Common sense needed on transfers

Thomas Paine

Whether you’re moving house or moving money, the process is fraught. We are no closer to pots following member than when the “portable personal pension” was established in 1987. The friction involved in moving money from scheme to scheme, fund to fund, asset to asset means money tends to stay where it is.

But for those wishing to consolidate their pension savings, there are  barriers to transfer that surmount these operational issues. Chief among them are the issues to do with guarantees – the guarantees surrounding the payment of a pension as opposed to lump sums. Since the cost of meeting these guarantees is determined by the markets, their value should be calculable at a market rate. But what price can you put on human longevity?

These are hard questions. It is easy to open Pandora’s box and allow pension freedoms out, but it’s harder to ensure that people get fair value from their pension savings.

These hard problems have not yet been properly addressed. We are good at making financial judgements based on critical yields but we are bad at helping with decisions demanding emotional intelligence. People’s objectives in later life do not overlay neatly onto the income streams of a conventional inflation linked joint life annuity typically offered by a defined benefit occupational pension. The success of Pension Increase Exchange programs – a form of transfer- suggests that many people would prefer more income sooner rather than higher income in their last phase of life.

And simple critical yield calculations can take no account of individual life expectancy. Should those with years or months to live, be treated as if they will live on for decades?

Depending on whether you look at the questions around transfers through a financial or emotional lens, you will get different answers on what to do.

In my experience, making decisions based on such complex judgements is extremely hard and people tend to be polarised in their behaviours. At one pole, their is a meek acceptance that to stay put and do as one’s told is prudent. At the other, we find people digging in their heels and demanding freedom. These are our insistent customers.

For most people, a balanced approach is needed. Hopefully we will find a synthesis between the polarities but there’s going to have to be some common sense applied to get there.

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Bad practice or malpractice?

michael johnson

Johnson hath spoken! Michael is one of the few people who owes the financial services industry nothing. His voice is independent and trustworthy and his latest contribution to the debate on how we fund our retirement is welcome

Pensions are afflicted by rip-off penalties.  The most egregious is an annual charge for “holding assets”, expressed as a percentage of assets which can amount to thousands of pounds per year, each year.  To be clear, what is being provided is merely a safe custody service, albeit shrouded behind proffered unsolicited research (invariably unread) as a desperate attempt to hint at value for money.  A small flat fee should suffice.  Indeed, some Stocks and Shares ISA providers, for example, charge nothing to hold client assets.  What is so different about pension pots?

The Government is, to some extent, complicit in this theft.  For decades, it has unwittingly granted a licence, in the form of the sanctity of the “pension product” tax wrapper, that has facilitated the industry’s profitable inefficiencies and rent-seeking behaviours.  The result is a bloated, inefficient, opaque, over-paid industry that is increasingly uncompetitive on the global stage.  The UK’s financial services supremacy, a precious export industry, is rapidly becoming a myth.

Meanwhile, Baroness Altmann, the new pensions minister, described the pensions industry’s post-liberalisation behaviour as “most disappointing”.  Her message needs little deciphering: the industry has been warned.  Penalty-free pension pot transfers beckon.

The language is harsh and the message plain. Value for money from a “bloated, opaque, over-paid industry” is in short supply.

The complicity of Government is an interesting charge. The charge cap which governs the accumulation phase of workplace pensions and may well be imposed on decumulation, is- if Johnson is correct – legitimising theft.

But how do you make money from a 0.75% pa charge on a “start-up workplace pension”? There are two ways.

  1. You work damned hard and wait to make your money from your endeavours
  2. You cheat and make your money from day one by charging whopping management fees to the fund.

And if you think that this cheating is illegal- think again. It is perfectly legal for any service provider, should he be permitted to submit an invoice to the manager of a workplace pension scheme for settlement from the member’s fund, provided that that invoice relates to the management of the fund.

Auditors can do it, solicitors can do it, custodians can do it – indeed the list of potential debtors to the fund is as long as a creative accountant can choose it to be. Provided there is someone in charge prepared to pay the bill, the bill will be paid – from your funds.

Which is why the current 0.75% charge cap may be no more than a front for legitimised theft. What is worse , unlike the usual larceny, you won’t notice you’ve been robbed for years to come. The impact of these bills , spread over a wide range of unit holders is seen in a drag on performance. People simply don’t worry about the performance of their funds in the early years. By the time they get round to worrying about performance, it is usually too late.

There is a very simple solution to this problem, It is called governance. Put at its simplest, fund governance is about making sure the bills submitted to the fund are reasonable and represent fair value. Every bill needs to be sensed checked as you’d expect for your expense claim .

But whereas the people who pay expenses have reason to pay attention, those who run workplace pensions may have every reason to pay a blind eye. If the manager and trustee of the pension scheme are complicit with those submitting the invoices, there is every reason to nod through costs that are simply charged to members. This is the easiest fraud in the world as it is virtually undetectable.

Which is why Government is trying to tighten up the governance of workplace pensions with a master trust assurance framework (MAF) and Independent Governance Committees. The trouble is that they are trusting in the MAF to be implemented on a voluntary basis and allowing the IGCs the freedom to do more or less as they plesase.

The number of master trusts that have adopted the MAF can be numbered on the fingers of your hands, there are hundreds of master trusts, many of them no more than shells, but all of them registered by the HMRC and therefore legitimised.

The Independent Governance Committees run by insurance companies have been in operation since April. They are too young to have done much more than establish their terms of reference. But I worry that they are so low profile as to be invisible to the average member. I know who the Chairs of these ICGs are but do you? Do you know who runs the IGC of your workplace pension (assuming it is run by an insurance company)?

The sad truth is that the system of workplace pensions is run by the Pensions Regulator with the FCA managing the IGCs. The opportunities for those looking to take money from your funds are so numerous and easy that everyone’s up for it. This is why mastertrusts are springing up like weeds on an untreated lawn. A few of these master trusts are good, but I worry that many aren’t.

I am more sanguine about insurance comapanies and their group personal pensions, if only because the barriers to entry are higher and the scrutiny of the FCA and PRA much better funded.

Andrew Warwick-Thompson (Executive at tPR for DC schemes) admitted last week that the standards for many small DC schemes would never match the high standards expected by his “best practice” guidelines.

I don’t just fear bad practice, I fear malpractice.

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The Plowman gets off his high-horse!

high horse

Yesterday I published an article that allowed me to get off my high horse about informed choiceand think pragmatically about how small employers are going to go about choosing a pension.

I reckon most people like choice , but they hate taking decisions. So most people (me included) like defaults which take the decision for us.

The defaults one way of helping people to engage with choice is to tell them they dont have to worry, if they cant decide there is always a default decision to go with

Garry Carter (the unstoppable..)

garry carter

Imagine the problem that you have if you are Garry Carter, the CEO of the Institute of Certified Bookkeepers. Youve got 30,000 bookkeepers all looking after more than 250,000 employers who are looking for help on things like RTI and auto-enrolment.

These bookkeepers like bookkeeping they dont like payroll but its part of the deal -they dont do pensions advice (either giving or receiving).

Auto-enrolment would be alright if it wasnt for all that pension stuff!

Thats what one bolshy bookkeeper told me.

Theyve been telling Garry that sort of things for years!

So what do you do if youre Garry?

Well you give your bookkeepers just what they want choice! And then when they start thinking about taking a decision you ask them if they want a bit of help

And you say that youve fixed up a simple way to apply for an Aviva Group Personal Pension which can be their qualified workplace pensions. You tell them it wont take more than 3-4 minutes to do all the paperwork(of course there isnt any paper but you are using the language they understand) and you call it ICB Pension Solutions.

Whats more, they get someone to hold their hand, a dedicated Independent Financial Adviser by the name of LEBC Group.

Going down this route is simple, everything is defaulted 3 months postponement -tier one earnings and boosh!

Whats the package look like Garry?

All the support stuff is supplied by LEBC Group webinars, marketing collateraland software that links Aviva up to whatever payroll is being used.

Heh its all in a box.

Now if you are reading this with a jaundiced eye, you might be saying-

that looks a little too good to be true, what does all that LEBC stuff cost..

Then youre right.  As in it does cost a flat initial fee and a small monthly retainer that can be as low as £5pm. ICB members can obtain details from the ICB website, they’re also eager to help non-members I’m told, so get in contact.

That may have made you think?

Think before you buy!

And this is exactly Garry wants you to do.  Its a default, but its not the only option. At the start of the process the employer is a given a choice, full market review or the Aviva option. Informed choice TPR calls it.

In yesterdays article, I suggested that any employer going down a pre-selected channel should be asked to complete a reason why statement they could send to their staff

Where an employer has chosen a workplace pension scheme, he should provide clear of evidence of why that scheme was chosen and why other options werent.

Because if one of Garrys bookkeepers cannot answer that question and be proud of that answer, I dont think theyve really made a choice.

And if the bookkeeper hasnt made the choice, you can be pretty sure that at some point the bookkeeper will be asking who has and pointing fingers at Garry.

This seems to make sense. Garry looks like he has cracked it. Hell have to find someone research the market for choice, but I might be able to help him there!


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Getting it right on choice – a pragmatic view.

choice exit now

People like choice but are afraid of taking decisions.

This paradox has puzzled pension people for a long time. People think that having 170 fund choices on their personal pension is good news, but 90% of us make no choice at all.

There is plenty of choice of workplace pension providers but it wasn’t always so. If you’d asked most experts back in 2010 (including former BBC economics editor Hugh Pym) what auto-enrolment’s all about – they’d have said “NEST”.

NEST did a good job of unravelling itself from “auto-enrolment” and you don’t often hear people saying “we’re doing NEST” anymore. Employers are getting wise to the fact that they have choice.

I don’t think there’s been much formal research about whether they are happy to have choice, but I suspect that as they’re people, they’ll be happy to have choice but afraid of using it.

The super-employer’s pre-select

Exploiting this fundamental flaw in human nature, super employers have decided to set up default pension arrangements – pre-selected by the super-employer.

I’ve written lots about this- typically in derogatory terms; though in truth, taking choice away from people is precisely what auto-enrolment is mostly about.

Perhaps I’ve been too hasty. Perhaps we are expecting too much from small employers. Perhaps they are no more capable of choosing good from bad than their employees. Infact I think this very likely, employers being people.

The question I’ve been asking is whether we can engage these “employer people” in the importance of choosing, whether we can educate people about the choice and whether we can empower them to make a choice. I have come to the conclusion that the vast majority of these “people employers” will not be engaged, won’t get educated and won’t take any choice at all.

What can we do for such employer people? One answer is to engage,educate and empower the super employers on what makes for good. At least that would narrow down decision making to the 100,000 or so accountants and other business advisers. It might be even easier to deal with the 1000 or so trade associations or even the 100 or so payroll software providers who make the administration happen.

The trouble is that the accountants and trade associations and the payroll software providers have not engaged , got educated and found a way to take decisions on behalf of all the employers in their care.

So I don’t really put my trust in super employers.

Another answer could be to put the decision making in the hands of Government. This could mean licensing pension providers and only allowing them to offer pensions if they meet quality standards. Infact this is what is happening, though the licensing system isn’t working very well, judging by the explosion in the number of schemes being marketed to small businesses.

The Government could be even more drastic and suppress choice to one provider (NEST), or maybe a troika permed from 4 or 5 of the biggest providers in the market.

This might make choice a lot easier , but it runs the risk of market failure from one provider that could be catastrophic. The more you concentrate decisions around a small number of providers, the more likely that market failure is.

I can’t see the solution resting with Government intervention EITHER


All decisions in the final analysis – are taken by people. Employer people will, left to their own devices fall in line with the 90/10 default strategies adopted by workplace pensions and indeed by the Government. 90% of employers like their staff, will leave it to the default.

But there’s a little twist in the tail for employers. They are taking decisions on behalf of their staff. Whether they like it – they are accountable to some degree.

Where regulated financial advice is given in this country, the adviser is required by the FCA to deliver a “reason why” letter to the client. The reason why letter simply indicates why it is that a course of action has been recommended.

Maybe the balanced view on choice reverts to this.

“Where an employer has chosen a workplace pension scheme, he should provide clear of evidence of why that scheme was chosen and why other options weren’t”.

And nul points for any super-employer who provides a template for the answer!

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Boring money.

holly 2

Boring Holly Mackay

Yesterday , financial journalist and founder of the Platforum Holly Mackay, launched a new company “Boring Money”.

I like that phrase, work is boring, money is boring- there is a natural synergy there.

It’s not done to talk about either in interesting society and I imagine Holly makes for an interesting society.

As does Chris Budd, who wrote a blog recently whose idea of a pension is boringly predictable –

I’d like to put some money aside which will give me an income in my retirement. 

chris budd

Boring Chris Budd

Chris is onto his second novel, he’s as interesting as his revolutionary idea about pensions is just that, turning to what boring money can do and away from an idea that the money is in-itself interesting.

I’m not against aspiration, I went to a launch of a portfolio manager last night, the big idea was a race-fit Aston Martin around which the launch happened.

The money and the glamour came as a package. I got into the car but got stuck, I guess it was my Icarus moment.


What Peter and Zac do with money

I think people are worried when they say they are in financial services that people will think they are boring so the management of money is dressed up in fantastic terms – “wrap”, “platform” “portfolio” and “portal” are part of the mysterious vocabulary of wealth management that creates an aura of fantasy to what is a conspicuously boring process.

Doubtless, Holly – who has a capacity for the mot juste, could find the exact epithet, but I’ll use an overworked formulation  – most of the jargon surrounding wealth management is “pretentious nonsense”.


Chris’ article, which you really should read, is a refreshing alternative. He describes what he wants from his savings in terms that mean something to ordinary people. When you take the jargon away, you may end up with something prosaic, but it is at least meaningful. The business of managing money does not need to be about managing money, more properly it should be about “getting the right money , to the right people at the right time”.

The periplum of financial services – involves reconnecting with this simple truth and (for most of us) leaving the fancy cars (and words) behind.

I wrote a comment on Chris’ article , saying that he’d just described CDC and I’ve been asked to write something for financial advisers on what CDC is.

I’m afraid it’s something no more interesting than what Chris wants, a way of putting money in people’s hands, when and how they need it.

You have to be very good to make that interesting and I fear- so far – the financial services industry hasn’t wanted to be that dull. But if Chris is “everyman” – and he sounds like the man down the pub to me- I wouldn’t be surprised if the rest of us catch up with him eventually.

Good luck to Holly , like my missus, she’s clever enough to make dull interesting.

Good luck to Chris , he writes the way we really feel.

Good luck to simple boring money- may it grow and find its way into our wallets/onto our phones/out of our banks – as we want it to – in the years to come.

The old masters were seldom wrong

The old masters were seldom wrong

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GARs – a simpler way out for insurers…


This blog offers insurers a simple way out of the problem they have with Guaranteed Annuity Rates- it means paying the reserved for value of the policy rather than the (lower) investment value of the contributions.

By way of explanation..

Guaranteed Annuity Rates (GARs) are defined benefit plans. They guarantee you an income based on the value of your fund at a defined point in your life. The Equitable life’s 200 years heritage was destroyed when Roy Ransom and his colleagues forgot this.

The Equitable had assumed that the guaranteed annuity rates embedded in their policies would never bite and for decades they didn’t. Then came the hungry years for income seekers, interest rates and inflation fell and guaranteed annuity rates suddenly became attractive. But the Equitable had insufficient reserves to meet the costs of paying these annuities and the rest is history.


The fate of the Equitable has always troubled insurers, especially mutual insurers who have limited access to the capital markets to meet unforeseen cash calls (again see the Equitable Life). So any statement from a mutual insurer suggesting the rules on advice be altered to make for easier transfers from GARs need to be looked at carefully and with some suspicion.

A touch of the Equitables…


In his recent letter to Ros Altmann, quoted in full on my previous blog , Phil Loney of Royal London makes a distinction between GARs and guarantees offered from occupational pension schemes.

We do not, however, believe that this solution should be extended to those with DB pensions. The complexity of these schemes and the nature of the guarantees that apply can only be assessed and communicated by a professional adviser with the appropriate level of qualification.

I think both in the legal and moral senses, Phil is wrong here. As I started this blog by saying, GARs offer a Defined Benefit- which is a pension. The guarantees that come from insurers are – it’s true- more straightforward. They are backed by the stringent regulatory requirements, not just of the FCA and PRA but of Europe’s Solvency rules. Some would argue they are too well reserved – the impact being the low annuity rates in this country (relative to those in the United States- for instance).

The guarantees from an occupational pension scheme are varied in quality. Some of them were worthless- some people got nothing from bust DB plans prior to the Financial Assistance Scheme and its successor the Pension Protection Fund (PPF). Some of them are AAA rated – such as those offered from Government Schemes and from the largest companies in the land. In-between, the chances of the guarantees being paid, depends on an assessment of the covenant from the employer and of an evaluation of the rules of the PPF.

Frankly, to most people a guarantee is a guarantee like a bottle of wine is a bottle of wine. Most people won’t countenance paying £30 for something they can get from £5 – unless they are expert. Arguing that occupational DB plans are so far removed from insurance policies that pay guaranteed income could come back to bite insurers in the bum.

An equitable transfer policy?

The transfer value offered from a “DB pension plan” is based on the value of the benefit given up – a value that is calculated by an actuary. It is calculated on a formula but can be adjusted to reflect the scheme’s solvency (its ability to pay). If an occupational scheme is in deficit, the transfer value may be less than were it fully solvent. All this could (and in my view should) be explained when the transfer value is offered.

But the transfer value offered by an insurance company for its transfers is based on the money that is in the policy that will purchase the annuity – not on the value of the benefit given up. Since the benefit being given up is typically much higher than could be purchased by the money on offer, almost everyone with a GAR is a muppet to use it for cash. This was the point made in the previous blog.

Sacrifice your pension for the good of the insurer?

Phil’s argument to justify Royal London’s position on GARs (outlined above) is posted in the comments column of the previous blog and runs as follows;

We are a mutual so any capital released by lower take up of the GAR option still belongs to customers and flows back to them via our profit sharing mechanic.

I can confirm that Royal London are very good at returning excess profits to policyholders, a practice that is winning them many friends.


But I very much doubt that any of his customers would be prepared to give up 60% of the value of their personal policy for the good of the millions of other policyholder- not to mention the CEO who picked up a bonus last year north of £3.5m.

If Royal London want out of their GARs – and this goes for all other members of the ABI, they are going to have to buy their way out. That means offering transfer values that reflect the cost of the GAR to the insurer, not the money being used to purchase the benefit. After all, that is what the insurer is reserving for.

Pay up or shut up?

I am not saying that Royal London (or other members of the ABI) are lobbying to use the limited protection of Pension Wise to get out of their obligation. In my previous blog I was saying it is better for their customers to be told “don’t be a muppet” for free than to pay £1000 for the privilege.

However I am (now) saying, what I thought about saying a couple of days ago, that Phil is batting on a very sticky wicket (I blame the old uncovered pitches of the 70s and 80s!).

The policyholders who got GARs were generally lucky not skilled purchasers. The GARs were given away by marketing departments keen to get on the selection panels of the large actuarial firms who controlled the AVC market. Some smart policyholders always knew that the GAR offered valuable protection but most didn’t.

If you’ve got a GAR, you now have to be told about it and should be told how valuable it is. If you don’t get advice, then you should be told by Pension Wise who should also guide you to the conclusion but nobody but a muppet lets the insurer off the hook by throwing away the guarantee.

I have a GAR and would like my insurer (Zurich) to make me an offer for the guarantees well in excess of the money used to purchase the GAR.

If the insurers insist – as Phil does in his letter that

Two months into the new pensions regime it is very clear that this policy to safeguard savers with GARs is a failure

then let’s demand that insurers, like occupational pension schemes , have to pay a cash equivalent value for the benefit being given up (the annuity) and not the value of the pot.

That is the logical conclusion that my senior actuary took and I suspect it is the position that any consumer focussed Regulator would take as well.


Posted in annuity, EU Solvency II, investment, London, Pension Freedoms, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , | 6 Comments

MoneyHub – financial education’s future?


I met yesterday with Toby Hughes, CEO of MoneyHub, one of the very few people in financial services who I could properly call visionary.

Like most visionaries, his big idea is very simple. He and his CTO Dave Toge talked me through how he wanted to get people to love managing their money. Unlike most visionaries, he’s organised his business to deliver.


The first thing I was shown was a room in which two people were talking to each other over a laptop. One was helping the other set up a MoneyHub account. In the room next door were analysts, watching, listening and analysing what was going on.

Hughes explained to me that any technology produced could only be validated by usage.

I was led through to a vast room where young teccies hunched over screens coding, designing and quality controlling. I’ve seen such operations before but only in gaming, this was Fintech on a staggering scale.

What quickly became obvious was that what was going on in the research rooms was being directly applied by the teccies.

For once – and I really mean “for once” products were being built around what people wanted, not what someone thought they wanted.

The latest version is being built for the smartphone;- tablet and full screen versions will follow but there’s recognition that our lifestyles dictate our financial behaviours. Toby gave as an example his healthcare company – Vitality; he can see the offers that go with the core product but he’s no interest in purchasing gym memberships through Vitality’s cumbersome web-interface.

It was reported yesterday that 50% of applications for internet banking accounts fail because people find it too hard to establish their identities. We can engage people, we can educate people, but if we can’t get technology to empower people to do things, then all this is just words.

The progress of their product development is less “big bang” more “evolution”. Money Hub is a means of engaging with budgeting, self-education and personal empowerment and is somewhere on the way to getting it right.

No doubt it will always be somewhere on that way, as “right” is only as good as we can currently understand. I understand this little chart is resonating with people.


While this beauty may look good but is not so effective


I bet the vast majority of those of us in financial services would have guessed the other way round. It takes a degree of humility to bin all the work, but these guys are honest – many of their ideas don’t work. I would like to hear similar admissions from the CEOs of our insurers and fund managers who continue to build around what they want people to buy, not what people want to learn.

The crux of this is that MoneyHub is not bing paid for by taking a charge on your money. The service is paid for by monthly subscription , there are no ad-valorem fees. IMO, this is the only way to eliminate bias.


The modesty of Toby and Dave is a refreshing change from the hubris of most FinTech exponents. They recognise that though they have captured millions of financial decisions , they are only a small way to understanding how those decisions were taken and why.

The data bank they are creating has no limits, just as our understanding of human behaviour. However the method of building this understanding , using emotional as well financial intelligence, is already bearing results.

Amongst the debris of abandoned pages I was shown, were tools that were working and getting such engagement from MoneyHub users that Toby could point to them as making it to future versions of his system.

These guys are living proof that if you know what you want and want it enough, you will deliver on the vision. I came away from the meeting, buzzing, thinking how I could apply these lessons to my own business and of the people I could share this great stuff with.

Almost every conversation I have – whether with HR, Reward and pension managers, providers and politicians reverts to the three words- engage, educate and empower.

They are easy words to say, they trip off the tongue, but they are amazingly difficult to deliver, when applied to people’s personal finances.

MoneyHub is a great venture which deserves our general support. I intend to be a customer and hope that my enthusiasm can be shared with those I know, so we can turn these easy words into action.


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Supply-side woes , buy-side goes; the disappearing pension billions

bumpkin 2

bumpkin billionaires

It’s not hard to spend a billion, not if you’re a nation that knows how to spend but finds it hard to save.

As Osborne found, a generation of planning can be unwound in a minute. Were the tax rules that surrounded the taking of pensions today, the groans of a retiring populace would be louder and perhaps we would not have a conservative majority.

Just as they were the villain of the piece when we “had to buy an annuity”, so insurers are the villains today- this time for failing to help those with retirement savings to use their pensions as bank accounts.

According to Michelle Cracknell, calls to TPAS are up to 80% but most of this increase is TPAS BAU , Pension Wise is not driving new traffic to the lines and the queries are from the pension literate looking for free advice, rather than the guidance needy.

Net outflows, finger pointing and muppet-like behaviour are the characteristics of the first three months of freedoms. Nothing much will change over the summer. Organisations like the Prudential are busy building aggregation platforms and pension payment systems that will arrive at some stage, but for the most part, the insurance company’s approach to freedoms can best be described as “lipstick on a pig”.


It’s easy for the “told you so” merchants to sit smugly on the side-lines, but difficult to find a lasting solution to the unsatisfactory situation that is emerging.

Here are three simple ways we can make things better.

Firstly we can use the workplace as a means to get simple messages across to staff to make the decisions a little easier. If you are a boss, try mailing your over 50s this link and suggesting they watch it on a private browser- or if your software allows, in the lunchbreak, It’s only 3 minutes


Secondly, ask for feedback, if only a mail. Was the video useful? Would it be helpful to get a pensions expert in to give a talk on choices?

Finally, if you’ve got a good response, ask your pension’s adviser if he or she’d like to come in and do a talk around this video to explain what is going on.

I’d offer to pay a fee and to cover their expenses. That way you don’t need to feel beholden to the adviser. As a rule of thumb, you’re able to pay up to £150 (including VAT) for financial education for staff, before the cost is regarded as a taxable benefit. Depending on the number of staff you have, you could justify the fee as a percentage of the total budget you can spend on them- with the carrot of more later if needed.


People are really interested in this stuff. They are desperate for impartial advice on what their options are. They call it advice, your advisor will call it guidance or education, as long as people aren’t being told what to do, be relaxed about this.

If you are a boss, the next 9 months are going to be the time you make the most difference, calming staff down, getting brownie points and hopefully- getting more out of your workforce in return for your investment.

If you are a pensions expert, put your best foot forward. We’ve got a load of good stuff to share with advisers, we’ve curated one presentation to slide share which has a load of slides that you can load up. You can use the video as you like – the embed code’s easy to copy and paste and works in powerpoint. The presentation is here,


I’d like to say that Financial Education will get us out of the current morass, but it won’t. It may keep us afloat but many people are and will behave like muppets and live to regret it. Many people have bought annuities and they had no choice. At least we have the choice now to get pension fit but the answer is not just better education.

The long-term answer to the problem is a default decumulation option. As Steve Webb was saying in his lap of honour, if we can’t come up with a solution for the 60% of us who don’t have the means to run drawdown but have too much in our pots to cash-out, a new choice that isn’t called “annuity” is needed.

For the silent majority of people in their fifties, sixties and seventies with money in DC pensions, the option to transfer into collective schemes that look and feel like  pensions schemes as we  used to know them, will become increasingly attractive.

I hope Ros is reading this, If you are- please put “CDC regs’ in the “top-priority” box.



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The inter web of trust

web of trust

My father did his national service in the navy. I remember him telling me why those in the navy saluted with a closed palm and those in the army with an open palm. According to my  Dad, those in the army couldn’t be trusted not to have a knife in their hand!

To all my friends in the army, I suspect my Dad was joking, though the fact I remember this from a very early age, means I learned the value of full disclosure as an infant. I have always trusted those who are open over those who demand trust by right.


This story flashed upon my inward eye, as I was reviewing a blog yesterday. I’d had a conversation with an organisation that claimed it did not operate an internet based system of disclosure (though it did run a website promoting itself and had been promoting on our linked in group).

The teaser ad, the ones that intrigue to draw you in, till you are stunned with the “big reveal” are all very well, but when we are talking about life savings, and an industry as complex as financial services, a system of web-transparency is pretty much essential.

The two objections the aggrieved parties had of my writing was that I had not carried out due diligence on them and that I had not written with the barricade of legal caveats that would have protected me (and everybody else) from defamation.

In short, I had spoken my mind and spoken as I found.


In this particular case, I had spent nearly three hours of -an admittedly wet – Saturday morning ,trying to find out about the organisation I was researching.  I had found nothing on the web but a complex set of inter connections in a very layered proposition.

The blogs I’d written had been exemplary; examples of how difficult it is for trustees and advisers to do due diligence into organisations that choose to tease but not to reveal what for me are essential details.

  • Who is behind an investment scheme?
  • Who is managing the assets?
  • What is the charging structure?
  • How do i find out more?


In a cloak and dagger world, compliance becomes a marketing tool. The very consumer protections that create pages of small print, allow for this information to be skilfully omitted from the public offering.

This approach plays to a very sophisticated audience, typically to other experts in compliance for whom the skill of a marketing proposition is in managing opaqueness without becoming uncompliant.

babel eu

The regulator’s tower of Babel?

In this cloak and dagger world, there is no means to talk of these goings on other than in veiled language, for fear t of an injunction and the legal fees that follow.

Is this the bloggers fight to fight?

In cases such as this – probably not. It is perhaps their job to ask questions and bring issues to the attention of readers who may or may not agree.

It is not the bloggers job to act as a surrogate regulator. But I think that those who write and enforce the rules, need the feedback of those who use the web, they are the eyes and ears for those who don’t have time or are constrained from discussing these issues themselves.

Personally, I don’t think that any new venture that involves managing people’s money, can be anything but web-transparent. The web is now such a source of information that we expect it, and information can so easily be posted to the web , that we must ask “why can’t I search it?”.

It is a general axiom of investing, that you should never invest in something that you cannot understand. So if you cannot find out what you need to know on a wet Saturday morning, a man’s entitled to ask “why not?”.

This begs questions which are no doubt being considered in more detail by those who protect consumers for a living. In the meantime, I will continue to do what I can – on the web – to promote good practice and question what I cannot know!

An open palm beats a closed palm.

if it can’t be searched, it can’t be trusted.

army navy


Posted in corporate governance, customer service | Tagged , , , , , , , | 3 Comments

If NEST’s web services are “free” – who’s picking up the tab?



Employers who choose NEST will be able to onboard directly from payroll assuming payroll holds the information NEST needs to set-up.

As with most things NEST do , the announcement this week that they have created a suite of web based links to allow employers to go “straight to NEST” made me happy and sad at the same time.

I’m happy that this is being done, it is what we are all doing, but I’m sorry that NEST are doing this on their own.

NEST were asked to join the PAPDIS initiative and integrate with the common data standard organised by Pensions BIB.

They chose not to and by ignoring the PAPDIS data standard and by not working with other providers, NEST is setting itself against, not working with – the rest of the market.


Better to work with than against

It may be that this announcement is as a result of work that was initiated before PAPDIS was conceived and part of a masterplan conceived at NEST’s outset. Or it may be that this is response to the problems of on-boarding they experienced in the first stage of auto-enrolment, but either way, NEST has rather sprung this on the market in a way that suggests it is more interested in getting market share, than easing the capacity crunch.

If NEST is trying to reclaim its hegemony over the 1m + decisions from SMEs and micros on which workplace pension to use, it is open to further charges of “market distortion”. If it is simply encouraging innovation in the private sector, it should be ensuring that it is linking to sites offering choice such as Financial SatNav, Pension PlayPen and Defaqto.

I speak here as Chair of the FofAE  Choices Taskforce as well as founder of Pension PlayPen. I quote the Pension Regulator’s website

It is important that the scheme you choose is well run, offers good value for money for you and your staff and that it will work with the payroll process or software you’re using, so allow plenty of time to make sure you make the right choice. Your pension provider will need certain information about the staff you’re automatically enrolling so it can set up membership of the scheme for them.

Your staff will probably have heard of automatic enrolment and may want to know more. If you haven’t done so already, now would be a good time to provide them with information. Use our raising awareness resources link below.

This does not read “GO STRAIGHT TO NEST”.


So what are NEST actually saying?

Here is the body of the press release –

‘We listened to payroll software developers and understand that the payroll process, whether managed by the employer or their adviser, is crucial to auto enrolment’s continued success. It holds all the vital information for worker assessments and contributions. Rather than duplicate work for employers, we have integrated the two processes, reducing time and complexity.’


‘NEST has been set up to support the roll-out of auto enrolment and to be ready to work at scale. NEST Web Services is a part of helping ensure we are ready for the next stages. With thousands of SMEs being brought into auto enrolment in the coming years, we need to make sure that the industry continues to innovate in order to help employers meet their duties.’


The new NEST Web Services capabilities make employer auto enrolment processes faster and more streamlined. NEST Web Services is fully flexible. Payroll developers can choose to build one or all 9 web services. NEST Web Services can be used to:


1.   Set up a new employer

Other than accepting NEST’s terms and conditions and setting up payment data, all other parts of the set-up process can be completed automatically through the payroll system.


2.   Retrieve current set-up details

Retrieves employer set-up data to ensure that data in NEST and the payroll software match.

3.   Enrol workers

Sends all worker enrolment data direct to NEST via payroll software.


4.   Update contributions

Sends NEST the earnings and contribution details for a particular contribution schedule. It will also be used to notify NEST where there won’t be contributions.


5.   Approve for payment

Sends NEST an employer’s confirmation that payment of a contribution schedule for an agreed amount will be made by the employer (Direct Credit or Debit Card) or can be collected by NEST (Direct Debit).


6.   Retrieve schedules

Retrieves a list of due and overdue contribution schedules, and their current status, from NEST.


7.   Retrieve opt-outs

Retrieves a list of members who have opted out within a selected date range from NEST.


8.   Retrieve stopped contributions

Retrieves a list of members who have instructed NEST they wish to stop contributing, within a selected date range.


9.   Retrieve refunds.

Retrieves a list of refunds made to an employer’s refund bank account from NEST.


Payroll providers who want to adopt NEST Web Services can request the technical specification from the NEST website.  NEST will also be providing a testing platform for payroll software providers to use, free of charge.


But is it really free of charge?

We must remember that the commercial advantage it is gaining in adopting this approach results from the almost unlimited development budget it has been given by the DWP. It is disappointing that rather than work with other providers to ensure that choice is available, it has chosen to go it alone- effectively snubbing Pension BIB and its Papdis initiative.

When we set out on this journey in 2010, many of us expected NEST to be the last provider standing as we faced 2016.

It isn’t; and despite the enormous loan from the DWP, it is not the obvious choice for all employers. We ( ) variously rate it top second or third best provider but for some employers NEST is totally inappropriate. 

My worry is that many employers will find it all too easy to use NEST, it is important that other providers catch up with NEST by adopting these protocols. Unlike NEST, the private sector has to do this itself – out of shareholder funds. 

Before we get carried away with NEST, we should remember that it’s debt to the DWP (thought to be north of £400m) cannot be written off. It is public money and has to be factored into ay decision to use NEST . NEST is – after all – considered to be a commercial provider competing on a level playing field.

Many SMEs and micros understand this and observe the well coined dictum “if it looks too good to be true – it probably is”.

Someone has to pay back the £400m, some of which is attributable to this “free software”. In a world where things have to be paid for, the only candidates are

1. The taxpayer- by quietly writing off the debt.

2. The employer who ends up having to pay for development costs through direct fees from NEST

3. The member- through the NEST charging structure.

We cannot really plan around a debt write off, we have to plan around 2 and 3. At a recent meeting on CDC, someone made the  point that nobody but a fool would invest in a CDC scheme that was underfunded, they would simply be buying into under-performance.

My challenge to NEST is the same. Why would I want my, my clients or my staff’s money invested into a trust whose sponsor owes £400m?

More specifically, if these services are free, who is paying for them?



Posted in NEST, Payroll, pension playpen, pensions, trustee | Tagged , , , , , , , , , , | Leave a comment

The loveliest golf course in the world (and fine Company!)


The second at the 18th

I am a very lucky man. I played 27 holes at Swinley Forest Golf Club on Thursday. On a blisteringly beautiful early June day it was quite simply the most beautiful golf course I have played (or am likely to play).


Impossibly lovely

If you want to read about this amazing place, you can do so here. The course is not publicity hungry, has no website and finding it needs GPS.


Putting for champagne

I played there thanks to Ceridian, the payroll people , who have had a golf day there for the past ten years. They were given an hour to accept a vacant spot in 2005 but are now part of   the club’s calendar.


We were looked after by Hayley who is as fair and bonny as the course! Thank you Hayley


Hayley is our leader

Certain are as extraordinary as Swinley Forest, a progressive company that put their customers first. I am not a customer or a supplier, I suppose I am an admirer.

And I like the way that Ceridian treat everyone the same. A muppet golfer like me is treated as well as an ace golf star like Centaur’s Kathleen


Kathleen – my kind of HRD

Here’s my playing partner John- who is head of Ceridian’s IT – thanks for putting up with me!


Super cool John

So thanks Swinley Forest Golf Club and thanks Ceridian, two jewels in Berkshire!



the rhodadenrons

These pictures are taken (discretely) on the day as a memory for me. I hope they give pleasure to anyone who was there on the day or who has ever played this beautiful course.

The experience in the club-house was as pleasurable as the golf itself.


The smile tells it all!

It’s all a far cry from the driving range! Talking of which, here is Chris Gayle’s sign off after his remarkable run in the T20 Blast. I’m not sure his antics would go down well at Synford Forest but they made me happy!'s%20West%20Indies%20batsman%20tries%20his%20hand%20at%20golf&product=sport

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Boom Bust Boom

boom bust boom

I went to the Imax this week (great cinema) to see Boom Bust Boom. I was a guest of Cardano, the Dutch fiduciary manager and I had a good time.

One thing I’ve learned about the meeja, is that if you ain’t got a beard, you’re nowhere. The only person I could see with a beard was Michael Johnson who wanted to talk about how the budget would transform pensions tax relief.

He introduced me to a bloke without a beard who I dismissed as some derelict who’d wondered in from the subway. This turned out to be a mistake as he was the Director of the film and called Terry Jones. It was explained to me that he was once a very funny man.

bill ben and terry

Fortunately, I was put right by Bill and Ben, the production men,

Bill and Ben pic_400

Bill and Ben

who’ve pointed me to check out this trailer. It appears that Terry Jones is still a very funny man.

You get the picture. The documentary’s bound for the BBC and will be coming to a TV screen near you later in the year. I think Cardano put up the money, which is pretty big of them. I had a lot of Prosecco and it was just as well Waterloo station was a short stagger from the cinema.

There are 25 economists featured in the film . 23 are men and two , Lucy Prebbles and Laurie Santos, are woman. Laurie’s the “lady working with monkeys” , which could be an alternative title for the film if you consider the Old Lady of Threadneedle Street’s central role in the 2008 banking crisis.

Monty Python was often described as a boys club with Carol Cleveland appearing as gratuitous eye candy. This film certainly had that quality about it. Fortunately I was sitting next to a lady who fed me popcorn in return for sips of my Prosecco. She found it hilarious and so did I.

It wasn’t hard, with her giggling besides me, to work out where the whole finance system had gone wrong. Too many men believing their own hype, too few women feeding them popcorn and digging them in the ribs.

We could also do with more South Park, the clips of which were highlights, together with the monkeys.  Alan Greenspan, Gordon Brown, the South Sea Bubble as well as the Bankers could do with watching this film.

They could also do with watching this excellent production (also from Cardano)

If you like that one- there’s another one after it with the good advice

If you’re a male , don’t go into the investment business.

There are some who might say that Cardano are deliberately distorting the beardless , female-less banking agenda by introducing irrelevent videos like these.

However the Pension PlayPen says we need more beards in finance, we need more women and we need more films like this to keep us honest.

If you have not listened to our latest podcast on beards, feel free to while away a wet weekend on this little beauty featuring the weirdy beardies of Quietroom.

And if you want to know what the point of all this hilarity might be, try out the Cardano education website . Don’t you love these crazy Dutchmen!

Well done Cardano, well done Terry Jones, well done Bill and Ben.

Theo Kocken – you are a top man

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Robo-up or get left behind


Robo advisors seem to get all the press but they’re just one fish within the digital ocean that financial advisors should be swimming in.

Every advisor should do a comprehensive review of their business and determine how they can improve the overall digital experience of their business both from the client standpoint and from the internal business operations standpoint.

The fact is, technology is advancing so rapidly that no aspect of an advisor’s business will remain untouched over the next few years.

Consumers are getting spoiled with services like Uber,  Netflix, and the iPhone and they expect the same level of ease and access when working with an advisor. If you don’t deliver it, you’ll lose clients to advisors who will.

What we know

We know two things right now

1. There are literally millions of working and retired people who need advice but have no trusted adviser

2. They are not going to pay along with the financial service charging model (see Paul Lewis rant)

So what have IFAs got to lose by shifting to Robo-Advice to capture this mid market?

If your cost of sale is £10 and you can charge £20, you are in business. Forget the fact that you are charging £20 for Robo-advice and £2,000 for the face-to-face version. If the £20 service can be served up two hundred  times a week you are in business.

That’s what the Pension PlayPen is, except we are not that cheap yet. To get our price down we have to invest in technology.

Invest to get your price down? You must be mad?

But that’s exactly what you have to do. Forget that plate of spaghetti stuck out the back of the hi-fi – this hi-fi adviser’s going wi-fi.

Drop your pants on price

Dropping your pants on price is only an option if you’ve got the balls to be the first mover. If you don’t get yourself to the front of the queue , you will have a low-cost offering which nobody wants. Except you’ll still be paying the development bill to get you there.

There really isn’t any alternative to Robo-ing up. In ten years there will be none of this manual processing – no fact finds , no report writing nothing. The only part of the advisory process which will involve human beings is the explanation of the solution – the Q and A.

Does this worry me?

No it doesn’t.

As I say above, there is a gap in the middle that advisers cannot service. If they can make a couple of quid out of delivering a thousand pounds of value- should that worry them. Do I think I am owed an ad valorem on every sensible decision my clients take?

Of course I don’t!

No time for losers

I’ve had it being nice to dull advisers who refuse to listen. Right now I am in no mood to pander to the mediocrity of yesterday’s aspirations.

We have 1.2 m new workplace pensions to set up, there are 450,00o people qualifying for pension freedoms each year

There are 23,000 advisers and most of them are only interested in advising the top 5% of the nation (the richest 5%).

Let’s make sure we have a solution for the squeezed middle.

Collectively yours

The Pension Plowman

Posted in pensions | Tagged , , , , , | 4 Comments

Why Paul Lewis is doing IFAs a favour.

Paul Lewis

Paul Lewis has written an article that has annoyed many IFAs. You can read it here. If you haven’t read it, you might as well now, as most of this article will only make sense if you’re familiar with Paul’s intent.

Paul Lewis chose to publish it in Money Marketing, which is mainly read by IFAs and those who use IFAs to distribute their product. The article has been placed to cause maximum disruption, the journalistic equivalent of farting in a crowded lift.

The article has succeeded on a number of levels. Comments from IFAs have been numerous and all have been uncomplimentary to Paul and his article. It has disrupted IFA BAU. Why is it so annoying?

Paul Lewis 3

Firstly, it has not actually said anything, but it has implied much – the reader has been left to draw his/her own conclusions but it’s clear that Paul Lewis thinks spending £700 on ancillary services to the purchase of an expensive washing machine is akin to spending £700 on advice around an expensive financial services product. To compare IFAs pricing model to a  plumbers has annoyed IFAs but as Paul says

Secondly it has required IFAs to look at themselves from a shared perspective to their customers. I think it very likely that those who pay for financial advice buy top of the range washing machines just as they buy pricey financial products. looking in the mirror, IFA’s don’t like what they see – and that hurts

Thirdly, Paul Lewis’ analogy is substantially apposite.  People end up paying a lot more for financial services than they thought they would do and it’s because of the hidden extras within the advisory contracts (and often within the product servicing contracts).

Paul paints an extreme picture for effect, the mirror may be a little distorted but do they think he’s any kinder on bankers, accountants, lawyers and actuaries?

The article is quite funny, I can imagine Paul at his computer grinning. I am sure he anticipated the outraged comments that have accumulated around it and I’m sure he’s grinning at those too.

Paul Lewis 4

I was an IFA for fifteen years and still see myself in the game, albeit a stage removed. The picture Paul paints is a grotesque but it’s recognisably me. And for me to think that because I’ve got “actuarial” in my title, I’m exempt from criticism would be even stupider than to say Paul is wrong!

So these lessons are for me as much as for those who are overtly criticising the article and Paul. I’m not beating myself up  – I’m gently smiling.

Lesson one

Never take yourself too seriously! It is a sure sign of the insecurity of financial advisors that they consider this an attack on them. It is not- it is an attack on IFA behaviours- or at least the bad behaviours.

Lesson two

Never mess with a good journalist, they have the Klout – quite literally. Paul Lewis is a massive influence, more influential than any IFA, right up there with Martin Lewis and Ros Altmann as a consumer influencer. He didn’t get there for nothing, more people trust Paul Lewis than trust any IFA!

Lesson three

Learn some humility, the man’s right and it’s worth learning from him. The majority of most adviser’s time is spent gaining people’s confidence – it’s called prospecting. Paul Lewis has people’s confidence and can spend all of his time advising- and being listened to.

I sit at this man’s feet, as I do the feet of Altmann and Martin Lewis and ask myself, what are they doing right , that I have been doing wrong?

Lesson four

Be thankful.

I don’t know what Paul Lewis got paid for the article but I’d be surprised if any IFA paid to read it. The reason Paul placed it in a trade mag was  for the improvement of the trade. If Paul had placed this in the Mail or on a BBC blog then there might have been cause for grievance – after all the article is deliberately oblique, you only get the points he makes, if you are in the know about IFA pricing,

Paul Lewis is doing IFAs a favour. If IFAs don’t get that, then they are doing themselves no favours.

Paul Lewis

Posted in Martin Lewis, Paul Lewis | Tagged , , , , , , , , | 6 Comments

Let my pension go!

Let my people go

Pension Fiction?

Friends Life has (in it’s new Aviva colours) decided to U-turn and not offer people the freedom of the bank account to its personal pension policyholders. Ros Altmann has laid into the insurance industry- as Pension Minister – and the Telegraph run a front page article claiming millions are being denied their fundamental pension rights.

It all sounds a little far-fetched. Even a couple of years ago this would have been dubbed the kind of pension fiction you’d have read about on this blog and laughed off as the crazed ramblings of a pension nutter. But this is Britain in mid 2015 and this is going to be the tone of the next few years.

It’s not just in the UK either.

In February, President Obama announced that the Department of Labor would re-draft a rule that would require investment professionals who advise retirement plan participants to follow a higher standard. The new proposal would require investment professionals that advise American DC retirees to act as “fiduciaries”.

As fiduciary advisors, investment professionals must recommend investment products that are in their participants’ “best interest.” The current rules require only that recommended investment products to be “suitable.” Under the more stringent fiduciary standard, advisors would need to justify recommending an investment that carries more expensive fees than other investments, or when recommending investments that may be underperforming.

What’s going on?

The new rules are designed to remove conflicts of interest. Guess what, it turns out that advisers have been recommending investments that benefit them to the detriment of policyholders.

The White House Council of Economic Advisers released a report on Feb. 23 that showed that these conflicts of interest may cost investors an average of 1 percentage point on their investment returns each year.

The Land of the Free?

What’s more – employers could be held liable for the advice of non-fiduciary consultants.

People opposed to the change point out that it would limit participants from working with the advisor(s) of their choice, and might cause them to have to pay more for investment advice.

What joins these two stories together is the emergence of a new consumerism that is being adopted in 10 Downing Street and the White House. The new consumerism is no respecter of the conventions of the pension industry. It expects the providers of financial services to not just treat customers fairly, but to put the customer first.

Let my pension go

A friend of mine tells the story of being asked to provide a communications strategy to a Bank which in 2009 was suffering a run of withdrawals from consumers worried about its safety.

The expectation that a tough new regime would be recommended that would stem the flow.

To the Bank’s astonishment, the strategy my friend came up with was to welcome the customer’s request, to facilitate the transfer and then to provide a listening ear. The listening ear followed the question “what’s worrying you?”.

The Bank reckons that , once it adopted the strategy, it retained £500m more than if it had continued blocking the flow of money.

As Ros Altmann says,

“The [pensions] industry has had over a year to prepare for the changes – and it is encouraging that some firms have risen to the challenge. But others seem to be failing to move with the times and are still acting as if nothing has changed.”

Over the past year, First Actuarial has tried to engage with a number of insurers to introduce technology  into insurers that would allow them to adopt the new freedoms and offer policyholders the freedom of a pension bank account.

We have been met by the industry’s mantra “there’s no such thing as first-mover advantage”.

Try telling that to Apple.

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When you’re 64… buy the state pension! (girls buy even earlier!)


pensioners-seaI chaired and spoke at a number of retirement income seminars last month – you may have been at one. While I was encouraged by the engagement and education of the audience in financial products, I was frustrated by the scope of the conversation.

In particular, I was surprised by how few financial advisers were talking about buying extra state pensions.

With the pensioner bond bonanza past, this is the next bonanza and the Telegraph have an article explaining why.

I won’t go into all the details as they are laid out via the link, together with a great Q&A by the evergreen Malcolm McClean.

It includes one  set of numbers from Glenn Martin (a reader) which I will quote

A man aged 65 would have to pay £22,250 to buy the maximum top-up of £25 per week. That translates into a taxable “annuity rate” of 5.84pc.

Mr Martin took the assumption – based on Government figures – that this man would live an average 22 years, to age 87. If he did so his return, after basic rate tax but excluding the effects of inflation, would be equal to 0.3pc per year on the original £22,250 investment. The return for a higher-rate taxpayer would actually be negative at –2.3pc.

Glenn Martin’s calculations are  sound but  a bit negative. The main benefits of this scheme are they provide an insurance against living too long and against inflation eating into your money.

And before we get carried away with the joys of our new single state pension, let’s remember that even the upgraded version engineered by Steve Webb is not going to provide a full state pension for everyone. (this from the GAD Quinquennial)

state pension -proportion of pensioner

So most people will need to top-up to get their full state pension (and even the full state pension is not nearly enough for most people’s immediate needs).


But enough about need – is it value for money?

If a couple wanted to buy an equivalent annuity from an insurance company, they would struggle to get a return of much more than 3% before tax, 5.84% is blinding value.

As a cold-hearted 53 year old I should urge Telegraph readers not to buy, as your purchase will result in a major bill for people like me.

This is a mammoth giveaway and I very much doubt that these rates will last, especially after I re-read the Government Actuary’s latest review of the state pension which suggest that future giveaways will be few and far between.

But being a sentimental bugger, I’ll tell any man born before April 6, 1951, and woman before April 6, 1953, to register your interest in buying the extra income by visiting the website at or by calling 0845 600 4270 or 0345 600 4270.

You won’t be able to buy till October but that gives you the summer to think about it.

Once you’ve done your thinking- fill your boots.


Why are insurers and drawdown specialists not talking about this?

I suspect there are three reasons, none of which reflect well on the “pensions industry”

  1. We are still in love with financial products that provide us with initial and/or annuity income by way of commission. The loss of up to £45,000 of a couple’s liquid estate to purchase state pension represents a conflict of interest to many advisers. There is little ROI (return on investment) to the adviser in this.
  2. We are living in a time of deflation, it is easy to forget that we have one month of deflation in the last 720 months. The rest of the time, inflation has been a killer to real retirement income. Most people are going to have precious little inflation protection on any retirement income other than their rights to the state pension, £25 pw may not sound much, but £1300 pa of guaranteed inflation protection (triple-locked for at least five years is worth around £12,000 in itself. That’s half the £22.5k initial investment.
  3. We underestimate our longevity. The chances are we are under not over-cooking our expectations of how long we live. Insuring against the financial consequences of living longer than expected is both prudent and a source of future happiness. The state guarantee that this pension will be paid for the rest of your life makes the investment attractive to a single person, to a married couple this top-up state pension is a no-brainer.

If you are of an age and have spare cash, investing in additional state pension should be in your shopping basket.


If you need all the cash you can get right now or if you are seriously at risk of dying shortly, take it out again, but for most people this is a really sound investment and  insurance.

And higher rate tax-payers (you lucky sods!)

Don’t be put off by the negative returns for higher rate tax-payers, it’s true that you will have to pay more of your investment in tax but you are likely to live longer! If you are lucky enough to have income for the rest of your retirement of more than £42,000 per annum, you are in good shape, you’ll be paying no more national insurance and the chances are that £22,5,000 is not going to make a serious dip in your capital reservoir!

This works for higher rate tax-payers too!


Posted in actuaries, annuity | Tagged , , , , , , , , , , , , | 2 Comments

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

rat An advert appeared yesterday on the Pension Play Pen Linked In Group.. 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

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.

I couldn’t get my head round this so Danny sent me more details

I promote an occupation pension scheme called Audax. It’s run by independent trustees solely for the benefits of its clients. It has section 280 administrator (not needed), an FCA regulated administration Comoany (not needed) and we have Beavis Morgan as our auditors. Our sponsoring employee actually has staff who are enrolled on the scheme. We do not charge for joint the scheme, there are no exit fees and the client is onky 0.75 annual with projected return of 5% net of fees.

Audax has a sponsoring employer – a  company called Refined By Ltd, situated close to Save my Pension’s Preston offices in Lancaster. Apparently Refined By has employees who are in Audax – I can see no evidence of any trading activity. The company is classified as providing IT services and was incorporated in April 2014. Because Refined By Ltd. sponsors the occupational scheme it can be registered and 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.  I have met with Gallium and am confident that they are ensuring that Audax is compliant with FCA regulations.

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.

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.

Again, I have no reason to doubt that Mark and Absolute are acting within the law. But why should there be so many moving parts and why can I find so little to connect them?

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.

But  Legal Financing is not necessarily a low-risk investment, read this .

Things can go wrong as they have here…

Receivers of the troubled Axiom Legal Financing Funds have brought claims against a number of parties in London’s High Court which are “considered to have acted fraudulently” in relation to “sums up to £110m”. 

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. Nor do we have any details of the funds into which your money is invested. 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.

Just how this works for people wishing to exercise their pension freedoms is unclear.

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”.


a rigorous analyst?


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.


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?


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.


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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


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.


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


Joanne Segars -NAPF

catherine rookes

Caroline Rookes – Money Advice Service


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


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)


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:


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:


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


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

2015-03-28 04.48.42

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?



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


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.



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.



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Coming to terms with the new politics


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?


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. 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


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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?




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.


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 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.


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!


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.



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.




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 with the title

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


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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”

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..


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Probably the worst flagship tax ever?


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?


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.


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?


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!


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


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



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

Will Lovegrove (with child)

Will Lovegrove (with angel)


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


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 or 07515 721603

Alwyn Welch, Non-Exec Chairman, on

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We need a tank to get us across this battlefield!


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


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.


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.


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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


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.



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!


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”.


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?


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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The FofAE Choices Taskforce – what we’re about!

Friends of


Every employer staging auto-enrolment will be able to demonstrate they have taken reasonable steps to make an informed choice over their workplace pension.


To ensure that employers are aware that they have a duty to choose a suitable pension in readiness for auto-enrolment.

To work with the Pension Regulator to articulate “what makes a good workplace pension”.

To work with intermediaries (AE software providers, agents and advisers) to improve understanding of the importance of choice , what makes for good and how to choose.

To encourage due diligence to be carried out in the choice of pensions.

Scope and deliverables

The Pension Regulator has produced guidance to help employers choose a pension – click here.

However many employers are not expected to be offered choice. There is a trend to offering deals through affinity groups or to books of clients. While we understand the importance of default mechanisms, this task force will encourage employers to look beyond the “pre-selected” solution.

The task force will lobby Government to improve not just the quality of decision making , but the documentation of “how and why” the choice of workplace pension was made. We see this as essential to the old governance of auto-enrolment and to always be in the member’s interest. We will lobby for not just choice, but evidence of choice to be a duty of the employer.

For the vision of the task force to be realised, employers will need to engage, get educated and feel empowered to sign off such a document.

Stakeholders, roles and responsibilities

The group will initially comprise of the following individuals

Henry Tapper – Pension PlayPen (Chair)

Jeremy McGahan  – Financial SatNav

Liz Cole – ICAEW

Andrew Evans – Smart Pensions.

David Rich – Accurate Data Services

Jonathan Parker – Dimensional

Richard Hulbert – Defaqto

Emma Jones – Employer representative

The Pension Regulator will be invited to all meetings and copied to all correspondence.

Dr Ian Clacher will also attend on an occasional basis

Engaging, educating and empowering employers to take informed decisions depends on ready access to relevant information and data, the Choices group will lease with other task forces to achieve this.


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How interoperable are you?


How techies talk…

One of the Friends of Auto-Enrolment’s groups is called the interoperability task-force. I think Andy Agethangelou makes these names up so his name seems short by comparison.

“Interoperability” is a concept I haven’t come across before, but like a lot of technical jargon, I went along with it to keep the pointy-heads in order. But now I am being dragged screaming into tech-land and I discover nodes of jargon centring on interoperability.

As far as I can make out, interoperability is the capacity of one system to talk to another system through data. You and I use words, but computers use code which is often encrypted to make it impenetrable to ordinary folks.

So when Star payroll systems wants to talk with the People’s Pension, the conversation doesn’t start- “what’s going on in Crawley”- more likely there are strings of numbers from which experts can extract a sense that all is tickety-boo or strings of numbers telling them they’ve just had a data-train-crash.

TPR has a bright idea.

The Pension Regulator has twigged that the capacity of Pension Providers to talk with Payroll software is critical to the ongoing success of auto-enrolment. I am a great fan of our forward-looking Regulator but on this instance, I will not praise him for his “out of the box” approach. We got there first and for nearly nine months we have been asking payroll how they get on with pensions using simple questions like “what do you think of..?” and “how’s it going for you?”.

Ask these questions often enough and you will get a consistent pattern of answers which tells you that XYZ payroll won’t be sending Christmas cards to ABC pension providers (but will to Provider DEF.

So – as a rule – we would suggest that if you use XYZ payroll and – all other things being equal- you have the choice between these two providers- you chose Provider DEF. You explain your choice by telling your staff that your payroll people like provider DEG because they can have a decent conversation – that they have interoperability.

Rules like the one above are know- heaven knows why- as algorithms and if you have enough data to drive enough algorithms, you can create a system that helps people make reasonable choices – such as the one above.

When people ask me what I do for a living , I do not generally answer “I create algorithms around inter-operability in auto-enrolment” – I don’t do that number of syllables without a few drinks.

But I might explain that I find ways to empower employers to take sensible choices on the pensions they’re setting up for staff.

But not that bright an idea!

Coming back to the Regulator, with whom I am spending too much time, I suspect that he knows that he needs to create a data set, like the one I’m creating.

The danger is that – as with the aborted idea of the Directory – people use s little piece of the jigsaw and call it “the big picture”. In case we forget, simply because pension and payroll happen to be mates in July 2015 doesn’t mean they will always be so. Nor is interoperability the only criteria on which a pension should be chosen – id does little to drive better member outcomes (for one thing).

But knowing who operates well with who is a start and as the Pension Regulator is a little behind the curve on how employers should choose pensions, I’m happy to help out!

Of course being the Regulator, he’ll probably get the interoperability data a lot easier than I would but I’ve offered to help out and get the ball rolling- if only to make sure the information is in the public domain.

Some people may thing that I am giving away the crown jewels, by sharing my interoperability data, but then they don’t understand interoperability like what I do.

neil esslemont

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Has Greece’s cloud got a silver lining? – Guest blog from Ralph Frank


The current situation in Greece presents a host of challenges to the global economy and related financial markets as well as the participants therein, including savers.  The uncertainty arising from the situation and the potential consequences thereof has many parties on edge.  There is, however, at least one potentially positive outcome from this situation.

Many product providers will have extolled the risk management embedded in their products and/or these products’ robustness in a range of market conditions.  The events in Greece provide a real-life test of these claims.  Are the risks (however defined) being managed within the specified ranges?  If they are, you’ve likely got the product you’ve signed up for.  If they’re not, it’s worth considering a change before an even more significant storm inevitably hits financial markets.

Greece joined the Euro back in 2001, contributing to the causes of the current crisis.  That same year, Warren Buffett wrote in his Berkshire Hathaway Chairman’s Letter that “you only find out who is swimming naked when the tide goes out”.  It seems that the tide might well be pulling back in investment markets, as well as on Greek beaches in the summer sunshine, at the current time.  Has your provider been wearing trunks or are they about to be exposed?

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The Regulator makes it easier for micro-employers to auto-enrol


Charles Counsell

Charles Counsell spoke at the Regulator’s provider conference on Tuesday (30th June).  These are my notes of what he said and there may be some minor inconsistencies. I hope to post a slide-share link to his slides when they are published as the Pension Regulator are clearly forging ahead.

He explained the Regulator’s position on employers who have no eligible jobholders (and no entitled or non-eligibles looking to join the workplace pension scheme.

If you are the boss and find yourself with a notification from the Regulator that you are staging auto-enrolment , you do not have to set up a shell scheme. Indeed the Pension Regulator was adamant, you should only set up a scheme, when you have demand for one.

If you have nobody to auto-enrol, do not set up a shell-scheme.Life

This marks how far the Regulator has come from the days of Stakeholder Pensions. In 2001, employers were told they had to set up a scheme and – if they did- their members would come. They set up schemes, nobody joined them and everyone said “what a waste of time”.

According to Charles, as many as 35% of the 1.3m employers still to stage will have nobody to enrol reducing the number of decisions on pensions to less than 1m. Before we heave a sigh of relief, 1,000,000 is still around 7 times the total number of employers paying into staff pensions at the moment!

But not having to make employers go through the motions suggests a new approach from the Regulator to what it calls the “micro micros”. We welcome this pragmatism

The Regulator’s research also suggest that the “back end of the initial staging project” will be  much bigger than expected with a  lot more newly born companies (since 2012) and a lot  less “deaths” (company failures). The Regulator is still checking numbers with Biz but now things  there are many more employers in the system than had previously been thought.

What’s becoming clear is that the letters the Regulator have been sending out all year have been a great success. The last letters go out this week and the Regulator reckons their letters have increased awareness from 65 to 77% for micros

Their research suggests that awareness of auto-enrolment is higher for the 2017 group of employers  than the 2016 group – (anyone who knows why please answer on a postcard to Napier House).

The micro employers are getting it!

The Regulator also has some interesting news on the trial group of micros employers staging in June 2015 (now!)

June stagers have a  96% awareness of their duties , 8% aren’t confident they are going to get there in time (a slightly higher number than previous groups).

Latest research suggests that  accountants are getting there. 86% of accountants surveyed know what auto-enrolment is about. For Book keepers, the numbers are at 80% (up from 29% in 2012). Interestingly there is increased interest too . Accountants increasingly see AE as a business opportunity (as do book-keepers), it’s compliance with the operational challenges that is turning them on!

When it comes to pensions, there is less enthusiasm. 66% of accountants won’t get involved in choosing a pension scheme

The Regulator is setting up a new simple pathway for these firms

Micro micros (those with 2 or less employees) represent 50% of staging population (680,000 are known to the Pension Regulator).  Most of these micro micros won’t think of themselves as an employer needing to stage auto-enrolment.

For them, there is to be a new program knows as  “Express Steps”;

as the name suggests, this will break auto-enrolment down into simple steps -with a default journey focussing on the most typical request of micro micros  –

“just tell me what to do”.

The Regulator is segmenting these employers into five groups, each of whom will get a customised journey

The five journeys

The  first is the standard group, what we know as Steve Bee’s chip shop!

The second is the Carers – who will get their own journey

The third is the Digitally exempt (1200 employers do their payroll returns off line)

The fourth is the 300,000 of so with no eligible jobholders (these will hacesimple simple steps)!

The fifth are employer  who don’t have any staff at all, and they will have virtually nothing to do at all

Further steps for micros

The Regulator is busy transforming its website for micro micros.

The Pathfinder group of June 15 employers has taught the Regulator some lessons

In its drive for scale, it is learning that in future auto-enrolment will be virtually a B2C propositions (though there was no mention of changing the Regulatory permissions to advise on workplace pensions on a B2C basis.

The Regulator is looking at the Tone of their  letters  which are currently very authoritative 

“very direct” is good but doesn’t play well  with all audiences. 

Charles expressed his astonishment at how a sample letter with a different tone solicited remarkably different results.

It’s good to see the Regulator listening so closely to the feedback on matters such as tone. As I said at the beginning of this article, we have moved a long way since 2001!

Auto-enrolment is now tPR’s #1 priority

lesley titcombe2

lesley titcombe

Lesley Titcombe, Charles’ boss also spoke at this meeting. Clearly Auto-enrolment is now the number one priority for tPR and she looks like adopting a no-nonsense approach to making it happen.

I am – and this may be a first in my 32 years on the job, happy to say we have a Regulator who is not only sympathetic, but showing us the way to do it.

Hats off to the Regulator.

neil esslemont

Neil Esslemont

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Auto-enrolment – a job worth doing?


Ask yourself a question – is the Government changed its mind and stopped the auto-enrolment program at the end of the year – how would you feel?

I expect that there would be a mixed bag of reactions

Outrage from those who have invested heavily  in systems and human resource to comply with  staging regulations and develop ongoing processes.

Puzzlement from many who had yet to stage but sensed problems down the track.

Delight from those who had done nothing and were contemplating the future with furrowed brow.

I don’t suppose there is the least likelihood that there will be an exemption for those staging in 2016, though this is what one payroll professional body called for at a recent meeting with Government officials.

The reason I say this, was that I was in the room, and I looked at our new pension minister and I did not get the impression the lady was for turning.

But it would be interesting to run a poll on Payroll World to gauge the reaction of the readership!

I think we have passed the Rubicon ,and like Julius Caesar, we know there is no going back now!

A friend, Kate Upcraft has taught me that the investment of my energy in learning the auto-enrolment ropes is worth it. It’s like learning Spanish when you can speak Italian, you know bits, can guess others and have to consult the dictionary (well the Pensions Regulator’s website) for the hard bits.

But learning a language just to have the skill on your CV is a bit daft. There has to be a reason for all the hard work.

Here’s why I think the hard work is worth it

As a pension person, I am passionately committed to retirement saving. I know the importance of doing it properly and have seen the mess that occurs when pensions people take short cuts. If you make a mistake in payroll, you get found out within hours, but it takes years for the damage from bad pension planning comes to light.

Sadly, while payroll mistakes can be rectified , it isn’t quite as easy to sort out a lifetime getting pension decisions wrong.

I was really pleased when auto-enrolment came along as I thought it made sense. I didn’t get that feeling in 2001 when we introduced stakeholder pensions and I didn’t get personal pensions and all that contracting-out malarkey.

The trouble with those pension ideas was that they relied on people taking difficult decisions. With auto-enrolment the most difficult decision is to opt-out! Many people do, but it takes a bit of doing.

My impression of payroll people is that you are conscientious, have a high level of integrity and that you pay attention to detail. I get the impression that you hate being taken for granted (but that this happens a lot).

“If a job’s worth doing, it’s worth doing well” – would be a motto for you lot!

The trouble for you with pensions is that you aren’t sure the outcomes of all this saving will be worth the bother.

This is where we need to work better together.  I work with good and bad pensions people. The good people run pensions that I could recommend to my friends and family. They are the pension schemes we rate on our website. I am determined to weed out the bindweed that has strangled good pension practice and we spend our time doing due diligence on all the pension providers offering auto-enrolment.

When we see things going well, we applaud, when things go badly, we say so – even at the risk of legal action (we’ve had that a couple of times). We send out regular surveys to the payroll software providers and many of the larger bureaux asking for their experience of dealing with the major pension providers.

We look at the investment strategies and monitor how they are working, we assess how ready the providers are for the pension freedoms, we look at how much the providers are taking out of members pots and whether they are offering value for money and we assess whether the providers have sustainable service propositions.

In short, we care about the quality of the pension schemes you use as much as you care about the quality of service you provide.

There are many people in pensions who feel this way about the outcomes of what they do. I’ve been doing this for over 30 years and probably will do 15 more! I intend to be accountable for the advice and guidance I’m offering today.

If we work together and all do our jobs – auto-enrolment will be worth doing.

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Glastonbury – Johnny’s still alive.



There was a touching moment in Patti Smith’s set on the final day of Glastonbury. I’d always thought that Land was about the Johnny’s suicide, I’m glad that Johnny (and Rock and Roll) survive

In the late 70’s, “Horses”, the album on which Land features, was seldom far from the top of the stack. I liked the way it linked my French A level to my extra curricula studies

Go Rimbaud and Go Johnny Go and do the Watusi!

And , having been a religious zealot in my early teens, it was nice to hear Smith start Gloria

Jesus died for somebody’s sins but not mine

Glastonbury has a good habit of bringing back the good (Lionel Rich Tea excepted) and debunking the self-obsessed (Kanye West- what were you thinking?).

This year’s festival- or what I saw of it on i-player, was mostly about Mary J Blige, who proved that she is the great RnB singer of her generation and about Mark Ronson, who more of less stole the show with one of those sets that should be curated to the Hall of Fame.

From Burt Bacharach to Dave Ezra, creativity and song writing seem to abound. Maybe I’m just getting unsceptical in my middle age , but every time I tuned in, I was hearing stuff that was properly inspiring.

The great sadness (for me) remains the absence of John Peel. How I missed his acerbic contributions as I listened to the gush of BBC nonentities, with nothing to say, buts limitless airtime in which to say it.

The last time I went to the Festival was in 1983 but…

Johnny’s still alive.


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Should workplace pensions have a duty of candour?

Duty of candour

We seem to have learned nothing from the Office of Fair Trading report on workplace pensions.

In case you’ve forgotten, the OFT reported they’d never encountered such  poor purchasing as with employers purchasing pensions for their staff.

What has been the industry’s response to this astonishing statement?

The ABI has put in place a protracted review of its member’s legacy products and agreed to the establishment of Independent Governance Commissions to manage the behaviour of insurers and a charge cap on the defaults of workplace pensions.

Meanwhile , every week heralds the arrival of a new workplace pension solution launched to meet the needs of some supposedly heterogeneous group of employers.

These new arrangements are typically master trusts, with us having to take it on trust that they are doing more than paying lip-service to the quality of member outcomes. They neatly by-pass the scrutiny of IGCs and the legacy review

Pardon my bluntness, but the proliferation of snake-oil solutions being peddled as Qualifying Workplace Pension Schemes suggests that the OFT report might as well have been a marketing document to the dubious of intent.

Is anybody doing due diligence?

Already two qualifying workplace pensions – those of Friendly and Source Pensions have had to be pulled from the shelves, both propositions suffering collateral damage from poor governance.

Since the new breed of master trust can be set up in days and operate without the consumer protections of FSCS and of EU Solvency regulations, they are an open invitation to any organisation to plunder to make hay.

The one serious governance structure on the managers of a master trust – adherence to the master trust assurance framework – is not even compulsory.

Have we learned nothing from the last thirty years of financial services mis-selling? Every problem has resulted from poor purchasing and poor controls on those in the sales process.

The only difference with auto-enrolment is  that the mis-selling will be on an industrial scale.

Unless, that is, swift and decisive action is taken to create an obligation on employers and those who advise them , to conduct some due diligence on the products being purchased on behalf of staff.

Should we not expect, any employers committing a major chunk of payroll, to at least be able to articulate where the money is going – and why?

I appreciate that employer duties are multifarious, but can any be more important than selecting a workplace pension saving scheme for their workers?

I am amazed that this issue is not being taken more seriously.

The charge cap of 0.75% is a token measure that can be circumvented with ease, simply by charging the member through the net asset value of the fund. Until a “total cost” measure is established, those who wish to fund their enterprises through member borne charges, can do so with impunity.

Some may think that the answer is more regulation. But layers of regulation , patching systemic weaknesses, lead to complexities which are in nobody’s interest.

What is needed is a willingness among employers and their advisers to pay attention to the pension they have purchased, not just at point of sale, but going forward. This willingness needs to become part of the DNA of employment, not just another employer duty.

Do I think this is likely? There are some 1.3m employers choosing their workplace pensions. The vast majority fit the OFT’s description. Most have no workplace pension for their staff, many have no pension plan for the bosses.

In order for these bosses to take their workplace pension seriously, there will need to be a major  campaign from Government to raise awareness;- and a sea-change in the way that advisers provide help to small businesses.

It is unlikely that the majority of employers will engage for themselves. They are more likely to engage through a trade association or adviser, or accountant or even their payroll software.

Delivering the three essential ingredients to good decision making (engagement- education and empowerment) means working with these employers in a radically different way to what has happened so far.

Conventional advisory models were simply not built for this kind of market. Unless the means of delivery and the price of advice radically changes, most employers will continue to sleepwalk into mis-purchasing. This may be very good news (in the short term) for those exploiting employer weakness, but it will be very bad news (in the medium to long term) for the auto-enrolment project.

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Why due diligence is soooooooo important!


due diligencesix

Yesterday I wrote about pension charges and the difference between poor practice and malpractice . At some point the value for money swing-ometre  tips into rip-off territory and it’s almost always when those managing its costs of a scheme, stop acting in the best interests of the scheme.

due diligence three

The problem is particularly concerning in the UK for occupational pension schemes. The Pension Regulator has identified around 40,000 small DC schemes which do their own governance. Last week, the Executive Director for DC schemes at the Pensions Regulator- Andrew Warwick-Thompson, admitted that it was virtually impossible to get so many schemes to adopt the voluntary codes of good practice that he and his colleagues have issued.

It is clear that – from a Regulatory viewpoint – the explosion of small mastertrusts which we are seeing at present, isn’t helping. From the abstract perspective that choice drives competition and innovation, new providers should be welcome, but if those new providers will not submit themselves to public scrutiny, how can we trust them to be acting for their members interests (and not just for their own).


Let me explain what I mean in more practical terms. Almost every week, I or my colleagues are approached by a pension provider not on the Pension PlayPen platform, to sit alongside the providers that are.

We are happy to research (almost) all propositions. The only ones we won’t research are those that fail an initial sense check (we smell a rat).

due diligence four

First Actuarial then send out a detailed questionnaire to the new provider which asks probing questions that enable us to estimate the value for money of the proposition and its suitability to differing types of employers using the Pension PlayPen Choose a Pension Service.

Usually we get the questionnaires back and – depending on the quality of the response and of the information in the response, we then include or exclude the pension scheme.

Obviously, just because you are not on the Pension PlayPen platform , doesn’t mean you aren’t a good pension provider. The likes of Fidelity, Zurich and BlackRock are good providers who just aren’t offering workplace pensions to employers staging auto-enrolment today!

But if one of the smaller master trusts isn’t on our platform, or in the queue, the chances are it has failed our due diligence.


We aren’t going to name and shame these providers. But neither First Actuarial or Pension Play Pen think it worth exposing employers to providers who either won’t complete due diligence or demonstrate some major flaws in their investment, administrative or governance processes.

If you decide to contract with one of these providers and haven’t done your due diligence, then you put yourself at risk. That risk could either be Regulatory (you didn’t conduct due care in choosing your workplace pension) or Civil – the members of your scheme come back to you in the future and ask you what the hell you were playing at.


Choosing a workplace pension needn’t be hard, nor need it be expensive, it takes a few minutes to conduct due diligence using our platform and costs very little.

We already know of instances where employers are having to re-establish pension schemes because the Regulator has refused to grant permission for the trust. We know of a pension scheme that has had to reconstitute itself because of a potential fraud against it. In both instances, the problems were in the Governance of the original provider.

I’m happy to say that neither provider – though they enquired of us -made it to our platform

Those providers are co-operating, things are orderly and it looks unlikely that any member money will be lost.

But what of the plethora of auto-enrolment offerings that we do not know of, that never submit themselves to public scrutiny, whose offering is a secret, known only to those “in the know”?


As a rule of thumb, any pension scheme that won’t submit itself to public scrutiny or the due diligence of experts is highly suspicious and should be avoided.

Transparency is a great disinfectant.

due diligence now

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