Pothole follows member


At one moment, as I sneakily followed the autumn statement on twitter (while supposed to be doing strategy), I heard the Chancellor remark

Over the next five years the Government will spend £250m to pay for pothole repairs

This has subsequently been corroborated by my favoured auto-website. Like many people I suffer from behavioural bias’. These cause me to hear what I want to hear and ignore what is actually being said. Pothole to me means something different than to other people.

Let me explain…

I have been thinking much of late of the Wise Men of Chelm. They are a loopy bunch of old men created by Isaac Bashevis Singer.  They were confronted with a terrible problem.  The mountain road to get to the village of Chelm developed a pothole, which grew and grew, causing ever more dreadful accidents. The solution.  Build a hospital right next to the hole.

I was distracted. I had come to think of that pothole as the cause of all the bad things that might happen to people’s money – if they take bad choices at retirement.

I actually thought that the Chancellor intended to devote some money to sorting out the pension problems that will cause “capital deprivation” for many of us in later life. I thought I heard George Osbourne say he stop our pension pots falling into potholes, so that pots followed members to their death.

But it looks like the potholes are still with us. And it is  potholes that will be all that many elderly people will have to look at as they draw to the ends of their lives- potholes filled with muddy water. For the potholes of late retirement are not paved with gold and our pension pots are smashed up by the road conditions.

In an earnest fit – brought on by my fantastical vision of potholes , I contacted Britain’s o leading experts on pots for clarification.

How many potholes does it take to fill the Albert Hall?

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How the autumn statement will effect pensions and pensioners


We’ll have to wait till April for the next rabbit in the hat!

There were no big pension surprises in this autumn statement but the Chancellor managed to squeeze some savings from auto-enrolled workers and pensioners. All eyes now turn to the 2016 Budget where the Chancellor is expected to make an announcement on the future of pension tax relief.


Key change

Change to auto-enrolment contribution phasing timetable.

The “realignment” of the phasing dates where auto enrolment phase upwards from current minima to the 4+3+1 rate means a further delay of 6 months before most enrolees see an increase in their mandatory pension contributions. NOW pensions have calculated that for an average worker – this means a loss of £770. The delay is bad news for providers and the ABI have called it “disappointing”. It puts further pressure on the business models of providers (including NEST).

Bad news for savers and providers- good news for HMRC.

For the Treasury, the delay saves a total of £840m, £390m in 2017-18 and £450m in 2018-19.

That these calculations are based on the current EET tax system suggests that whatever the Chancellor announces in the Budget 2016 as a result of the consultation on pension taxation, there are no plans to move from EET before the end of tax year 2018/19.

The FT, commenting on social media quotes David Fairs, Chair of the Association of consulting Actuaries “the AE delay paves the way for a fundamental change to the existing tax regime.” The numbers quoted assume the DWP’s current estimate of 28% opt-outs (up from the current rate of under 10%). If opt-out rates remain at current levels, the tax savings will be considerably higher and we suspect the Treasury are low-siding their estimates.

These savings demonstrate the importance to the Treasury of capping tax relief, since the majority of savers being auto-enrolled are basic rate tax payers, we suspect that for the Treasury to make significant savings from reforming the taxation of pensions, a more radical change to tax relief than a move to a flat rate is likely. We are therefore in agreement with the ACA that this move points to a Tax Exempt system.

It certainly shows how expensive (and potentially unsustainable) tax-relief will become after 2019 if the EET system is maintained. Any thought that we will auto-escalate beyond the proposed 8%, needs to take into account the cost to the public purse.


Changes which will significantly impact pension saving

Significant changes to anticipated spending capacity for those on low incomes

The Chancellor’s decision to U-turn on tax credits is a relief for those on low incomes and for the auto-enrolment project, for which the removal of tax-credits threatened a sharp increase in opt-outs. Pension saving is therefore a net beneficiary of this policy change.

Stamp Duty Hike on Buy to Let will keep money in pensions

We also expect the surcharge of 3% on stamp duty for buy to let properties to reduce the attraction of this form of investment.  This measure is expected to bring in £4bn in the next five years.

As much of the £4.7bn taken so far through the use of pension freedoms is reported to be destined for buy to let, we expect pensions to further benefit from this change in taxation.


Further pension news

The new state pension

The new full state pension will be set at £155.65 a week when it begins to be paid in April 2016. The Government has confirmed the weekly amount which will be paid to people with a full 35 year National Insurance Contribution record. Workers who have been contracted out of additional state pension during their careers will receive less. In addition, the basic state pension will rise by £3.35 to £119.30 a week from 2016.

Announcement on the Local Government Pension Scheme

The autumn statement coincides with the publication of the criteria for pooling Local Government Pension Scheme (LGPS) investments, alongside the consultation on the backstop legislation and draft amendments to the scheme’s investment regulations The publication contains a proposal to move towards a ‘prudent person’ approach to investment in the LGPS. This means the LGPS investment rules would mirror those of trust based pension schemes in the private sector

The Government to press ahead with a secondary market for annuities

The Government is to press ahead with plans to allow pensions to sell-off their annuities and will unveil a consumer protection package next month. The proposals will come as part of a response to a now-closed consultation on the reforms due in December. Funds left in drawdown pensions after death will not be subject to inheritance tax. The Treasury committed to legislative changes as part of the Finance Bill 2016.The exemption will be backdated to deaths on or after 6 April 2011. The Bill will also contain a simplification of the tax treatment of scheme pensions.


Tax Changes impacting payroll and auto-enrolment

From 6th April 2016: The personal allowance rises to £11,000 (+£400) with a new basic 20% tax threshold of £32,000 (formerly £31,785) – a potential tax saving of £43 per annum for those who hit the 40% bracket earnings under £100,000. However, the 45% tax bracket remains at £150,000 and the tax free pay restriction continues to kick in from £100,000 upwards.

National Insurance Contributions

For the first year in many, the majority of the NIC earnings bands remain unchanged. The exceptions is the Upper Earnings Limit (UEL) with the Upper Secondary Threshold (UST used for Under 21s) and the new Apprentice Upper Secondary Threshold (AUST) all matching each other at the new values of £43,000 per annum or £827 per week (formerly £815 where applicable).

  • The weekly Lower Earnings Limit (LEL) remains as £112
  • The weekly Primary Threshold (PT) remains as £155
  • And the weekly Secondary Threshold (ST) remains as £156

The result with any wage inflation is that more UK workers will be paying NIC and those earning above the UEL will be paying slightly more NICs as well with an additional £1.20 per week (around £62.40 more per annum).

Scottish Rate of Income Tax (SRIT)

It is anticipated that the Scottish Parliament will announce the SRIT income tax rate which also applies from 6th April 2016 on Wednesday 16th December 2015.

The Income Tax Bands will remains the same as for the rest of the UK


Warning on salary sacrifice


The Government is investigating the use of salary sacrifice. The law firm Ashurst says salary “sacrifice is in the Government’s crosshairs and we should expect a “strong attack” on tax savings associated with these arrangements next budget”


Pension Credits

Pension credit payments will be stopped to people who have left country for more than one month. This is bad news for pensioners taking extended breaks in the sun.


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“Deprivation of capital” = double dipping= WOT = ignore!



If you are waking up with the Daily Express falling onto your doormat- you shouldn’t be reading this blog.

That’s because you are prepared to pay 5p less than the Daily Mail for another “not news” story about pensions, this time a story fed by the Personal Finance Society and reported in other wondrous magazines- vide this version of the PFA press release in Financial Recruiter.

Anyone googling the phrase “Deprivation of Capital” will come across April’s statement by the DWP

Deprivation rule

If you spend, transfer or give away any money that you take from your pension pot, DWP will consider whether you have deliberately deprived yourself of that money in order to secure (or increase) your entitlement to benefits.

If it is decided that you have deliberately deprived yourself, you will be treated as still having that money and it will be taken into account as income or capital when your benefit entitlement is worked out.

This practice of spending to fall back on the state is known in Australia as “double dipping” – rather more snappy, I think you’ll agree!

How does this play with George Osborne’s spending review?

Not well I suspect, the Treasury is still reaping its own “pension credit” for launching the Lamborghini culture and he could do without the stick in the muds round the corner in the DWP reminding people that splurging their pension savings in their fifties and sixties, does not mean recourse to the tax payer in their eighties and nineties.

This is not news to Australians and to Americans and to many other cultures which require sufficiency in later years to qualify for super duper older age benefits. Nor – I suspect is it news to the “spend now, worry later” brigade still living the maxim “hope I die before I get old”.

The PFA clearly want people to hold onto their money, which allows the money to continue to earn fat fees for financial advisers operating drawdown. But most people want out of pensions because they see “deprivation of capital” as the practice of financial rape practiced on them by the pensions industry (and most of all financial advisers).

In short “deprivation of capital” is a risk that many people will take simply to call the state’s bluff. At the very least, they can have a go at the DWP for embedding this clause in a long and boring paper and point to the Treasury mis-selling them pension freedom. At the very best, they know that no sensible Government isn’t going to give them admittance to some five star long term care establishment because they haven’t got any money. There’s no votes in that!

They would rather deprive advisers of fat fees than cower beneath the DWP’s vapid threat.

So where am I on this?

Well, I see no way that the DWP are going to make this stick without something tougher from the Treasury and I see no chance of Harriet Baldwin and George Osborne letting the DWP piss on their parade.

Eventually, ordinary people – who incidentally read the Daily Express (and the exorbitantly priced Daily Mail – save 5p a day with the Express) – where was I?

Oh yes! Eventually the silent majority will say a plague on all your houses, these freedoms are illusory without guidance on how to spend our money and a proper means to do so. Pension Wise is fine as guidance goes, but show me a way of spending my retirement cash that doesn’t involve me paying too much tax or exorbitant advisory fees.

Which is where the DWP will have to come clean and explain that for the sake of a few quid, it’s ditched (sorry postponed) the CDC project which could have provided a product that gave people greater targeted income in retirement without having to go into advised drawdown or buy an annuity.

In the meantime, Michael Johnson is busy convincing the Treasury that the way out of the mess that Freedoms will soon become, is to introduce TEEN – a taxed – exempt- enhnanced pension taxation structure. Here the enhancement of benefits is at the end of your saving phase and involves you getting a top-up to your pension pot out of the money saved by not giving you tax-relief at outset.

People who decide to enter into a voluntary arrangement where they preserve their capital (such as an annuity, a proper (old-style) drawdown contract or a CDC type pension spending scheme, will get the enhancement and those who just want to take and spend – won’t.

Which is a lot clearer than the weasel words in the DWP’s April statement, that few noticed and most – including those who read the Daily Express – will ignore!


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The Public Accounts Committee on Auto-Enrolment – (tweets on DWP/tPR and NEST)


tweeps- just dive in! It’s all here!

I’m not sure a blog has ever been written around one person’s tweets of an event, but Jo Cumbo’s online reporting of the Public Accounts Committee’s session on auto-enrolment is so excellent that I thought to hand over to her twitter feed!

It was an important session, following the recent report of the National Audit. There were no questions (it would seem) about pressing the panic button , as widely reported in the Telegraph and more recently in Corporate Adviser. The issues dealt with were proper issues, those discussed in this blog and those of national interest. Top of the list was the accountability of NEST and the need for it to be clear on how it clears its debt.

There has to be an urgent and cogent discussion on NEST pricing if we are not to have pricing distortions that could lead to major market disruption next year.

Over to Jo…

Jo’s summary statement

Who gave evidence (from the public sector)


Questions on “Workie”

Charles Counsell on choice and workplace pension investment

Helen Dean on NEST investment

Questions on small pots following  members

Charlotte Clark on costs and charges in “Workie”

Questions on savings levels

Charles Counsell on supporting SMEs

Questions on the capacity of NEST to repay its public debt

Questions on opt outs and cost to Treasury of low opt-out rates

Questions about the roll-out of staging (the timetable)

(TBC)   I will publish the private sector session in a separate blog.

Thanks to Jo for excellent reporting, if I have misrepresented her reportage, I am sure she will be in touch!

Any comments on whether this format for a blog is helpful – most welcome!

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Terry Smith – What I have learned from Fundsmith in the Past Five Years


Fundsmith is my favourite fund manager. Like Aberdeen (another favourite whose conference I’m going to today), it is an organisation with a strong purpose (moral and social). Terry Smith is an extraordinary man who’s views are always worth reading. He sent me this comment by email and I hope the FT (where this post has been previously published) will permit me to reblog here.

Fundsmith, my fund management business, celebrated its fifth anniversary in the past month. What have I learnt over the past five years of running the fund?

One thing I have observed is the obsession of market commentators, investors and advisers with macroeconomics, interest rates, quantitative easing, asset allocation, regional geographic allocation, currencies, developed markets versus emerging markets — whereas they almost never talk about investing in good companies.

It seems to me that most of these subjects pose questions to which no one can reliably forecast the answers, and even if you could the connection to asset prices is tenuous at best. Take GDP growth — few things seem to obsess commentators more, yet no one has ever managed to demonstrate a positive correlation between GDP growth and stock market performance.

Invest in something good

What has continued to amaze me throughout the past five years is not just this largely pointless obsession with factors which are unknowable, largely irrelevant, or both, but how infrequently I hear fund managers or investors talk about investing in something which is good. Like a good company with good products or services, strong market share, good profitability, cash flow and product development.

I suppose I had assumed that the credit crisis might have taught them that you will struggle to make a good return from poor-quality assets. No amount of CLOs, CDOs and the other alphabet soup of structured finance managed to turn subprime loans into a good investment. When the credit cycle turned down, even the triple-A rated tranches of these instruments turned out to be triple-Z. There’s a saying involving silk purses and a sow’s ears which encapsulates the problem.

I am not suggesting that there is no other way of making money other than to invest in good companies, but investing in poor or even average companies presents problems. One is that over time they tend to destroy rather than create value for shareholders, so a long-term buy and hold strategy is not going to work for them.

A more active trading strategy also has its drawbacks. Apart from the drag on performance from trading costs, it is evident from the performance of most funds that very few active managers are sufficiently skilled to buy shares in poor companies when their performance and share prices are depressed, and then sell them close to their cyclical peak.

Another obsession I have been surprised about is that with “cheap” shares. I have been asked whether a share is cheap many more times than I have been asked whether the company is a good business.

This obsession often manifests itself in the critique of our strategy which goes something like, “These companies may be high-quality, but the shares are too expensively rated.” This is almost certain to be true, as from time to time the share prices are sure to decline, but it misses the point. If you are a long-term investor, owning shares in a good company is a much larger determinant of your investment performance than whether the shares were cheap when you bought them.

Ignore the siren song

A fairly obvious lesson, but one I have re-learnt, is to stick to your guns and ignore popular opinion. I lost count of the number of times I was asked why we didn’t own Tesco shares, or was told that I had to own Tesco shares when our analysis showed quite clearly that its earnings-per-share growth had been achieved at the expense of returns on capital. In fact, its return on capital had deteriorated in a manner which pointed to serious problems in Tesco’s new investment in areas such as China and California.

Similarly, it is important to ignore the siren song of those who have views on stocks which you hold, particularly if they are based on prejudices about their products. I also lost count of the number of comments I read about how Microsoft was finished as it “wasn’t Apple”. This included one investor who rang us to ask if we had seen the quarterly numbers from Microsoft which were not good. (It was tempting to respond saying No, of course we had not seen the quarterly results for one of our largest holdings and thank him for pointing this revelation out to us.)

He said we would face questions at our AGM if we still held the stock then. It was of course just one quarter and the stock more or less doubled in price after that. Sadly no question was raised at the AGM.

Stick to the facts

Another of my observations is that impressions about stocks are often formed erroneously because people do not check the simplest facts. Sometimes they simply relate to the wrong company.

We topped up our stake in Del Monte, a processed food and pet food business, on some share price weakness which resulted when a news service carried an article that dock workers in Galveston had gone on strike and so had stopped Del Monte’s ships being unloaded. The company it was actually referring to was Del Monte Fresh Foods, which imports tropical fruits like bananas and pineapples, not the one we were invested in. Or the client who contacted us to say how concerned he was about our large holding in Domino’s Pizza since the chief executive and chief financial officer had left. They had left the UK company, but we owned the US master franchiser.

I would be hard pressed to name the least well-understood subject in investment given the wide choice available, but I suspect that currencies is among the leaders. Over the past five years I have heard lots of people talk or ask about the impact of currencies in a manner which betrays a complete lack of understanding of the subject. The commonest question or assumption about our fund is the impact of the US dollar, since the majority of the companies we have owned since inception are headquartered and listed in the US.

This makes little or no sense. A company’s currency exposure is not determined by where it is headquartered, listed or which currency it denominates its accounts in. Yet this does not seem to stop people assuming that it does and making statements about the exposure of our fund to the US dollar, based on where the companies are listed.

We own one company which is headquartered and listed in the US, but which has no revenues there at all. Clearly this assumption would not work very well for that company, any more than it would work for the UK listed company we own which has the US as its biggest market and which, perhaps unsurprisingly, reports its accounts in US dollars.

Nor could we understand the reasoning of the commentators who wrote that our holding in Nestlé had benefited from the rise in the Swiss franc. How? Ninety-eight per cent of Nestlé’s revenues are outside Switzerland. It may be headquartered and listed in Switzerland and report in Swiss francs, but the fact is that a company’s currency exposure is mainly determined by where it does business. In Nestlé’s case the Indian rupee is a bigger exposure than the Swiss franc.

Does anyone read accounts?

I have also discovered that hardly anyone reads company accounts any more. Instead they rely upon management presentations of figures which often present “underlying”, “core” or “adjusted” numbers. Not coincidentally, the adjustments to get to the core or underlying numbers almost always seem to remove negative items. Reading the actual accounts bypasses this accounting legerdemain.

We have also discovered mistakes in accounts which no one else seems to have noticed. Like the $1.8bn mistake in the IBM cash flow. This alone did not prevent us investing in IBM, but it helped to support our conclusion that hardly anyone reads its accounts thoroughly.

Don’t sell good companies

I have also learnt that selling a stake in a good company is almost always a mistake. Take Sigma-Aldrich, a US chemical company based in St Louis. It supplies pots of chemicals to scientists around the world who use them in tests and experiments. Its financial performance fitted our criteria, as did its operational characteristics — supplying 170,000 products to more than a million customers at an average price of $400 per product. It fitted our mantra of making its money from a large number of everyday repeat transactions, as well as having a base of loyal scientists who relied on its service.

It was a predictable company of exactly the type we seek. That was until it was revealed that it was trying to acquire Life Technologies, a much larger company which supplies lab equipment. Given the execution risk involved, we sold our stake. As it happens, Sigma-Aldrich did not acquire Life Technologies as it was outbid. But having gone public on its willingness to combine with another business, it was in no position to defend its independence and succumbed to a bid itself from Merck at a price about 40 per cent above the price we has sold at.

Selling good companies is rarely a good move. The good news is that we don’t do it very often.

Our best share

The best performing share contributing to Fundsmith’s performance over the past five years was Domino’s Pizza Inc, with a return of over 600 per cent from the initial stake purchased on the day the fund opened. What might we learn from this?

● People often assume that for an investment to make a high return it must be esoteric, obscure, difficult to understand and undiscovered by other investors. On the contrary — the best investments are often the most obvious.

● Run your winners. Too often investors talk about “taking a profit”. If you have a profit on an investment it might be an indication that you own a share in a business which is worth holding on to. Conversely, we are all prone to run our losers, hoping they will get back to what we paid for them. Gardeners nurture flowers and pull up weeds, not the other way around.

● Domino’s is a franchiser. If you regard a high return on capital as the most important sign of a good business, few are better than businesses which operate through franchises, as most of the capital is supplied by them. The franchiser get a royalty from revenues generated by other people’s capital.

● Domino’s has focused on the most important item for success in its sector — the food. This is in sharp contrast to other fast food providers, such as McDonald’s, which are struggling.

● Domino’s is mostly a delivery business. This means that it can operate from cheaper premises in secondary locations, and so cut the capital required to operate compared with fast food operators who need high street restaurant premises.

● Domino’s was owned by Bain Capital. Like a lot of private equity firms, Bain leveraged up the business by taking on debt to pay themselves a dividend before IPO, so it started life as a public company with high leverage. This can enhance equity returns. In a business which can service the debt there is a transfer of value to the equity holders as the debt is paid down and the equity is de-risked. Please note — this does NOT indicate that leverage always enhances returns.

Terry Smith is chief executive of Fundsmith LLP

Terry’s Fundsmith also has the best advertising strap of any fund house

No Fees for Performance

No Up Front Fees

No Nonsense

No Debt or Derivatives

No Shorting

No Market Timing

No Index Hugging

No Trading

No Hedging

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Crowd-sourcing a solution to the net-pay pension problem.

net pay

The people who are losing out on Government contributions into their workplace pensions because their schemes work on net pay rather than “relief at source” are oblivious of this problem, they serve coffee in Costa, work in nursing homes and clean trains. They are not pension experts and rely on their employers , pension providers and the Government to do the right thing. They are some of the most valuable and most vulnerable new savers in our auto-enrolment program and so far they have been let down.

They have their champions, I name among them Adrian Boulding -Director of Policy at NOW, Kate Upcraft,  – freelance pension and payroll expert, Ros Altmann- our pension minister and Gerry Flynn who wrote on my recent blog on this subject

Now that payrolls now use RTI to HMRC, surely the process of returning tax relief does not have to wait until the end of the tax year?

The impetus for his comment was a suggestion from NOW pensions that we could work around the “expensive to solve” problem of moving a net pay system to relief at source “in running”.

I would not have run that blog, had I not been barraged by twitter comment on the subject from Karen Wake, Will Aitken, Ian Macquade, Alan Sneddon and without the constant attention to this issue from Andy Young (in my ear with actuarial persistence).

Then in my inbox yesterday  I got this

I reed yesterday’s blog on a solution to the NPA conundrum with interest. … you might want to know that there is  no need for any complex end of year reporting to HMRC. All employers are required to include the NPA deduction  that period every time they report to HMRC i.e. weekly, monthly or whatever the pay frequency is.

The figure can also be amended after year end of a file called an EYU if it turns out there was an error.

So the only additional reporting would be for HMRC to request employers to supply a YTD figure or for HMRC to accumulate it. We have done this since the start of RTI because NPA contributions are not added back in for UC purposes in the same way as RAS contributions because of the (alleged tax relief).

As a matter of interest I’ll be raising this with the DWP UC team on 30th November when I see them as I want to understand what they are doing with UC to ensure that those in NPA aren’t being that unfairly treated compared to those in RAS as I think they are!

If you want to look at the data data items list it’s here – item 61 – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/477430/RTI_Data_Item_Guide_16-17_v1-2.pdf

If my correspondent wants to be revealed , I will lift the veil of anonymity, but between NOW, Gerry and her, I think we are getting a solution to this problem that can suit HMRC, DWP and the occupational schemes (including the master trusts).

This isn’t some vain-glorious showing off from a  social media site, it is an example of how new technology can bring various people together to solve a social problem. Nobody’s going to bet paid for this and the true heroes of the piece will remain anonymous.

A further mail demonstrated the positive spirit in which this conversation has been conducted

Happy to talk/help on this as I’m very disappointed that DWP haven’t done more on this other than shout at TPR who I think have done a sterling  job on AE often with their hands tied behind their basks. If we used RTI data to solve this it would of course also be a solution in the public sector statutory schemes where this problem bites even more 

Perhaps the DWP should try crowd-sourcing from social media little more! It’s a lot easier and quicker than running a consultation!

net pay 2

Oh and here’s that poll again – on NOW pension’s potential solution

Results so far are positive but keep those opinions coming. We can of course widen the question to include the comments above. If you want to leave your comments at the end of the blog, please do- or just mail henry.h.tapper@firstactuarial.co.uk.

To be continued….

Posted in auto-enrolment, Blogging, journalism, NEST, now, Payroll, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , | 2 Comments

Preparing for an auto-enrolment capacity crunch.

Ros Altmann new

The Telegraph is running a story suggesting that the DWP are drawing up a plan B for auto-enrolment that could see the timeline for initial staging stretch to the next decade.

Nannies, gardeners and staff at small firms may not get workplace savings schemes until 2020

Currently, all employers can expect a staging  date by the end of 2018, so this would represent a material change not just to the timetable, but to the pension prospects of those whose employer’s staging was deferred.


What do we mean by a capacity crunch?

On the plus side, such preparation is prudent. At a seminar given by the Pension Regulator late last week, I and the audience was told that there has been a further re-cast of the numbers of employers staging; the Government now estimates that in one quarter alone late in the enrolment cycle over 350,000 employers will stage. These numbers are frightening and the phrase “capacity crunch” is not alarmist. To manage around 120,000 employers in a month is logistically equivalent to managing all the employers which have staged so far (c60,000) twice in a month!

Just look at the original staging numbers

auto-enrolment traffic jam

and compare them with the revised projections of the Pension Regulator, issued earlier this year (after the total numbers staging was revised upward from 1,200,000 to 1,800,000.

staging graph

the purple lines represent the revised spikes in staging

The capacity crunch could come at any of the spikes but particularly the periods around the end of 2017.

staging profile

To understand what a peak of 350,00 in a quarter would look like, you need to extend the biggest spike here by a third again!

It is right for the DWP to be making contingency plans – this represents an unprecedented  call on private pension and payroll provision.


Unfortunate timing.

But I have issues with the timing of what appears to be a DWP leak. The DWP are putting the delivery of auto-enrolment largely  in the hands of the private sector, a sector that is disgruntled at being handed what it considers a “hospital pass”. If the DWP had attended the 20:20 innovation seminars, where accountants have been able to speak freely among themselves, they’d have heard this spoken plainly.

Suggesting that were we to have mass non-compliance, auto-enrolment would be deferred or even pulled, is to offer an amber light to those who advocate cicil disobedience, namely employers who ignore or deliberately flout the law.

Clearly I speak with the vested interest that I have put myself on the side of legal compliance and that I run a business that helps employers stage auto-enrolment successfully – I would say that wouldn’t I?

But since when has helping employer to do the right thing by their staff and comply with the law been considered a bad thing?



Clearly there is concern that the Telegraph story could do much to disincentivise employers and demoralise those providing them with support.

Steve Webb, who did more than anyone to make auto-enrolment a success tweeted yesterday

And of course, the cynics were quick to pick up that the Telegraph’s message flatly contradicted the Government’s current advertising campaign to raise awareness of the workplace pension


To the likes of John Ralfe, the Telegraph story is a saboteur’s charter.

Oneof my freinds (not prone to conspiracy theories)  mailed me for my views on the matter

Seemed alarmist but  big enough to prompt Steve Webb to tweet. Is this the deal with CBI to get support 4 Living Wage?

My view is that if there is pressure on Government, it is ballot-box pressure. The CBI do not represent nannies, gardeners and those who run small businesses, but their employers are the kind of people who vote, and can become disgruntled voters.

It’s no secret that pension policy is a football which those in power kick around to suit their  purposes. Football matches get postponed (for political reasons) and so can pension programs.

A group of 40 right wing politicians (in marginal seats) set out in 2012 a manifesto of 40 “red-tape” reforms they wanted in the Tory manifesto for 2015. They included the abandonment of auto-enrolment for small employers (starting now!). The demand was designed to make them electable. The demand was quietly dropped when it became clear that auto-enrolment had become a public policy success story , but ti could be revived at any time populist sentiment swung against “Workie”.


Giving the DWP the benefit of the doubt.

I don’t think it will come to that, I see what the payroll industry is doing to help people to compliance, I see them taking pension choice seriously and I hear accountants talking responsibly about how they will approach auto-enrolment. But what I see is the proportion of the staging population (and their agents) who are engaged.

What I don’t see – but the DWP (through tPR enforcement and HMRC RTI numbers) sees the level of non-compliance.

I don’t see the DWP panicking. I have often said on this blog that in Ros Altman and Charlotte Clark, the DWP has a sensible and level headed team leading auto-enrolment policy. In Lesley Titcomb and  Charles Counsell, they have two first class regulators. If there is a threat, it is not from within the DWP but from without, from those who see no value in auto-enrolment – only the short-term loss of votes.

It was ever thus, the short-term interests of getting elected against the long-term interests of the country in getting retirement saving right.

Why this matters.

Politicians may regard pensions as a football but pensioners don’t. If your sole means of income is your state pension and what you’ve saved in workplace pensions, you consider your saving vital to your current and future well-being. Sadly, too few of us in work can imagine what it is like not to be able to work due to infirmity and cognitive impairment. We see retirement as something that’s either going to happen by right or – if we’re heartless – we adopt a “work till you drop” mentality. Think Boxer in Animal Farm.


If you are a nanny, gardener or you work for a small employer, how do you feel about missing out on eight years of employer contributions and having no workplace pension till eight year after your colleagues at Marks &Spencer and RBS got theirs?

Eight years is 20% of a working lifetime, and the contributions you haven’t made in the first eight years of your career are worth three times as much to you at retirement as those you make in your last eight years (the power of compounding interest).

The point of staging auto-enrolment is that the people who have no workplace pensions have already been waiting too long. They are the ones who are excluded from the benefits of a good savings plan, an employer contribution and the soft compulsion of auto-enrolment.


Those, like Ralfe,  who scoff at “Workie’ and the auto-enrolment project, scoff at the people without a workplace pension.

But I see very few of the scoffers who are without good pension provision themselves.


Posted in accountants, actuaries, advice gap, auto-enrolment, NEST, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

End of year sweep up to resolve “net pay” lost tax relief?


A friend, a Director of NOW Pensions and a man whose integrity cannot be questions , has sent me this paper. I had thought to take thoughts on it privately, but in the light of the controversy over “net pay” this week, I’ve decided to publish it anonymous to its author.

I am sure that the problem with net pay was unforeseen by NOW and other net pay pensions. While NOW had an opportunity to remedy the situation when they switched administrators late in 2014- and while that opportunity was missed – NOW is taking steps to solve the problem (partly caused by HMRC). That HMRC are part of the solution, seems only fair.

But this is not just NOW’s problem, it is a problem for the vast majority of occupational pension schemes and I would be interested to hear from the PLSA on this as (to date) they have been silent.

A lot of contributions will “flow under the bridge” before the pension taxation reforms are implemented and  my personal view is that this solution strikes a balance between an expensive full solution and the current inactivity that seems the default position for occupational scheme trustees (and their trade body).

At the end of this blog, I call on readers to vote on whether this solution is workable. I will share the results of this poll to NOW pensions and with the Pension Minister.

Sent to me by email

End of year sweep up to resolve “net pay” lost tax relief

The Issue

Employees in a pension scheme operating under the net pay system get their pensions tax relief automatically as their employee pension contribution is deducted from their gross pay before the remaining taxable earnings are fed into the PAYE process in payroll.

This breaks down where an employee earns less than the income tax personal allowance, currently £10,600pa. They pay no tax but they get no tax relief.

In contrast, the equivalent employee within a PTRAS (pensions tax relief at source) scheme is given a 25% uplift to their employee pension contribution through the PTRAS payment that the pension provider claims on their behalf. This 25% uplift is equivalent to 20% tax relief and is given to all taxpayers, even if they have no earnings or are a higher rate taxpayer.

Available data

Pension schemes keep records of the amount of employee contributions made to the pension scheme

HMRC have records of taxable earnings at the end of the tax year from the employers P60 forms completed for each employee through payroll at the year end.

Sweep up solution

This solution starts by looking at an employee who has one job and one pension scheme through the whole tax year. We look at alternative more complicated employment scenarios later.

At the end of the tax year, the pension scheme submits a declaration to HMRC of employee contributions received under the net pay method, showing one line per member, identified by national insurance number and showing their total employee pension contribution during the year.

HMRC match the pension data against P60 data, and identify employees who missed out on pension tax relief because they paid pension contributions under a net pay arrangement but received no benefit as their total taxable earnings for the year was below the income tax personal allowance.

HMRC calculate the missing relief, which will be 25% of the pension contribution, but subject to a ceiling as if the total of taxable earnings for the year and pension contributions made is greater than £10,600 then relief will have already have been granted under net pay for the top slice of pension contribution that took the total above the personal allowance.

HMRC send one payment to the pension scheme with a record breaking it down to the amount for each employee against their national insurance number.

The pension scheme applies the payments to the accounts of each affected individual, purchasing additional units at the date of receipt of the payment from HMRC. The payment is shown on the employee’s pension plan as “tax relief for employee earning below Income Tax Personal Allowance”


The current issue, which is attracting adverse commentary in the media and concern from the Pensions Minister, is resolved.

  • There is some additional work for both pension providers and HMRC, but it is only on a once a year basis and is suitable for automation and bulk claims.
  • There is no additional burden on employers from this solution.
  • No action is required from employees, supporting the “inertia” philosophy behind automatic enrolment.

Further work is required to analyse more complicated employment patterns and the first “alternative employment scenario” is set out below. As we work through these it is likely that some additional requirements may be added to the process above so that the reclaim remains robust for more complicated employment patterns. This is particularly important for the demographic affected by this issue – people earning below £10,600 pa are obviously not full time 9 to 5 employees and will often exhibit unusual employment patterns driven by their personal situation.

Alternative scenario 1

Employee moves from employer A to employer B during the tax year, both employers use net pay schemes and the employee is auto-enrolled into scheme B before the end of the year

What happens

Employer A completes a P45 on leaving service, employer B enters the P45 details into their payroll system, tax is paid under PAYE for employer B and at the end of the tax year employer B issues a P60 to HMRC

Both Scheme A and Scheme B will submit their employees’ pension contribution data to HMRC at the end of the tax year.

HMRC collates the “taxable pay” data from both employers and the employee contribution data from both pension schemes, and then calculates any additional tax relief due as before

What needs to be added to the basic procedure :

As the HMRC calculation cannot be done until both Scheme A and Scheme B have submitted their declaration, there needs to be a deadline, requiring pension schemes to submit their declarations ahead of a set date, which might be  1st July following the end of the tax year.

HMRC will need to know which scheme to send the payment to. This suggests two further entries for the scheme data sent to HMRC

“do you still hold pension assets for this member?”

“date of most recent contribution received”

That would enable HMRC to send the tax relief to the scheme which has most recently received contributions and which still holds assets for the member

Further reading!

If you want to learn more about the background to this issue, you might want to read my blog on why things must change  (which you can find here). The position of the Pension Minister on net pay can be accessed here, and here is the original story  I wrote on the matter.

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Is a Net Pay pension scheme ever suitable for those earning <£11,000pa?


With this straightforward question, our Pensions Minister puts her finger on one of the central problems with putting the implementation of pension policy in the hands of commercial employers.

Commercial employers pay attention to staff who are important and pay the minimum wage to the rest. If those who are earning less than £11,000 are to get a pension, it will be because they have to (by law) and not because the employer feels it has a moral obligation to help them to it.

So it is that good employers like Whitbread and good mastertrusts like Smarter Pensions and NOW! operate “net pay only” pension schemes that deny low earners tax relief that they would have got had they been in NEST, People’s pensions (mostly) or in a group personal pension.

Here are three myths that need to be debunked, all are directly relevant to the Pension minister’s questions

  1. This is all irrelevent- the sums lost and the numbers affected are so small
  2. People who pay no tax, should get no tax-relief
  3. It is not possible for master trusts to get relief at source because their administrator’s systems won’t let them

Let’s deal with each in turn

This is all irrelevent- the sums lost and the numbers affected are so small.

People who make this argument don’t understand auto-enrolment. There is a small proportion of the working population whose base earnings are between £10,000 and £11,000 who will be auto-enrolled into no tax relief (under net pay). There is a large proportion of those working in the UK whose earnings exceed the equivalent of £10,000 pa in one pay period. This includes a lot of personal service workers who might trip into auto-enrolment because they double invoice their employer.

The numbers quoted in the FT and Daily Express articles on this assume there are 900,000 people who could be losing out, a back of the envelope calculation suggests this could well be the case.

The numbers are not irrelevant, nor is the loss. Ok, people are only losing out on 0.20% of band earnings and that might in cases be only a few pounds, but a few pounds to someone on only a few pounds is a lot more than a few pounds on £100k. In any event, everyone has been promised a formula for pension contributions under auto-enrolment which includes a Government contribution by way of tax relief.

A promise is a promise, and if people are being denied the promised relief are right to treat this as serious. More importantly, NOW- who have been claiming that their super cheap charging structure makes the minimal loss of tax relief irrelevent are wrong. Tax -relief is a right under auto-enrolment and should not be denied.

People who pay no tax, get no tax-relief.

This is a statement that has recently appeared on one large employer’s pension website. Lawyers may argue that crediting people with relief at source may be a tax credit rather than a relief but this is legal wrangling and has no business keeping people from their money.

There may be people in our countries boardrooms who are anti redistribution and would like their money to stay in the pocket and not be spent on boosting the retirement pots of those on low earnings. But theirs are opinions that should be kept in the boardroom, the law of the land is that those on low earnings contributing to pensions are entitled to tax relief whether they pay tax or not.

It is not possible for many trusts to get relief at source because their administrator’s systems won’t let them

This argument is put forward by those who run trusts and employ specialist administrators (known as third party administrators or TPAs). TPAs have been happy to run net pay systems since the day dot because net pay pleases the top earning people who run occupational trusts and until recently, very few people worked and didn’t pay tax.

They say they have been caught on the hop by the rapid expansion of the nil rate tax band and only lately discovered the problems of people auto-enrolling into no tax-relief. They say they have no money to introduce new processes and that any spend would be redundant when the Chancellor announces changes in tax relief in next year’s budget.

All of these arguments ware pretty thin with people who aren’t getting their tax relief. I have sympathy with the trustees of NOW and of Smarter Pensions and the trustees of large single employer trusts, but not much.

NEST had no problem getting TATA- its TPA to offer net pay and trusts like People’s Pension and Supertrust offer both systems.

If NOW and Smarter  were doing their job properly, they would have done their due diligence on TPAs without reference to these questions. JLT were appointed as TPA to NOW and Smart pensions well after the rise in nil rate band was flagged by the last Government and the impact of running a net pay system was clearly ignored in this due diligence.

Frankly, it is up to the TPAs to put their houses in order or create a workable workaround in place PDQ.


Trusts can’t go on like this

The current situation is untenable. The net pay v relief at source issue isn’t going away any time soon and it is unacceptable that relief at source is being denied to so many. Whether you are working for a large NOW customer like ISS, or a single employer like Whitbread or you’re a worker for an SME or even a personal service worker, your tax relief is at risk under net pay.

Employers choosing workplace pensions are typically choosing blind with no way of choosing the type of tax relief they are getting their staff.  It is only a matter of time before we have employees affected complaining, complaining en masse and ultimately complaining using lawyers with a class action.

Remedial work starts with the trusts using net pay. Either they get their TPAs to change their processes, or they find a workaround, or they give up. But they can’t go on like this.



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The conflicted world of Independent Governance Committees


Ever since Share Action exposed the selection procedures adopted by the insurance companies setting up their “independent” Governance Committees, I’ve considered the composition of their Boards open to particular scrutiny. Independence is as independence does and as none of the Boards have done anything publicly (other than the patchy publication of  terms of reference) , they cannot be judged by output.

But they can be judged against their potential for falling foul of conflicts of interest. I have worked for Zurich (previously for Eagle Star) and know how important the relationships are between insurers and the major consultancies – by which I mean Towers Watson, Aon and Mercer (with Barnett Waddingham, Punter Southall , Hymans Robinson and Lane Clark & Peacock not far behind). These consultancies are the gatekeepers for many of the large corporates pension decisions.

Former consultants packing IGC boards.

Distribution being key to the ongoing success of these organisations, it is only too easy for cosy relationships to build up between large consultancies and the IGCs and Master Trust boards of the insurers active in the provision of workplace pensions. I have written about the potential conflicts that Standard Life have created for themselves by appointing Barnett Waddingham as advisers to its master trust while offering Barnett Waddingham customers preferential terms on certain workplace pension products.

I am very uncomfortable that Scottish Widows have on its IGC such strong connections with Towers Watson. Not only is its Chair, Babloo Ramamurthy, a former executive of TW, but so is Mark Stewart and so is Tilly Ross – both formerly of Towers Perrin and Watsons. Scottish Widows have laid themselves open to charges of cronyism and a lack of diversity. We have to ask whether the Scottish Widows IGC is subject to the Towers Watson house view. If Scottish Widows is dependent to any degree on Towers Watson for existing and new business, they are open to the charge that they have packed the IGC with friendly faces.

How does Towers Watson feel about this? Knowing the integrity of that firm, I would be surprised if some of its consultants aren’t a little embarrassed!


I have been in contact with Babloo on this and should point out that he is not a trustee of the People’s Pension and therefore not directly responsible for People’s appointment of State Street (who coincidentally are the lead consultants to Scottish Widows – the appointment made before Babloo’s arrival). I will not rehearse the reasons for my opposition to  State Street playing any part in the fund management or fund administration of workplace pensions.

But I will say again that were State Street to be subject to the FCA’s Fit and Proper Person regulations on individuals, they would struggle as an entity to be granted permission to control retail assets in the UK.


Why does this matter?

Charges of cronyism dog private pensions in the UK. Observers from overseas – and I mean in particular continental Europe and North America and Canada, are surprised by the low levels of governance in place around our pensions. They remark on how little we understand and mitigate the trading costs of our funds and they are surprised by the conflicts (such as those mentioned above) which go unchallenged in the UK.

For a leading financial centre, we do not, in the opinion of those I speak to, have a strong enough self-regulatory governance structure. This is what the OFT found in its report on workplace pensions and it is what the Governments attempts to strengthen both Trustee Boards and Insurance company supervision is about.

But already, the IGCs are being claimed by the insurers as their own, and already there are worrying signs that the Boards of IGCs don’t know what they are doing and who they are doing it for.


Who can do anything about this?

Conflicts are rife. The editors of many of our trade magazines are conflicted because the insurers and fund managers are now their principal sources of income (advertising). Even some of our trade bodies have come to depend on advertising revenues from insurers and fund managers. Despite the Bribery Act, the boxes of Twickenham, Ascot and Lords are still home to the fund managers and insurance company executives whose guests include the people charged with overseeing their behaviour.

The systemic problems with analysing value for money result from a failure among the consultants charged with knowing about costs and charges, to properly manage the fund manager’s behaviours to keep those costs and charges down. The damage to our funds has been done on the watch of the people who are now being appointed to govern the fund management of our personal pensions.

How can we expect those consultants who have stood by and let the train crash happen, to criticise the manning of the signal box?

Is it any wonder that they struggle to adopt the FCA’s vision for Value for Money?


What price independence?

Independence is in short supply. As I have written about many times recently, those independent voices who are both skilled and knowledgeable, are not on the IGC boards.

There are rare exceptions- John Howard on the Scottish Widows board is one- but he is but one voice in seven!

With the exception of Zurich, who do not give their corporate members a vote, all trustee boards give the insurance company a substantial vote (usually 40%) on any decisions taken, statements made. It only takes one independent member to be in the pocket of the insurer to render the Board quite dependent. The seven person board of Scottish Widows is -alongside Zurich’s- the only non five person board out there- and it has its own issues (see above).

The temptation for IGCs to simply validate decisions taken in the past is too great. We need fresh blood on these boards, not the former consultants and other pension industry figures who dominate them at the moment.

We need less multiple appointments – (NB Rachael Brougham and Steve Carrodus), insurers in the workplace are a small club – we don’t need an over- concentration of IGC members around a few individuals.

And we need to challenge the dead hand of the past on the output from the IGCs. I will return to this theme but leave this blog with the Society of Pension Professionals vision for the output of these IGCs.

If this is consumer friendly – I’d rather be a Dutchman!



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TPR gets a kicking from Altmann on “Workplace Pension Choice”.

Jo cumbo

Cumbo speaks out

In a spectacular piece of reporting, the FT’s Josephine Cumbo has exposed a structural weakness at the centre of Auto-Enrolment;-  the failure of the Pension Regulator, the advisory trade bodies and the FCA to provide proper guidance to our 1.8m employers on how to choose a workplace pension

It now appears that even the DWP’s Pension Minister has blown her lid on the shocking lack of guidance and the misleading information emitting from the Pensions Regulator.

The UK Pensions Regulator is facing demands from the pensions minister to do more to protect low earners at risk of being enrolled into pensions that deny them tax relief.

As the government’s automatic enrolment policy enters a critical phase, Ros Altmann has written to the regulator demanding it improve its guidance for employers looking for a pension for staff.

The minister’s concerns centre on the information provided by the regulator to help millions of employers choose a pension to meet their new automatic enrolment duty.

Baroness Altmann told the Financial Times the regulator was not providing clear enough risk warnings that some pension schemes deny tax relief on contributions made by low earners.

“As pensions minister, I have a duty to ensure that low earners are treated well,” said Baroness Altmann, who was a high-profile consumer campaigner before being appointed to her ministerial post in May.

“My fear is that unless the guidance is very clear then employers — many of whom will be small employers acting without the help of advisers — may inadvertently choose an arrangement for low-paid staff, without realising the consequences.”

The minister wants the regulator to make its guidance explicit that “net pay” arrangements do not have a mechanism for those earning below £10,600 to claim tax relief they are entitled to on their contributions.

This is in contrast to pension schemes operating “relief at source” arrangements that enable the same low earner to benefit from tax relief at a basic rate, which helps build their retirement pot.

Baroness Altmann said she had raised her concerns many times with the regulator.

“I am frustrated that as pensions minister my concerns have not been taken seriously,” she said.

“The guidance for employers needs to be in plain English and clearly explain the implications of using net pay arrangements for low-paid staff.

“I want this done immediately.”

The minister’s concerns grew after the regulator last week announced it had added another net pay pension plan to its list of approved schemes that had met quality standards.

However, the scheme, now promoted on the regulator’s website, does not make clear in its online marketing communications to employers and employees that low earners will not receive tax relief.

“The letter templates made available to support employers in communicating with their employees are based on guidance from the Pensions Regulator,” said Gillian McKillop, secretary to the trustees of the Welplan pension scheme.

You can read the whole article here.It is worth the price of this month’s subscription on its own!


How relief at source works!

Welplan and NOW – in dereliction of duty?

Well I can confirm the point about Welplan. Those lucky enough to be in last week’s Payman seminar in Frome church hall will remember me chairing a debate where both the providers – Welman and Now used net pay. I had to make it clear to the audience that neither offered tax relief to those earning under £10,600 pa.

The way that auto-enrolment works, those who have earnings spikes that take them above the £833 pm minimum earnings threshold become eligible workers even if their earnings for the year are well below the £10,000pa threshold. For those earning on a weekly basis, the likelihood of their being sucked in is even higher.

At the meeting both played down the issue as a minor technicality. Let me tell them, those who miss out on 20% of their contributions will not see this as a minor technicality!

It shouldn’t be down to the FT and Pension PlayPen to deal with this!

The FT have clearly spoken with the Pension Regulator who have confirmed

“We plan to make amendments to our website content shortly, including a revision to our employer letter templates to point out the government ‘may’ pay in, rather than ‘will’ pay in.”

It is high time that Lesley Titcombe got me down to Brighton for one of the Monday morning AE pow-wows and got me to explain!

People want certainty, they need to be told which providers are giving tax relief to everyone and which just give it to those who pay tax. Misleading statements such as that in the letter template or the statement “you only get tax relief if you pay tax” are lazy, misleading and were they to be made by an FCA regulated entity – would get those who made them into a great deal of trouble.

“On pension choice- they’re as much good as an inflatable dartboard”

inflatable dartboard

MAF is not going to sort this out, nor its architects -the ICAEW and tPR.

The ICAEW has been faffing for two years to say anything meaningful on workplace pension choice and the Pension Regulator- admirable as it is on auto-enrolment, is all over the place on workplace pensions.

The reason is there’s not one Pension Regulator in charge of workplace pensions, but two. The Auto-Enrolment regulator knows a lot about process but very little about pensions, the DC regulator, knows a lot about pensions and very little about auto-enrolment.

Pension choice falls down the crack between their two buttocks.

It’s the DC regulator who is behind the MasterTrust Assurance Framework (MAF – which is silent on issues such as the communication of tax warnings. But the Auto-Enrolment regulator, is relying on MAF to sort everything out. MAF is now recommending NOW and Welplan because they have jumped through the ICAEW and tPR’s hoops.

If employers think that MAF gives them safe haven status then they should think again. If I was a low paid employee enrolled into NOW or Welplan and I missed out on tax-relief, I would be asking serious questions about the guidance my employer got when choosing that scheme.

If my employer pointed to these schemes being promoted on the Pension Regulator’s website because they had MAF accreditation, I would be asking serious questions of the Regulator.

Shape up, outsource or insource!

It is high time that the Regulator offered proper guidance on how to choose a pension scheme or provided access to someone who can. If the DWP wants to nationalise the Pension PlayPen, we are  open to offers.


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Sustainable pricing is key to workplace pension support!



That Workie lumbering around the park has a price tag. If he’s the NOW workie, he costs £40pm and if he’s People’s Pesnsion’s Workie you need to dish out £3-500 to use him in your workplace . Standard Life charge between £80-!00pm and Aviva and Scottish Widows have a range of price tags for Workie – depending where you hire him.

Only NEST and L&G of the big players are free to use and of the remaining smaller master trusts and insurers, the issues are more to do with the durability of the product offering as the sustainability of the price.

Shopping with no regard to the quality but with a fixation on price is not a good idea. Value for Money is a more complex matter than comparing the price tag on the rail.

With the duration of a workplace pension a matter of several decades and with pot proliferation a real concern for those switching a provider, it pays to get the decision right first time.

Employers need guidance in these matters, especially those who have not had to set up a Workie for their staff before. The research suggests that it is their accountants (more than their IFA) who they’ll rely on for advice about the right scheme. So how can accountants get quality research on the sustainability of pricing?

There is a proper answer to that question . http://www.pensionplaypen.com offers a sustainability rating against the pricing of each provider offering an employer a pension. It is not the same as a durability rating- which measures the capacity of a provider to stay in business (the old financial strength measure). It is a measure of the capacity of the provider to maintain its current level of pricing.

So what could impact pricing going forward?

  1. The financial strength of the provider (available cashflow, access to capital and cost of capital)
  2. The appetite of the provider for new business; – a matter of strategy
  3. The stability of the provider’s management – the sustainability of the strategy
  4. The cost of new business acquisition for the provider relative to the value of that business over time

These are complex questions and no rating organisation can get them right all the time. But it is clear that short-term market distortions arising from mis-pricing will damage providers in the long-term.

So our message to providers coming into the hard miles of 2016 and 2017 is to be clear about your intent, what business you want and what you don’t want. Be clear about what you are charging today and don’t provide the market with nasty surprises tomorrow. Above all, price responsibly and don’t put existing customers at risk because of the new business strain mis-pricing can create.

And Regulators – regulate! This is a free market but you have a responsibility to maintain an orderly market. The National Audit Office has commented on the need for the biggest market player – NEST – to ensure it is not a burden on the tax-payer, let’s see how that works.

We have had three years to work this out, we are now at the critical juncture where auto-enrolment moves from being a minority sport for the great and the good to being a mass-market occupation of 1.8m pension virgins. To play in this market requires a degree of responsibility from all participants.

Workie is lumbering around the park, he needs a home – but not at any price.


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tPR’s Plain English Guide to Auto-Enrolment – the best explanation for business advisors – ever!

Pensions RegulatorAE

The Pension Regulator’s guide to auto-enrolment is a must read. If you haven’t read it, you can read it here.


The Plain English guide to automatic enrolment

Information for business advisers

November 2015

Since automatic enrolment began in 2012, all large and medium employers in the UK have staged, leaving over a million small and micro employers whose duties are yet to begin.

It’s important that we communicate with these smaller employers
in language that is clear and straightforward. Terminology that was appropriate for larger companies and their advisers will not necessarily be suitable for smaller employers with limited experience of pensions. We have therefore adapted our automatic enrolment language for this new audience.

This guide is for business advisers and other pensions industry professionals who are familiar with technical automatic enrolment terms and shows how we are explaining them to small and micro employers (eg ‘opt in’ is being replaced by ‘ask to join’). Please note some of the terms we are using have not changed and our definition may not always be a technical definition, but is instead intended to make this simple and easy to understand.

If you already use these terms in your processes or with your clients, you may choose to phase in some of the new terminology, or simply use this guide for reference.


Automatic enrolment terms and definitions

Original term

New term



Assess your staff

Work out who to put into a pension scheme

Working out how much each member or staff earns and how old they are. This will help identify if they need to be put into a pension scheme.

“Before you make your plans, you should work out if you have any staff to put into a pension scheme.”

Automatically enrol staff

Put your staff into a pension scheme

Putting your staff into a pension scheme

“Work out which staff you need to put into a pension scheme.”

Automatic enrolment pension scheme

A pension scheme that can be used for automatic enrolment

A pension scheme that can be used for automatic enrolment

“Make sure you choose a pension scheme that can be used for automatic enrolment.”

Independent Financial Advisers (IFAs)

Business/financial adviser

A business/financial adviser could be an accountant, bookkeeper or payroll consultant.

“Independent financial advisers (IFAs), employee benefit consultants (EBCs), actuaries, accountants, bookkeepers and other advisers can use our guidance and resources to help their clients make the right choices.”


Meet your duties

Meeting the legal duties of automatic enrolment.

“You can ask someone to help you meet your duties.”


Money paid into a pension scheme

The amount of money paid into a pension scheme by a member of staff and/or the employer.

“You must pay money into the pension scheme on a regular basis.”


Original term

New term



Declaration of compliance (registration)

Declaration of compliance

Information that must be provided to let The Pensions Regulator know that the employer has met their duties.

“To let us know how you have met
your duties you must complete a ‘declaration of compliance’. This can be done using our online form.”

No previous term used

Directly pay

A person an employer pays to work for them and who is not supplied by an agency.

“If you directly pay one or more people to provide you with care and support, often called a personal assistant or
a personal care assistant, you’re an employer and automatic enrolment duties will apply to you.”

No previous term used


Usually the most senior person/people in a company.

“Automatic enrolment duties will apply if more than one director has a contract of employment.”

Employer duties

Legal duties

A set of duties which an employer must complete in order to obey the law under the Pensions Act 2008.

“There are several tasks that you have to do to meet your legal duties.”

Employer duties


(See ‘Legal duties’ for definition).

“There are several tasks that you have to do to meet your duties.” Only use once legal duties have been defined earlier in content.

Original term

New term



Eligible jobholder

Member of staff who must be put into a pension scheme that you pay into (also known as ‘type 1’)

A person who is 22 to state pension age and earns over £10,000 a year/£833 a month/£192 a week. They must be put into a pension scheme which they and the employer must pay money into.*

“If a member of staff is 22 to state pension age and earns over £10,000 a year, you must put them into a pension scheme and pay into it.”*

Entitled worker

Member of staff who can join a pension scheme if they ask, but you don’t have to pay into their pension scheme unless you want to (also known as ‘type 2’)

A person who is 16-74 years old and earns less than £5,824 a year/£486 a month/£112 a week. They can ask to be put into a pension scheme which they must pay money into. The employer doesn’t have to pay money into it. *

“If a member of staff is 16-74 and earns less than £5,824 a year, you must let them know that they can join a pension scheme.”*

Letter code

No new term used

A 10-digit number found on letters The Pensions Regulator sends to employers about automatic enrolment.

“Enter your letter code and PAYE reference.”


Staff/member of staff

A person an employer pays through their PAYE scheme to work for them.

“On your staging date, you must work out how much each member of staff earns and how old they are.”


Let us know who to contact

“Let us know who to contact. We will be in touch over the coming months as your staging date approaches.“

* Figures correct as of April 2015, subject to change.


Original term

New term



Non-eligible jobholder

Member of staff who can join a pension scheme, if they ask, that you pay into (also known as ‘type 2’)

A person who is:

  • „  16-74 years old and earns less than £10,000 a year/£833 a month/£192 a week
  • „  16-21 years old and earns over £10,000 a year/£833 a month/£192 a week
  • „  state pension age to 74 years old and earns over £10,000 a year/£833 a month/£192 a weekIf they meet any of the above criteria they can ask to be put into a pension scheme which they and the employer must pay money into.*

“If a member of staff is:

  • „  16-74 and earns less than £10,000 a year
  • „  16-21 and earns over £10,000 a year
  • „  state pension age to 74 and earns over £10,000 a yearyou must let them know that they can join a pension scheme that you pay into.”*

Opt in/join

Ask to join

Certain staff can ask to join a pension scheme.

“If any of your staff write to you asking to join a pension scheme you must put them into one once you have received their request.”

* Figures correct as of April 2015, subject to change.


Original term

New term



Opt out/cease active membership

Ask to leave

If a member of staff asks to leave a pension scheme.

“If any of your staff ask to leave your pension scheme within one month of being put into it, you need to stop taking money out of their pay and arrange a full refund of what has been paid to date.”

Pension scheme

No new term used

A financial arrangement which enables people to save for their retirement.

“Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it.”

Postpone/ postponement

Delaying working out who to put into a pension scheme/ postponement

Delaying working out who the employer needs to put in to a pension scheme. Postponement does not change the staging date.

“If you have temporary staff, you may choose to delay assessing them.”

Primary contact

Employer contact

The most senior person or business owner.

“As the employer, you are the main contact.”

Secondary contact

Additional contact

The person the employer has chosen to receive emails from The Pensions Regulator.

“Provide an additional contact and we’ll send them help and advice via email. The additional contact may be the person you want to manage the day-to-day tasks for you such as an accountant/bookkeeper.”


Original term

New term



Single person director/one person company

Director-only companies

The sole director of a company which employs no other staff.

“The online guide also contains essential information tailored for the needs of employers of carers and also director-only companies.”

Staging date

No new term used

The date automatic enrolment duties start for an employer. Their staging date is when the law comes into effect for them.

“On your staging date, you must work out how much each member of staff earns and how old they are.”

State Pension Age (SPA)

No new term used

The age at which members of staff can start to receive their state pension.

“If you are unsure what the State Pension Age is, use the State Pension Calculator to find out.”

Automatic re-enrolment

No new term used

Every three years an employer will need to put staff back into their pension scheme if they have left it, and if they meet the criteria for being put into a scheme.

“Every three years you’ll need to put staff back into your pension scheme if they have left it, and if they meet the criteria to be put into a pension scheme. This is known as automatic re-enrolment.”


The following terms will continue to be mentioned in our detailed guidance for business advisers and pensions professionals but will not be used in communications with small and micro employers:

  • „  Inducement
  • „  Jobholder
  • „  Joining
  • „  Joining window
  • „  Pay reference period
  • „  Phasing
  • „  Qualifying earnings
  • „  Qualifying pension scheme
Posted in pensions | Tagged , , , | 1 Comment

“Winning hearts and minds” – what IGCs can do for retirement saving!

diy pensions

no more money down the drain please!

What so concerned many of us when we read the comments from the Independent Governance Committee’s recent meetings at Evershed’s city offices, was that they showed no unified sense of purpose, no urgency and worst of all – confusion about who Independent Governance Committees were for

Butcher 7

Even the lawyers seemed unclear!



The articles I wrote sparked interest from a lot of people, including people sitting on IGC boards – some of whom took my criticism as constructive. I’m pleased to be now working with some of these people on the key issues which I take to be

  1. What do we mean by independent?
  2. How can we define value for money?
  3. Can good governance improve value for money?

I don’t think that IGCs can do much for value for money if they aren’t independent. And independence means breaking free of all the layers of intermediation between the policyholder and his retirement pot. That means no conflicts – NO CONFLICTS!!! (see how the CAPS tab helps you escalate!)

But there is a fourth thing that IGCs can do, and I have not seen this in one of the Terms of Reference I have read. It is within the scope of an IGC to restore confidence in workplace pensions and thus to encourage retirement saving.

Indeed – that is the vision not just of the Pension Plowman, but of any right thinking IGC.

taps on pension playpen

Me banging on about restoring confidence in pensions (I expect)

No more money down the commission drain please!

The traditional solution to improving savings levels is to throw money at distribution (aka advice). By putting advisors in the workplace, and rewarding them with a percentage of the money people saved (aka commission) every wins. Well almost everyone, the only loser is the saver, who pays dearly for the cajolement in terms of eventual outcomes.

As the OFT point out, the extra 0.5% pa that advisory commission put on the AMC comes at a huge price to people’s retirement pots.

OFT -info

sorry about the poor quality of the infographic

So commission is a bad way to get better outcomes, though  a good way to reward advisers. The RDR did for commission on contract based plans and it’s on its way out of occupational pension schemes (at last).

Without commission, we are left with three choices to improve savings rates

  1. Hard compulsion – which is what they have in Australia (where they fine you for not voting)
  2. Soft compulsion- auto-escalation and auto-enrolment
  3. Winning hearts and minds.

Of the three, “winning hearts and minds” is the hardest. Because it involves treating customers fairly and not finding as many ways to pay everyone else before the customer as possible. I call popular pensions popcorn pensions.. you can read about them here!

The process of putting the customer first is very much what pension governance is about. It is what the IGCs should be about and it absolutely what is needed to restore confidence in pensions and win back people’s hearts and minds to retirement saving.

Which is why I regard the IGCs as our best – indeed our only  hope – of getting savings rates up voluntarily.

So how have these guys been doing so far.

Well I am not happy at all with the performance of IGCs since they opened their doors in April 2015.

Here is a table I have compiled with the help of Lexis Nexis who surveyed the IGCs of the insurers below and published their findings in October.

Insurer Number of meetings so far Terms of Reference (downloadable)
Aegon 3 NO
Aviva 2 YES
BlackRock 3 YES
Friends Life 5 NO
Legal & General NOT KNOWN NO On request
Phoenix 4 NO On request
Prudential 5 YES
Royal London 3 YES
Scottish Widows 8 NO On request
Standard Life 6 YES
Zurich “numerous” YES
Source Lexis Nexis Occupational Pensions October 2015

This is not a good start. It doesn’t look to me that these IGCs have  hit the ground running. It seems to me that they are doing the bare minimum to comply and that they see their customer as the FCA- if not their paymasters, the insurers.

Having been recruited by the people they are supposed to be at arms length from, and sitting as they do alongside representatives of the insurers who have the same voting rights as the independent members (Zurich being the notable exception), I am very doubtful that most of the people sitting on independent governance committees will act without conflicts.


Insurers cannot keep policyholders in the dark any longer.

The customer is the policyholder  (and of course IGCs should protect all personal pension policyholders- not just those actively contributing at work) . The customer needs to be assured that

  1. They know what they are paying for and to whom
  2. They know what they are getting for their money
  3. They can see they are getting value for money- using proper benchmarks
  4. They know how their money is being invested
  5. They can monitor how their investments are doing – using proper benchmarks

You may say that we’ve tried this in the past and failed. Well that was because we didn’t deliver the information in a way that people wanted it delivered and also because few people believed that the information was trustworthy (eg wasn’t being spun by insurance company marketing departments.

The IGCs are a unique opportunity to offer us a proper assessment of how our pension providers are doing. If we are in a Personal Pension, where we have no trustees, they are our trusted fiduciary. They are our champions. We rely on IGCs and if they do not show they are on our side, we will be having words – well I will anyway!

Winning hearts and minds

sunny uplands

Let’s get back to the Sunny Uplands!

IGCs need to do more than comply, they need to do more than beat insurers up, they need to change the way insurers behave so they really do put their customers first and treat them fairly.

We customers don’t know what we’re doing. As the Office of Fair Trading pointed out..


But if we felt we were being properly protected, if the IGCs were regarded as our consumer advocates and if they could remember that they do not serve the FCA or the insurers but the policyholders

  1. We would have trust in pensions
  2. People would be inclined to save more
  3. Many of the welfare problems we currently face would become a little less challenging.
Posted in governance, investment, pensions | Tagged , , , , , , , , , , , , , , , , | Leave a comment

What happened in Paris makes me want to win peace – not war!


What happened in Paris makes me yearn to win the peace not the war

In Paris there has been a massacre.

Every week in Iraq, Pakistan, Afghanistan and in many African countries, there are massacres.

In Syria, every day is a day of massacres.

Massacres of people whose lives are as important as our own. Their relatives and friends feel grief as we feel grief.

Because Paris is just two hours away by train, because 128 people died having a Friday night out, as we have Friday nights out – the Parisian massacre is getting more publicity than what happens in the middle east. Only this week 40 people were massacred by IS in Beirut. In April, 148 students were killed in similarly random fashion in Kenya.

A death in Paris is as important as a death in Beirut, Kenya or Syria, but no more important. I am not making a political point, but a humanitarian point. If IS kill 129 people in Syria, then it is an act of war and goes unreported, if they kill people in Paris it is an act of terrorism and sparks international outrage. But the deaths have the same moral weight, and if we say otherwise – we assume a European life is more valuable than a middle eastern life – which is a racist statement – at least in my book.

The gratuitous violence that marks IS’ behaviour is equally deplorable in Syria as it is in Paris. I have no language to condemn it that does not create further tension and resentment. I do not want to understand the behaviour -to justify it at any level- violence of its kind is inhuman and wrong.

But the equal and opposite reaction, that of war against IS, which is what is being proposed by almost every western politician speaking today, is not the answer. War does not solve problems – it creates them. IS has been born out of conflicts that we were stupid enough to escalate. Conflicts in Iraq and Palestine and Afghanistan have been inflamed by western intervention and what happened in Paris is to a degree a consequence of our reactive belligerence.

Statements such as “we do not negotiate with terrorists”, sound good on the TV but they don’t help. These terrorists are pissed off enough with us to blow themselves up to prove it. Instead of demonstrating our intelligence and sophistication through superior “weapon systems”, perhaps we should try working out why these Jihadists are so pissed off and what can be done to stop them blowing us and themselves up in the future.

Nor should we use what has happened in Paris as a further excuse to close borders to those who IS have made migrants.

Nor should we allow the events in Paris to disrupt the normal business of states, as should be being discussed at the G20 summit. If barbarism is allowed to stop us going about our daily business, barbarism will win.

Those countries that deal with terrorism best are those who look to find ways to peace not war. I can point to Germany and the Scandinavian countries that have found ways to comfort the bereaved and displaced of the Syrian conflict and have made themselves part of the solution. This does not make them invulnerable to terrorist attack, but it gives their people a pride that they are not accelerating the problem.

I hope that the belligerent reactions of political leaders in the west, especially those in Europe and America, will be proportionate to the overall problem. What has happened in Paris this weekend is horrible, but it is no more horrible than what Syria sees every day.

We must find a way for Syria to find peace before going to war with the terrorists. For we cannot win the war with terrorism, we can only win the peace.

Posted in Politics, social media, Syria | Tagged , , , , , , , , | 2 Comments

For now- fill the potholes – but we need a new road!

pot holes

In an excellent article in Money Marketing, Nic Cicutti offers us the following analysis of how pension policy has progressed in the past thirty years

The defining moment in financial services was the introduction of the 1986 Social Security Act, which gave employees the right to leave or decline to join their employer’s pension scheme. At the same time, it introduced personal pensions to the general public.

Back then, government experts predicted that 500,000 people would opt for a personal pension, but that figure was reached in weeks. In two years, almost four million personal pensions were sold, many of them consisting solely of rebates paid to persuade people to opt out of Serps.
Back then, we totally underestimated the likely impact of what was to follow. When the Financial Times’s former pensions correspondent Norma Cohen broke the story about the SIB pensions review, the talk was of a compensation bill running into hundreds of millions of pounds, something I described at the time as “one of the biggest financial calamities to hit the City”.

The number of personal pensions rose to more than five million by 1993, just before the edifice began to crumble in the wake of an inquiry by the Securities and Investments Board, the first City financial regulator, into suspected misselling.

How little we knew. By the time the final dribs and drabs were paid in the early to mid-Noughties the final cost, including the review itself and fines levied on those who delayed paying redress, topped £11bn.

Far more important than the compensation costs was the change in attitudes it engendered. If they had previously been sceptical about the merits of saving for retirement, many consumers now found there was increasingly little to choose between personal pensions and company schemes, where a corpulent Czech publisher could steal your money before falling off the back of his yacht.

The sense that you could never really trust a financial adviser or be bothered to save probably began in earnest in the mid-1990s. Every other misselling scandal since then, from with-profits endowments to payment protection insurance, has confirmed what we first learned in the aftermath of 1986.

It is because of that experience, massively underestimated at the time, that I predict the next big shake-up will once again involve pensions. Specifically, it will involve the Government’s liberalisation of the pensions regime to allow people to take cash out of their personal pensions.

What we seem to be seeing are two things happening in tandem. The first is that more and more people are making use of these new freedoms to extract money from their schemes.

Last week the FT reported that pension providers have paid out £2.5bn in 166,700 lump sums in the six months since April. In addition, a further £2.2bn was paid out via 606,000 income drawdown payments, according to the Association of British Insurers.

Meanwhile, Tom McPhail, Hargreaves Lansdown’s head of pensions research, has estimated the tax take for the Government so far is about £666m, more than double its original estimates.

Intriguingly, what the figures also indicate is that people taking their money out of pensions are clearly doing so on the basis of a calculation of some sort about what they can afford to free up and how much they should leave in their pension. The FT quoted an estimate by Just Retirement external affairs director Stephen Lowe to the effect that people are accessing about 48 per cent, a little under half, of their pension pots.

Precisely how they are figuring out that leaving the other 52 per cent of their money in a tax efficient pensions environment will provide them with the funds they need to meet their retirement needs 20 years down the line is anyone’s guess.

Which brings me to the second aspect of the tandem effect I referred to earlier: this mass withdrawal of cash is being carried out with little or no evidence of financial advice.

As Money Marketing has repeatedly indicated, take-up of even the incredibly limited form of ‘guidance’ on offer through Pension Wise is way under what many people assumed would happen. In turn, Citizens Advice is trying to retrain pensions advisers in other aspects of its work, although it strenuously denies suggestions it may want to redeploy staff.

What we are starting to see is a slow-motion drift into another chapter of a saga that began in the 1980s but will come to fruition in another 20 years’ time.

I started advising only three years before the 1986 Social Security Act at a time when tax incentivised personal saving was primarily into life insurance policies benefitting from an uber-friendly EEE tax regime. I remember being told that the personal pension was a responsible step in tax policy designed to encourage provision for later life.

On Friday afternoon, First Actuarial’s staff heard two powerful speeches, one from the Pension Advisory Service’s Charlotte Jackson and the other from Kings College’s Debbie Price. The first focussed on the use of the Pension Freedoms (confirming Nic’s numbers), the second took a long-term view of the impact of mass- market financial education.

I was left thinking of my comment on Money Box last week

“We need pot-hole mending and urgently .. but let’s not forget in the long term, we need a new road”

Posted in pensions | Tagged , , , , , , , , , , , , , , , , | 1 Comment

How much support do we get from our Workie?


Here’s Workie!

Workie – if the DWP’s advertising campaign’s to be believed, is a workplace pension (albeit one looking for friends in the park).

We want to know how friendly our Workies really are, how much support they are giving  employers in running workplace pensions, to those who manage payroll and most importantly to those who are going to depend on Workie as a savings pot to supplement their State Pension.

Pension PlayPen takes feedback from a variety of sources to get to our support rating and we need your help to make sure that those employers making purchasing decisions in the future, do so informed by your experience.

Please help us improve our ratings by completing our survey. It takes on average 8 minutes but will help your clients ensure they choose a quality and easy to administer pension.

Please do it now- before you read the rest of this blog!

Here is the link to the survey …..



Are we getting value for money for this support?

As many of you will know, this support is not always free. Two of the three largest mastertrusts (People’s Pension and NOW) have recently introduced charges to employers for support and from 2016, new schemes set up will pay a one off fee to People’s (£300-£500) and a regular £40pm to NOW. NEST are not currently charging a fee but have the right do do so provided that fee is charged to the employer and not paid by the employee.

Many of the insurers charge support fees, including Scottish Widows, Aviva and Standard Life. These fees are all charged to the employer.

Our survey sets out to find whether the support levels differ from provider to provider and whether the costs incurred can be justified by an improvement in the level of service compared to the one large master trust not charging (NEST) and to Legal & General who say they have no plans to introduce a charge.

At the Payroll World Client Conference yesterday, the People’s Pension told the audience that their research suggested small employers were prepared to pay for service (well they originally used the words “happy to” but had to retract them!

When the charge is explained in value for money terms, I suspect most employers would consider a single charge worth paying. But the discussion is rarely framed in these terms. In our experience, decisions are too easily taken purely on who is cheapest with no reference to the consequences when cheap is “not cheerful”!

Our current service level ratings, suggest that NEST is providing a comparable level of support to that of its principal rivals, People’s Pension, NOW, Standard Life and Legal & General. Your input – together with hundreds of other people we know, will allow us to test what service levels are like today and to test how they change through 2016 – when the capacity issues crunch!

If NOW and People’s and the insurer’s who are charging for support, demonstrate – though the survey – superior service, then we can assume value for money is being delivered.

If they aren’t seen to be delivering special service and that those not charging are delivering comparable service, we must question the value for money of the support charges.


How sustainable are current pricing propositions?

If – as may well be the case, service levels are typically in a bunch then we may have to look again at the ratings we give to those providers not charging and ask whether their propositions are sustainable at the current price.

NEST have recently gone on record to say that they are not planning to introduce employer charges. While I am minded to trust Legal & General, I am not so minded to trust NEST. Legal & General are responsible to their shareholders and their CEO is accountable to them, he has their support and that’s that.

NEST have a more difficult job. The National Audit office are charged with making sure that NEST stick to their promise to be able to repay the loan it is building up to the taxpayer. Currently NEST owes over £400m, with only £600m under management, that’s a huge debt. We suspect that NEST is not meeting its target revenues , it has only 2.5m of the 4m employers it was projected to have at this stage of the auto-enrolment staging period. Convincing the National Audit Office that it will make good its promise to repay the loan in a market where it is only getting around 30% share is going to be a tough job.

For employers and their advisers, planning ahead, a view not just on the value for money of the current pricing structure but also the sustainability of that structure is vital. We will continue to provide ratings on both through http://www.pensionplaypen.com . That means that you as an employer will be able to take decisions not just on what is right today, but what is good for you in months and years to come.

But we can only provide this service with the help of people like you, who have taken the time to read this blog and are interested in the employer’s experience of auto-enrolment and of making Workie available to staff.

So if you ignored my plea to complete the survey earlier here it is again, we’d love to provide you with a giveaway Workie but sadly we have neither Workies to hand or the capacity to give you one! Workie – say it quietly – is digital only!

Here is the link to the survey …..



When – and only when you’ve done the survey, you can watch the video! No cheating, we’re watching!!

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

SHOW ME THE MONEY! What’s going to happen our auto-enrolment savings?

media city

L&G are Investing in Salford, where First Actuarial have an office

People want to know what happens to the money they invest and we are terrible about explaining where their money ends up. This blog talks about how we can make pension investment as vivid and real as the picture above.

Over the next 35 years, the mount we’ve saved into workplace pensions is set to grow from around £700 to £3,500bn. These numbers come from a graph given me at a recent Prospect round table by Britain’s biggest pensions savings manager- Legal & General.

Yesterday I was answering questions at an accountant’s conference in Solihull and the question came up – what’s going to happen to all this money. A similar question had come up the day before at a meeting in Froome in Somerset.

People want an answer to this question, not from an academic point of view, but because they are thinking of their own savings. They don’t think in terms of Billions but they do know they are saving thousands, maybe hundreds of thousands and they want some way to know what’s happening to their money – after all it is now “their money” – it doesn’t disappear into an annuity.

If we are to win the hearts and minds of ordinary people like those I met in Solihull and Froome, we need to have better answers than “it gets invested in what we call a lifestyle fund”. Every time that I hear the mechanical approach of “shifting money from growth to income sensitive assets” a little kitten dies. I saw it happen in Froome when a well meaning pensions expert this out as if people understood or cared. They don’t.


Real freedom right now.

The question was , is and will be – what are fund managers doing to help people who want income right now – those in later years.Here is what Nigel Wilson, CEO of L&G told us.

He’s identified a chronic shortage of UK housing , especially suitable housing for those he calls “last time buyers”. A third of retirees want to move and “rightsize” where they live. They want the right kind of place close to family, friends and facilities. And if they move, housing stock will be freed up for younger families.

So what is L&G doing about it?

For those who want to stay in the family home, they’ve started selling lifetime mortgages which provide cash to the householder so long as they live. The over 60s in the UK have over £1,300,000,000 of equity in their properties. Having opened this product in March, L&G are now seeing £10m of new applications each week


“Slow money” for the future

For those of us with many years ahead of us, the question is not about immediate but future needs. The people of Solihull and Froome want more than a stock answer with the word “lifestyle” in it. They want to know where the money is going. Individual savings are the basis of all institutional investment and we can use digital technology to pinpoint where a saver’s assets are invested. And their money can be invested in the UK economy to create local jobs and growth.

Nigel Wilson gave us a map showing investments in Methodist Care Homes, investments in brownfield sites in Liverpool, Plymouth, Canning Town, Salford and Wakefield, it shows investments in Southampton University, an Aberdeen international business park and in Royal Liverpool University Hospital. In all £15bn – almost twice the total amount saved in L&G funds through auto-enrolment is invested by L&G in long term direct investment.

Let’s not ruin this by selling this to people as “infrastructure funds”, let’s keep talking of direct investments into these kind of projects.


Winning hearts and minds

I want to know where my money with Legal and General is invested. I want Digital Data services to pinpoint the projects that the default investment fund of the First Actuarial Workplace Pension Savings Plan invests into.

I don’t want woolly nonsense about global equity trackers, annuity protection funds.

Show me the money!

I’m a very lucky lad.

Dr Nigel Wilson and I are going to meet in his offices and he’s going to tell me just what he intends to do to win my heart and my mind.

I am lucky because I will be one of only a handful of policyholders who will have a chance to directly influence that conversation.

But there are other ways to get to the boss. Legal and General, like all the  insurers, now have an independent governance committee, charged with making sure that policyholders like you and me get value for money from their savings. I would like the scope of the IGC’s activities to be extended so that the annual Chairman’s report included a statement on how money is invested. In time, I would like as an individual saver, to know where my money is invested.

Because it makes me feel very good to know that my money is invested in things that have a great future, like those direct investments listed above.

Of course I’m interested to know that my fund is properly tailored to my lifestyle and to know that it has low costs and charges and that it’s diversified to reduce risk but…most of all, I want an answer to the question of the business owner in Froome and the accountant in Solihull

“what’s going to happen to my auto-enrolment money?”


Posted in infrastucture, investment, NEST | Tagged , , , , , , , , | Leave a comment

How can auto-enrolment help those that most need it?



This morning I’m off to the House of Commons to discuss this question with some policy people, Prospect Magazine, my friends Alex Rowson of QTAC and Darren Philp of People’s Pension  and Nigel Wilson, the CEO of Legal & General. Nigel’s written an article which address the question in the title and you can read it here.

The article’s important for a number of reasons, firstly because it is intrinsically good, but secondly because it demonstrates the ongoing support the “for profit” providers see in supporting auto-enrolment. If I thought that this was philanthropism, I wouldn’t be impressed, we already have NEST taking a bath on AE commercials.

L&G and the other insurers still in the game (Aviva, Standard Life, Aegon,Royal London, Scottish Widows) aren’t offering Qualifying Workplace Pensions out of public service obligations, they see an opportunity to make money for shareholders.

At this morning’s session, we will be discussing a number of questions that touch both on the future of auto-enrolment and how the commercial as well as the not for profit providers will approach auto-enrolment from now on.

Here are the questions – what do you think?

  • How will pensions companies deal with the large number of small pension pots coming on the market from SMEs in 2016 and with people moving jobs in the absence of pot-follows- member or aggregation?
  • What is the likely short-term consequence of the National Living Wage announcement in the Summer 2015 Budget, and in the longer-term, how do we move beyond auto-escalation to deliver meaningful pension income in retirement?
  • Given the cuts in tax credits and cash freeze on working age benefits, can we expect an impact on the number of people that choose to stay ‘opted in’, especially if employers don’t make up the shortfall?
  • Given questions about the sustainability of the state pension’s “triple lock” and about pension tax reliefs, what is the most effective way to incentivise saving through auto-enrolment?

Perhaps the final question is the one that matters most to the nation, as it touches on questions of culture that go much deeper than the fiscal issues in previous points.

In my view, the only way to win the long-term argument is to capture people’s hearts and minds as has happened in Australia. We need a long-term savings culture and that will happen when people return to trusting pensions.

As Nigel Wilson points out

We should have a financial system where our slowly ageing population can use low-cost digital technology to save adequately for a longer retirement, which should include meeting costs of care.

We should make much more productive use of peoples’ retirement savings as they accumulate—investing for growth, productivity and jobs in ways which are directly visible to savers.

We should help people make well-informed choices about how to access their funds in later life, using the whole of their “personal balance sheet,” without paying away excessive sums in advice charges, fees and commissions.

And we should use the pensions infrastructure to “lean in” to a world where governments face mounting affordability issues with state benefits.


Auto-enrolment is the platform on which much of this work can be done. But to make it happen, we need the whole “feelde of folke” working together.

Never has Piers Plowman’s dream been more important- good on Prospect for helping make it happen

More on the outcomes of this discussion tomorrow – and on my subsequent meeting with the good employers of Somerset at the Payman Auto-Enrolment seminar this afternoon!

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Why financial education can only go so far….

Snake oil

You know when you have a guilty thought and you can’t share it with anyone. And then, quite by chance, someone repeats that thought back at you – and you feel relieved, ashamed and a little bit angry all at the same time?

Well I felt like that yesterday. I’d been very excited all morning as I was on Money Box, I’d done my bit on the show and was being shown round the BBC building by Paul Lewis’ assistant Janet (with my son and the other guest – Katie Evans of SMF).

Katie and I were talking about how the SMF had had trouble engaging with politicians and how the political agenda was dominated by just one idea – that we could make everyone capable of taking financial decisions for themselves.

And then the penny dropped, this was what had so frustrated me when I’d spoken with Harriet Baldwin earlier in the autumn and this was what I couldn’t understand about pulling the defined ambition project.

I realised what had been blindingly obvious to me – but I just couldn’t accept, that  financial empowerment can become an ideological cul-de-sac.



It’s such heresy, especially in a firm such as ours , where making people more engaged, and better educated is considered the sine qua non of “financial empowerment”. But it’s not. It’s an evangelical thing -this personal empowerment agenda – and it’s got a lot of people under its spell.

These include our Chief Economic Secretary and City Minister  who is (to quote Shirley Valentine) “loop the friggin’ loop” in love with making us all our own pension managers.

But I’d been sitting in the studio only a few minutes earlier, listening to Talk Talk customers being sweet talked into handing over the control of their bank accounts to plausible crooks teaching them about internet security! And I’d been listening half in awe and half in horror as I realised that the methods we use to engage and educate are precisely the methods that these fraudsters were using.


Indeed, once you have scared someone enough, you can get people to do whatever you like!

Here’s a mail I received last week from an accountancy network

late yesterday, I… received notification that six people had been arrested in relation to auto enrolment fraud allegations. I attach a copy of that article

Whilst we are unlikely to know the facts for some period of time, there is one clear message there are criminal implications in relation to non-compliance on auto enrolment. 

I don’t know the name of the business concerned but it will be the client of some accountant somewhere in the UK. In all probability, the accountant was not even aware of the potential issues. In a sense, it doesn’t matter who it is because that someone could be you.

A lot of accountants are opting NOT to get involved in auto enrolment because there is a lot of work for no apparent return. I understand that.

However, just consider this one issue – what if the individuals above had not been arrested yesterday and that the business concerned had their accounts prepared by their accountant, accounts were signed off without any adverse issues being raised regarding compliance with regulations and then at a later date, the individuals concerned were arrested?

Let’s be clear, like or not, there is an implication for every single accountant, for every single client that has employees and in every single accounting period after the auto enrolment staging date.

You have to consider whether or not the client’s chosen solution is compliant – again, whether you like it or not.

If you let your client choose their own solution or simply pass on the responsibility to a financial adviser, you’ve still got the same compliance responsibility. The more and varied solutions that clients use, the more problems you’re going to have.

There is only one way to minimise that risk – that is to TAKE CONTROL and offer the same solution to all your clients – a solution which addresses the key risks …

You have to start with the risks!

Like you, I probably receive 10 emails a week regarding auto enrolment and offering this to my clients. The message is all about income and opportunities to you in your practice. I’ve not yet had any email that talks about, let alone addresses, risk – risk to client of non-compliance and more importantly, risk to you. 

I’m a chartered accountant and proud of it. I passionately believe in what we do and what we have to offer to our business clients. I always want to deliver positive messages and solutions to my clients. However, compliance with regulations is not a choice. It’s legal responsibility and this one is not going to go away.


An action is required by you. Positive action. Positive action to help your clients. 

I’ll be writing to you again in the next couple of weeks to outline the actions we are taking and the positive role that you can play.

 However, you can do something about this now, and that’s to trust our ae solution…


Whether it’s the scammers relieving Talk Talk customers of their money, or accountants scaring the living daylight out of each other over auto-enrolment, the techniques are the same


And it’s that same evangelical tone that runs through all of this – and is there in the utterances of Government when they talk about the Financial Advice Market Review. Whether for good reasons (and I actually believe that the accountants do believe in their “ae solution” and that Harriet believes we can robo-advise the nation into good financial behaviours) – or for bad, there has to be a balance in this debate.

There are many people who will not get all this sophisticated financial stuff and will do whatever they are told. If we allow proselytizing from the evangelists of self-empowerment to go unchecked, we will be opening the castle gates not just to the good but the bad.

We need fiduciary care, strong Government and good products

Financial education , whether in the workplace or on the PC or tablet or smartphone is not enough.

People can be taught bad behaviours as well as good and people can believe they are being clever when they are being very stupid.

My biggest worry about what Harriet and the FAMR are up to, is not what they are saying – which is right, but what they’re not saying. In the headlong rush to get more advice to more people, they are forgetting the fundamental need for Regulation and Governance of the financial instruments people use to sort their finances out.

My Eureka moment

In my brief conversation with Katie Evans, somewhere in Broadcasting House, the penny dropped. I’m not against La Baldwin, but she scares me. I’m not against evangelists, but they scare me. I’m for balance and proper regulation and I don’t see much balance in the debate on advice and guidance, at least as it’s being presented to us at the moment.

You are much better off listening to the excellent episode of Money Box that Paul Lewis presented yesterday. Roll up…Roll up!

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Doubt is not a pleasant condition , but certainty is absurd


The quote’s from the French philosopher Voltaire and was sent me by my friend Derek Benstead . Derek’s been ill all year, never stops thinking about how to make my and his client’s lives better!

We were discussing people’s options at retirement as I’ve been asked to discuss this on Paul Lewis’ MoneyBox today (Radio 4- 12pm).

People have worked out that if the cost of certainty for their retirement is the feeble return they get from an annuity, they would rather live in doubt and draw their savings as they please.

But as Katie Evans, the author of the Social Market Foundation’s “Golden Years” report will tell us, the experience of Australians and Americans who have tried this has been dubious!

Another friend, David Pitt Watson told me the story of the wise men of Chelm, who have to deal with road accidents caused by a hole in the tarmac.  The solution? -Build a hospital close by.

He was pointing to the SMF’s suggestion the Government   build an early warning system and intervene when dubious decisions become too common!


DWP research arrives just in time!

With serendipitous timing, another eminent research body yesterday released the results of its study on the merits of DC drawdown and CDC as a means to spend retirement pots. The work was funded by the DWP and can be found here. I have found very little in the study that I disagree with. Here are its conclusions

Screen Shot 2015-11-07 at 07.39.38

To paraphrase, if done properly, CDC would produce between more than 40% income and even if done badly it would match the best income levels of drawdown with less likelihood of money running out. While people using CDC would still suffer the uncomfortable condition of doubt, they would not pay the ridiculous price of certainty!

Or maybe a little late…

It is then a great shame, that this means to mend the road has been kicked into the short grass by the Pension Minister’s decision to cut funding for further regulations to allow CDC to work.  The road has undoubtedly got holes in the Tarmac.

To quote directly from a mail sent me by a notable economist

… if I had a one sentence criticism of where we have got to, it would be this. “It is now no longer possible to buy an effective retirement pension with your pension savings”. It is possible to save, (with NEST, NOWand others). But if you want a pension, that is an income-for-life, which won’t run out if you live for a long time, you will look in vain.

We have forgotten that pensions are an insurance product. Instead, we have drawdown products of ever greater dodginess, which are attractive to suppliers in the early years, (when there is a lot of money about), but offer no protection for longevity.

Put simply, for the first time in seventy years, we now no longer have a private pension system.  And meantime we have allowed the banning of the very product (CDC) which, properly regulated, all experts recognise is the structure most likely to resolve the problem. In whose interest could such a decision have been made…

So I am going to BBC broadcasting house to meet Paul Lewis and Katie Evans to talk about this and no doubt much more. I have had some conversations with Paul and we have found some common ground. It is quite surprising that he is more knowledgeable on almost everything I know about than almost anyone I know.

Bearing in mind the breadth of his interests, I think him a renaissance man. I am rather in awe! So wish me and Katie luck – thanks to all who have already!

I will remember Voltaire and not be so ridiculous as to be certain on anything. Nevertheless, I don’t think we need to be as reactive as the Wise Men of Chelm!


If you want to hear more about the Wise Men – listen to me and Katie Evans on Paul Lewis’ Moneybox  at 18 minutes 25 seconds via this link  http://www.bbc.co.uk/programmes/b06nhpxq


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People’s Pension announces one-off fee – world comes to an end!

chicken licken

If you were to read some of the reactions to the announcement yesterday by People’s Pension that they would be charging employers either £500 or £300 to set up a pension with them, you’d think that some intermediaries had just had a close encounter with Chicken Lickin.

Take this thread on Accounting Web for instance. I particularly delighted in

Screen Shot 2015-11-06 at 07.58.22

In a pithy article , Richard Hattersley comments

Businesses will now have to pay the mastertrust £500 plus VAT, but if a client comes through an adviser they will be charged £300 plus VAT.

The new charge will affect businesses who sign up from 23 November with a 2016 staging date.

And goes on to quote an old friend of this blog

Steve Brice from LP Auto Enrolment Solutions believes this charge is ‘entirely appropriate’. “Auto enrolment is not free for anybody,” Brice said.

The People’s Pension underwent a consultation earlier this year to decide whether they should add an annual management charge, and at the time decided against implementing a charge – perhaps due to the market pressure of potentially being the only one of the big three mastertrusts charging. However, with the announcement that close rival NOW Pensions will charge from the start of next year, Brice theorised that The People’s Pension are now free to charge as well.

With both People’s Pension and NOW charging for implementation, NEST will be the only provider left to break ranks. Brice questioned how long NEST will remain not charging. “Two commercial organisations like the People’s Pension and Now Pensions have done their sums and said that they cannot on-board small companies over the course of the next couple of years without making a charge. And if NEST pension doesn’t apply a charge then tax payers will end up paying it”, he said.

“Now People’s Pension has joined NOW: Pensions, will NEST follow suit?”

Well you know we’ve been asking this question of NEST all year. Yesterday I sat between Malcolm Small, a non-exec of B&CE (People’s parent) and Charles Counsell – the Pension Regulator for auto-enrolment. As I was chairing the session I got to ask the question that Steve had.

Predictably I was told that any answer would be speculative, but those who have read this blog know damn well that speculation tends to come true when it is backed by cold business logic.

  1. NEST is already over £400m in debt and continues to burn money
  2. It has a £600m ceiling on its loan to the DWP
  3. The bulk of its stagings are still to come
  4. The National Audit Office this week confirmed NEST was committed to being “no cost” to the taxpayer
  5. It has taken just 50% of its target of employees in the first half of auto-enrolment
  6. With lower employe numbers it is behind target in repaying its debt to the DWP
  7. It has within its constitution the power to charge employers without recourse to primary legislation
  8. It is an accountable public body dedicated to not creating a market distortion
  9. By becoming the only MAF accredited master trust without an upfront or ongoing charge to employers it is distorting the market
  10. It is a sensible and reasonably managed outfit which I’m sure will do the right thing.

My message to anyone who believes that choosing a pension on the basis of upfront or ongoing charges to the employer is to think again, The cost of choosing the wrong pension in terms of the way it operates and the satisfaction it delivers to your staff will  outweigh the puny costs of Peoples and NOW.

NEST is a great pension , but so are the pensions of NOW, People’s Legal and General, Standard Life, Aviva and many many more. Many of the smaller mastertrusts such as Salvus and Smart are investing to the Master Trust Assurance Framework. You should not be making a comparison between providers purely based on what it costs an employer in November 2015.

Accountants! – Do not listen to Chicken-Licken!

The sky is not about to fall on your head because your plans to put all your clients with NOW or Peoples have to be revisited. There is no certainty that putting all your eggs in the NEST will be any more sensible a strategy than putting them with aforementioned trusts. Legal & General have stated they have no plans to charge and personally I prefer their business model to NEST’s (in terms of solvency).


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“TEEN-AGE kicks” – incentivising sensible spending in retirement

Teenage 2

“A teenage dream’s so hard to beat..

Just say those words and I’m thinking  1978, radio under the pillow – John Peel show – 11pm.

teenage 3

But I could relive the TEEN- AGE kicks in a few years time, if that crazy maverick Michael Johnson gets his way!

Michael’s latest idea is what he calls TEEN taxation and it’s for those teenagers of the seventies who will be retiring from now on.

Here’s how it works. You pay your Taxes as you put money into your pension  through PAYE  – T

You are Exempt  on your investments between then and the point you start spending your  savings – E

And you get an ENhanced retirement pot at “spending time” if you agree to spend your money in a sensible way – EN.

Now there’s a value judgement in that word “sensible”. It ties in with the Social Market Foundation paper this week which lays out what “sensible” is.

Sensible is not spending all your pot and running out in later years

Sensible is not putting all your money under the bed and “dying loaded”.

Sensible is establishing a plan of action that makes sure that you’re not going to be a burden on another generation of tax-payers.

Teenage kicks

So in practical terms, sensible is insuring against extreme old age, making provision for later life expenses and setting the rate of targeted pension at a reasonable level to sustain it till death do thee part,

Of course- if you are an annuity provider – sensible is providing an annuity. But that need not be the only sensible way to spend your savings. You might set up a plan which does what NEST is suggesting, keeping money in cash to make income payments, investing some in shares for the long term and planning for an annuity purchase when your cognitive faculties desert you quite!

You might, and say this very quietly as this financial heresy, club together with others and form a spending club where your money is pooled to provide protection against extreme old age and an investment strategy that provides economies of scale enhancing the regular income.

All of these ideas seems a sensible strategy and without starting that “in my garden a thousand flowers should bloom” nonsense that so messed up the DA policy, I do think there’s more than one way to skin a cat. There cold be more than one way to get back to  TEEN.

teenage 4

Michael explained this idea at a conference organised by Professional Pensions on the future of pension consulting. Frankly I don’t see it does much for pension consulting – accept reduce the amount of it!

Unless you are going to pay someone to review the level of income you take every year, which most people are reluctant to do- the annuity, the NEST hybrid or the CDC decumulator described above are the alternatives. None of them need a lot of love and attention, they are what Paul Lewis calls “Fire and Forget” strategies.

Of course all of the Fire and Forget strategies need to have some form of flexibility. The NEST strategy gives a bail out option and property rights can be built into the collective decumulator I mention at the end. Even annuities look set to have a second hand value for those who get fed up with their guaranteed income streams.

But Michael’s ENhancement can cope with even that, it would of course be recovered if someone decided to get dippy with their savings and become a tax disincentive to jack a sensible strategy in.

teenage 6

Which might sound a bit recidivist to the lover of pure freedom. But nobody said that the freedom to be feckless was to be encouraged. Right now people pay enormous tax penalties to be a “tax-muppet” and cash in their pension for a “Lamborghini”. If we move to TEE, the disincentive to spend it all at once gets taken away.

TEEN may involve a value judgement on what qualifies for the incentive and what doesn’t , but heh- what are Regulators for?

So I like Michael’s idea, I think it makes TEE responsible and it allows me to sing that song to myself


Altogether now…

A teenage dream’s so hard to beat

Every time she walks down the street

Another girl in the neighbourhood

Wish she was mine, she looks so good

I wanna hold her, wanna hold her tight

Get teenage kicks right through the night

I’m gonna call her on the telephone

Have her over cos I’m all alone

I need excitement, oh I need it bad

And it’s the best I’ve ever had

I wanna hold her, wanna hold her tight

Get teenage kicks right through the night


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Half-term report for AE – an excellent start – keep it up!



The press is not full of the NAO’s report on auto-enrolment, why should it be? There is no story other than the good news that auto-enrolment is working as predicted by the DWP.

nao- key factsWhy the document is important is that it is a case study in what good looks like

Specifically it sets out a number of things that the DWP did right. This should not just be instructive to Government but to many private sector organisations setting out on projects with national significance

The DWP set clear aims for the project – which has allowed it to be flexible in its approach (consulting widely and implementing change) while protecting their core objectives.

The Department, The Pensions Regulator and NEST have identified and tested critical assumptions about behaviour – I’d agree with that, from the high level work by the DWP (including Workie!) to the very detailed insights in NEST insight, the Government have really got to grips with the mechanics of auto-enrolment. No better evidence is the Pension Regulator’s section of the auto-enrolment website.

The automatic enrolment programme team has been small and stable; I had this conversation with Charlotte Clark last year. She played down her role in this but I won’t. She is the rock around which all else has been built and her return to the DWP was of immense help to the auto-enrolment project. I’d also mention the importance of tPR’s contribution. Charles Counsell has built a team around him who understand business and understand payroll. They enforce sensitively and effectively. We should treasure the team that Charles has assembled around him.

The Department has developed automatic enrolment over a long period and introduced it in stages ; the plan has worked and though the project has sometimes flown by the seat of its pants, it is now ready to take on the really huge logistical challenges of 2016 onwards. I can think of no better implementation plan of a major Government project than that devised and delivered by DWP/TPR so far.

A word about NEST

The main body of the report contains some useful insights into the market for pension providers and acknowledges that the market has changed and is likely to continue to change,

It makes specific mention of the impact of these changes on NEST

Against this backdrop, the Department and NEST work together on an ongoing basis to review NEST’s financial position and the long-term sustainability of the current funding arrangement, including the size of its loan facility and repayment period. The Department and NEST are committed to ensuring the original objective of introducing NEST as a low-cost, quality workplace pension scheme that can be delivered at no direct cost to the taxpayer.

The success of auto-enrolment has attracted new providers and it has kept existing providers like Aviva, L&G, Scottish Widows, Aegon, Standard Life and Royal London in the game when most had expected them to pull up the drawbridge on new business.

The table below, taken from the main body of the report demonstrates that the insurers have taken over 1/3 of the initial market and that NEST is only one of several providers offering a “product to all”

blue 2

My understanding is that NEST is not as asset rich as it was projected to be and this is because it is competing for business at a time when many considered it would have the market to itself.

A competitive market is a good thing, it improves consumer outcomes and improves employer’s engagement with workplace pensions in a way that “NEST or nothing” wouldn’t have.

But it means that NEST is now looking less likely to repay that loan any time this century!

Unless a way can be found to reduce its cost-base (unlikely) or increase its revenues (possible) NEST will be a direct cost to the tax-payer.;

I’d urge the NAO to press hard here. The market is changing as I write as NEST’s rivals implement fees to employers to provide the support that NEST provides for free. It is not right that NEST claims to be at no cost to the tax-payer, introduces no remedial plan to get its finances back on track and in the meantime picks up business because it is free to use.

The sooner NEST starts charging for its support or reduces its support to reduce its cost basis – the better. At the moment it is distorting a working market.


A clean bill of health?

Having read (most of) the report, I feel comfortable and confident to be one of the contactors the Government is using to implement the auto-enrolment project. Many of the suggestions in the body of the report (including improving the links to HMRCs RTI reporting to improve enforcement) have been flagged on this blog.

I agree that the employer declaration of compliance is a little weak and that more needs to be done to ensure that that is a proper statement of fact – rather than intent!

The revised estimate of opt-outs (down from 28 to 8-14% seems realistic. It is something for SMEs to plan around.

This should be my least read blog of recent weeks, since (other than repeating what I have already said about NEST), I have nothing to add.

It remains only for me to offer the DWP, tPR and NEST a round of applause at the interval and hope that the second half of the show is as good as the first!

The final chart – again from the main report- should sober us up after half-term drinks – just look at the blue line!

blue line

I am off this morning to speak at a conference on retirement freedoms and will be spending this afternoon with a notable journalist discussing how we will spend this money we are saving.

I have written on a little card these words from the NAO’s conclusion.

The DWP will need to ensure that more widespread enrolment translates into higher retirement incomes as it tackles remaining questions about the design of auto-enrolment, wider reforms and market development.


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Heard the one about the Englishman, the Australian and the American?


Last line of defence

If you are a fan of such jokes, read no further – the Social Market Foundation’s  (SMF) study Golden Years? What freedom and choice will mean for UK pensioners“, contains all three characters (unsexed), but there the joking ends. This is a serious study into the likely consequences of changing the tax rules around the purchase of annuities in the UK.

If I was studying it for English A level, I would have to give it low marks for characterisation. It assumes that we all behave the same and that left to our own devices, we are likely to become like the Cautious Australians , Quick Spending Australians of Typical Americans. Racial stereotypes feature throughout and for good reason; the study finds that

Cautious Australians reduce their pots by 1% per year, Quick- Spending Australians run out of cash by the time they’re 75 and that the typical American burns their pension pot at 8% a year and like the feckless Aussies, are likely to find themselves broke before they die.

But what of the English person?

Were we to copy our (ex) colonial friends we too would be potless in our seventies and with a life expectancy of 87, staring out of our attic window in penury .

State pensions and benefits may put a crust of bread in our hand but for many late retirement will see us sink below the poverty line.

The scrooges who scrimp on savings may be alright later on at the expense of having a party in their sixties and seventies.

For those choosing DIY or even advised drawdown, there’s little certainty of success and relative to buying an annuity, someone drawing down from a £200,000 pot  is likely (on average) to need an extra £10,000 in state benefits.


An Economic discussion (verging on philosophy).

It was when  I read this final finding that I smelt a little editorial bias , so I turned to the front page of the report to find that it had been sponsored by Just Retirement – an annuity provider.

When considering how UK retirees are likely to act, the SMF talk of something “often called the annuity puzzle”, the paradox is that

‘consumers will not act as rational economic actors. Standard economic theory predicts that an “economically rational” individual would choose to guarantee income in retirement by buying an annuity, as doing so  allows for higher consumption in retirement and eliminates investment and longevity risk’,

I’m not sure I’d agree here!

The economically rational human being is going to work out for him or himself the correct balance between certainty and return for him or herself and will choose the level of risk specific to them. They might be prepared to have a 1% chance of not getting a pension increase in one year in return for the 98% chance of having a 2% better income for the rest of their life (for instance).

The assumption that economically rational people are the ones who want their future financial welfare guaranteed, assumes a very one dimensional view of human nature. I suspect it is a world-view very prevalent in the offices of Just Retirement, but were they to decamp themselves to the offices of William Hill or Joe Coral for the afternoon, they would find a quite different world view who consider the aim of life to be happy, this being achieved by taking substantial risk on the outcome of the fifth race at Perry Barr,

“Money is something we use to alleviate poverty and purchase pleasure” – Pension Plowman.

The political popularity of Freedom and Choice is that it recognises that the balance between these two extremes should be in the control of those living their lives and not the Chancellor of the Exchequer. In my book, it is economically rational to maximise the utility of the retirement pot in a balanced way – I think economists would call me Benthamite, I don’t consider calculated risk-taking irrational, not when it optimises pleasure!

Assumptions.. assumptions

The bulk of the report (and I have read all 96 pages and noted all 106 sources), is an attempt to

  1. Draw on international patterns of behaviour
  2. To use financial models to analyse the long-term impact of changes resulting from freedom and choice
  3. To look at how impacts change for different groups

To do this there are a lot of assumptions. Assumptions can be bad but they can also be good. Assumptions are statistical short-cuts that allow conclusions to be reached without the report running to 1000 pages and costing more than the problem it is trying to solve!

As soon as an assumption is made, it is open to challenge – which is why you will find so many earnest conversations in the offices of First Actuarial! The key thing for actuaries is to understand where bias’ are creeping in and to eliminate those bias’.

My worry about “Golden Years” is the bias identified in the previous section of this blog. namely that an “economically rational human” being would always favour a guaranteed solution’.

That said, the modelling methodology adopted by SCF seems a good one and the data sourced from ELSA is generally considered reliable. The modelling was done by the PPI, an organisation I am a fan of (and would join if I could afford it). NB – Andrew Young.

The answers to the three questions is of course “it depends” and the dependencies are all about the likely real return on investments (eg the extent to which investments beat inflation) and the risks of being in the market (in particular sequencey risk- known on this blog as “pounds cost ravaging”).

The conclusions reached is that we carry on like the Australians and Americans , we are risking poverty in old age or a rotten lifestyle in late middle age. What’s more, the State is likely to be on the hook for bailing many of us out if we blow our savings and fall into destitution. This is what the Aussies call “double dipping” – you dip into your savings, then you dip into somebody else’s.

Throughout the report, we hear the same editorial bias as identified earlier e.g.

3.3 “The likelihood of someone going below the “low income thresholds” is much reduced for someone buying an annuity than any other path”.

The message for the Treasury is clear, as Adam Smith pointed out, the only argument for compulsion is to keep one group of tax-payers from being a burden on another.


Bring back those days before the war!

The bulk of the back end of the report is directly pointing to “policymakers” – e.g. the Treasury (and to some extent the DWP).

It argues that there is too little financial literacy to make drawdown the default option, that people are their own worst enemy and will behave irrationally given half a chance. That Freedom and choice is giving them more than half a chance and that were we to “shop around” annuities would look a lot more attractive,

To return us to a pre 2014 world of sensible behaviours (that would return annuity providers like Just Retirement to pre 2014 levels of profitability), SMF suggests a remedy.

The remedy’s an early warning system that (like radar pointing to France in 1940) detects the impending arrival to our nation’s health -eg bad behaviour (see Rational Economic Behaviour stuff above).

Battle 3

That big room below Dover Castle

This comes in the form of a “Retirement Risk Dashboard” and a Personal Pension Alert”. The former is what fighter command would get in that big room below Dover Castle, the latter the financial equivalent of squadrons of spitfires sent up to beat off the beastly Hun.

Battle 2

Spitfires beating off the beastly hun

There is a lot of good stuff about how this might be done which I thoroughly agree with. If only I agreed that this was the battle for Britain I wanted to fight.

For my analogy breaks down at this point;   the enemy is not some foreign power, but “the enemy within”, a kind of fifth columnist infiltration of our  formerly green and pleasant land by the freedom and choice brigade.

I don’t see freedom and choice as the enemy, I see it as a liberator. What I want to see is a way to use freedom and choice to repatriate the millions of refugees displace by policy failure over the last 30 years and looking for a new-start.

What the report doesn’t say

What the report doesn’t do is speculate on whether there may be any other solutions out there which might be used as an alternative to income drawdown or annuity.

My new-start solution is nothing more than a return to the collective system of paying pensions that worked very well in Britain from the end of the war until the end of the millenium.

What happened then was that the savings of the workers were supplemented by those of the bosses and tipped into one big fund which paid out a regular amount to the workers until they died (and sometimes till the spouse died). This simple idea might be called collective decumulation or if it might be called the default way to spend your money.

We can worry about where and how the money might be invested, how to avoid the impact of pound cost ravaging, how to give people rights to take a transfer value and how people might use the fund to insure against long-term care but first we’d need to agree that the majority of the problems identified in “Golden Years” could be solved or mostly solved by agreeing…

  1. That there must be a balance between risk and reward (guarantees aren’t everything)
  2. That doing things together is more efficient than doing everything on your own
  3. That if you don’t want to take decisions about your retirement income, you’ve got to trust someone to do that for you
  4. That the cost of guarantees under our current regulations makes guarantees too expensive
  5. That to bring costs and charges to reasonable levels – we must cut out most intermediaries.

So we need to move the debate on

I’ve taken a lot of time in the past twelve hours reading Golden Years and it was great, Thanks SMF and thanks Just Retirement and the PPI.

I don’t agree with the conclusions because I don’t believe we are fighting the Battle of Britain II (but I know there are those (Steve Lowe) who think we are!)

Without this monumental work, we couldn’t move the debate on, and this work allows us to have a proper discussion. I hope the likes of Paul Lewis pick up the report and debate it on social media and the radio. If they do, I’ll be listening!







Posted in annuity, Australia, CDC, Paul Lewis, Pension Freedoms, pension playpen | Tagged , , , , , , , | 2 Comments

The frictionless fees that shame our name!

frictionless fees

I have been following at a polite distance the argument among financial advisers between those pressing for fee disclosure in pounds and pence and those who would prefer to charge and disclose advisor fees as a percentage of the fund.

Over the summer, the IFA publication Professional Advisor ran a good debate that clearly set out the arguments for and against. You can read it here.

Where we stand on this

For the record, Pension PlayPen displays its fees on the front page of its website as a pounds and pence figure and this only varies if you have a voucher code at the point of payment.

First Actuarial directly bill almost all fees. A very few clients ~(mainly those we have inherited) are charged an agreed amount from the funds under advice but we do not go  in for “Ad Valorem”.


Most people understand Ad valorem through property taxes, you pay a percentage of the value of your property to an estate agent when you sell it on an “ad valorem” basis, and that’s how you pay stamp duty too.

It’s blatantly re-distributive as those who have big properties subsidise the fees of those with small properties (though some estate agents have sliding fee scales). With stamp duty, the percentage of the tax actually goes up with the value of your property.


You may have pondered the use of the phrase “frictionless fees” in the title of this blog. That’s my beef with Ad Valorem and why we charge our fees in hard cash up front and with VAT payable.

What Ad valorem does is to hide the fee as a percentage of something that is insufficiently real to make the loss of the money quite painless. The fee doesn’t touch the sides- hence there is no friction?

Which is why those charging their fees on an Ad Valorem basis so love them. They are just so easy to collect and the damage done is not appreciated to much later (if ever).


Here are three ways of charging £10,000

  1. I can take 1% of the value of your £1m Pension Pot.
  2. I can take 1% of the balance of your bank account (on a day when there is £1m in it)
  3. I can ask you to send me a cheque/TT for £10,000

I reckon most people would find 1 easiest and 3 hardest. Most people see a raid on their bank account as an attack on their spending power and therefore more real than on a raid on their pension account – which is their future spending power. But a demand to physically write a cheque or go online and press the send £10,000 button is tougher again.

And with VAT entering the equation (at 20%) the escalation from 1 to 3 gets even tougher.

Necessary Friction?

People like me, who argue for full disclosure, believe in the concept of necessary friction. We think that people should think before they buy and make an assessment as to whether they are getting value for money.

The argument in the other direction is that the ends justify the means and that if the “end” is more saving, the lack of transparency at outset is a small price to pay.

The really big financial decisions we take, the house purchase, whether to have a family and how to organise later life finances, cannot be made on Amazon, nor should we buy without understanding what and how we’re paying.

It is ironic that most financial advisors will tell you to think before you buy – with the exception of paying their fees!

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Paul Lewis and cash – tactically astute – strategically moribund!

Paul Lewis 4

Jon Cudby is both brave or foolish to take on Paul Lewis over Paul’s remarks at  FT Adviser events over the past few weeks.

As the next speaker up at two of them, I heard what Paul said, what the questions from the floor were and – as Jon chaired one session, I was able to chat with Jon about the issue.

Jon won’t win because Paul is a) fleeter of foot, b) noisier and c) tactically right. Paul is telling people what to do right now and right now he is saying that cash is the best place for people’s money when they don’t know what to do!

Paul Lewis knows how to tweak the tail of the advisory community and there is no point in arguing as he will win.

This is of course not what anyone would call a strategic approach. Strategically speaking, an investment in real assets provides a hedge against inflation and gets you the risk premium that comes from tying up your money. Cash doesn’t get you these things but in the short term cash has advantages

  1. your cash is protected (at least up to the £85k level)
  2. there is no inflation to protect against (in the short term)
  3. drawdown is too expensive and risky for most small savers
  4. annuities are a  busted flush (because of the cost of the guarantees)
  5. without proper advice, there’s a real risk of being robbed by fraudsters

Now I’m sure that learned advisers can disagree on all five points but at a tactical level, I think Paul is absolutely right. For many people – cash may be the best option – until something better comes along.

There are however some “buts ” about. Firstly if the cost of getting to cash is the busting of the pension , using “freedoms” then the cash may come with a ludicrous tax-bill. Only a muppet would needlessly pay 45% tax to have cash in the bank!

Secondly, it’s not good enough for Paul to sit on the fence about what should be done to get products in place which offer cash plus. I have looked Paul in the face and delivered a sermon to him on the advantages of a collective approach to spending pension savings.

I have not seen any engagement with potential solutions from Paul, which is a shame. We cannot move forward without investing time in looking at the new ways of paying people back their money. Even a collective cash account with a proper payment system would be a step in the right direction,

  • But shouldn’t we be looking beyond that – to ways of paying people collectively?
  • To collective insurance mechanisms to provide people with protection against the prospect of living too long or needing long-term-care?
  • Shouldn’t we look to bring down the cost of drawdown from 2.5% pa to 0.25%?

I say that the current system works for those with the wealth to afford advice and it works for those with the smallest pots who can use pension savings to pay off debt.

But pension freedoms are not working for those in the middle who are stuck for what to do and will be parking their savings in cash rather than risk it on (perceived) risky and expensive investments in equity and bond funds.

Paul’s tactical approach is ok for now but not good enough for tomorrow. Paul is a responsible and able journalist with a clear conscience and a will to see the right thing done.

There is no use arguing on twitter or on this blog – I’m going to see if we can find a way to work together to make things better!



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When will these taxation nightmares end?

nightmare 2

The ludicrous complexity around the 2016/17 rules for the pension annual allowance, are only part of the story! Add to them , the extraordinary complexity surrounding the use of Pension Input Periods and you have manna from heaven for pension tax specialists and a “nightmare on pension street” for those on high earnings with big pension pots.

The Nightmare on Pension Street is the title of Jo Cumbo’s excellent peice on this which appeared while i was writing ming. I’m glad we are saying the same thing, I wish I could say it in the same way but I’m a blogger not a professional and if you can afford the FT paywall (which if this stuff interest you – you should), here’s  a tweet from Jo that can take you there


Of course all this nonsense would disappear if we had a proper simplification of pension taxation. My sources told me that we would get some definite news on the direction of travel in the autumn statement (November 25th) but it looks – despite the Treasury throwing the kitchen sink at the problem – that all we’ll get is a green paper with options. Which is pretty well what we got in the budget,

The choice is very simple. So long as we have an EET system, we will have problems controlling tax relief and the Treasury will have to operate Heath Robinson type mechanisms like the AA and LTA to stop higher rate tax payers stealing all the cheese.

If we move to TEE, the higher rate tax payers will not have the opportunities to game the tax system , we won’t need the annual allowance and the lifetime allowance and there can be a more targeted approach to tax relief that should benefit those who need pension income most, those in lower paid jobs.

But the pension taxation system is so complicated that unless you went into the HMRC’s back office , dragged out all the books and burned them in the courtyard of Somerset House (something Robin Ellison regularly threatens to do), then any simplification is going to take time. And there will be losers as well as winners and the good folk who are pension lawyers (Robin included) will have a field day/month/decade demonstrating cases where people have been unfairly treated on a retrospective basis.

Which will mean we will have to have “preservation” meaning that everything that came before will have to be granted and everything going forward will be subject to change.

Preservation is a gift to lawyers.

Meanwhile, every month, lots of poor people who are being told that their pension contributions  are being topped up by the Government are being denied this top-up because they are not in schemes that offer relief at source. A lot of these people had to join schemes under auto-enrolment and have not opted out because they either find that too hard or they are convinced by the man in the turban that we’re all in!

all in

Although it’s at the other end of the earnings scale from the problems with the annual allowance, the Net Pay /Relief at Source is just as much a product of simplification.

The reason we have two types of tax relief on contribution is because the occupational pension industry could not manage refunds and relief at source. Until September of this year, occupational pension schemes could be subsidised by contribution refunds from members who left in the first two years. This doesn’t happen any more (thank goodness) but these schemes can’t move to net pay because it would be too expensive (or so the people who manage administration tell them).

Ironically, when I ask them when they are likely to move to net pay, they point to the current consultation on pension taxation and say, “when we have clarity on that”.

Well we aren’t going to get clarity on “that” till the Budget in 2016 at the earliest. I am with the CIPP in asking Government to announce soon and implement later (2018/19) to give everyone a chance to get auto-enrolment in and systems changed.

So even if we get an announcement on how things are going to change in April, we will still have a number of years of transition and of course preservation of everything that went before which is all good for lawyers and top-end tax and wealth advisers, but a nightmare on pension street for the rest of us.

Can we point a finger?

I don’t want to point a finger at anyone, least of all HMRC who are boldly going where no HMRC have gone before and thinking the unthinkable.

If we see recidivism from the proposed TEE system, and if it preserves the complexity we see today not just for what went before but for what goes forward, I will be more than pointing a finger, I’ll be down the Treasury with a fistful of complaints. Moving to a flat-rate taxation system looks to me to “scotch the snake not kill it”. It leaves enough opportunity for the experts to find ways to complicate things enough for loopholes to emerge.

So I’ll only be pointing fingers if we don’t get proper simplification and that means a move to a single taxation system for ISAs and pensions that everyone “gets”.












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Pensioning high-earners;- the nightmare deepens

tax relief

We’ve known about the problems for high earners losing their pension  lifetime allowance protection for some time. They now have an exemption from auto-enrolment if their employer knows that enrolment would jeopardise their tax privileges in retirement.

But now there’s another threat; the threat of 100% taxation on contributions under auto-enrolment when someone’s hit their annual allowance from next tax year. This may sound fanciful but there is a big  problem brewing.

Provided you earn under £110,000, you have an annual allowance to pay into pensions of £40,000 pa. But that allowance tapers to £10,000 on your earnings over £110,000 at a rate of 50p for every £1 you earn over £110.000 -with everyone earning over £210,000 only having an annual allowance of £10,000.

If that isn’t hard enough, the definition of earnings is different depending on how much you earn. If you earn below £110,000 your income for these purposes is pretty well your earnings for national insurance providing you don’t have any income from other purposes.

But if your “outside earnings” tip you over the £110,000 “total earnings threshold”, things get really tricky. Firstly you are losing your annual allowance on a tapered basis (see above) but secondly, your total income including pension contributions could tip you over another pension threshold at £150,000

If  your total taxable income including pension contributions exceeds £150,000, your pension contributions also become taxable meaning that your annual allowance for pensions is reduced as if the pension contributions which have tipped you into the new bracket were income.

What all this means is that many people may start out a tax-year expecting to contribute £40,000, but find that they are breaching their annual allowance a lot sooner than they thought. As soon as they do so, they can find – under the very punitive rules that apply to those breaching the allowance – that they could be taxed at a marginal rate of 67.5%.

If people invest additional contributions into a pension once they have breached the annual allowance, the end to end outcome can an income tax-rate close to 100%. This would occur if they pay  tax when they exercise their pension freedoms. If we were to include an extra tax charge if the lifetime allowance has been breached, the situation becomes even more serious though I suspect that HMRC might baulk at demanding tax for a benefit that had already been reduced to nothing by 100% taxation.

There are thee practical issues for employers

Firstly, how they communicate to vulnerable employers. It’s easy enough to assess who is under what threshold if all that is being considered is NI-able income. But what about that outside income and how can an employer keep tabs on that (even if the employee has kept tabs!). In practice most employees won’t know (for sure) about their breach for sure till they do their self-assessment the following year!

Secondly ,how  employers protect members from paying unnecessary tax. Employers can put in a cap on all pension contributions at £10,000 and pay salary in lieu but that’s expensive in terms of income tax and national insurance and would doubtless penalise some who would have been better off with higher pension contributions.

Thirdly, how auto-enrolment operates. Even if an employer is taken out of the pension (for contribution purposes), he or she will become an eligible jobholder and will be auto-enrolled back in. Those auto-enrolment contributions could attract an income tax charge at self assessment of 67.5% plus more to come at retirement if freedoms aren’t exercised with care and LTA is breached.

And this can’t be sorted by salary sacrifice as all new salary sacrifice arrangements will be considered artificial (new  being post July 2015). The salary (or bonus) sacrificed will be considered part of the annual allowance or (if below the £150k threshold) part of adjusted earnings.

The only good news for high earners is the Pension Input Period alignment (and mini-PIP rules) which may give them some flexibility, but this is one for another article!

We may see payroll software re-coded to take this into account but all of this is transitional. I doubt there will be much appetite to re-code with so much further change in the pipeline. This means a lot of manual messing around and a lot of individual conversations with senior staff.

We had hoped that the agony of the current consultation on pension taxation would be over on November 25th and the Autumn Statement. But we were wrong! The Autumn Statement will now announce a green paper which will allow the Treasury four more months to sort this mess out!

In the meantime, we have written to the Pension Regulator asking that we can at least have an exemption from auto-enrolment for high-earners opting out of pension contributions to avoid the punishment of the annual allowance.


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IGCs – 6 months in – a worrying lack of diversity.

governance 2

In April 2015, insurers offering personal pension contracts were required to set up Independent Governance Committees as a result of the findings of a study by the Office of Fair Trading that concluded


Also in April 2015, the FCA issues a call for evidence on how we could judge “value for money” in workplace pensions. With the call for evidence , they published a paper commissioned from Novarca, a European consultancy, which provided a method for assessing the costs of a pension fund relative to the value it was bringing (value for money).

In the intervening six months , we have seen a lot of hand-wringing from those who have been appointed to these Independent Governance Committees about how hard it is to report on value for money, but precious little action.

If you’d like to see how to assess the costs incurred by a fund manager in delivering value- you can do so by reading section 8 (the appendix) of the Novarca report by pressing this link.

Nobody is expecting ordinary people to have the time, energy, skill or knowledge to assess the value for money from their workplace pension. But we are expecting the IGCs to do this for us. They are due to report to their members in April 2016 (for the first time) and I am expecting good things, along the lines of the Novarca report.

That is because I have been promised big things by a Government who decided not to refer the insurers offering workplace pensions to the Competition Commission. If the IGCs do not come up with the goods, I hope that the FCA recommends that the Competition Commission are brought in.

Continue reading

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When is a fiduciary independent?


It’s a question asked by Karen Wake on twitter

I’m not into chasing tornadoes so I’ll try to put the wind back in Pandora’s box! 

Independent is as independent does, in its purist form- independent fiduciary behaviour is altruistic, doing work for the benefit of others rather than the benefit of oneself. Having spent last night in the company of “Contact the Elderly”, I know that altruism happens. One speaker at its Golden Jubilee Concert said that it was “in the little acts of kindness she was able to do for elderly people, that she found meaning in life”. Virtue is its own reward.

So the concept of commercialising independence is difficult. We have seen recently instances where Trustees have taken their fees from the funds of the members they are suppose to be protecting, because they were in dispute with the plan sponsor with whom they were contracted. This does not seem to have any sense of altruism about it. Here independence is a concept with a legal rather than a moral definition.

Jo Cumbo was querying whether a pension trustee who is also a beneficiary of the trust can be considered “independent”. At a legal level, clearly they cannot be, they are conflicted between wanting what is best for them and what is best for the sponsors of the plan and indeed other members. At a moral level, such a trustee – typically member nominated- may show moral independence by putting him or herself at the back of the queue.

Independence is as independence does

Quite clearly , independent trustees – working in the pension space – are principally operating in a commercial capacity and their independence comes at the price of their fees. It may seem wrong to put a premium on independence but I think it is right to do so. Independent trustees are exercising their skill and knowledge on behalf of their members and are also considering the interests of other parties (such as the pension’s sponsor- usually the employer). Whether the cost of this work is met by the member or sponsor or both should be immaterial, what is being bought is skill and knowledge to ensure that the benefits of the plan are paid in full at the right time to the right people.

So I have no beef with paying independent trustees.

However, when the primary consideration of a trustee is to protect him or herself- either to ensure revenues or to minimise his or her personal liability, something has gone wrong. This may not be the fiduciary’s fault, but if that fiduciary has to question for whom they are acting- as happened recently (see yesterday’s post) , then any sense of independence has been lost.

Fiduciary means “the carrier of trust”, the fiduciary needs to be clear whose trust they are bearing and if there is a balance of power between an insurance company and a policyholder, it seems absolutely clear who is trusting who. Policyholders, the people with an insurance policy resulting from their employer establishing a personal pension plan on their behalf, are trusting the insurance company with their money. The “Independent” in the Independent Governance Committee means (legally) independent of either the sponsor (the insurer) or the policyholder.

But in a moral sense, the duty of an independent fiduciary, such as a member of an IGC is to protect the interests of those most at risk- the policyholders.

I am not a lawyer, I am sure that my distinction between legal and moral obligations is open to legal challenge. But we have a great history in this country of moral obligation , which extends beyond the law courts into every aspect of our daily living.

When I listened to the stories of tea parties for the elderly last night, it became clear to me that unless “independent trustees” have their moral compass properly set, no amount of legal rhetoric can properly describe them as “independent”.

For trustee read fiduciary, for trust board read independent governance committee. I have my moral compass, it is my father, a man who’s moral compass was set by his father before him. He is my definition of an independent fiduciary.


My father - a trustworthy man

My father – a trustworthy man

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The day the IGCs had their picnic


Apparently yesterday was the day the IGCs had their picnic or whatever they do when they congregate at some legal temple in the City.

The IGC’s – let’s be reminded – were set up by Government to keep the insurers from the grips of the Competition Commission following the harrowing findings of the Office of Fair Trading. The OFT found that employers and employees were getting a thoroughly bad deal from many workplace pension providers and recommended independent governance of those providers as a last chance saloon.

Clearly enough time has ensued for the insurers to have returned to business as usual. The Governance Committees have been set up and chosen by the insurers with the help of headhunters – in the pay of the people who run the money for the insurers and (unsurprisingly), the boards are packed with faces who also appear on the boards of mastertrusts.

The magic circle of fund managers who provide services to the policies which ordinary people contract to include State Street which within the last two years  has been convicted of stealing money from occupational pension schemes such as Sainsburys and the Royal Mail. As I reported recently, State Street are the lead  investment manager for Scottish Widows and master trust Peoples Pension, the Governance committees of which are headed by the same person Babloo Ramamurthy.

Pitmans and PLSA DC head honcho Richard Butcher appears on a large number of IGC boards as well as sitting as a trustee to mastertrusts (though less since the demise of GenLife). It was his tweet that alerted me to whatever was going on in the City yesterday

Well the OFT and the Government and the FCA were all pretty clear that the IGCs are there to promote the interests of members or (more rightly) policyholders.

But this is all a little too difficult for the IGCs. So rather than find ways to engage , educate and empower policyholders to save, the consensus is that IGCs are really about compliance with whatever rules the FCA sets.

Despite the craving of the public to know what is going on with their money (see viewing figures for Martin and Paul Lewis), the IGCs have convinced themselves that whatever they produce will not not be read, and what is read, will not be understood.

Of course – if all you’ve ever known is how to hide behind compliance – then all you’ll ever produce is undigestible, complex, 50 page reports. Josephine Cumbo of the FT challenged the received idea.

At one point in last night’s debate on twitter a lawyer suggested that were the IGCs to issue a robust challenge to insurers and fund managers, they’d risk frightening people into opting out of pension saving.

Josephine Cumbo . would have none of that!

For it seems the IGCs have decided that business as usual is preferable to disturbing the status quo.

I cannot remember a spike in opt-outs when the OFT reported, indeed the general public seem much happier to know what they are buying and what it costs, especially if they have an independent and trusted expert showing them the way.

Surely this is what the IGCs are supposed to do, not act as a megaphone for the insurers and fund managers.

Jo Cumbo went so far as to engage with Steve Webb (well almost!)

If you press the link on Jo’s last tweet you can see a great many more tweets from a number of participants – voices that should be heard by the IGC boards.

There are voices missing from the IGCs , they include the voice of Josephine Cumbo but also a number of genuine consumer champions who understand what value for money means.

David Pitt-Watson

Dr Chris Sier

Norma Cohen

Nigel Stanley

Steve Webb

Gregg McClymont

Mick McAteer

Con Keating

Emmy Labovitch

Paul Lewis

Martin Lewis

Andrew Young

To name but twelve.


These are not people who will be seen on the boards because they are genuinely unconflicted and can speak for the interests of the policyholder.

If you were, like Rene Poisson,  for 20 years MD of  JP Morgan Fund Managers  you might have difficulty managing conflicts of interests with a portfolio of jobs that includes

Chair of the Advisory Committee for Five Arrows Credit Solutions

Chair of the JP Morgan UK Pension Plan and its Investment Committee

Chair of Standard Life Assurance Ltd’s Independent Governance Committee

Trustee Director of the Standard Life Master Trust

Director of the Universities Superannuation Scheme and Chair of its Remuneration Committee

Director of Stemcor Holdings Ltd and Chair of the Remuneration Committee

The reality is that most of these IGC members are part-timers and use their busy portfolios as an excuse not to exercise any pressure on the insurers and their suppliers

As Richard Butcher tweeted last night

So there we have it, a bunch of part-timers, worried about criticising  the people who pay them and scared of upsetting policyholders by telling them what is going on.

This is pretty vapid stuff and if the FCA had a mind, it would re-read the OFT report which spawned IGCs and ask itself whether it hasn’t just created another talking shop paid for by the people it was designed to protect.

I will not mince words, what we saw on twitter last night was disgraceful and what we are seeing as DC Governance is generally so poor (by comparison with what we see in the USA, Canada and Europe) that something needs to be done.

We need these IGCs to be populated by people with the independence, character and perception to stand up to the vested interests intent on maintaining poor value for money for the consumer. We clearly are a long way from there right now.

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One small step for payroll, one giant leap for auto-enrolment.

one giant leap

There have been two events over the past couple of weeks that I think we’ll look back to as tipping points in the auto-enrolment staging timeline.

Till now, employers have had no choice but to send and collect data to and from pension providers using CSV files. Not only is this a risky business (think TalkTalk) but it’s manually intensive. If we were to carry on like this, I suspect auto-enrolment would fall over at some point in the next 36 months.

The first breakthrough came when pensionsync announced that they had successfully integrated with Legal and General so that progressive payrolls such as QTAC can now pass encrypted data at a push of a button without the need for messy CSV.

The second breakthrough came yesterday when Sage announced it can now do the same with NEST. Here’s how they describe things in their press release

The innovative functionality, which seamlessly integrates NEST’s new Web Services functionality, will automate all pension interactions for NEST and Sage’s customers, both direct and via accountants, bookkeepers and commercial bureaux.

Moving from a manual process to a ‘one click’ automated tool, the Pensions Data Exchange empowers Sage’s payroll & Pension Module customers to meet important regulatory requirements with greater ease and confidence.

For auto-enrolment, this is like the invention of the telephone 150 years ago – it changes everything!

All the conversations I have with those in payroll managing auto-enrolment suggest that  it is the initial and ongoing interface with the pension provider that is eating time. The uploading of CSV files and the reconciliation of data are too time-consuming. With 1.8m more employers to come, the capacity crunch is all about this use of time.

Our initial experience is that moving from CSC to API technology cuts the time taken to manage scheme set up and ongoing contributions by around 80%.

Of course we are at an early stage. But things are really exciting.

Pensionsync already links using the new technology to Pension PlayPen and we are getting data sent every day into our workforce assessment using its and our APIs. We can now integrate seamlessly to L&G using the same technology so setting up a workplace savings plan with that employer is only a click away.

This radically reduces the time needed to assess a workforce, choose a pension and set a scheme up. Within a couple of months we expect a host of other providers to be working with pensionsync in the same way.

In an excellent post on a Pension Play Pen Linked In Group thread, Adam Saunders sums up how the impact for bureaux

For Payroll Bureaux that deal with lots of small employers each of whom have a handful of staff; pensions are often a whole new thing to come to terms with. If the process isn’t automated then it isn’t a ‘bit’ of extra work – it’s multiplying the time involved, and therefore the cost, of processing payroll runs. Bureaux will either shut up shop, refuse smaller clients or increase their costs – there aren’t many other choices. If automation comes in time (although it comes with a price) it may mean that Payroll Bureaux will be able to keep going and keep their costs more or less the same.

The benefit of automation to the employer therefore may be that their relationship with payroll carries on more or less as usual, despite the massive extra workload that payroll is taking on.

Sage customers can of course set up with NEST in seconds and manage data with NEST as easily. Let’s hope that Sage don’t stop there, there are more fish in the sea that NEST -even if NEST is a very big fish. Let’s hope that Sage customers can get the chance to integrate to choice as other providers catch up.

Sage and NEST represent size, size matters, but we have to remember that choice matters too, choice of payroll software, choice of payroll manager and choice of pension provider. Thankfully as well as the Sage and NEST link, this new technology is available to all.

The great thing is that whether supported by the mighty Sage or the smallest software provider, all bureaux can benefit.

Pensionsync is doing it for the smaller players, Sage are probably big enough to build their own interfaces to providers. )NEST you remember didn’t bother integrating to the PAPDIS data standard that is used by pensionsync but many other providers have).

PAPDIS makes life easy for smaller providers and payroll software houses and it’s thanks to Pensions Bib that they will be able to offer a competitive service to the big boys.

So it looks like things are all coming together, thanks to Pensions Bib, the Pension Regulator, and the heroes of payroll.

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

Helping employers with pensions – you don’t have to be an IFA!

The Gobi Desert

What it’s like getting workplace pension advice!

Since RDR in January 2013, the number of IFAs operating in Britain has more than halved from 50 to 24,000. The ban on commission or its sibling “consultancy charging” has made it all but impossible for IFAs to make money from “selling” workplace pensions to employers.

Indeed, we are fast approaching the point where commission will be turned off for existing sales made prior to January 2013, making workplace pensions a barren desert for most advisers.

As well as the positive aspects of the shift away from commission, there have been a number of negative side-effects

  • voluntary contributions from members have fallen (partly as a result of IFAs not being in the workplace cajoling reluctant employees to save)
  • employers with workplace pensions have found themselves left to their own devices, particularly harrowing if your pension provider assumes you will be getting a BAU service from the intermediary
  • employers purchasing workplace pensions (Workies) for the first time, have precious little help to turn to.
  • employees joining these pensions are even less supported.

The commission system, flawed as it was, had the benefit of supporting advice and that advice is now no more.

The Financial Advice Market Review being sponsored by Treasury Select Committee head honcho Harriet Baldwin, is now underway. It’s task to address the advice gap left by the RDR’s implementation. It should definitely consider the impact of advice on pension saving and on the quality of pension decisions being taken by employers.

But after the scorched earth policy of the RDR, we are already seeing green shoots – where advice is returning to the workplace. One such shoot is the launch of a little known facility

The Auto-enrolment Member Advisory service  0207 630 2705

This helpline is for members who have been enrolled and for people considering whether to opt in , out or who simply want to know what auto-enrolment is about. It’s staffed by dedicated pension professionals from the Pension Advisory Service.

As with all things TPAS, you don’t get told what to do (no provision of a definitive course of action), but you get told what’s what and what your choices are.

What’s more it is free to use and it’s staffed by people who know their stuff (most TPAS advisers are PMI qualified).

If I was in the mood, I would turn this blog into a press release and if the pension press were of a mind, they would distribute this number to every employer in the land as a little oasis of hope in the desert of neglect, we advisers have created since 2012.

But I’m not in the mood, and if you have read this far, you may want to put the number into your phone and give it a ring. You’ll speak to a real person who will be interested to speak to you and will answer your question courteously and with authority.

Frankly, that’s what most people need.

You don’t need to be an IFA to help an employer, you just need to know the right people and the right telephone numbers!

While I am in this happy mood, here’s my favourite pension video of all time.


Thanks to Quietroom for curating it to us, I hope there are more in the pipeline – perhaps one on our options with the new State Pension?





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Companies count the cost of pension freedoms

target pensions

Pension freedoms are … creating a human resources burden, the CBI said, as company leaders try to ensure their older staff do not spend their pension pots early and face hanging on to their jobs when they should have retired.

“Even at this early stage it is clear that succession planning is likely to become more difficult,” the CBI said. “The challenge the pensions freedoms brings for businesses is that employees risk not being able to afford to retire if they choose to spend a significant chunk of their pension pot on reaching 55 years of age while remaining in their jobs.”

This from the CBI as reported in this morning’s FT.

The tripartite social contract between employers, the members of occupational pension schemes and the Government has been a pillar of post-war British (and European) social policy.

Put at its most brutal, members agree to work in return for jam today and jam tomorrow, employers agree to share part of the risk of an ageing workforce with the State and the State incentivises employers through tax-breaks.

Written into the contract is the maxim “don’t spend it all at once” which is why scheme pensions and annuities are designed to pay a pension for life. We now have the freedom to break that contract and the CBI know it. Far from freeing employers, the pension freedoms (who no longer have the power to impose a statutory retirement age) face the prospect of an ageing workforce sitting on their hands. Employers are tied to the whims of their staff.

The solution that the employers surveyed propose is that the Government leaves things at that and doesn’t complete the job started with the tax changes at retirement. Changing the way we receive tax relief to a flat-rate – or more radical TEE formulation where the tax relief is on the benefit, would disincentivise high-earners from saving (it is thought).

This is a little like planning a skyscraper and building a bungalow. We are in the process of changing the way the nation plans for its later years through auto-enrolment, through the pension freedoms and finally by the way we incentivise prudence in later years.

Unlike the CBI, I do not see the problem of people spending their retirement pot too early as merely a savings issue. It is a spending issue. Even were people to have saved harder and longer, those wishing to swap retirement savings for a Lamborghini lifestyle would simply be trading up in their consumption.

The surveys (principally the Aon survey) suggest that most people are worried by their money running out and the facts (very few large pots have been cashed in since April) suggest that people are sitting on their hands and waiting for a proper spending vehicle to help them plan retirement.

For most people that will not be an annuity or advised drawdown. It will be something else which targets a level of pension about which people are reasonably certain , offers greater flexibility than an annuity and does not require a retinue of advisers to make it work.

Unfortunately we have just cancelled work on the regulations that might have made such a spending vehicle possible and though the project has been “mothballed”, it is unlikely that any serious alternative legislation can be put to parliament before a pensions bill in October 2016.

In retrospect, the Defined Ambition project was too nebulous. The idea that in Steve Webb’s garden, a thousand flowers could bloom, was nice from an aesthetic viewpoint but rubbish when it came to getting buy-in from the public- most especially from the employers on whom CDC was deemed to rely.

The harsh reality is that employers are not going to share longevity risk with Government if they can help it. They have plenty of it in their DB schemes and their task right now is to reduce that risk to a point where they can get on with making widgets.

Whatever we salvage from the wreck of DA must offer the employers completing the CBI survey clear separation from its outcomes. By which I mean that DA(2.0) needs to focus on the retirement needs of those exercising pension freedoms both from privately held and trustee operated pensions. Just because the employer helped with the saving of the money does not make them on the hook for how it is spent.

The second thing that needs to emerge from DA is a clarity about what the Government is facilitating. Are they opening the door for the multiplicity of Heath Robinson designs in the DA papers or are they specifically facilitating some form of mutual risk-sharing where the later-life contract is between the plan, the Government and the member.

I think this is the only practical way forward. It is not something that has been openly discussed but it is pretty much the solution that is being established in a number of European countries and in parts of Canada. It is ambitious because it assumes that people can co-operate in a common purpose without benefits being guaranteed. There are many who see this as no more than a pipe-dream.

But if we are to move on from a debate about whether the pension freedoms are damaging or helpful, we have to consider how to spend the money that has been liberated so that the CBI and others can get on with widget- making and we can plan for our retirements with a degree of certainty.

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Pensions on Coronation Street (nearly)


Obsessed as I am by Kylie and David Plarr,I got home last night just in time ,switched on Gogglebox and  saw Workie’s walk in the park.

I have so far counted four people I know who like the DWP’s awareness campaign (Ros Altmann, Jo Cumbo, me and Tom McPhail). Apparently Metro have run a poll showing more than 90% of readers regard the campaign as a total waste of time , the rest reckoning him a “chippy little fella”.

I don’t hear much reaction from the pensions industry. The PLSA’s twitter feed was silent on Workie which is odd as he made his appearance a day after they launched their new campaign to increase awareness of auto-enrolment. My friend Margaret de Valois who has resolved to get a pensions story onto Corrie was not on the case.

It was Jo Cumbo of the FT who made the crucial observation

And the Pension Minister to justify the £8.5m spend

The message is simple enough, if you want to engage the silent majority of Britain’s employers, you need messages that resonate with our emotional intelligence. We are used to public service announcements which appeal to other parts of the brain , but you cannot educate people who aren’t engaged.

Ironically, I had sat in a meeting earlier in the week when a leading financial institution had suggested that it might be more helpful if I re-branded Pension PlayPen as First Actuarial. I think the suggestion makes sense if Pension PlayPen was aimed at the membership of the PLSA, but it isn’t. It’s designed to appeal to employers who feel intimidated by words like actuarial and consider accountants, payroll and pensions as unfortunate accoutrements to the main event -running their businesses.

Workie is an embodiment of how most employers think about pensions. As he wonders around the park, hapless and forlorn, we are asked to consider what is the point of him.

Those who dismiss Workie have yet to find a better way to ask people this question.

Supposing that getting to 1.8m employers like the Rovers Return or Roys Rolls is not going to be business as usual for the PLSA or me or the rest of the pension industry. Gift horses like Workie don’t come along very often and when they do, we shouldn’t dismiss them out of hand.

Embarassing as some may find him, insulting as many find him, Workie is our way to reach out to the public. As with Pension Geeks, which works on the same principal, I am going to support Workie in engaging with the nannies round the pond and the businessman on the park bench.

And I hope that what Ros and Jo and Tom and myself are saying, influences others. Because if we can’t act as one for the common good, we have precious little chance of making the next three years a success.




Posted in advice gap, auto-enrolment, pensions, PLSA | Tagged , , , , , | 3 Comments

Making auto-enrolment rather more fun! QTAC,tPR and Pension PlayPen by the sea


The business of learning is seldom made much fun, at least in adult circles. Children are more sensible about this and make games of education.

Recently, we’ve embarked on a round Britain road trip to talk about how auto-enrolment might work for the customers of QTAC, one of our leading payroll software suppliers.

Yesterday we reached Branksome Dene in Poole (though we thought we were in Bournemouth.

For those who came it was a wonderful experience.

Auto-enrolment and workplace pension plans are hard things to understand, we try to make them a little easier to get your head round by making our seminars rather more fun.IMG_0012

Of course you may prefer to learn in a boring place, without sun and without laughter. But why not learn jn a slightly different environment.


Our guests yesterday had the pleasure of our company and we of theirs, all in the pleasant confines of one of Britain’s quaintest seaside buildings


Would you expect anything less from the Pension PlayPen


If only all learning ended this way



For more fun packed auto-enrolment events – go to


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PLSA to be of help?

Screen Shot 2015-10-20 at 06.28.14


Yesterday , the good egg that is Jonathan Stapleton forwarded me the PLSA’s press release announcing their initiative to help small business’ understand workplace pensions.

The Pitch is straightforward

“The Pensions and Lifetime Savings Association knows pensions inside out – our largest members were the first to tackle Automatic Enrolment so we’re familiar with the problems businesses encounter on the way and we also know the solutions. We’ve used our expertise to create Pension Solution, designed purposely for small businesses to make Automatic Enrolment simple and straightforward for them, and to make sure it really works for them we are also letting them add their own experiences and views on providers.

“Small businesses employ millions of people1 in the UK and we want to help all those employers and employees get a great workplace pension scheme in place. I know from personal experience it can be tough rolling out Automatic Enrolment to your employees for the first time, even in a big company, and small businesses are just as busy and often have less experience of running a pension scheme. Pension Solution gives small businesses the know-how and the tools they need to tackle Automatic Enrolment confidently and successfully.”

This is precisely what the PLSA should be doing , putting its considerable experience to good use pro bono.

Well, it’s almost pro bono. To access this skill and knowledge you have to stump up £49 +  Vat which will give you admittance to the web pages of www.pensionsolution.co.uk.  I have to admit a certain reluctance to pay the PLSA this money without a preview of what I’m getting and I’m not sure the teaser https://www.pensionsolution.co.uk/step-by-step-guide/ page quite does this.

As reported over the weekend, the Pension Regulator has just upgraded its pages on auto-enrolment which are considerably more user-friendly, both to intermediaries and to employers and I suspect that many involved with auto-enrolment will refer to the Regulator in the first instance.

The site also contains some insights into the relative merits of the various workplace pension schemes available to small employers. We get a sneak preview of how this is presented (a style that is familiar to users of http://www.pensionplaypen.com !


It’s odd that this mock-up appears on the website as it contains some wrongful information about charging and some pretty strange ratings! But at least it is right on NOW’s PQM ready and Friends of PQM status, which I guess is important to PLSA.

The value of the PLSA approach is that it will be driven by feedback on user experience by employers, the more https://www.pensionsolution.co.uk/ is used, the more relevant it will become.

I see the site as being useful to other trade bodies looking for a way to help membership with choice and – since its provenance is the PLSA (nee NAPF), it may even be able to be promoted from the Pension Regulator’s site.

Whether it provides value for money for what is- to most users – a £58 recurring annual fee, it is impossible to tell as you need to pay the money to find out!

there is a space for a voucher code for those who are privileged to get a free view, my friend – who is a senior pension journalist – has not got such a code – so I guess I won’t be seeing one anytime soon. Judging by the number of typos and the state of the NOW mock up, it may be a little too early to visit.

This afternoon, the Friends of Auto-enrolment Choices Taskforce will be discussing how we promote pensions into the smaller schemes market, I have sent an invitation to PLSA to join us and perhaps participate in the document we are putting together for the CIPP.

We welcome them to the fold!

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If not CDC – what?

Prospect 5

CDC – flawed in conception

Steve Webb told me that when he spoke with Andrew Young, the former Government Actuary for the DWP, Andrew advised him to “think big”. Steve did and he will be remembered not just for the scope of his vision but for some big ideas that have made it to the statute book. Steve was not the architect of pension freedoms but he supported them as free-market liberal.

His final months as pension minister saw the publication of the Pension Schemes Act 2015 which contains the framework for collective DC schemes. The secondary legislation to make the framework workable , was being drawn up , until the announcement last week by the new Pension Minister- Ros Altmann.

In this article, I will explain what use I – and some like me- wanted to put CDC to, why the need exists for a collective means to decumulate savings and how I hope we will (one-day) get things back on track.

This ties into three recurring themes in what I’ve been saying lately

  1. That Britain has Pension Freedom and nothing to do with it
  2. That the traditional connection between employer and worker’s pensions has to change
  3. That some intervention is needed as the financial services industry cannot provide an answer from its own resources

“Freedomed up” with nowhere to go!

220,000 people have exercised the right to take their money but less than 20% of that number have taken guidance from Pension Wise , around 12,000 used the money to buy an annuity and as many again set up an income using “income drawdown”.

But 62% of those asked by a recent Aon survey what they’d like from their pension pot described something very much like the state pension, or an annuity – a certain stream of payments paid until death.

So clearly the public want something quite traditional but not from annuities or drawdown!


The current “big idea” does not come from the DWP or its regulator but from the Treasury and the FCA. The idea, expressed in the consultation within the Financial Advice and Market Review is that given the right access to advice, the general public will manage their post retirement financial affairs with an adviser- or at least with a robo-adviser.

This is speculative and nothing I’ve seen since I became an adviser over 30 years ago suggests that most people want to manage their retirement income with the care and attention needed for drawdown – or pay for someone else to do it for them. As Paul Lewis puts it, they want to fire the gun and live with the consequences.


The previous big idea was that you could do just that- using an individual annuity policy purchased by someone at the point when they exchanged their pension pot for a pension . People got fed up with this idea and that’s why Pension Freedoms were so popular.

We have got rid of the old big idea, are groping for a new big idea but we aren’t there yet!


A solution looking for a problem

When CDC was introduced by Steve Webb, it was proposed as a third way between DB and DC. Unfortunately Webb did not test the market to see whether a third means to build up a pension was required.  It wasn’t needed or wanted and not one employer has stepped forward to trial CDC for its workforce.

Worse, Steve Webb included a range of other ideas as part of his Defined Ambition project. These muddied the waters and CDC  lost any focus in the “pension’s eye”, let alone the “public imagination”.

So CDC became a solution searching a problem.


We need a new “big idea”.

So we have Pension Freedoms with nowhere to go and CDC as a solution searching for a problem. The third leg of this stool is the public’s wish to have a non-advised pension solution providing more than annuities without the fuss and bother of income drawdown.

For this to happen , we need a genuinely new “big idea” which does four things

  1. Provides a problem to the issue of people not knowing when they are going to die
  2. Gets round the issues to do with guarantees that force annuities (and defined benefits in general) to cost so much.
  3. Provides staff with a “fire and go” solution without heavy upkeep costs
  4. Provides employers with something to signpost retiring to – which solves the problem.


A help not a hindrance to employers

It’s currently thought that there is a silver bullet for this problem – the master trust. NEST and the large pension consultancies are touting solutions to decumulation which involve “to and through” investment strategies culminating in the purchase of an annuity at some yet to be determined age.

These solutions have two problems.

Firstly the timing of the annuity purchase, which looks very problematic, not least because we become cognitively impaired as we get older and are less able to deal with difficult financial decisions like annuity in our pensions in very later life.

Secondly, when someone joins a master trust they do so because they are an employee of a participating employer of that master trust. This link between employer and employee may be broken when an employee retires, but it remains in the pension trust, so long as the employer participates in it. Clever lawyers point out that employers are therefore potentially on the hook for the outcomes of these master trusts and risk avers employers are extremely nervous of the implications of this residual liability.

Of course the problem is even more acute if you are an employer with your own DC trust, which is why employers are so resistant to running decumulation schemes using their own DC pensions.


How CDC could have brought everything together.

My idea for CDC was always different from Steve Webb’s. Steve wanted a third way product, I wanted something that was

  1. Able to provide an easy way to provide mutual insurance for those worries about how long they lived. CDC provides mutual insurance within the pool of membership
  2. Gets round the issues of expensive annuities and uncertain drawdown, by taking out the layers of intermediation, not having guarantees and so providing more pension (albeit with a little less security)
  3. Is a set and go product that does not need management (but has limited property rights for those who want a transfer)
  4. Provides a clean break solution for employers wanting to signpost a default “spending” option for those entering the decumulation phase.

Of course CDC would not provide perfect solutions, all of the aspects of the product outline above have their own problems and many people would have preferred the total certainty of annuities (or buying extra state pension) or the freedom of drawdown.

A step back to go forward

What I’m describing is pretty close to the kind of DB contract between member and trustee of a pre 1987 Defined Benefit Plan, funded by the pots build up in workplace pensions and (for those willing to lose the guarantees) from DB.

The big difference is that instead of this being employer sponsored, it is sponsored by individual transfers and instead of employers setting up the trust, the trust is set up by an independent third party.

This kind of structure does not currently exist (current master trusts need participating employers). That is why we need the DWP to sort out the secondary legislation and why it is a shame that this work is now on hold.

I’m confident that we can make anew the old way of making pensions and look forward to doing just that – just not now!



The battle has been lost , the war may yet be won

We were never going to get the legislation to build the product tomorrow. The latest estimates we got from the DWP was 2018. No product would have been ready till 2019 (IMO). What we are seeing is an unfortunate stalling in already slow process.

Ros Altmann has made it clear that CDC may be dead but it is not buried. I suspect that the third way product envisaged by Steve Webb may not arrive for much longer, but that the need for the simple in retirement version I am proposing will emerge before too long.

We cannot have pension freedoms with no default way of spending our money. We shouldn’t expect there to be a revolution in behaviour making us all want to get advice. Annuities are not due a comeback any time soon and drawdown doesn’t look a mass market product.

The need for innovation is there and will grow. The financial services industry is not showing much sign of meeting that demand. When the current mania for the “new advice” has passed and we accept that neither Pension Wise or robo-advice is the solution…

then we will return to collective decumulation models.


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Making “PLSA” more than a name-change.


“What’s the point of disruption?”

This is the kind of exam question that I’d love to answer. Just sit me down in some massive gymnasium with a pen and paper and I’d hand you back 2000 words an hour later which could be condensed to one

– YES!

The Peasant’s Revolt that brought to the attention of Richard II and his court, the plight of agricultural workers was a bloody failure. The revolting peasants were generally hung and it was business as usual for the Court in the next couple of years. But it’s generally acknowledged that Watt Tyler and his unmerry men advance the lot of the common man much as the Tolpuddle Martyrs did 500 years later.

I will get out of exam mode and come to the issue of the day! Is the pension industry, as represented by the Pension and Lifetime Savings Association (nee NAPF), in a position to make a difference or is business as usual a slow decline into irrelevance.

Certainly there will be many stalwarts struggling with the new PLSA acronym. What of “Funds”? Where if not “National”?

There are good answers to these questions. Most of ordinary people’s pension is unfunded – there is no fund to pay the State Pension (putting aside notional arguments about NI). Most public sector pensions are unfunded and frankly most funded pensions aren’t likely to be fully funded any time soon! We are trusting to  the endeavours of future generations, whether we like to admit it or not.

As for the location of the Association, most of the employers asked to pay their subs are international if not global organisations. Most of the sponsors, on whom the PLSA will be dependent for revenues are similarly global. There is no place for parochialism in the City or in the PLSA.

So the name is moving as it should to reflect the changes in the structure of the PLSA’s current membership.

Rename or reform?

But there is a much harder issue to address. That of what I referred to earlier this week as two nation pensions. While the PLSA were meeting in Manchester, 350 leading accountants were meeting in the Birmingham NEC. 20:20 innovation help practicing accountants organise their work around relevant issues, mitigating risks and maximising their revenue opportunities. Working with 20:20 , you are never more than a click away from the best interests of their clients.

I chose to be in Birmingham and not in Manchester because I am interested in the 1.8m employers who have yet to stage auto-enrolment. 95% of them have no workplace pension  and – according to NEST’s stats earlier this year- 68% of these employers are looking to their accountants to get them up and running – and the accountant’s payroll bureau to keep them compliant.

The clear message coming from this conference (as from the breakout sessions I’ve been a part of with Payroll Software company QTAC), is that there is little or no help for accountants, payroll and their bureaux in choosing and managing staff pensions.

This was the focus of the Pension Regulator’s remarks to the Conference

Reaching out?

If the PLSA is to help these small employers, it is going to have to start talking to groups like 20:20, ICPA and the other accountancy networks that congregate at Accountex and have their own conferences. It needs to understand the needs of the customers of the large payroll software companies and their trade bodies the CIPP- their trade magazines such as Payroll World.

But it will need help. In a recent tweet, one of the PLSA’s luminaries told the world that the PLSA got there without the help of the likes of me. He is right- I had no part in the re-naming of the NAPF.

But the PLSA should be aware, that disruptive as I may be considered, mine is the only pensions name on the Payroll World 50, it was me who the CIPP invited to deliver their keynote speech at their conference early this month and it’s http://www.pensionplaypen.com that is being promoted by the accounting networks to help employers understand the pensions they are entering into.


If the PLSA wants my help, I am happy to give it. But it needs to understand there will be more to reform than a change of name. There will need to be a wholesale shift in the lifestyle of the organisation , a reduction in the fees to accommodate smaller employers and the new intermediaries and an acceptance that life isn’t just about the investment of funds!

I could and should have been at the PLSA conference this week, I actually passed through the exhibition hall on Tuesday night. I hope that next year, the organisations that are making a difference on the ground helping the 1.8m new employers will have a place at the  PLSA’s table, and the PLSA will be attending the events of the accountancy and payroll organisations.

When I see that happening, I’ll believe that the disruption will have been worth it. I hope I won’t end up with my head on a spike – or deported to some distant colony.


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Easy on the baloney – Baroness!


The DWP’s official line on CDC is that it would be a change too far for a pension industry struggling to deal with change. This from a Government about to radically simplify the taxation system.

 ..we have decided that the time is not right to implement Defined Ambition, Collective Benefits and Automatic Transfers. The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively. The market needs time and space to adjust to the other reforms underway and these areas will be revisited once there has been an opportunity for that to happen.

But in an interview with Professional Pensions, Ros Altmann makes it clear that CDC is not going to be available to the pension industry, let alone the general public till 2018 at least.

“If this shift had happened ten years ago then we might have seen interest but even if we were to work full pelt on CDC then we wouldn’t even have regulation in place by 2018.”

So what are the DWP and Ros Altmann talking about?

On the 25th November, the Government is going to announce the Departmental budgets including the revised budget for the DWP. My guess is that the team of bright lawyers who have been working on CDC are for the chop, or at least for redeployment (with others for the chop). If I am right – my heart goes out to Jo and Ronan and the team).

And here’s the tragedy. By 2019, we will be four years into the Pension Freedoms. So far around 1 in ten of those exercising freedoms and few more than that are actually using their pension pot to create a pension.

Fast forward four years and we are going to have an awful lot of people with an awful lot of money and no obvious way of converting to pension. These are the 62% of us , Aon have surveyed who want a certain income in retirement without buying an annuity or employing an expensive adviser to manage it.

I am very afraid that the CDC project has been put on hold to save the Department of Work and Pensions a few bob.

I fear that in four years time when we are all heavily sick of drawdown going wrong and annuities stuck at current conversion rates, we will rue putting CDC on hold.

The trouble with CDC is that it has been presented to the nation – especially by Steve Webb- as a halfway house between DB and DC – as if employers want to spend a whole load of money on their staff’s retirement.

Employers don’t and won’t. They will spend enough because of auto-enrolment and (for the more affluent) because of reasonable contribution rates. The problem is not with employers, it is with the employees who have no means to spend their pensions.

They deserve a little research and development from the private sector, that it has had from firms like First Actuarial and Aon. It deserves a little regulatory work from Government. That  it has had – so far.

The work from the private sector has been done pro bono (for the public good). Sadly it looks like it has been donated in vain.

Short-term thinking from the Pension Minister.  Contradictory messaging from the Minister. Not much good to say about the whole rum business!

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A day of pension “not news”


BAU at the PLSA

After 6 months of not saying anything at all, the Pension Minister, yesterday broke wind and knocked two of Steve Webb’s pipe-dreams on the head.

In the latter days of Webb’s reign as pension minister, he had retired to his bunker in Whitehall and produced a number of initiatives which had got as far as the statute books. Somewhere in pension regulation , there is the legislative capacity to allow pot to follow member, somewhere (well in the Pension Schemes Act) there is the primary legislation for collective DC schemes. Both ideas now look as productive as a Redcar steelworks.

The chance of seeing something done to minimise pot proliferation or create a more efficient means of delivering pensions without guarantees, is as problematic as British Steel (Nigel’s plans somewhat dashed). As they say in sport “it’s no longer in our hands”.


It’s not her fault that no-one wanted CDC or PFM!

I don’t  blame Ros Altmann, she inherited a rag tag and bobtail of ideas from the previous Government and it was clear from an early stage that not all were going to survive. I made a couple of attempts to probe for support for CDC from the Minister and I got a very severe look from the Chief Economic Secretary when I broached the subject at a recent Prospect Fringe meeting.

As for Pot Follows Member, the idea is either 20 years after its time or 2 years before it. The time we should have done something to create an aggregated DC environment was when we introduced Stakeholder Pensions, I remember we debated the single pot idea in 1997 and everyone thought it a good idea except the providers, who argued for choice. We got proliferation to satisfy the IFA.

Now that the IFA is not interested in choice proliferation , we have TISA arguing for consolidation, this is not how we should conduct public affairs. Virtual aggregation is here- if you don’t believe me, download the MoneyHub app and aggregate your financial affairs using the Yodel platform.

Pension Dashboards trump pot follows member and the Financial Advice Market Review will see to that PLSA.



So the demise of CDC and pot follows member is “not news”. The other bit of “not news’ is the rebranding of the NAPF to the PLSA.

Here’s CEO Jo Seagers

The Pensions and Lifetime Savings Association’s will, by 2020, speak for “all of the (retirement) sector — from the biggest DB scheme to the smallest and newest auto-enrollment (Sic) employer; from every part of the employer and every corner of the U.K. That means we want to talk beyond pensions, to lifetime savings,. The association’s clear purpose is “to help everyone achieve a better income in retirement,”

This is good, the NAPF spoke for a pension elite and I said so.

My comments weren’t necessarily welcome – but clearly they were percipient!

For the PLSA to achieve this goal in the next five years, it is going to have to reach out to the worlds of payroll and accounting, to IFAs and to those technologists who are interested in new ways of delivering pension income.

The NAPF has also got to stop spending so much of other people’s money. We live in an age of austerity where many “hard-working” people are retiring or preparing to retire on small amounts of money.

These are the photos appearing on social media last night of their annual gala dinner. Perhaps the ostentation is a little conspicuous.


All set for the PLSA gala dinner



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Where can I stick my input to #FAMR?


The FCA have called for input on their Financial Advice Market Review

Its big idea hinges on this statement

the advice gap should be regarded as any situation where consumers cannot get the form of advice that they want on a need they have, at a price they are prepared to pay.

Which deals with half of the problem

The other half of the problem is that nearly 2m critical decisions will not be made by consumers but for consumers. They are made by people trusted to take those decisions- trustees – or in the wider sense fiduciaries.

My fundamental issue with the FCA’s FAMR is also an issue with the FCA, it does not consider that it can or should regulate these fiduciaries – presumably because they don not have an advice gap.

But this is patently not the case. As the OFT stated of employers (charged with setting up pensions)-


How can we suppose that employers, who are no more wise about buying pensions than their staff, are expert buyers?

If they cannot buy on their own, what makes us think that the 95% of the 1.8 employers yet to buy workplace pensions, are any better placed to get advice than the silent majority of consumers that the FCA worries about?

I fear that the answer is political. This is not the FCA’s problem, it is tPR’s. It is not the Treasury’s problem , it is the DWP’s. This is not a problem that need concern the FAMR because it is sponsored by the Chief Economic Secretary to the Treasury and the FAMR secretariat is comprised of senior officers of the FCA.

So we are not really looking at matters from the consumer’s point of view, we are looking at it from the FCA’s point of view, and since the consumer- so ill protected on pensions – is having nothing looked at , that might improve the quality of his or her workplace pension, I am minded to ignore this document.

And I’ll say at this point that if the FCA want input from practitioners rather than policy wonks. At nearly 50 dense pages and with 41 questions, this is not a paper that a practitioner can readily be asked to digest and provide input to, without laying down his advisory tools for a couple of days.

If there was an advice gap, it is about to get a whole lot wider if all advisors do as they are bid.

But back to the premise that an advice gap exists where there is not money to pay for advice and advice is needed.

I’d run with that.

That’s the situation that 95% of the 1.8m employers who don’t have a workplace pension in place.

And nobody – not Government or Regulator or advisor or employer, seems to be particularly worried whether the investments made on behalf of the consumers, work well or badly, whether the pensions provide retirement freedom or not, whether there is any attempt on behalf of the provider to engage or educate the consumer as to what she or he is doing.

Why not?

Can I ask that question please? – And can you point me somewhere in the rectum of Government I can stick it ?




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“Two nation pensions” – why I can’t make the NAPF this week


Henry prospect

There are a number of reasons why I can’t make the NAPF Conference this week

  1. I have to talk to accountants , payroll managers and finance directors in London, Birmingham and Slough
  2. The conference now costs too much for my pocket
  3. The conference agenda contains nothing on it that connects with the world of the 1.8m employers about to join workplace pensions for the first time

Of the three, the most desperate is the third. The NAPF seems to be stuck in a 1990s time-warp -bemused by the “ephemeral” changes brought in by the Pension Freedoms, advances in technology, the disintegration of the DB consensus and the progress of DC workplace pensions as the predominate means for employers to help staff to a better retirement.

In the three days of the Conference there is not one session that deals with Auto-Enrolment. It’s not even on the agenda as a topic for large employers who are about to re-enrol for the first time.

As Joanne Seagers implied when starting  a speech earlier this year “with auto-enrolment nearly over” , the NAPF have declared UDI on smaller employers.

Those initiatives that were supposed to be addressing the needs of SMEs such as the Pension Quality Mark, don’t get a mention on the agenda, instead the conference is dominated by talks from trophy speakers (Clive Woodward, William Hague, David Willetts, Eddie Izzard and Steve Webb). Sorry – but these are yesterday’s men!

Yes the new Pension Regulator and Pension Minister will be speaking but who will they be speaking to? The people who need to deliver the great pension projects in the room are not invited and those who remain in this time-warp are frankly not interested.

Large chunks of the current debate on how pensions are managed are completely ignored. There is nothing from the FinTech sector, there is no engagement with the question of what is value for money, On “advice” and  how we engage, educate and empower the silent majority, the conference is just that – silent!

We have a two nation pension system. The nation of the “haves”, represented by those at the NAPF conference, and the nation of the “have nots” who aren’t within the NAPF’s scope (apparently).

If I was Jo Cumbo, who has the tricky job of interviewing Lesley Titcombe, I would be asking her what her priorities for her time as Pension Regulator are. I know the answer, it is to make auto-enrolment work and to ensure that workplace pensions work for those enrolled.

The big issues facing employers in the UK are to do with making auto-enrolment stick and -amazingly – the NAPF sees this as none of their business.

If I was Ros Altmann, I would be asking myself the question – why am I here? This is no longer the constituency that matters. Her presence would have been appreciated at the Celtic Manor last week when 500 payroll specialists spent two days working out how to deliver auto-enrolment and considering how to pay people their pension freedoms and pondering the proposed changes in pension taxation so they could deliver them.

It is not just that the NAPF is becoming irrelevant, it is actually becoming obnoxious. It is putting two fingers up to the consumerist agenda , to the democratisation of pensions through auto-enrolment and pension freedoms. It is now no more than a club for those who do not want to move on.

Meanwhile Rome burns. George Osborne is delivering hammer blows to the NAPF’s fertile pasture – the LGPS. The impact on the business models of the large proportion of NAPF members who are dependent on LGPS – will be as profound for them as RDR has been for IFAs.

The ticking time-bomb of the FCA’s value for money call for evidence and the DWP’s uncompleted work on the charge cap for workplace pensions is a further storm-cloud.

Worst of all is the threat of a radical reform of tax relief that will see pensions losing their hallowed status in the tax reform and relegated to a sub-set of ISAs

The self-immolation of the Investment Association can best be interpreted as an allergic reaction to change. Taken together, the impact of political reform demanding that members get a better deal from pensions is swamping the fund industry on which the NAPF depends.

Without the support of a well-nourished fund industry, the NAPF is nothing – unless it can reinvent itself as relevant.

That this conference agenda offers no kind of outreach beyond the narrow circle of NAPF stalwarts shows just what a death spiral it is currently in.

The only way that the NAPF can make itself relevant again, is by reaching out beyond it’s traditional support, the dwindling band of members with substantive DB assets. But I fear it does not want to hear from those running the payroll , the accountancy networks and those who are delivering the pension revolution.


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Why it should always be cheapest to buy pension from the state


Much as I like Tom McPhail, his current campaign against the Government for selling rights to the state pension cheaper than rights to private pensions is fatuous.

Tom has it in his head that the Government Actuary is setting the rates at which we will be able to top-up our state pension as part of a great conspiracy against the private sector.

When of course the reason that private sector annuities are so unpopular is that they cannot match the efficiencies of the state!

Issuing gilts is what Governments do, and issuing gilts which include some longevity insurance is not that hard. Just go to the Office of National Statistics and check when people are living to, draw a line through changes in those rates (over the past 100 years) and Bob’s your uncle, you know how to price your longevity gilt (which is what a pound’s worth of state pension is.

Think of the Government as a factory outlet which operates on a not for profit basis and you get why buying from the issuer of gilts, rather than from someone multiple  intermediaries away from issuance, is always a good idea.

The Government has not signed a non-compete clause with Hargreaves Lansdowne

– or with the rest of the Financial Services industry for that matter!

It is the Government Actuary’s job to knock out pension at a factory gate price which properly reflects the interests of all tax-payers, those on the sell and buy side.

It is not GAD’s job to stand behind the carthorse and sweep up the manure.

The state should sell rights to the state pension because it can, because these rights are necessarily good value and because people have far too much cash in retirement (mostly as a result of pension freedoms) and are looking for a sensible way to turn it into an income that lives as long as they do.

Infact, the slogan “an income that lives as long as you do” is so much the best description of what a pension is , that I am curating it to Tom – so he can sell more of his expensive private annuities.

Me – well I wish I could be retiring today so I could be buying some of this nice cheap state pension and even better – deferring my state pension – like all the smart people at the Government Actuary do!


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Will the Investment Association eat itself?

IA 2


Hot on the heels of Daniel Godfrey’s departure from the Investment Association, the FT’ Claer Barrett has published a great piece on what appears to be another own goal- that only 25 out of some 200 members could find it within themselves to sign up to these principles.

1 – Always put their clients’ interests first and ahead of their own

2 – Take care of clients’ money as diligently as they would their own

3 – Only develop, offer and maintain funds and services designed to add value for clients and help them achieve their financial goals

4 – Maintain and apply the investment and operational expertise needed to meet the objectives agreed with clients

5 – Make all costs and charges transparent and understandable

6 – Disclose to investors the source and value of any other material benefit they receive as a consequence of their role as investment manager

7 – Ensure regular, timely and clear lines of communication with clients

8 – Set out clearly their approach to the stewardship of client assets and interests

9 – Maintain a corporate culture that sustains these principles

10 – Work with industry colleagues and stakeholders to develop and maintain guidance on industry best practice

The only duty for the 25 who signed was to publish a statement by the end of the year on how they intended to show they were complying.

I completely failed to pick up on the press release from the IA – in August and- had this row not blown up, I suspect that the principles would have consigned to another drawer in the governance cabinet.

But now it’s all red hot news. The question that I would be asking any fund manager not on the list would be which of them they objected to?

The Trustees of an occupational pension scheme would surely expect a fund manager to subscribe to all ten, so would any individual , who understand the fiduciary nature of fund management.

And this is exactly what trustees and private investors should do.

There are some very embarrassing conversations to be had with household names such as Black Rock and Aberdeen Asset Management and I don’t think that arguments about the internal politics within the IA wash.

Had this press release not gone out- fully 9 weeks ago – the 175 or so non-signatories would never have had a question to answer. In retrospect, the publication of the document, in the IA’s name and with such a small sub-set of signatories will bring the very issues that have been suppressed to a head.

We are reminded that it has been six months since the FCA’s call for evidence on “value for money” .

We are reminded of the scandals surrounding the likes of State Street caught with fingers in the till.

And we are reminded that the consultancies and IFAs that act as gate keepers to the asset managers focusses on precisely the issues that these principals deal with.


On the face of it, the panels of the IFAs and the preferred provider lists of the consultancies should reflect the willingness of the asset managers to embrace these principles.

I would be tempted to create a shortlist myself based purely on the funds of the 25 managers who have signed up and excluding the rest.

Indeed, we could go so far as to only include those providers on the Pension PlayPen whose investment defaults are managed by “signatories”.



This is probably taking things too far. But for the refuseniks, the ball is in their court. Just as the signatories have signed up to telling us how they will live the principles, so those who aren’t signing , should tell us why.

The only alternative would be for an asset manager to absent itself from the debate and resign from the IA. This may be why M&G and Schroders are not making positive noises about changing their intention to leave the IA (even though Daniel Godfrey has left).


Good will come out of this I am sure.

Not only are we back discussing the important governance questions but we are doing so with some commercial venom.

One thing is for sure, this story has a long way to run and the longer it runs, the better the consumer’s hopes of getting something good out of all this!


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#APPC15 Why Payroll needs to manage Pensions.


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

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

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

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

I want to make my vision clear.

I want to help restore people’s confidence in pensions

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

then you swapped pensions for professionals-

a smart move in my opinion!

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

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

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

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

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

We know what payroll can do for pensions,

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

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

at the right time.

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

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

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

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

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

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

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

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

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

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

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

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

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

the CIPP reckons these changes will be positive for payroll.

That’s because payroll deals with everyone the same.

The current pension system rewards higher rate tax payers disproportionately

and offers progressively less incentive, the lower your income.

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

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

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

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

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

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

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

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

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

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

We cannot rely on defined benefit pension schemes for ever.

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

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

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

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

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

One thing that links it all – is payroll.

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

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

Software will need to be recoded

People will need to be re-trained

Processes re-engineered

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

And then there’s auto-enrolment!

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

We are building a platform on which everyone can save.

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

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

Payroll is the radar for fraud and malpractice.

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

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

Payroll is encouraging new entrants.

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

and many other providers.

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

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

led by Karen Thompson It included both payroll and pension experts

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

When Pension and Payroll people work together they are most powerful

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

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

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

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

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

But payroll still has its own mountain to climb!

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

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

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

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

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

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

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

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

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

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

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

So where do we begin?

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

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

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

We need a  proper partnership between pensions and payroll practitioners

to deliver auto-enrolment,- a fairer taxation system

and a means to help people spend their pensions

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When can you call a trustee “independent”?


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

you must not be a member of the scheme

you cannot be connected with the sponsor

you should not have connections with the suppliers to the scheme

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

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

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

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

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

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

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

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

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

“How’s it going?” – I asked

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

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

He could have answered

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Why this carnage at the Investment Association?

daniel godfry

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

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

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

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

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

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

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


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

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

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

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

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


So what is the upshot of all this?

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

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

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


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

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


The transparency task force.

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

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

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


Can the Investment Association heal itself?

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

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

Harriett Baldwin MP, Economic  Secretary to the Treasury

Carlton Hood, Customer Director, Old Mutual Wealth

Jeremy Quin MP, Work and Pensions Select Committee

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


A change is going to come

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

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

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

Thanks Daniel Godfrey.




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

 Prospect 3


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

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

Prospect 5

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

More specifically

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


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

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

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

An asteroid has struck Planet Pension.

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

Then came a bolt from the blue.

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

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

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

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

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

said Chris Curry, Director of the Pensions Policy Institute.

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

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


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

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

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

Henry prospectharriet

And that’s where the debate needs to go!



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


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

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@prospect_uk @andy_davis01 @HBaldwinMP @OMWealthUK #OMWadvice #cpc15

Nearest stations: Manchester Oxford Road, Manchester Victoria, Deansgate
Upon arrival: please report to the main reception as you enter the building and ask to be directed to the Stanley Suite.


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4 months until…. Guest Blog from Ralph Franks



The Chancellor of the Exchequer has confirmed that the Government will respond to the consultation into pension tax relief in the 2016 Budget.  The confirmation was set out in the 2015 Autumn Statement.  This same Statement set out Government’s ambition “to extend opportunity for working people at every stage of their lives”.  Here’s hoping that Government’s Response to the Consultation will maintain the opportunity for those in work to save for later life anywhere near as effectively as those already retired.  Current retirees benefit from the triple lock on the Basic State Pension in addition to levels of tax relief/protection no longer available on contributions and/or accumulated savings.


The confirmation of the forthcoming Response in the 2016 Budget does begin to manage expectations/anxieties related to when (some of) the uncertainty created by the Consultation might be addressed.  However, over 100,000 employers are due to go through Automatic Enrolment (“AE”) staging between the 2015 Autumn Statement and the 2016 Budget, more than doubling the number of UK employers providing pensions.  These employers are being reminded of their obligations on a regular basis by Workie.  The employers’ affected workers are being encouraged not to opt out by the tax relief (currently) available.  How solid is the basis on which these employers and workers are making material commitments and decisions?


One of the stated aims of the Consultation is to simplify the system of tax relief.  However, it seems all but certain that tax relief is going to become more complicated shortly after the Response is delivered.  Tapered relief for those effectively earning over £110,000 per annum is due to be introduced in the tax year commencing less than a month after the 2016 Budget is tabled.  Thisincreased complexity is unlikely to encourage pension saving by those affected.  The reduction in tax incentives probably compounds this discouragement too.


A long-term resolution of the pensions tax relief issue in the 2016 Budget would be welcome but do the next four months, in addition to the two months that have elapsed since the response period ended, give the Government enough time to clarify what it is seeking to achieve?  The Consultation raised two particularly challenging issues:

  1. What Government considers a sufficient standard of living in retirement to be. Once the income level has been identified, the corresponding amount in capital terms can then be calculated.  Ideally, the post-Consultation taxation regime will be agnostic as to whether this standard of living is supported by Defined Benefit (“DB”) or Defined Contribution (“DC”) provision.  The current taxation regime heavily favours DB provision; and
  2. How the Government defines its long-term fiscal strategy. Any changes will have an impact on this strategy well beyond 2020.  The amount of tax relief is a material input into this strategy.  Who benefits from this relief is another matter of Government policy.  Government cannot currently identify whether relief is provided to a DB or DC scheme let alone specific groups of members.


The Statement claimed that “the government will provide opportunity for working people through higher wages, lower taxes and lower welfare…..the government is taking action to reward work and aspiration”.  However, the Chancellor has dampened many savers’ retirement aspirations since taking office in 2010 through reductions to the Annual Allowance and Lifetime Allowance.  These changes have ignored the increased amounts of capital required to support a specified level of income in retirement due to falls in bond yields and increasing longevity over the corresponding period.  The tapering of tax relief will increase taxes for those affected, even after taking account of changes to tax bands and rates.  Will the 2016 Budget deliver a simple, consistent, transparent and sustainable pensions tax regime, strengthening the incentive to save?

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“Good Governance – Bad Governance” – the Aberdeen Conference


Tesla Motors’ Chief Technical Officer, JB Straubel and Saul Klein – Former Partner at Index Ventures

I’ve been working hard so I gave myself the luxury yesterday of half a day off to find out about how good governance can help investors get more from their investments. Forget the swanky surroundings and the top-dollar grub, this was a day where I learned the real value of what goes right when you do the governance well and what goes wrong when you don’t.

As bad news sells better than good, one of the stars of the show was Michael Woodford who after a lifetime with Olympus, (the Japanese camera and healthcare firm) , was promoted to be President of the company. Eight weeks in he discovered a massive fraud and three months later he was fired by his Board and had to flee Japan to save his life.

Here he is – interviewed.

But Michael’s moving story was only one of four stories which have left me thinking.

The second was the testament of David Milliband on what is really going on in Syria and the Magreb. Milliband was brilliant, eloquent, concise and consistently on the money, a great panel session became a Q&A with 400 delegates with Andrew Neil and some quality journalists and economists watching on in admiration.

The third story was the account from Sir David Ormand – who ran GCHQ – about how Britain has not succumbed to terrorism (as Brussels is succumbing to terrorism).

But – for me personally, it was the session on nurturing innovation through start-ups which was best of all. My question to Tesla Motors’ Chief Technical Officer, JB Straubel and Saul Klein – Former Partner at Index Ventures was simple.

“How do I save my start-up company as I partner with firms many times my size”

The answers were simple but brilliant

  1. Keep your eye on the prize, it is what you want your company to be in 10 years that will guide you

  2. Make sure you have every commercial angle covered

  3. Stay in control of yourself.

As I rode home on my Boris Bike, I thought how this could be applied to governance in general, and concluded that this is all we can do when we invest in something- whether with our time, our money or with our love.

Thanks to Aberdeen – it was an exceptional event that showed your organisation for what I knew you to be, an organisation that invests properly. As an advertisement for your values, this could not be bettered – and your values are those I follow.

governance 2

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A lot more people earning £10k or less are “in” and some don’t even know it.


Don’t ignore it – Workie!

I was talking to an auditor recently who had questioned why someone who cleaned her client’s office in the morning and was on £120 pw had been considered an eligible jobholder – and auto-enrolled.

It turned out that the cleaner submits an invoice every month except the month  she takes a holiday when she submits two at once.

Since 2x £120x 8 is more than the pro-rated earnings limit for her AE pay reference period (phew!), she had spiked into eligibility the last time she produced a double invoice.

Her payroll hadn’t picked up on this, missed the chance to postpone her staging and now she was in, though she didn’t know it – and there was nothing her employer could do to get her out.

How many low paid employees (let alone personal service workers like this lady) have the odd month which makes them eligible?

How many AE modules will pick up on them and include them on the AE monthly schedule – an eligible jobholder ad infinitum?

How many employees and personal service workers will query this?

How many of these people will be enrolled into a net pay scheme?

How many will miss out on the Government’s tax incentive that they would have got if they’d been in a relief at source scheme?



Answers to these questions are easy to garner- we need to make a public information request and find out.

The FT estimated (using de Vere numbers that I sense checked) that net pay was a real problem for the low paid. They reckoned that the total relief being missed out on was around £85m, that’s about 1.6m people on £10k. This is a tough stat to verify, but if you include all those who’ve been spiked into eligibility and are still enrolled as they haven’t got the wit , understanding or energy to get out, you get a sense of whey the NET PAY problem is a real problem – and not de minimis – as some have suggested.

Of course there are ways that large employers can get round the problem, salary sacrifice being one (though this is hazardous for those on the minimum or even the living wage), pension scheme rules can be used to kick out those contractually enrolled but as my payroll guru reminds me.

 going back to the public sector  of course their employee contributions are much higher so the loss of tax relief is much greater, although calculating the loss must be a nightmare given such structures as the LGPS where there are 14 contribution levels

The De Vere numbers for the tax incentives lost by low earners on net pay are higher than the private (£100m plays £85m) ; some would say the public subsidy on public sector pensions is so huge what’s the loss of a little tax.

But the majority of the low-paid in the public sector are peripheral workers on short-term and/or part time contracts that do not give them admission to defined benefit arrangements

These disconnected public sector workers will find their way into net pay money purchase schemes where the lack of tax relief is material to their ultimate benefit (at least in terms of their pension spending power).

They too are being unwittingly enrolled much as they became PPI policyholders.


.Professional Pensions’ buzz survey leads this week with the question

“Should the minimum earnings threshold for auto-enrolment be lower than £10,000?”

I think it already is.



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