this. By the time we get to Q4 2015, nearly as many employers will be preparing to stage as had staged in the previous three years. They will be preparing often without advice and with little guidance. It is critical they do the right thing by their staff.

If we do not get some proper purchasing into the system, we can expect to see employer and employee contributions being woefully invested.

In this world, the best lack all conviction

while the worst are filled with a passionate intensity.

Let us hope it does not come to that, but for us to avoid this problem, we should, as the Regulator asks us to do, pre-plan.

Except this time, we look like we are going to have to do the Regulator’s job for them.

 

 

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Hats off to the Regulator – there is no shortcut to good practice.


Pension information

The Pensions Regulator has scrapped a plan to list auto-enrolment schemes on its website. We in the Pension PlayPen are pleased. We put our views to the Regulator (you can read them here), we can sum them up by saying that “if a job’s worth doing, it’s worth doing well”.

The Regulator agrees saying that it has now dropped the plans over fears the list could not be objective and transparent with our substantial assessment of all listed schemes. This was precisely our point. A bald list of schemes prepared to quote for everything would have presented a charter to every snake oil salesman and seamster who chose to set up a master trust or rent an personal pension licence.

The last time the Regulator tried something like this was for Stakeholder Pensions and that list has not been updated since 2001! So well done the Pension Regulator for listening.


 

We all agree SMEs and micros need support choosing a pension

I think there is a consensus that we need to find a  proper way to support small and micro employers finding  their scheme.

We believe this  way exists and, I’m pleased to say it has already been used by hundreds of employers up and down the United Kingdom – it is of course http://www.pensionplaypen.com.

In case anyone is in any doubt of the seriousness of our project, we will be meeting with the Pensions Regulator next week to discuss with it what can be done to ensure that employers do not sleepwalk into NEST or any other “default provider” put up by an auto-enrolment adviser.


Do we want a big three?

NOW_RGBnest-185x114peoples

 

 

 

This is a rather more positive position than that reported in Money Marketing  by NOW and The People’s Pension. Their moaning about tPR favouriting NEST is understandable, the DWP owns tPR and it’s put £600m behind NEST but I do not get any sense from the Regulator that they “it will only flag NEST”.

NEST reported in its Insight 15 document that many providers they spoke to looked no further than NEST and, if they did, looked only at People’s and NOW.

This is not a good situation, any more than having a premier league comprising Chelsea , Man City or Man Utd. Currently Legal & General and Standard Life are regularly chosen from http://www.pensionplaypen.com and there is a long list of insurers and mastertrusts that are used less often.

Where would a premier league be without West Ham,Southampton and Swansea?

We suspect that the lack of research by employers is not because they do not want to know what is available to them, but because there is insufficient awareness of “teams lower down the leagues” that are particularly relevant.

If you are a construction company in Northern Ireland , you should not ignore the Workers Pension, if you are a Social Housing organisation, check out Pension Trust’s Smarter Pension and if you are a member of the Federation of Small Business, get the excellent terms they offer on the Scottish Widows GPP.

Many of these propositions might normally be overlooked, but provided you fill in our fact find, you will find your way to these workplace pensions.


 

Informed choice, comes from knowledge not lists

I was asked by Money Marketing for a comment on the criticism of the Pension Regulator and have made this statement

Nest is not the only fruit and employers who don’t look at alternatives are failing their staff and leaving them exposed to criticism or even litigation, especially if the scheme chosen under performs. NEST acknowledge that employers should document why they chose NEST and there’s no way an employer can do this without reference to other schemes.
So employers need to know the choices available to them and in theory a directory is a good idea. But in practice, the directory tPR was proposing could not work. The only criteria for inclusion would have been that the scheme qualified and was open to all  employers. This would have been a charter for every snake oil salesman in Britain to legitimise their product on a Government site,
Information is not knowledge, knowledge comes when the information is presented in a sensible way that enables employers to make informed choices. The Pension Regulator took the decision that they could not present a directory that was ambitious enough to give employers guidance. Working on the principle that if a job’s worth doing it’s worth doing well, they decided not to do the job at all. We think this was the right decision.

 


 

How we shortlist providers

I’ve been asked to provide a statement of how we choose who appears on our shortlists

All the credible providers are researched. Occasionally a provider who meets our criteria will not complete due diligence and chooses to be excluded. Currently two products that meet our criteria for selection are choosing to be excluded (Corporate Vantage and Supertrust).

Sometimes, providers choose to be temporarily excluded. Friendly Pensions is an example of a provider that has asked to be excluded for a quarter as it makes changes to its proposition.

We want http://www.pensionplaypen.com to be inclusive, but respect providers who do not want to be researched and have their products compared.

We do not currently include the GPPs offered by advisers which dress up existing products in their clothing (examples CBS’ version of Scottish Widows GPP) or Aon’s version of Blackrock’s GPP).

We don’t currently include those mastertrusts set up for advisers to market their own investment styles.

And we will never include any workplace pension that does not provide us with all the information we need to complete due diligence.

There is good reason for these exclusions. Choice has to be meaningful. Where the underlying governance, administration and at retirement processes are identical, we think the tweaking of investment options and member communications is little more than re-branding and we will not offer variants on a core proposition merely to put advisers into play.


 

Transparency in all things.

http://www.pensionplaypen.com does  not claim to be a definitive directory, but it offers a wider range of choice than any other service.

We are happy to share with the Regulator not just the methodology, but our fundamental research and the underlying ratings which we give providers.While much of this research is not ours- but the property of First Actuarial, we will share, with First Actuarial’s permission, our ratings with providers.

We publish a range of guides and research documents at https://www.pensionplaypen.com/guides which tell our customers how we do this.

We also publish our guide to how we apply our research which can be found here

Our directory is properly formulated and properly maintained, it is as inclusive as we can make it and we aim to ensure that an employer using our service (or the adviser) can present all meaningful choices that are available to it.


 

Meaningful choice at the right price

The current retail price for using our “choose a pension” service is £499 (+vat). This includes the support of either ourselves, or where we are working in partnership with an adviser such as First Actuarial, Alexander House or Abacus – our partners.

Where support is not provided, we have considerably less overhead, there may be scope to reduce our price where a client is self sufficient or where our service is embedded in a a holistic auto-enrolment service.

For employers, unused to having to pay upfront for financial services products – any price is initially a barrier (this is the pernicious legacy of a commission system that kidded employers that advice was for free).

However, as the numbers of employers choosing a pension increases and the capacity to introduce self-service increases, we believe that we will be able to reduce the cost of using our service substantially.


 

But auto-enrolment costs

The DWP and tPR have generally done a great job so far. Perhaps my one serious gripe is the publication early in the process of these numbers

DWPCapture

The original cost assessments for staging auto-enrolment produced in 2012 by the DWP (above), created a false expectation not just to the Treasury but to their own civil servants that AE was pretty well for free.

It is not possible to set up the complex processes needed to implement and manage auto-enrolment, let alone research and select a proper workplace pension within these budgets.

Next steps for the Pension Regulator

When we meet the Regulator next week, we will be calling on them to research the actual costs of auto-enrolment , both in terms of internal management time and in the purchasing of outsourced services.

In particular, we would like tPR to work with us to scope what employers should be doing to choose a workplace pension. Once scoped, we’d like tPR to cost that process within a range of options , ranging from the belts and braces approach adopted by larger employers employing a manual process to the bare minimum acceptable standard (let’s say a properly researched view of the market culminating in a reason why letter made available to staff and employee representatives).

I challenge tPR to find any service that can put meaningful choice to an employer and document that choice and the decision taken, for less than five hundred pounds.

No short cut to best practice

I think we will look back at tPR’s decision as a tipping point in our progress towards national enrolment.

By rejecting the easy option of a Directory, tPR has put “informed choice” back on the agenda of smaller employers. But it is not enough for tPR to just wash its hands of pensions (it is the Pension Regulator), tPR must now insist on SMEs and micros choosing a pension for staff- or if delegating this responsibility to an adviser, having that choice made in an informed way.

The alternative will be for up to a million companies having workplace pensions which they know nothing about and many millions of staff investing in schemes that might as well have been purchased in a car-boot sale.

There is no short-cut to best practice.

 

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Ken Davy – you are a magnificent man – but we must move on!


Ken_Davy_682x400_877517a

 

I was entertained and amazed last night listening to Ken Davy talk about the likely impact of pension freedoms. I was saddened too, for Ken’s a man who represents the absolute integrity of advice in this country, and he is not happy.

His theme was mis-selling and he reminded us of the bitterness created between actuaries and financial advisers from the late eighties onwards.

There is a divide between advisers and actuaries that was created then and has still to be bridged. I first met Ken in the offices of the NAPF last year. He had never been into them, I felt I was never out of them. As we were taking Joanne Seagers walked past and we exchanged pleasantries, she looked at Ken and walked away. It remains an image that dwells in my memory and flashes to the front whenever I talk with trustees about advice.

The entrenched positions that have been taken are not helping us to move forward. We have a regulatory regime that has yet to move an inch to accommodate the desire of ordinary people to spend their defined benefits in their undefined way.

Understanding the objectives of ordinary people is simply not on the agenda of the FCA when it comes to the “guaranteed” benefits offered by occupational schemes. It remains the Transfer Value Analysis that governs the advisory process, not the wishes of those who are beneficiaries. Indeed, the member and the adviser are not even given access to a key document that should enable proper advice on risk to be given – the trustee’s assessment of the employer’s covenant.

I think Ken Davy a fantastic man, I could have listened to him talk all night (and nearly did). But he is wrong to be bitter, understandable as his bitterness is. Even though the treatment meeted out to advisers and their insurers as a result of mis-selling was disastrous  to independent financial advice, even though the restitution process was hopelessly unfair and allowed all kinds of arbitrage against adviser, we have to move on.

Trustees do not have it in for advisers nor should actuaries. I say “should” though I know that many actuaries remain obstinately prejudiced against or blindly ignorant of the value of advisers. Many, like Joanne, simply haven’t engaged and are consequently unwittingly part of the problem.

It is critically important that Ken and his gang and Joanne and her gang meet half way and that they work together to sort out the problems with transfers. While the two sides stay apart, it will be difficult to get the regulatory easements needed for people to make choices about staying or going from their occupational schemes.

You can shake a bottle of pop so hard but eventually the pressure will force the cap off, the resulting mess from pop and cork and broken glass is not what we want. What Mark Hoban calls “financial carnage” will ensue from our failing to bridge the divide.

 

 

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The long walk to pension freedom


house

Would you buy a house like this?

So why do so many people treat their pensions like they were buying a 12 pack of beer?


I wrote three blogs last week about the need for a Code of Good Practice for pension transfers.

The first suggest we take a more grown up attitude to risk both within and without a DB scheme

The second introduces the idea of a code of practice to improve the quality of advice

The third looks at transfers from an advisers perspective and asks whether (without a code), it’s worth an adviser getting involved

The idea came out of work I’m doing for the trustees and employers we work for at First Actuarial. Trustees are required to ensure that advice is taken on transfers 9over £30k in value) and employers , who would love to see the back of their pension liabilities are keen to help the trustees find people to do the job.


So what’s the big issue?

The problems’ that (according to Hargreaves) 8% of all in DB schemes want to look at a transfer to exercise Pension Freedoms. IFAs fear they aren’t skilful and knowledgeable and don’t want to advise. (And I suspect that their insurers won’t let many of them).

So we are in a bind with thousands wanting freedom, Government rules that demand advice (For transfers with a valid over £30k) and very little advice to go round.

The risk is, that without proper advice, many people will become insistent customers and transfer anyway.


Advice protects pensions

(A senior journalist picked up on this last night)

It’s campaigners like Angie Brooks and  IFA’s like Peter Pearce (@agedboyracer) that are needed. Responsible people who want to do the right thing by clients

Angie and Peter tweet “fraud”  because they are concerned that without action, the money that is transferred will find its way into scams.

If you read the blogs , you can see what a code of practice would need to cover.

  1. A proper understanding from adviser and client of the client’s financial objectives
  2. A proper understanding of risk of staying in and of transferring out
  3. An understanding of the value of the transfer relative to what is being given up.

As Alan Rubenstein said in the Telegraph a couple of Sundays ago, people need to be aware of the risks scheme deficits pose members as part of this process.

They need to understand that the transfer value is based on assumptions that may be quite different from what actually happens (in terms of inflation, market returns and longevity)

But most of all, people need to understand what their retirement is likely to look like in terms of financial needs- and organise their finances around it.


What needs to happen for progress to be made?

Any code would have to come from the bottom up (as happened with the code for ETVs organised by Margaret Snowden).

If it happened, it would need to happen around one of the proper IFA compliance service companies – and through the energy and good sense of someone like Phil Young  (@philyoung360)   at ThreeSixty Services.

It would need the blessing of the FCA ( Project Innovate) and the active support of trustees and employers and of course it would need to work.

My guess is that @rosaltmann @pensionsmonkey and @alanhigham would need to get behind such an idea. If you are on twitter, you should link to these people, if you’re not, they’re Ros Altmann, Alan Higham and Tom McPhail who between them have done a great deal for the over 55s.

For the code to work it would have to have the support of the Pension Regulator whose job is to protect the assets in occupational pension schemes .

And for a code of practice to work, we would need @TPASnews (TPAS) and @citizensadvice  to accept and promote it as part of Pension Wise.

Pension Wise

Without it , I see a lot of frustration from the stalemate. With it, we may get some sense in the market but there are risks in any event.

When an adviser has to say “no” and charges a customer who has paid hoping he says “yes” it hurts, a bit like paying for an IVF assessment only to be told you can never have a baby. Or paying for a structural survey only to find you can’t get a mortgage on the property.


Jobs for the boys?

Some will say that a code just promotes unnecessary advisory fees; I think they are wrong. A code of practice should make sure that if you get transfer advice you get value for your money.

You can spend a lifetime pounding away trying to get a baby, you can buy your house and find you can’t resell it. You can take a transfer signed off by a fraudster and lose your pension. Or you can do things properly.


Or getting it right?

There is a walk to pension freedom – it needn’t be that long if we can get advice right.

mandela

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When will we ever learn?


 

seeger

There are no short-cuts in pensions, there are no silver bullets, easy answers, no lottery wins, no free alpha. There’s just a lot of hard saving backed up by good governance , cost control and sound investment strategy.

Pete Seeger, the American folk singer, composed “Where have all the flowers gone” to express his fatigue at the cynicism of the America he had fought for in the Korean war. He ends the chorus with the refrain; “when will we ever learn”. If you’ve got 119 seconds free, listen to him sing it at the end of this blog.

Financial services seems condemned to repeating its mistakes. We have a capacity to dress the mistakes in different clothes but the mistake is the same. Until we design our products, our conduct and our attitude around our customers, we will find ourselves reversing up cul-de-sacs of our own making.

When will we ever learn?


 

Last week I had a number of conversations with people who have been entrusted to establish auto-enrolment programs for small employers. The people I talked to were accountants, the managers of payroll bureaux and the designers of auto-enrolment software.

The common assumption is that as long as the workplace pension integrates with payroll at the commencement of the process, everything will be alright (compliant).

One firm of accountants is adopting NEST as the default, another a vertically integrated master trust managed by a national IFA, another has no guidance for the employer other than to google workplace pensions.

When will we ever learn?


 

We have taken short-cuts  so many times. We did it with pension transfers, we did it with PPI  and now we are doing it with workplace pensions.

We forget that the money we are extracting from people’s pay packets is being invested for the financial futures of our nation’s workforce. They are consenting to this because they have been told, and they believe, that the investments will secure them a proper retirement. They are putting their trust in their employer to choose the right investment, for the provider to do the right thing and for Government to well – govern!

If an employee were to ask the boss how he chose the investment of a lifetime of contributions, what would you- the boss -say?

I took advice from my accountant who said…they’d spoke to the people who run our payroll and they said, they’d  spoken to some  financial advisers and they said…

They said what?

They said that if I couldn’t make up my mind, I should use the default- which is exactly what we did…

So you took advice?

Yes, we took the advice…

And where’s the record of that advice? 

We were assured that the workplace pension we were using complied with the Government’s qualifying rules, so we didn’t ask for reasons why they selected the pension they did.

I thought that you were selecting the pension?

Well technically yes, but we didn’t want to get involved in something we didn’t understand.

And now it’s gone wrong!

Well I know, and I’m having words with our accountants, and the are having words with the software suppliers they used and we are all having words with the financial adviser.

And what are they saying?

They’re blaming the Government.

I saw that program on the TV about this..

The one that said I could join the class action? You know what it means if that action succeeds?

I’ll get compensation?

You’ll get compensation but I’ll be paying the price in my insurance premiums and we’ll have to get new accountants and a new payroll.

You should have thought about that when you set this up

That was a long time ago and there were different managers then…

Yes, but I’m still working for you , and I’ve paid into this pension every month for 20 years

But we’ve learned from their mistakes and in future it’s going to be ok.

When will you ever learn?

 

Playpen home

Advertisement!

 

Ladies and Gentlemen, it doesn’t have to be like this. For the cost of a new tyre on his Jag, your boss can choose the right pension , not just for his payroll, but for you.

If he chooses to spend a couple of hundred pounds, he can get the information he needs to take his decision, a full report on what and how he chose and a certificate signed by an actuary confirming that he has followed a process with due diligence.

Don’t settle for less, don’t take short-cuts and don’t risk your workers and your company’s future.

 

Now for that video!

 

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Pension transfers – are they worth it?


advice-luggage_2318792b

Britain is in great need of advice on transfers between one pension and another. This doesn’t just mean transfers from defined benefit schemes to defined contribution schemes, it means support in transferring pot to pot transfers for DC arrangements.

Unless you have a very small DB benefit, you will have to take regulated advice before you free up your benefits, insurance companies are writing to customers looking to move their pots warning of potential risks and urging they take a similar course of action.

In this article I outline the bind that we are getting ourselves into as we collectively ask

“pension transfers – are they worth it”


 

The value of a transfer

There are a number of objective people may have for wanting to shift money. For instance

  1. Performance – they think their money will work harder for them and provide more for them in the future
  2. Guarantees- people do not want the guarantees they have been offered (or aren’t prepared to pay their price
  3. Freedom- people want to spend their money in retirement how they like and not have a pattern of payments imposed on them
  4. Control – some people are uncomfortable with others managing their money and want to have day to day control of its management
  5. Debt, the immediate need to release a person or a family from debt may mean swapping future security for a way out of a crisis

These objectives are collectively the value of the transfer

I am sure there are many other objectives that people have for bringing their savings together , though if one Lamborghini is actually purchased from aggregation, I would be surprised (cue one reader sending me their pre-order form!).

lamborghini


None of these objectives makes it right to transfer. But the point of pension freedoms is that it puts people’s objectives back at the top of the agenda, it’s no longer what fiduciaries think is right that matters most, in the end it is what people think is right for them.

People want some light in the darkness.

lux in tenebris

lux in tenebris

I we freedom and choice, let’s make sure the choices are informed.

Before pressing the transfer button, people have a right to know what is being given up as well as what is being gained. When people were last encouraged to transfer like this, it was in the late eighties and nineties when the introduction of personal pensions was seen as a reason in itself to transfer.

Many people were advised to transfer because they could. The net result was a massive restitution program that cost personal pension providers and advisers a fortune and tainted the reputation of pensions for decades.


 

The cost of a transfer

weighing-up-cost

 

For most people, the value of a transfer needs to be weighed against the cost of a transfer.

The cost of the transfer is more easily measurable than the value but it is still partially a subjective measure. For instance, it’s a matter of opinion whether one fund will produce more money than another, that the security of one promise is higher than another or that the transfer value is a fair reflection of the benefit given up.

Of course there are objective measures; we can estimated transition costs with reference to those incurred from other transfers and if we have proper information (IA pleas note) we can assess the value for money of one fund over another in terms of returns achieved against costs incurred.

But a risk assessment made about someone’s own money is bound to be subjective, and it’s considerably harder to make a decision on your own money than it is on other people’s money, because this decision affects your and your family’s future – possibly for decades to come.


 

Value for money

value of something

The formulations for value and for cost are fiendishly difficult and questions like “is it worth it?” cannot always be answered with a yes or no, there are too many “it depends” clauses that need to be inserted along the road to a decision.

Value for advice?

advice

For advisers, the “is it worth it?” question is almost as hard. The value is in the fee that can be secured (or the income stream from funds under management) plus the value of helping a client out- in terms of relationship management. But the cost of getting it wrong, in terms of fines, restitution and reputational damage is high.

This week we have heard a number of IFAs and IFA groups stating publicly that they will not give transfer advice. In the same week, I hear that

” market research conducted earlier this month by Hargreaves Lansdown suggests that about 500,000 of the 6.8 million DB scheme members in the UK plan to transfer their money to DC schemes following the introduction of pensions freedoms – about 8% of the total.” – Professional Adviser

Neil MacGillivray, who’s head of technical support at James Hay told a conference that if IFAs do not advise, the way is clear for the fraudsters. 


 

The Bind

bind

We are in a bind here; 8% of people in DB schemes (and many more with legacy DC benefits) are looking for advice on whether transferring from the DB scheme towards “pension freedom” adds sufficient value  for the cost involved.

But advisers will not advise or will only advise at a cost which most people will not entertain.

Intercession?

Financial-Conduct-Authority

When we get to such a stand-off, there needs to be some intercession, either from the top or from the bottom (or both). It could be possible for the boffins in Canary Wharf to construct a new section of the COBs rule book, consult on it and enforce it. But this process would take a very long time and runs the risk of being over-engineered and unwieldy.

The bottom up approach involves advisers, with the help of someone who wears a collective compliance hat for advisers, going to the FCA with a code of practice , constructed by advisers under which advisers would be able to support individuals make decisions without fear of recrimination. By recrimination, I mean both civil or regulatory litigation.

What that solution looks like in detail is not for these pages. I’ve described  the three legged stool , with client objectives, a credit risk assessment and a transfer analysis in a recent blog.

A code of good practice looks like the basis of an “is it worth it?” discussion that can lead to somebody taking an informed choice.

But as a bottom up solution, perhaps organised around Threesixty , such a code could not in itself provide protection. It would need to be tested by the FCA and approved. I am interested in the FCA’s Innovation Hub and how it can be used to help this problem.

 

http://embed.buto.tv/DWCTY

 

More questions than answers

For the trustees of occupational pension schemes and the IGCs of insurance companies the issues are broadly the same, is it better for the members they represent to exercise their freedoms and move to good or is it better to stay put (the devil you know). They cannot advise their members other than to recommend Pension Wise

Pension Wise

 

Pension Wise cannot give advice and can only recommend taking financial advice. So the Bind extends beyond the individual and the adviser and encompasses employers and trustees, Pension Wise and ultimately the people who set these Pension Freedoms up.

For all the talk of “second line of defence” there is no obvious answer to the question “is it worth it”. In this, as in so much else, only leadership will see us through.

 

Call to action

adviser

I hope that  you will feel you would like to be involved, whether as a member, employer,trustee, regulator or advisor. If so, please drop me a line on henry.h.tapper@firstactuarial.co.uk. I already have many such emails (thanks to all who wrote this week).

I promise to run with this till I can pass the baton to someone or some people better fitted to taking it on.

blackboard

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A code of good practice for transfer advice?


 

lauren-characterWe are rubbish at financial risk and we know it. We take decisions on financial matters with as much confidence as betting on the horses and if our horse falls at the first we blame everyone but ourselves!

Small wonder that many financial advisers look to de-risking their businesses as discretionary fund managers or their agents. Exposure to something going wrong is limited and payment is certain.

At the other end of the risk spectrum are advisers helping people with the really difficult choices that surround guarantees.

I spent some of yesterday with Phil Young who manages a compliance service for financial advisers known as 360. We talked about the need people have to understand the risk within their “guaranteed” products and how little we explain what the market calls “credit risk”, the risk of guarantees being broken.

Phil is very smart about priorities and taught me something that I once knew and have since forgotten. Good advisers understand people’s objectives, I’d go further and the best advisers get their clients to understand their objectives. What a client wants and needs are of course different things and part of the job of a financial adviser is to help people prioritise their needs, often deferring immediate gratification and insuring against future peril.

The degree of certainty needed to achieve long term goals varies from person to person, some can afford to take risk and some like to take risk and some are risk averse to the extent that risk can physically make them sick. So financial objectives involve understanding what can realistically be expected from the structuring of retirement savings.

It is clear that most people want a replacement income in retirement , but it is not certain they want that income to be guaranteed. If the income is guaranteed, how good is that guarantee. In yesterday’s blog I looked at ways of incorporating risk analysis to get a simple measure for how likely a pension fund was to meet its obligations, make every payment to you as agreed.

If someone’s financial objectives are top of the ladder in considering “what to do” about planning retirement income, risk must be second.

A simple yes/no/maybe answer using a transfer value analysis system which does not take into account someone’s objectives and a total understanding of risk, is an insufficient basis on which to take a decision.

And yet much analysis we see focus on finger in the air projections which rely heavily on fund recommendations. The reliance on silver bullets from fund picking is a subtle risk transfer from the adviser to the fund manager and beyond that to markets.

Similarly a simple yes/no/maybe answer using a transfer value analysis system is

One learned actuarial friend explained the reason for active funds was to give trustees someone to blame when he screwed up. Blaming fund managers for not meeting the targets set by actuaries or advisers is second only to the old chestnut “irrational markets”.

To return to my racing analogy, and we are only weeks from Cheltenham, when a horse falls, blame the jockey, the trainer even the horse, but never blame yourself for backing it!

I want to see more advisers advising people about their objectives and the risks they are taking meeting them, whether those risks are not saving, or insuring or simply taking too much or too little risk in their investments , for their risk appetite.

Phil and I agreed to work to a common goal to make this happen in one area of the market we see as particularly in need of improvement, the provision of advice to people on whether to exchange defined benefit pension rights for rights that could be more secure (annuities or state pension ) or less secure, drawdown- or thinking ahead – CDC.

We didn’t have a silver bullet but we discussed the work of Princess Margaret Snowden OBE and what she has done to create a code for benefit consultants managing enhanced transfer projects; we agreed that what is needed is a code of conduct within which advisers can advise with a degree of certainty and without the risk of regulatory or client litigation.

Fundamental to our conversation was our agreement that what is good for a client must be good for an adviser- not the other way round.

Trustees of occupational pension schemes need good advice to be given to members about risk, especially when coming to the point when they exercise the new pension freedoms.

Those who advise trustees and those who advise members spend too little time talking to each other. Phil and I agreed to talk more.

I’d be pleased to hear from anyone who would be interested in joining us in looking at what a code of good practice for transfer advice could look like.

 

Posted in reward, risk | Tagged , , , , , , , , , , , , , , , , , , | 11 Comments

Why DB pension promises may need a credit rating.


credit granny

How do you rate the creditworthiness of your scheme’s funding?

Trustees of defined benefit schemes now have to properly assess the employer’s ability (and willingness) to fund the promises made to the members of the scheme. The assessment helps them in negotiations with the employer on funding issues and (typically) the recovery plan put into place when there is not deemed to be enough money in the DB pot to meet the promises made to all the members.

This assessment can be expensive to get,  the costs are passed on to an employer but the information stays with the trustees.

Much of the information in the assessment may be sensitive as a good assessment probes into the risks the employer is running and the challenges ahead.

Understandably, employers who may already  be aggrieved by having to pay to expose their dirty linen to the trustees, may be even more reluctant to share this information with pension scheme members and their financial advisers.

It may be in the employer’s interests to expose its dirty linen.

But it may be in their best interests to allow members of their defined benefit scheme, paradoxically, especially when the assessment is that the employer’s covenant is weak


Let me explain;

A weak covenant means that the employer may have trouble paying its pension promise to the fund, unless the fund gets lucky on investments or the outlook for interest rates improves (the measure that governs the measurement of liabilities) it may be that the pension scheme may stay underfunded and one day go into the pension protection fund (PPF)

For many people, the  PPF may not be that bad news, people with small benefits may not lose out; but members with bigger benefits stand to see their pension promise clipped by as much as a quarter if their pension scheme has to be bailed out.

If people knew that there was a significant risk of losing part of their pension, they might be more inclined to take a transfer value, even were it to be a tad stingey,

And this might suit the employer very well, since the kind of people who bother to look into these things with their advisers are the kind of people who have sizeable chunks of a DB scheme’s liabilities.

The transfer value takes these liabilities off the books, often at considerably less cost than the book value of the member’s benefits.

To understand this last bit, you will have to investigate the arcane valuation system of a pension scheme which can be carried out on a number of basis. As all the basis’ produce different results, a trustee can use one valuation basis to calculate transfer values and another to value the members benefits when asking for funds from the employer,

I am not an actuary (does nobody listen?) and I don’t want to go into why all this is, but let us just say that it may be in both the member’s interests and the interest of the Pension Scheme, that the member goes his or her separate way.

So airing your dirty laundry to your staff might just make sense. It may be embarrassing and it may not be something you want suppliers and customers to know, but sometimes it pays to be honest and transparent.


 

And no employee should be anything but grateful for this information.

I cannot think of any other asset of comparable value to a pension promise that we know so little about. Imagine owning a corporate bond and not being offered a credit rating, or buying a house and not being able to see a structural survey.

A pension promise is only as good as the promise that backs it up, and if the employer’s covenant is junk, then the Transfer value may be very good value indeed.

Working out a credit score is hard , but understanding it is easy.

 

credit score

 


 

How Alan Rubenstein can help!

In his article in the Telegraph over the weekend which you can read via this link, Alan Rubenstein, the boss at the PPF, suggests that members of pension funds should be asking the difficult questions about the quality of the support employers can give to the pension promised.

For the PPF, who want to see greater solvency in DB pension schemes, the de-risking of those schemes by members voluntarily taking transfer values, is a good thing. For trustees, it improves security for the remaining members. For employers it gives welcome relief from pension pressure on the balance sheet.

For members the availability of a covenant assessment and/or a PPF rating is wothwhile information, with the assistance of a trained adviser (or a personal understanding of credit), that information can be turned to  knowledge.

Perhaps DB members should be asking Alan a question.

“If DB scheme’s are risk-assessed by the PPF, why doesn’t the PPF make those ratings available to scheme members?”

Posted in de-risking, defined ambition, Pension Freedoms, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , , , , | Leave a comment

Let’s talk about risk – trustees, let’s talk about you and me..


 

Talk Risk

The Telegraph has published an excellent article on the risks of you not getting your full pension from a defined benefit pension scheme. In it, Alan Rubenstein who is in charge of the Government Lifeboat for schemes that go bust (the Pension Protection Fund) says

“It is misleading to allow people to expect promised pensions when in fact there is only money enough to pay about 60 per cent of those pensions [should they be cashed in today] and where nothing is being done about the shortfall.”

He is absolutely right, there are a small number of these schemes that are falling further and further behind the run-rate. Some will have to score at the equivalent of ten an over and some of the employers have too many wickets down. Unless there is a miracle partnership from numbers 10 and 11, many schemes will be all out.

deficit levels

Today DB pension schemes can only afford to pay on average 80% of the pension

 

The situation looks particularly dire at this moment. We had expected to see an interest rate rise (at least on the horizon) but instead the long term prospect for rates remains super-low, while this is good news for borrowers, it is bad news for savers. Annuity rates remain super-low and the cost of paying pensions super-high.

Put this in a cocktail shaker with sluggish stock-markets and you get a very hefty annual bill presented by the actuary to meet the shortfall between what he or she estimates is needed to pay all future pensions and what is in the pot.

This bill is simply too much for some organisations. The prospects of these bills for years to come (known as the recovery plan) proves too much for those who finance these companies and the employer is forced into administration.

coins falling

The Pension Scheme is pre-packed and enters the PPF after a bit of too-ing and fro-ing.

Those most vulnerable, typically the pensioners with no capacity to get income elsewhere get pensions in full, those with bigger benefits awaiting payment are likely to take a pension cut. In the end the PPF bails out the basket cases and were that to happen too often, the tax-payer would bail out the PPF.

lifeboat

The PPF is a lifeboat not a cruise liner

 

This is all very good and  a whole lot better than the bad old days where schemes that went bust (like Allied Steel and Wire) paid nothing to people who most needed every penny they were due. It’s thanks to people like Andy Young @andyjags who designed the thing, Steve Webb who oversees it and Alan Rubenstein who manages the thing, that the PPF has done its job (in very difficult circumstances).

This is not alarmist- this is responsible Government

Alan Rubenstein is being accused of being alarmist- but I think he is being extremely responsible. He is drawing attention to an unpleasant fact, that not only are some schemes technically bust, but many people are making their plans  around these schemes paying out in full.

Employers who are failing to put in place proper recovery plans or who are failing to meet the payment schedules need to be having a conversation with staff which talks about some harsh but unpleasant choices. These might include

  • Choose whether you want a pay cut now or for your entire retirement.
  • Choose whether you want this company to stay in business or your pension promise to remain intact
  • Choose whether you want to be part of the problem or a part of the solution.

A couple of years ago, some very able people had these conversations with the members of the Kodak pension scheme. Kodak was bust and so was the pension scheme. In the end Kodak continued to trade but the company became the property of the pension scheme. Kodak employees are working for their pensioners and those who are retiring today will have their younger colleagues working for them.

There are no silver bullets that shouldn’t make people helpless

I am quoted in the article as saying there is no silver bullet that is going to sort this problem out. Putting the pension fund under the mattress (and into cash) will drive up the cost of the Recovery Plan, investing in risky assets is playing double or quits.

talk risk 2

I wanted to agree with Alan Rubenstein that we cannot be complacent about these pension deficits.

If I’d had more than 5 seconds preparation for my call I would have made asked the Telegraph to consider what people in defined benefit schemes (whether they still work for the employer or not) – can do.

( Note to Telegraph -I’m no actuary- working for First Actuarial doesn’t make me an actuary, working as the convent handyman wouldn’t make me a nun).

So what can people who have rights in a pension scheme do?

  1. Find out who the trustees of the scheme are by contacting the employer.
  2. Contact the Chair and suggest that the trustees make a statement to members about the funding position of the scheme
  3. If you are not comfortable with that statement ask that a meeting for those to be impacted be arranged with members of the scheme.
  4. If necessary, get involved, this may not just be the employer’s problem
  5. Be tolerant, however worried you may be, throwing rocks is not going to make this better,

Well done to Alan Rubenstein for saying it like it is, well done to the Telegraph for publishing. This should not be a debate about whether people should take transfers from DB schemes (as rats from sinking ships). It should be a debate about risk sharing and how fair solutions can be found to intractable problems.

If the run rate is 10 an over and we have 9 wickets down even the rain and  Duckworth Lewis won’t save you! The best you can do is to ensure that the impact of the defeat is minimised and that the team live to fight another day.

With Pension Freedoms around the corner, Trustees cannot duck this conversation. Members cannot take exercise freedoms on pensions in payment so the decision to draw a DB pension is as irreversible as buying an annuity. Trustees need to make their members knowledgeable about their options.

talk risk 3

 

Postscript

As a postscript, I notice that Alan has published some clarifications which are posted on Jo Cumbo’s twitter time line.

 

 

 

 

 

 

Posted in pensions | Tagged , , , , , , , , , , , , , , , , , , , , | 5 Comments

Why it’s harder to get knowledge than information


knowledge

 

Digital Guidance supports people taking tough decisions but it cannot take those decisions for them.

Even when a decision is taken not to do something – like not to choose an investment strategy or pay voluntary contributions, people feel guilty pressing “next“!

Faced with impossible decisions people tend to give up and turn off the computer-  or go and do something on Facebook

People make choices based on what they want in life but they hate taking decisions about financial products.

This is one of the reasons opt-out rates are so low. The decision to opt-out is far too difficult; and without it being framed properly, the question is seldom properly considered.

So if I would ask you,

“which would you prefer, go to the cinema tonight or put a tenner in your pension?”

…you’d probably take the cinema option,  but if I framed it,

“I’m taking a tenner from your pay so you can have a proper retirement unless you insist on going to the cinema tonight”

you’d probably say –

“oh go on then”.

But if I told you,

“I’ve been taking a tenner a day out of your salary for the past ten years and (ha ha) you never noticed and now you’ve got a shed load of money for the rest of your life”

I bet you’d say,

“Thanks very much”

If the point of financial education is to encourage participation, in the words of the song “you say it best, when you say nothing at all”.

But good employers want more than a low opt-out rate, they want people to engage with the pension scheme and make positive choices that make a real difference to their later lives.

“Saying nothing at all” is not the way to do that!

When the choice is binary “in/out” “default/choose” “save/don’t save”, then people can be nudged into the no-brainers – in –default – save.

But when the choice is between a certain (but limited) income and a fat wedge of cash in the bank, engagement is critical – critical to getting people knowledgeable about what these choices mean.

When done well, digital guidance can “narrow” choices and link those choices to differing outcomes. This enables people to feel comfortable that it is not a financial product they are choosing, but the outcome from using that product.

For instance, investing in a conventional lifestyle program can be framed as

” taking the guessing out of when to buy your pension”,

or even

“making it easier to spend your savings”.

It should not be about

“choosing gilts and cash over equities to deliver an optimal flight-path”.

In the context of the need for an emotional response to the choices on offer, we can better understand why “people buy people”. Digital guidance is pretty good to get people from B to C but the “A to B” needs the personal touch.

Before people are going to download the app or log on to the website, there needs to be a spark.

Whether that spark is generated around the water cooler or through a formal seminar, it is unlikely that it will happen without a conversation.

Most people download the apps they use for daily living through recommendation. I downloaded an app yesterday to help me track London busses because I saw someone use it. Interest in technology has to start with a conversation.

This matters particularly for financial education delivered in the workplace.

The reason to run a face to face financial education program is to start that conversations. So it’s critical that the education program promotes the digital guidance available to members.

Whether it be an app, or a website – whether delivery be via text, spread sheet or video, financial education must reference what is available elsewhere and make sense of the employee journey to making the choice.

Which is why preparation is so important. A Financial Education program must be properly integrated into the employer’s communication strategy and not be “free-standing”.

Likewise, digital guidance, no matter how good it may be, is useless without engagement.

The key for the employer is to ensure that whoever delivers group sessions is able to properly explain how the employee journey works and how –with or without digital assistance – members can translate tough decisions into easy choices.

We generally have more information than we cope with, we need people to help us convert some of that information into knowledge.

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

Let my money go!


 

Moses

I woke up to news that the Pension Play Pen RBS bank account can now be accessed by my iphone using fingertip security. Apparently mobile technology has outwitted clunky old pc technology which makes my thumb all that stands between us and a good time.

This is good news for those looking to enjoy  Cheltenham Festival Freedoms  on March 10th but won’t give much merriment to people like me , hoping that the pensions industry would be providing people with pension bank accounts from April 6th.

 

WHAT PEOPLE HEAR

“Oh good” , I thought.when George Osborne announced that people would be free to draw their pension savings as they liked, “this will mean insurers, third party administrators and SIPP providers will wake up to the 21st century”.

I naively thought that instead of sitting on their hands, as they have done ever since 1987 when personal pensions “set us free”, that we would start giving people what they want, instant access to their money when they reach a certain age.

I now look at 55 as 53 year old as I looked at 18 as a 16 year old, as a time when a whole shedload of freedoms will be visited upon me. It is not the reality of a Lamborghini but the dream of one -or at least the chance to see a positive balance when I thumb my iphone, that makes me smiley.

But having smiley customers is clearly not one of the core values of our financial service partners on whom we rely for the delivery of such freedoms. Far from opening the doors, up go the shutters and we now have a pensions Maginot line – the second line of defence -to protect ourselves. Over protection rarely results arousal.

WHAT PEOPLE WANT

I am not a behavioural scientist, but I have witnessed everyone from my children to my grandparents frustrated by the dangling carrot they never quite can reach. Offer me the opportunity of taking my money when I want, letting me imagine the button that says “withdraw now” and a big number after it and I feel happy, secure – fulfilled.

I may not , indeed I will not blow it all at once, I just want you to – well – show me my money!

This is not the same as showing me a unit holding and a notional amount that is sitting in some fund I do not understand. Pension Freedom is not playing with stochastic models that show me when my money is likely to run out depending on 50 shades of economic theory. All of these things I can do later.

“We are drowning in information but starved for knowledge”

~ John Naisbitt

When you get to the seaside, you don’t want to do a tour of the town , or of your B&B, you want to see the sea. The sea is the one tangible certainty of the seaside, all the rest-even the sandy beach is incidental.

So when I finally access my pension account , I don’t want a piece of paper describing a process and setting out settlement terms, I want a button I can press that lets me at my money.

WHAT PEOPLE GET

So come on everyone, stop treating us as idiots, there is a button that stops the train between stations but no-one presses it. There is a button on this laptop that could wipe the hard drive, but I’m not going to press it. The sea might drown me, but I’m not going to let it.

The technology exists to let me access my pension as I want to, it exists for the banks through thumb recognition on an i-phone.  7,10, 14 days settlement periods leading to a cheque in the post is not freedom, sending birth and marriage certificates, passports and utility bills via recorded delivery is not freedom.

Freedom is the capacity to do whatever you want to do, and knowing you will almost certainly do the right thing – the right thing by you.

Posted in advice gap, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , , | 2 Comments

The pernicious power of financial advertising


Financial advertising

The incendiary resignation letter from Peter Oborne cites the removal of articles from the Telegraph’s website , claiming the articles went because of pressure from HSBC as a major advertiser.

Buzzfeed have the story (and the article( here).

I know nothing of HSBC (other than I bank with them and that First Direct is a model of probity), but I know a lot about the pernicious power of financial advertising.

The greater the dependency of an organisation on advertising revenues, the harder it is to remain independent. This goes not just for on the page (including webpage) advertising but the more subtle sponsorship of events and even education.

What starts out as an altruistic venture, quickly turns into a search for “ROI” as advertisers seek a return on the investment. Necessarily there are conflicts between what is good for the advertiser and what is best for the reader/member even pupil.

The dead hand of advertising impacts on the great pension debates we are having. The vested interests with the weight of advertising behind them stifle and distort debate. Few organisations can rise above the “they would say that” test!

This works at a personal as well as a strategic level.

It is so hard to maintain editorial independence when your bonus or the very funding of your job is dependent on the ongoing support of the organisation that you are exposing. Which is why (whether there is substance to these allegations or not), I instinctively side with Peter Oborne.

For it’s first 12 months, when its transactional revenues have not been sufficient to match development costs, my own venture, http://www.pensionplaypen.com has benefited from revenues from NOW and Legal & General and ITM. I hope those organisations benefit from this advertising but they know very well that I will not promote their product because of their advertising.

I have been very impressed by Legal & General, especially since they have moved their investment and workplace pension teams into one. I continue to be impressed by NOW but have been critical of some aspects of their proposition both on my blog and in the pension press. ITM’s middleware has never been directly promoted as part of our solution.

I know how hard it is to remain independent and my thanks to my advertisers is for their understanding that the value of our service is nothing if we are anything less.

The big loser in Peter Oborne’s resignation will not be HSBC, the stories about their inadequate accounting remain on other influential websites, it is the Telegraph.  But by association, financial advertising in general, which when it sits alongside editorial or conferences or “educational” programs, inevitably compromises.

Looking around my flat, I can see a pen from OPDU, a notebook from JLT , even a plastic piggybank from Hampshire County Council.  My rucksack is emblazoned with a NOW logo. I am a tart for tat!

But the inducements rule, that my company follows scrupulously , recognises that the greatest care needs to be taken in attending conferences, or educational courses , even reading articles which (by dint of surrounding articles) may become advertorial.

http://Www.pensionplaypen.com is now advertising free, as is this blog, as is the http://www.firstactuarial.co.uk. I have to pay http://www.wordpress.org to have the ads removed from here!

We may take more advertising but those advertisers know that it will not purchase a blind eye to imperfections. Nor will it lead to sponsored articles where the words of the Pension Plowman are written by those paying him.

The bravest and best advertisers are those who continue to support a venture through thick and thin (witness Morten Nilsson’s stoical response to criticism of his service which you can now find at the bottom of yesterday’s blog).

In the short term , advertising can achieve a return on investment by obstructing editorial independence, but in the longer term, the divide between the editors desk and those in marketing must be scrupulously maintained.

There are no short-cuts for independence.

Ironically, the product that has most value on my sites is independence. Organisations that want to buy into this commodity can do so knowing that they will be treated in exactly the same way whether they pay us money or not.

If you want to associate yourself with our high standards, then we’re happy to take your money as it allows us to develop faster and improve the buying experience for others. It will also allow us all to eventually get paid for this endeavour.

So here’s a bit of free advertising for those who have stuck with us, we’re grateful to you , but we’re not in your debt!

 

NOW_RGBlg-logo

 

Ease

Posted in advice gap, auto-enrolment, First Actuarial, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , , , , , | 2 Comments

It’s only human nature after all!


 

Barack.Farage

It’s natural for us to crave money but we are not natural money saving experts. Debate has raged on this blog and on the Pension Play Pen group pages as to whether Pensions Wise is doomed along with the financial education agenda.

For those with an eye to the “most vulnerable” as our masters refer to the poor, the idea of a pension dashboard is ludicrous, the difference between a good and bad week may come down to whether there is a pound coin left on Sunday to feed into the meter. Universal credit (formally introduced today) presents a budgeting nightmare to those for whom week by week cashflow management is “financial planning”.

Not surprising that there is such national outrage at the failure of our tax authorities and our leading commercial bank to prevent or investigate the theft from the Treasury of millions of tax payers pounds that could and should have been shared through society. We live in a tolerant country, if we didn’t, then rocks would have been thrown.


 

With these sharp divisions between the richest and the poorest, we forget those in the middle who want to become money saving experts , have been offered pension freedoms but are frustrated by the state of change.

I am one of those people, but I’m in the fortunate position of having access to technology and people to apply that technology to educate and empower people to manage their finances more effectively.

One person who I hope I can build a relationship with over the next few years in Mark Hoban who, having been a Treasury Minister, is resigning from parliament to pursue a private career. If you think this man is just out to cash in on former glories you a) haven’t met him and b) haven’t read his pamphlet “RetirementSaverService” (RSS) published by Reform last month.

Pension Wise

Mark’s vision is of a second line of support (Pensions Wise being the first) that can be offered to ordinary people who want to know what they’ve got when they get in their 50s  and 60s and what they can do with it. There are two key elements to this support

  • Creating a single view of someone’s pension savings, state pensions and other assets, and
  • Developing a digital guidance service.

The biggest barrier to doing this, in his opinion is regulatory. In this he and I are one. I’m encouraged that the FCA are addressing this issue, particularly encouraged that they have established “Project Innovate” which (among other things) aims

to identify areas where our regulatory framework needs to adapt to enable further innovation in the interests of consumers.

I intend to use this support from the Regulator as my firm increases digital guidance not just to employers (choosing workplace pensions) but to those wanting to help their staff take financial decisions in the workplace.

Increasingly, employers are seeing the place of work as one where people can focus on managing their money. Employers recognise that employees are more productive when they are solvent and even more productive when they are working towards clear financial goals. Providing people with financial guidance in the workplace is something that many employers want to do.

This is how Government and Financial Services organisations can work together to make the most of the new freedoms. The freedoms are nothing if we don’t know how to or are prevented from using them.

For many people, the idea of viewing their money on a pensions dashboard and “narrowing” choices by means of digital guidance will be exciting, to many it won’t.

At those who can’t or won’t manage their own retirement incomes, we should not be pointing fingers. Most people would rather do other things;- it is only human nature after all. For many people, packaged solutions such as annuities (and CDC) which deliver greater certainty (albeit with less flexibility) are the obvious alternatives.

So just as we need to build the dashboards and digital guidance services, we also need to build new ways to drawdown our retirement savings. This is why we have a defined ambition program which picks up the slack.

Posted in Financial Education, First Actuarial, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , , | 4 Comments

How Payroll can avoid offering pension advice (in 5 easy lessons)!


Pension information

The blog in a nutshell

This is a long risk-warning to payroll bureau and their software suppliers  who may be considering providing advice to employers by reducing the choice of pension options to one – a default.

If you don’t want to read it but want my advice upfront – here it is

  1. Do not short-cut advice on the choice of workplace pensions
  2. Use someone with skill and knowledge if you don’t have skill and knowledge yourself
  3. If no such person exists, find a digital guidance service that will take the advisory risk
  4. Pay money for this service, if it looks too good to be true, it is probably A SCAM!
  5. If you cannot find a way to sort this problem for yourselves go to http://www.pensionplaypen.com

 

Interested? read on!

 

I am hearing some odd stories from payroll managers using http://www.pensionplaypen.com including this comment I came across on a CIPP board.

Has anyone in a bureau situation decided to adopt a default AE pension scheme? What would be the line between advice and providing the service. A TPR representative spoke to us this week and brought up the idea of a ‘default’ pension scheme.

I was planning on veering away from any suggestions as to a scheme employers should use as I don’t want to fall foul of any regulatory authorities.

I asked Kate Upcraft who lectures on payroll for  her take on this; her reply

most of the bureaus I work with are either taking all comers but then working out a price for the client if it is a new interface to be developed or saying here are a stable we already do business with if you want to use them for our entry price or pay more if it is a new one on us.

Payroll are between a rock and a hard place and need some help. We need a common data standard.


PAPDIS and Pensions BIB

If  this is the new reality for SMEs and Micros, we not only need a common data standard, we need those providers who are currently deemed “new interfaces” to adopt it.

That means some of the household names such as Aviva, Royal London, L&G and Standard Life who risk being priced out of the market by payrolls who cannot afford to set up bespoke interfaces for their clients to use them.

As it stands, it is only a handful of mastertrusts who have developed the capacity to adopt the common data standard but the outstanding work of Will Lovegrove and SystemSync with the support of the Pension Regulator , Steve Webb , the friends of auto-enrolment and the CIPP, PAPDIS has the capacity to keep choice in the market.

Pensions BIB have created a tool in PAPDIS which we should all support!

If you don’t know about PAPDIS, read this excellent article by the CIPP and the video from Friendly Pensions (a PAPDIS user)

Pensions BIB?

Pensions BIB?


Auto-enrolment in the long-term is about pension outcomes

I very much hope that the report that the Regulator is suggesting bureaus adopt defaults is wrong. It goes against the Regulators own attempts to encourage choice, both in its work to set up a data standard and in its attempts to set up a Directory (however flawed they may be).

Auto-enrolment is a process, but workplace pensions are investments. They are investments of the money of ordinary people who consent to have money deducted from their wages for their long-term benefit. They are also investments made by employers who share the burden of contributions. The results of the decisions made today, won’t be available for up to 40 years but (read the end of this article) payroll may find advice given in 2015 still haunting them in 2055.

You heard it here first

You heard it here first

It is not just a crystal ball – it is possible to tell good pensions from bad

No one knows which of the various schemes on offer to employers today, will do best for its members.

  • But it is clear that some are more likely to offer better investment returns than others.
  • that some will provide better options for people wanting to spend their pot than others…
  • that some will provide more support to employers’ payroll and HR systems than others
  • that some will last longer than others

And there are some very good ways to assess who are likely to be winners and who losers

  • Some have a sustainable business model that reduces the risk of them having to pack it in over time
  • Some have a clear strategy, or are working to one, to adopt the pension freedoms
  • Some have proper investment governance in place and a clearly reasoned default
  • Some have adopted PAPDIS or assisted payroll to build links to them.
  • Some help employers with communications

and some don’t.

Both the FCA and the Pension Regulator agree about the nature of regulation

 

020415_0742_WhatcanWest2.png

 

but the Pension Regulator makes it equally clear that skill and knowledge of pensions is needed for a recommendation be made

Skill and knowledge needed

But to understand which are doing the right things and which aren’t takes “skill and knowledge” and a system that allows employers to assess the workplace pension for their staff.

This is something that a consumer would normally find help with from a number of sources

  • the consumer could search on money saving expert
  • the consumer could go the library and consult past copies of Which (or use its website)
  • the consumer could go to a shop and look at the products on display.
  • the consumer could ask friends what they did and how they found it

From this kind of research, an everyday shoppers could make an informed choice.

But there are barriers to small businesses doing any of this.

  • workplace pension are not  toasters or credit cards and don’t appear in Which Surveys (yet)
  • they cannot be measured for success in the short-term, they are long-term investments; which is why MSE does not currently rate them
  • they cannot be displayed in a shop , nor do they lend themselves to glossy brochures
  • nor is there (yet) any common database of knowledge to which the employer can refer (as they could when buying a toaster or credit card)

But let us not give up hope!

The employers would, were it “no skin off their nose” sooner choose a good pension than a bad…if only to stop complaints from staff. If employers were aware of the class actions that happen against them in other parts of the developed world, they might see choosing a pension as an important duty.

And it is not impossible to build a system that allows employers to compare and contrast the offers made to them using digital guidance.

And it is not impossible that such guidance could be made available at a cost that could be justified many times over in terms of risk reduction and “value add”.

Guidance

Digital guidance is the only way to deliver skill and knowledge at an affordable price

Indeed, as any reader of these blogs knows, such a system exists and is being used by many bureaus, employers, accountants and advisers.

It’s being used because it outsources the risk of the adviser being sued for incompetence, or straying into regulated territory and falling foul of the Financial Services and Market Act.

It’s also being used because the cost of providing a fully compliant advisory service that is inclusive of all reputable pension options . provides proper direction and fully documents the scheme chosen, cannot be delivered manually at a price most SMEs and micros can afford.

Indeed many forward thinking advisers, who until recently were offering a manual service, are now adopting the digital technology available through http://www.pensionplaypen.com

playpenratings

Why Pension PlayPen supports PAPDIS

But for the moment, it is incumbent on us to make it clear to those who are providing the software for bureau, to those who run bureau and to the pension providers, that we urgently need to adopt the PAPDIS standard. Www.pensionplaypen.com will be upgrading the scores for all providers who use PAPDIS (and downgrading those that do not)

A default is not a safe-haven, it will be seen as a recommended course of action- advice.

So we need to ensure that the bureaus who may be being nudged into adopting default pension providers do not do so (I am writing to the Regulator- to ensure this is not happening).

For there is nothing so risky for those who know nothing about pensions, as to suggest a pension as a safe haven.

 

No safe haven and no short-cut.

I’ll finish with one very frightening example of the ruin can be brought about by short-circuiting proper governance and providing advice without proper regard to risks.

 

RISK WARNING;  PAYROLL – THIS COULD BE YOU!

APFA,  the Association of Professional Financial Advisers , is currently campaigning to get a long-stop in place which will stop their members being sued for events that occurred decades before. Read this article to understand how advisers who did not do the job properly and are now in their 80s are being hounded by policyholders and regulators for advice that may have been given 40 years ago.

The long term consequences of the advice we give, even if it is no more than a default position, will hang around and are financially toxic for decades.

 

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My missus!


Stella 001

 

My missus’ called Stella and, it being St Valentine’s day, I thought I’d say something about her.

We met, nearly 15 years ago, in Ronnie Scotts in Birmingham, she had just become Pension Director at BT, something I found hard to acknowledge, she being young, female and down to earth.

It has taken my 15 years to acknowledge that being male, high-falutin and a wee bit older does not make me better at the job.

We have lived together most of the time since, occasionally she’s kicked me out when I became too annoying and like any couple, we live on our nerves .

Me working on the sell side , she on the buy side, at first made for conflicts of interest, but that’s turning to a kind of creative tension.

Many of what I thought my best ideas have bitten the dust when Stella harpoons them with her wit and good sense. Many of her best ideas are in my blog.

My favourite pension story involves Stella, who- when asked by the pension minister- “what do you want to change” replied

“the only guarantee I want to give my members is the right to buy a guarantee”

which for someone who has managed four of Britain’s largest DB plans suggests an independence of thought and a concision of language which are as valuable as they are rare.

I hope the day will never come when we are  apart, on my Valentine’s card to her are the words

You complete me

I would be a broken person without Stella, or “even less complete” as she put it when she opened the card.

Stella will probably not read my blog, she does anti-social media, like Corrie and Heat Magazine and Inspector-bloody-Morse.

She is happiest when she is shopping and happiest of all when she returns from the shop with ridiculously underpriced garments from TK Maxx and yellow-labelled bargains from Waitrose.

Her natural habitat is Poundland not Christian Dior though she could afford to buy the shop-out.

Today we are off to Ascot, as much because it is free to get in as that we love racing! Stella’s values come from her upbringing when every penny counts. But she is not mean, when she gives, which she does a lot, she gives big.

Anyone who has worked with her , will know her for her intelligence but also for her integrity. She may outwit you but she will not cheat you.

She can be withering in her criticism, not to make you small but to make you better. Those she does not like, she will not bother with – she in not vindictive, she is  supportive – she carries many people, but not fools.

I hope that you can say good things of your loved one. I hope you can feel as proud as I to be with the person you are with.

If you are on your own this Valentines, I hope that you will find love  as I have. Or, you find something that helps you, whether that consolation is spiritual or temporal.

Life’s a bit of shit, when you look at it, but through love we can make sense of it.

Posted in Bankers, brand, Candy Crunch, iphone, pension playpen, pensions | Tagged , , , , , , , , , | 3 Comments

As clear as a frosted window – the IA on charges (again)


'You're doing a little better since we deworsified your portfolio.'The Investment  Association (IA) have published another paper as their contribution to the ongoing debate on what the public and their fiduciaries should know about their funds. The paper fails on a number of levels

1. It ignores the fact that the FCA are far enough down the road to statutory disclosure to make this paper all but irrelevant

2. The paper continues to downplay the role of  fiduciary (IGC and Trustee) and hide behind the lack of comprehension and disinterest of consumers as an excuse for inaction.

3. The paper is appallingly written (if the IA are to act for consumers then they will need to find a language that normal people speak) 4, The central argument of the paper, that we should treat transaction costs separately from the fixed costs borne by members of the funds is flawed.

Context

This paper is only one in a long line of initiatives from the IA, designed to take back control of the price we pay for our funds. The fundamental conflict is still not addressed. In a world of 13 shades of intermediation , the costs of fund management are either too complex (for the consumer to analyse) or too great (for a fiduciary to stomach).

The IA’s argument is to keep these costs locked in a cupboard, the keys of which need to be requested. So the IA are the authors of their own proposed accounting standard, they determine the way costs are presented and they determine the rules regarding the minutiae (for instance the bundling of research into transactional costs). The IA are now trying to ride a wave of popular discontent with European intervention by setting their new position (which is pretty much their old position) as a bold move to stand up to Brussels.

Weirdly, this is not an occasion that any sensible person would disagree with Brussels. Indeed the FCA and Brussels are for once as one both in the ways and means of charge disclosure. By courting an unlikely alliance between the fund managers and their consumers against the UK and European Regulators, the IA are walking on quicksand. Unlike King Canute, they may not even get as far as contesting the waves.

Who is the consumer’s champion?

Consumers employ many intermediaries between them and the direct purchase of an asset. The fund manager is only one, though he has the major role of controlling most of the costs incurred within the fund. Other intermediaries are advisers, trustees, IGCs, insurance companies and platform managers.

These “other” intermediaries, if they have value, are paid to ensure that members of the funds get value for money. Very few consumers do not have these layers of intermediation when buying a fund and it is fair to say that those who buy funds directly tend to be the kind of consumer who can work things out for themselves.

So the argument that consumers will be confused by the disclosure proposed by Europe, the FCA and most fiduciaries who know what is going on, is specious. There is increasing knowledge on the buy side and for the IA, the game of filibustering over investor confusion is up.

If you cannot write transparently, how can you act with transparency.

I will not cut and paste any section of the paper to demonstrate its intent. Almost every sentence is full of long and difficult words, clauses and sub clauses that make understanding sentences a struggle.

If the aim is to demonstrate that the subject is too complex for ordinary people to understand, it succeeds, but only by the use of impenetrable jargon and syntax that should be a warning to the reader that this is not a paper attempting to make things clear.

That the IA argue that their proposals are aimed at the person on the street , but present them in such arcane terms, demonstrates the fundamental flaw in their approach, they simply are too conflicted to pronounce on the subject.

Past costs cannot be taken as a proxy for future costs?

At the nub of their argument, the IA propose that the overt costs of fund management- the Ongoing Charges Figure (OCF) be quoted separately from those member borne charges to their fund that are born covertly (and only appear today in obscure documents itemising costs charged to the “net asset value of the fund”. The impact of this is that the public will still be blinded by a partial number that claims to be an “overall” number and will have to add two numbers together to get to what they are actually paying.

This may seem a matter of semantics, but any salesman (or behavioural scientist for that matter) will intuitively understand that a simple number called “ongoing charges” will relegate a complex set of numbers – requiring a deal of explanation, back into the cupboard of concealment. The reason given for this separation of costs is that while the OCF number is fixed (it pays the fund manager) the other number- representing transactional costs is variable and cannot be relied upon to occur in future.

But if a manager has a track record of high transactional costs, it is fair to assume that he or she is incurring those costs for strategic reasons (and not just because he or she has no cost control). If costs are consistently high and performance is consistently high, why not invest in such a strategy, if costs are high and performance low, then the manager’s value for money is questionable. To suppose that there is no strategic intention in having high costs and that the manager might have low costs the following year, suggests that the manager has no strategy at all, There is no point in the IA continuing to argue for the separation of transactional costs and the OCF. If we are going to have an OCF or a TER or any number that claims to total charges, then it must be inclusive of everything.

A paper worth reading?

I am afraid that I have only half read this paper. I have not completely read it because it was so badly written, so annoyingly patronising towards the consumer and fiduciary, so deliberately dissembling in its central arguments but above all so utterly irrelevant to the central argument. The central argument is that we need good governance, we need to know what we are paying for and what value we are getting for the payment. We need to exercise that governance, usually on behalf of others, with full information and we need to get on with it. If the IA are not going to come to the party but are going to continue to write long and pointless papers like this one, they will become an irrelevance themselves.

Posted in accountants, advice gap, Fiduciary Management, Financial Conduct Authority, investment, ISA, pension playpen, pensions | Tagged , , , , , , , , , | Leave a comment

Pot follows nanny?


Payroll 7

The debate on auto-enrolling nannies into workplace pensions is being called #Nannygate. The FT have quoted Anne-Marie O’Leary of Netmum as saying nannies and their bosses are in “a state of near panic” at the prospect of enrolling

Nannygate has even drawn a letter to the Times from Ros Altmann, the new pension Minister, making it clear the lady’s not for turning. Nannies are going to get no special pleading.

Ros in Times

So what’s all the fuss about?

Firstly, the challenge from Netmum is likely the first of many. The Pension Minister’s clearly wanting to be tough from the start.

Secondly, the particular circumstances of nannying as an employment highlight the predicament for employees who move through a variety of jobs.

Pot follows – nanny?

Nannies tend to change jobs once every five years and typically look after children from up to 10 families in a career.

From now on, nannies will become eligible for contributions to workplace pensions set up by their bosses – the parents. So nannies can expect to build up 10 pots.

Expensive and clumsy to manage, we are facing an explosion in the number of pension pots in the UK.

Some pension experts see this as an opportunity to test the Government’s resolve to introduce “pot follows member”.

If the DWP’s after getting pots to follow members – why not start with nannies who are, by the nature of their work, job-hoppers.

Why not encourage the nanny to ask the new boss to set up your old pension as their workplace scheme?

 The Payroll lottery?

Sadly, it’s not as simple as that. You may be in NEST with boss #1, but boss #2 may be powerless to help you. Payroll #2 may refuse to interact with NEST.

If you talk to payroll (and we do) you’ll find that each payroll software provider and each user of that software have sweet and sour relations with pension providers and there are payrolls who refuse to support payments to certain providers.

This state of affairs is made worse when a payroll software provider or bureau strikes a deal with one provider to be its default.

So whether you can get your new employer to support your existing workplace pension may come down to what payroll support they are getting.

Choosing a pension could become a payroll lottery.

jackpot

The wizards of Oz.

In Australia your pension follows you around and that works because of hubs like Super choice which take contributions from an employer and clear them to a variety of “Super schemes”.

We had the chance to replicate this at before auto-enrolment started but the idea never got off the ground. It’s a shame it didn’t but we have to work with what we’ve got.

What about PAPDIS?

PAPDIS

It should be possible for our payrolls to use a common interface with all providers. This exists and is known as PAPDIS.

But for PAPDIS to work, there needs to be a way of mapping the data on the PAPDIS file into the provider’s record keeping systems so that the right money goes to the right nanny account at the right time. Work is underway to make this happen, this is the plumbing being done by Pension Sync and others so that PAPDIS can be adopted by all providers.

But this is not the end of the problem

Many parents will employ first time nannies – nannies without a pension or a clue what pension they want. Nannies needn’t worry, under auto-enrolment it is the boss who needs to choose. But what if the boss has no more of a clue than the nanny?

Bosses will need a way to choose a pension which is right for their nanny, for them and for their payroll. That’s not as easy as just listening to what payroll wants.

Nannies have every right to have a pension scheme chosen for their benefit – after all it’s their retirement! Employers will not want to get caught up in conversations between moaning payrolls and moaning nannies, they need guidance on what works for everyone.

The technology to help make these informed choices is not widely available yet – it needs to be easy to access and at minimal cost to such employers.

Playpen home

There may be three lessons for us here.

  1. Without improved technology employers will not get choice of workplace pensions.
  2. If there is no improvement in technology then pensions won’t follow members.
  3. Without informed choice, the suitability of the pension is a payroll lottery.
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Auto-enrolment – who really pays?


netmums

Pensions Minister Ros Altmann has written a letter to The Times, showing her disappointment to an article published that negatively covered the issue of families having to pay their nanny pensions, because of auto-enrolment.

In her response, Altmann said she was disappointed to read the article ‘Netmums warning over nanny pensions’ and in particular the negative comments about the burdens of automatic enrolment on families which employ a nanny.

I’ve spent some time on Netmums and I can’t find the “rising level of panic” in their forums due to the new legislation. However I am not a Mum ,don’t have a nanny and will take Anne-Marie’s word for it.

There is another website “Mumsnet” and this does have a thread on auto-enrolment in which there is real concern expressed, not by the employers but by the nannies! You can read the thread here.

Here’s what kicks the thread off

I personally wouldn’t want to miss out on a great job by being greedy and expecting parents to pay into my pension. I have my own one that I pay into each month and wont be asking for it in any future interviews with parents.

I would much prefer to know that I’m getting a fair weekly wage plus having the money left in the kitty each week to take the kids out to nice places and treats and not leave my bosses worrying about their bills as they are being stretched too thin.


Nannies don’t need protecting – they need self-confidence!

It says a lot for the vulnerability of nannies that they consider the right to a pension contribution from their employer’s a threat to their livelihoods.

Of course parents have the right not to employ nannies and there may be some who see the administration and contribution to their nannies’ workplace pension as an obligation too far. But as other posts on the thread make clear, the obligations are not that severe and is it really in the interest of nannying for it to become a non-pensioned occupation? I;m with Ros Altmann..

“I make no apology for believing that workers in all industry sectors, not just some, should be given the opportunity to save into a pension. Nannies deserve a secure retirement just as much as the families they serve,”

In her letter, Ros Altmann also gives some assurance over the cost of running a workplace scheme

“As for the administrative burden, we are determined to ensure, that all employers particularly small and micro employers who may have the greatest concerns, are supported as much as possible by the regulator,” 

The people that Ros Altmann need to talk to about this are Nannytax, a really strong  payroll bureau that is working flat out to manage the 90+ employers of nannies, staging auto-enrolment this summer in the “trial run” for 2016-17.  Nannytax pay over 10,000 nannies and if anyone should be able to comment about the issues of setting up and managing auto-enrolled pensions, it should be them.

Playpen


Practical solutions

I know one or two families with nannies – one quite vocal in her opposition to auto-enrolment who has recently become a Director of Scottish Widows. While I have sympathy as a small employer myself, the best help I can give such people is practical. Such employers only tend to have a nanny for a few years, the cost of setting up a workplace pension has to be minimal, the cost of running it even less.

hi res playpen

The workplace pensions that are set up for nannies in the next couple of years need to be portable, while the original employer may only contribute while the child(ren) are young, the nanny may have a number of periods of engagement.

The workplace pension must be adaptable, capable of working with a variety of payrolls and under differing contribution structures.

Above all, the workplace pensions should work for nannies so they get the best possible security and wealth in retirement relative to the money paid into their pension plan.

The workplace pension is for a nannies life and not just for the original employment.

I hope that as we start to consider workplace pensions for the vulnerable disassociated staff of nanny and caring agencies – as well as the millions of staff working for teaching and cleaning and IT contracting agencies, we accept that their work is every bit as “pensionable” as those who work for larger companies on a more permanent basis.

If auto-enrolment can serve a secondary social purpose of narrowing the gap between those in full-time permanent employment and those working for agencies, then it will be even more successful than it already is

nannytax

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If it’s not in the price- I’m not paying it.


Standards

All week I have been beset by those nasty little extras that add up. On Norwegian Airlines everything is extra, water, food , headsets , blankets – the duty free is more expensive than Tescos. It costs $50 to put a bag in the hold!

If you want to stay at the Hilton Midtown New York, watch out for $18 a day wi-fi and a $3.5 charge for storing a bag for a morning. I was particularly stung as I’d done nothing in advance, I’d hopelessly assumed that my kind hosts were taking care of things- but heh – you’re on you’re own buddy.

Take a taxi and you think you’ve got a price- you’ve forgotten about the toll and the tip and then there’s tax! Everything is priced ex local taxes so you never have the right change.

The locals say taxis are cheap but I don’t see  any poor people in them. Poor people ride the subway – try the E to Jamaica and you’re paying $3 to the airport, but then it’s back to standard pricing, $5 for one stop to your terminal and you have to buy a card as well for the priviledge.


 

So the price stacks up, and that fistful of dollars quickly runs out. Makes you realise that we price pretty fairly in our lovely land. VAT included, no-tip necessary, that water in your room is complimentary, tea and coffee -help yourself.

I won’t bang on about financial services but I’ll relate a great conversation I had yesterday afternoon with a trustee of a Canadian municipal trustee. I asked him how they tested they were getting value for money when they didn’t know what they were paying for services.

The answer was that they sent their service managers a simple letter asking them how they made their money. They expected a pie chart back with a breakdown of where the money came from. They knew the answers – they had done their research, they were testing the honesty of the managers.


 

I think in the final analysis- I want to know what it takes to fly with Norwegian, stay at the Hilton or ride in that taxi, I don’t want a fake price , I want the cost of the service.

When I ask a fund manager how much I am paying, I do not want to know that he didn’t mention x y and z because (like the tolls taxis pay) the manager was simply passing these costs on.

I’m trying to run a budget- make sure the greenbacks last.


 

People are a bit mystified by why I keep asking these questions – especially as there are any numbers of way that I can pass these costs on. It is -as I was told yesterday – someone else’s problem.

Accountability for your own behaviour doesn’t happen so log as there is someone to pass the tab on to

When the nice lady from Standard Life started telling me how important it was that I exercised my voting rights – especially on matters such as excessive boardroom pay, I asked whether the £11m bonus paid to  Standard Life Execs Skeogh and Nish was a case in point- especially as the calculation had excluded the $250m profit fall from Standard Life Canada.

The reply was that Standard Life Investments don’t invest in Standard Life Plc and therefore she had no knowledge of what I was talking about. Infact I should be impressed that there was such a clear Chinese wall in place.

I was left wondering just who was going to pick up this £11m tab. I guess that price wasn’t included either

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The view from the other side of the pond.


andy and henry

It’s been glorious in New York. Here’s Andy Walker (Pension PlayPen’s genius designer) and me, enjoying a craft beer above the high line (note the Empire State building behind us!)

I wouldn’t like anyone to think that drinking beer was all I did yesterday, but it couldn’t have got much better than an evening on a rooftop downtown (certainly beating an incarceration on Broadway watching Phantom of the Opera).

But “what news”, I hear you cry. What is going on over the other side of the pond to keep Taps from the diurnal grind?

The answer is that this whole conference has been about the new technologies (and waving goodbye to DB).

Daniel Kraft spoke of the the Future of Health and Medicine- well it wasn’t so much a talk, more a merry dance through around 250 images on a Prezi reminding us that an image is worth a thousand words and in Daniel’s case gets them. A lot of images, a lot of words and one question – which received a dismissive grunt from Walker

who’s going to Uberise pensions

Well I don’t know -do I? – Well maybe I have pretensions…

The Uberification of pensions seems well under way, I heard great talks about using gamification to help people learn how their pensions work, what they needed to save, even how to invest.

Gamification is how Sun Life Financial are going about getting engagement and their stats for take up, both of the program and of the desired outcomes are translatable, I’ll be getting on the blower to their gamifiers in California to have some more of the same.

Sally Bradley-Golding of “Financial Engines” spoke to the same theme (but in an American rather than Canadian context. The cheese has clearly been moved, Uberification has begun,


 

The emphasis throughout was in helping people understand outcomes. This was a step in the right direction. When I’d last engaged with American educationalists, the main thing seemed to be to turn normal healthy Americans into Chief Investment Officers. People love this kind of thing in a class-room, but trying to beat the markets is a mugs game.

I was really pleased to hear a session demanding action on decumulation. Too right – I say! Well if people are getting het up about the lack of options to help people save their retirement pots over here – perhaps we’ll see some spirited debate in the UK! The spirit of collectivism was upon us!

If we are ever to get better at DC, we have got to remember that DC is about providing people with good later life outcomes. Whether these be through a pension , the accumulation of wealth or the alleviation of debt – is a matter for the individual. It is not for us to tell people how to spend their money, it is for us to provide choices.


Canadians are great people. They are polite, kind and generous. They cannot be blamed individually for Supertramp and Brian Adams , nor for driving Leonard Cohen and Neil Young away.  They present a decency and care which I think we may have lost (at least for a little while) in the UK.

But Canada, in pensions terms, is not a nation, it is a series of provinces -Ontario, Newfoundland, British Columbia, all doing their own thing in their own way.

I can write of a Zeigeist within the conference, most especially the feeling that pensions are being Uberified, that we are moving towards a more outcomes based view of DC and that risk sharing is definitely on the agenda for those who can’t or don’t want to manage all the risk.

But I cannot really write about Canada. Terence and Philip were right, it’s not even a real country anyway

 

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The land of the (pension) free


 

Never mind the buss pass!

Never mind the buss pass!

As I cleared immigration this morning, the chap charged with checking my travel authorisation asked me..

“so how are we doing over here?”

I looked blankly..

“it says here you’re a pension consultant – how we doing?”

To the annoyance of those behind me in “the line” , he started telling me about how his 401Ks and IRAs were coming right for him and he’d be gone from his job in two months to spend more time with the grandkids.

“I bet they’ll be pleased”

I quipped, with tired irony in my voice.

It turns out that it would be a matter of complete indifference to the grandkids whether pops was around or not, but heh- pops was about to come into a shed load of money.

I am not used to this kind of stuff, so I asked what a shed load of money might be. It turned out to be around $200,000 in total. If the grandkids’ interest in pops was purely financial, I expect it will be short-lived.

Now don’t get me wrong…this guy’s clearly a diamond. I could see the other officers chuckling away as pops delivered his proud and rick grandfather routine not for the first time that day. Nonetheless, he was suffering from what one economist termed “irrational exuberance”.

Freedom


 

 

I guess this is the point I’m supposed to deliver some rant about these pension freedoms, but all I can think about (apart from breakfast) is that man’s genuine happiness to be free of financial worry.

I am now in my swanky Manhattan hotel, contemplating a day with swanky pension people and I wonder just how many guys like this fellow they get to meet of a day.

There seems to me a lot of confusion on both sides of the pond about personal wealth and retirement income security. Was this guy getting much help with the retirement income security? Had his new found wealth blinded him to his longer term issues- it all sounded horribly familiar.

I wasn’t going to disabuse him of his happy state. I reckon this guy was happy in his DNA, which is something I’ve found quite uplifting about the colonialists – something we could do with a little more of back in blighty.

Whatever our concerns about the money running out, ruinous charging structures, pounds cost ravaging et al. , what most pension consultants lack is the infectious love of growing old that the chap at the immigration desk was dishing out.

I made this point last week when I spoke to pension consultants in London and I’ll make it again over here, it is our job to restore people’s confidence in pensions. That was exactly what this chap was doing – despite it being his pension that he was confident about, despite it not being a pension but a fistful of dollars that he was grinning over!

Some day -back in the day, this man must have participated in a defined benefit plan, perhaps the benefits were underpinning his confidence. He may have some Federal pension rights – he looked that kind of guy.

But – and this is the takeaway – it was the money he’d saved for himself- in 401k and IRAs that he was proud of.

I suppose this is what the utility of a DC pot comes down to – the warm glow that he did it his way.

 

my way

 

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Who’s risk is it anyway? How Canada and Britain are dumping pension risk


Pension Risk 3

I’m off to Manhattan to talk to a couple of hundred Canadian pension experts.

This is broadly what is going to be said, I’ll be sharing the stage with a couple of Canadian pension experts and (if you open the presentation), they’ll be speaking to the slides with Canadian flags in the header.


I may by then have alienated the Canadian pension plutocracy with my latest blog but I’m not jetting 8,000 miles for a friendly chat! For the next two days, I’ll be holed up in the Manhattan Midtown Hilton chewing the pension fat and I’m waving the flag for Britain.

CPBI Forum

There appear to be three major differences between the ways we go about things.

  1. Canada, unlike Britain, does not have a uniform pension policy, each province takes its own decisions – so there’s a whole bunch of Canadian pension policies, glued together by organisations like the Canadian Pensions and Benefits Institute.
  2. Canada still believes in sharing risk between employers and members. In this it is either behind or ahead of Brtiain, depending on where in the circle of this debate, you stop the wheel.
  3. Britain believes in personal financial empowerment, Canada is more sceptical.

I am going to be arguing that Britain’s pension reforms are currently quite radical. While every G8 country is moving towards annuitisation, we are moving to pension freedoms. While our former colonies polarise between compulsion (the Australian model) and enlightened self-interest (the American model), we go forward with auto-enrolment.

Britain is making a pension statement in all this, and I’ll be interested to see what the Canadians and Americans at this Forum make of it

Pension risk

Of course, our attempt to liberate may end in tears and wet pants. We may find ourselves having to create collective structures that share the risk between participants, as the Canadians are doing (especially in Ontario). I doubt that we’ll have an appetite to take risk corporately, but I suspect there is an appetite among ordinary people for what the Canadians call “Target Pensions”.

target pensions

In the meantime, I’ll be interested to find just how widespread pension coverage is in Canada. The chap I’m presenting with, Simon Nelson of Eckler, has been a bit coy about this. I suspect that Canada has more than a few of its citizens excluded from the kind of high quality corporate schemes that Simon’s consultancy advises.

While I am a big fan of the Canadian risk-sharing model, I’m not clear about what the support structure is for those who don’t enjoy wealth in retirement. Is there an issue with pension exclusion in Canada? I intend to find out!

Pension Risk 2


I suspect that Canada is struggling along, trying to find solutions to the big issues for pension policy makers – just like us.

The trouble is that there is not empirical data to tell us whether what they are planning to do about it, is any more likely to work than what we are planning to do about it.

What’s more, I suspect that those who are making the policy up in Canada, spend too much time in fancy conferences, just like  their British counterparts.

What we are doing in Britain, should be of interest to other countries and I hope my trip will justify the substantial cost of flying me to and putting me up in  New York. For my part, getting an insight into other country’s problems might help me do my job back in Blighty a little better.

At least , that’s how I’ve sold it to my bosses.

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First we take Manhattan…


Canadaflag

Canada bores me.

I have only two cultural references for the place, Supertramp – (the band that drove me to punk in the 1970s) and South Park the movie which urges Americans to

“blame Canada, they’re not even a real country anyway”.

I know Canada has produced Neil Young and Leonard Cohen but they had to go to the States to keep their sanity. Unsurprisingly the likes of Brian Adams are still allowed to inflict mental suffering on the few remaining Canadians with any edge to them. Quite simply -it’s dullsville on a transcontinental scale.

I’ve been asked to speak to a bunch of Canadian pension gurus at the Canadian Pension and Benefits Institute (CPBI).

CPBI Forum

Like Cohen and Young, they’ve relocated and  their 2015 Forum’s in New York.  Cohen and Young helped define my future, but I suspect the title of the gig may be a touch ambitious, at least for this sceptical limey.

I’ve been asked to speak on the subject of “Who’s risk is it anyway” an attempt to compare British and Canadian approaches to dumping risk on someone else.

Being fantastically Middle of the Road , the Canadian approach to risk sharing – at least philosophically – is to retain much of the operational risks of providing pensions with their big institutions while asking ordinary people to take more market risks- specifically the risks that pensions won’t pay out in full when the market’s down and may have to be adjusted downwards  if everyone lives too long.

Neil Young quipped on his big hit (Heart of Gold)

“This song put me in the middle of the road. Traveling there soon became a bore, so I headed for the ditch. A rougher ride but I saw more interesting people there.”

I was tempted to entitle my talk  “Rust never Sleeps” –

“better to burn out than to fade away”

but suspect this a little too radical a pensions solution. Apparently , when Young heard the line had been quoted in Kurt Cobain’s suicide note , he made people listen hard to another line in the song ‘

“once you’re gone you can’t come back”

Maybe a few people de-risking both Canadian and UK DB liabilities should be listening.

If you’re reading this and you are going to the CPBI Forum, I’m on at the uncivilised hour of 9.30am on Wednesday morning (Eastern Time). I think they worked out that I was a loose canon , so I’m sharing the stage with Simon Nelson of the Canadian consultancy Eckler.

Working on the Hegelian principle that I’m thesis and Simon’s antithesis, I reckon the idea’s we get to synthesis, which is fine as long as you don’t pronounce Thesis with an F.

I reckon I’ll be checking out of the conference entertainment, a night on Broadway watching “Phantom of the Opera” and heading to the Village with my mate Andy Walker and his fiancee Christie for some fun.

The king is dead but he’s not forgotten,

this is the story of Johnny Rotten.

cpbi hall of fame

 

Nominations welcome!

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Let’s stop bitching about Pension Wise.


Pension Wise

Pension Wise is not yet two months old, but already it has been written off by some industry commentators. I suspect that part of this is frustration from journalists who cannot get data out of Pension Wise – who remain in post election Purdah.

After a lot of noise leading up to April 6th, Pension Wise had to shut up for the election, it being the pensions lovechild of Clegg and Cameron, Osborne and Balls. Pensions turned out to have little (overt) impact on the election though I suspect that a lot of “shy Tories” considered the Pension Freedoms part of a general reason to vote Conservative. Osborne won the day, Webb didn’t even win his seat.

But even after other Government figures came out of Purdah, Pension Wise remains in lock-down, take-up figures are not published and HMRC simply mouth bland platitudes about positive feedback from those who have attended.

Finding people who have been is hard, they are clearly not the kind of people financial advisers talk to; straw polls at each of the Retirement Income Planning meetings I chaired in the past fortnight, did not solicit a single adviser who had met someone who was Pension Wiser.

As the pension providers sponsoring these sessions, smugly announced, the numbers reported to have booked Pension Wise sessions were (in total) about half the average number of calls that an insurer would expect in a day.

In the absence of evidence to the quality, it is journalistic nature to smell a story – small wonder that the Pension Wise advisers I know, are under oath not to talk to me!


 

The fledgeling’s still in the NEST!

But now is not the time to kick Pension Wise. Unlike NEST, who’s role was clearly defined and who’s funding secured over time, Pension Wise is a fledgeling – and one with no nest.

Now is not the time to kick Pension Wise , partly because it is young and vulnerable but mostly because we want it to grow up strong and healthy.

I say we want it to grow up strong and healthy and I guess I’m being a little assumptive. I suspect there are many people who would like to see Pension Wise fail, for selfish reasons. They would rather see people take advice, or take no advice or guidance and buy blind. Either say, for many people I speak with, the reason for disliking Pension Wise is unclear.

If Pension Wise is a threat, it threatens no one but those with ill-intent. If Pension Wise is a distraction, it is simply getting in the way of the commercial interests of the financial services community. I do not think it threatens or distracts people from making good financial decisions.

Pension Wise – “30 years too late” or a stitch in time?

As my colleague David Joy says, “Pension Wise, if it has a problem- is 30 years too late”. We should have been engaging and educating people about the need to save hard and well since the last pension revolution- the introduction of personal pensions in the mid eighties. That we’ve made such a mess of personal pensions, has been – to a large part- because we tried to empower people to take financial decisions before we’d engaged them in the business of funding their later years or educated them about how much was needed of them to do this properly.

What Pension Wise can do – for most people – is make the best of a bad job. But that is better than nothing. For some people it can stop them making really bad decisions, like being a muppet about tax, or giving their pension savings to a scamster. It cannot help people work out which type of drawdown to enter into, or how to protect pension wealth or how to invest money. You need trained advisers to do that.


 

If advisers are wise, they will back Pension Wise, if they are foolish – they will run it down.

When the great British public get the hang of Pension Wise, they will like it – as they like the Citzen’s Advice Bureau and The Pension Advisory Service and even the Money Advice Service. They see these as places where they can get impartial help on matters without being sold anything and without the need to feel an idiot for asking questions.

The same goes for http://www.moneysavingexpert.com and for the social media mavens Paul Lewis, Annie Shaw, Sarah Pennells and (till her recent elevation) Ros Altmann. All these people have immense followings and increasing influence as they find their way into the columns of the newspapers we read and onto the screens we watch (from TV to smart-phones).

Pension Wise fits naturally into this financial architecture and could – were “pension experts” not being so sniffy about it, become part of the UK advisory infrastructure.


 

Now is not the time to kick Pension Wise, infact it’s the time to promote it – as this excellent video promotes it.

 

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Helping carers to a proper pension..


AE

How hard is it for us to get those who care for others , the same pension rights as those of us cared for by our employers? Rather hard – it would seem – at least according to yesterday’s Moneybox.

The program went out at mid-day yesterday, but Paul Lewis had been trailing it on twitter. In the process, he highlighted some of the issues we still have to face as we seek to include those who have historically been excluded from funded pension provision.

It’s brave and right for Paul to highlight these issues now. The Pension Regulator has chosen to dry run a tranche of these dis-enfranchised people who will be staged in June of this year (ahead of their natural staging date in June).


 

Getting to grips with how this will work – it’s hard!

Paul Lewis, Jo Cumbo, Brian Hill and Annie Shaw- four pension experts who got roped into a cacophony of confusion.

Paul Lewis kicked off

But his second statement was unintentionally mis-leading

Brian Hill picked up on this

“NE” stands for non-eligible workers, they’re the ones too old or young to be automatically enrolled but who are still “entitled” to an employer contribution.

Although “entitled” is a confusing term in this context, because there is another class of earners- the very low paid who are “entitled” to be in a workplace pension scheme but not to a contribution to a scheme.

Paul Lewis picked up on this.

 

Meanwhile, a whole bunch of people were queuing up to ask Paul just who , when and why disabled people had to pay their carers pension contributions. It’s hardly surprising that many of them were confused, baffled and frustrated.

When even the experts can’t agree, confidence in the process is threatened

Here we have more confusion about who are workers are not. The rules are supposed to be clear- if you are self-employed and regularly invoice one organisation, you will be considered a worker of that organisation and that organisation will be responsible for providing you with a pension contribution into its workplace pension.


 It seems a bit of a mess right now.

This discussion is a foretaste of things to come. It proves two things;

  1. that the rules at present are so complicated that even experts tie themselves up in knots trying to explain them
  2. that this confusion is amplified by those trying to learn through social media!

But we’re making sure that no-one gets left behind

The eligibility rules for auto-enrolment are little understood and I suspect often broken. I am sure that there are many non-eligible jobholders who have no idea that they could opt-in to an employer contribution and a lot of workers who have no idea that they are “eligible, entitled or non-eligible (but entitled to contributions).


 Carers are special people, they need pensions too.

The issue of carers is very emotive. Many think that disabled people have to find the costs of their own care- some do – but most don’t. Some are cared for by the state and some have funds that pay the costs (typically as a result of a legal claim). The administrators of these funds are professionals who should be aware of their responsibilities to manage auto-enrolment on behalf of those for whom they have a fiduciary responsibility.

The fact is that auto-enrolment does not make emotive judgements on whether it is right or wrong for an employer to be involved, it treats all employers the same, whether they are Tesco , the parents of a nanny or the fiduciary of a disabled person.

 


A step towards simplification

This is why we need to be clearer about these employer duties and ensure that they are as simple as can be.

Personally, I feel that the complexities of these different types of eligibility and the various tiers of contributions are not needed anymore. But it is really hard to say goodbye to them because they are there for complex organisations who have spent thousands if not millions of pounds in operational changes to comply with these regulations

Simplifying complex regulations for the simpler needs of smaller employers needs skill and knowledge; fortunately we have a Pension Regulator which has both and – at the DWP- a group of legislators who are immersed in these issues and have been for nearly a decade now.

The point of doing this trial run in June, is to find out exactly what needs to be changed for 2016 and 2017.


We are learning as we go.

Twitter discussions like this morning’s may not be elegant, but from them may come a new understanding which may make it possible to get carers into auto-enrolment in a simpler , less-confusing way.

Social media is – at times like this- exasperating. It shows the workings of the process, not the finished process. But without discussions like that which went on this morning (and an equally complicated exchange over nannies earlier in the week – progress will be slower!

AE up of down

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