Don’t get fooled by the phoney pension giveaway


The phoney give-away

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

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

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

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

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

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

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

Corroding the good work of the past five years

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

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

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

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

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

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

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

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

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

The obvious solution

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

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

So what does this mean?

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

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

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

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

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Annuities get another kick in the goolies


What’s the story?

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

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

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

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

What’s the point of the changes?

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

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

With staggering percipience, the BBC report that Osborne will  say

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

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

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

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

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

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

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

What sceptics will be asking

It seems to me a policy that begs further questions;

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

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

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

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

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

What this will mean in practice

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

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

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

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

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

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

The real winners

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

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

The wrong message

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

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

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


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

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

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

Need for financial education and advice greater than ever


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

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

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

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

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

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

Assuming nothing else changes!

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

John Ralfe

Confused or confusing?

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

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

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

Mr Plowman

Thanks for your enquiry.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yours sincerely

A Friend of CDC

This article first appeared in

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The value of regular savings

man from pru 2


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

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

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

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

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

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

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

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

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

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

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

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

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

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

man from pru

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

whats that coming over the hill


The NAPF CDC Debate

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

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

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


What’s that coming over the hill?

To address the question in hand …

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

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

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

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

Wrong monster – John

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

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

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

Wrong hill – Hamish

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

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

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

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


Another chance goes a begging

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

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

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

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

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


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


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


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

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

staging profile

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

what's happened so far

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

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

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

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

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

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

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

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

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

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


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

TPR framework

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

It’s not all bad..

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

Good member outcomes

But the rest is hapless

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

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

So where is all this leading?

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

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


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

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

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

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

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

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

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

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

In conclusion…!

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

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

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

Who will employers turn to

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

Accountants 2

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

Accountant intentions-tpr1

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

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

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


So who is going to advise?

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

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

workplace advice

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

And are we any closer to empowering our employers?

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


will continue to apply.

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

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

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

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


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Telling it like it is – a Jamaican perspective on annuities



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

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


I disagree that annuities are not understood by most people.

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

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

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

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

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

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

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

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

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

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

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


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

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I’ve just been (pension) geeked!

hello pension

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

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

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

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

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

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

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

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

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

An inspection of revealed a cornucopia of pension goodies on which I could feast my eyes and wiggle my fingers.

I had no need to be made aware of pensions, but I was needed waking up to this stuff!


Mike reminded me mournfully, that if I didn’t watch my laurels, could go the way of (still a great site) which he runs. Pension Geeks could overtake me and render me obsolete.

Mike reckons without my inate capacity to collaborate. If you can’t beat ‘em, join ‘em!

So my next move is to send Jonathan Bland and all who geek with him, social media greetings and extend the warm hand of friendship across my entire bandwidth!


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Making sense of the Budget’s Pension Changes


Everyone knows that the changes in the taxation of pensions announced in the budget and now working their way into law – are going to make a big difference. But just how will they affect you and what can you do to make sure you are a beneficiary of change and not a victim?

From April 2015, anyone over the age of 55 will be able to choose to take their pension savings as a lump sum and not as income. So you could take all the money you’ve saved and pay off your mortgage, have a huge bank balance or even invest in a Lamborghini. According to numbers released by the Treasury, this is exactly what the Government expect many people to do. Which is why the Government expects to make money out of these changes. Because taking your money all at once will come with a big tax bill. You’ll still get your cash, but some or all of it may be docked anything between 20% and 45%- depending on your “marginal” rate of tax.

One way of making sense of the budget’s pension changes is to think of it as an elephant trap into which a lot of us will fall, because we are so eager to get our hands on our savings, that we miss the tax consequences and like the Elephant in the hole, find ourselves unable to get out of the mess we get ourselves into! The Treasury never gives money away, without the expectation of getting it back.

But you don’t have to be a victim. Infact, if you are a little bit expert, you can make tax savings from the budget pension changes. Instead of taking your money all at once, you can time how you take your money to pay less tax. By using your pension savings when your other income is low, you may be able to avoid paying your normal rate of tax on some or all of the money you draw against. So another way of making sense of the changes is that the Chancellor is looking to reward you for being prudent and managing your retirement savings prudently.

But there is a third way of looking at the budget changes which may make more sense than either of the first two. It involves thinking about investment – and thinking about it from the Government’s point of view. At present, most private pension savings is used to buy annuities. Annuities insure you against living too long and they do so by investing your money into Government Bonds (lending money to Government). The other way of investing is to through buying shares in companies. The long-term investment of pension funds into shares is what has kept the stock market flourishing since the Second World War, but this source of funding for companies is drying up as company pension schemes stop investing.

In our view, and it’s the view of most pension professionals, the budget’s pension changes are going to stop people buying annuities and keep them invested in shares. Those who take their money at once will benefit the Inland Revenue, those who stay invested in shares will benefit the private sector. Annuities weren’t just unpopular with the population, they were unpopular with the economists!

There is a final piece of the jigsaw which needs to be put in place. If you take away the default investment (annuities) and don’t help people with the choices they have to make, you risk being seen as a Government who at best was irresponsible and, at worst was actually mis-selling pensions. Which makes sense of why the Government are putting in place the Guidance Guarantee which offers everyone free face to face guidance on their future choices. The intention of these sessions, which will be paid for by the financial services sector, is to ensure that people who use the Guidance aren’t victims but beneficiaries of the budget’s pension changes. Let’s hope that this strategy works and that people take Guidance, take good decisions and make the budget as sensible as it should be!



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How much should I spend on retirement?

People get frightened by this question – they shouldn’t! The simple answer is that we all pay into a national pension scheme through national insurance and you can find out what you’re likely to get from the State we completing a simple online form using this link. Finding out how much you get from the State is the first stage in answering the question – how much should I spend?


For most people, the thought of being reliant on state benefits in what will be “the longest holiday of our lives”, isn’t thrilling. Most of us will want to spend some of what we earn on our later years and auto-enrolment will mean that it’s a whole lot easier for us in years to come.

In case you don’t know about auto-enrolment, it’s the way money is automatically taken from your pay and put into a workplace pension chosen by your employer. The amount that goes in depends on your earnings and is generally around 3% of what you earn above £5,500.

For many people, the state benefits combined with the amount they save through auto-enrolment will be all they get from pensions. But will it be enough?

When we talk to groups of employees and give guidance sessions on retirement savings, we get people to think of their financial future in very simple ways. Understand your debt and aim to get yourself “debt-free” in later years. It’s nice to think of retirement as a time when you don’t have too many financial obligations. The less debt you have in retirement, the less need you’ll have for an income


When you’ve got your debt sorted, it’s easier to understand what you’ll need to live on. One way of looking at this is as a “the amount of income you’ll have to replace from earnings to savings”. The old rule was that you needed around 2/3 of your final salary from private pensions (with the rest coming from the state). But things have moved on a little since the fifties and sixties when company pensions started up. For starters, we tend to work longer and when we retire we often continue to do some paid work. That’s good because it means the amount of income we need to replace may be less than 2/3’s.

The not such good news is that while we may not need to replace all our income (especially if we continue to work and are debt free), the cost of replacing income is a lot higher than it used to be. This is because we are living a lot longer than we used to. Most people don’t think they will live as long as they do. As actuaries, we are always asking people to understand the impact of living longer- income has to be paid longer- savings don’t go as far.

This is one of the reasons that pensions have become so expensive to buy. If you’d like to find out how long you’re likely to live, you can press this link which will take you to our Death Predictor. You’ll be surprised at how long it will tell you – you’re going to live!

So once you’ve worked out how much income you need in retirement (to replace earned income with income from savings), then you can start to work out how much you should be saving. Please don’t be frightened into thinking you need to be saving huge amounts, saving regularly over time can mean you can build up a decent capital reservoir which you can either exchange for a pension (an annuity) or drawdown as an income while keeping access to your capital.

Age UK have a brilliant website which gives free and impartial advice on what you might get from your pension savings. We find that people we talk to, trust this site because it’s independent of any pension providers and doesn’t link you to any commercial provider of financial adviser. There’s plenty of time to go to commercial sites once you’ve got the basics sorted – so try their pages here and then move on.

You can get a pretty good idea of what you need from the modellers on the Age UK site and a good idea of what you’ll have to save to meet your needs. But to get the most from your savings – in terms of investment, tax-planning and the complicated choices awaiting you at retirement, you’ll probably need to pay for someone to advise you.

I can’t advise you, and you probably wouldn’t pay me if I could. But I can give you a very simple answer to the question I posed in the title of this blog. The amount you should pay into your pension scheme is “as much as you can!”

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A beginner’s guide to annuities


Annuities haven’t got a very good name at the moment. They are blamed for many problems which are not their fault. One problem with annuities is that most people don’t understand them! Another problem with annuities is that people have bought them carelessly without understanding what they have bought. A third problem with annuities is that they are solving a problem that most people don’t recognise exists, that most people are going to live a lot longer than they bargain for.

The annuities I am going to talk about in this article do a very simple job, they are called “purchased life annuities”, because you buy them for the rest of your life! The deal is this, an insurance company takes a view on how long you are going to live and then works out a sum of money it is going to have to put aside to guarantee it will pay you this amount till you die. It then tells you how much it needs from you to pay you an income.

So supposing I am 60 years old and a man and in pretty good health, the insurance company might work out that I can be expected to live another 30 years, and if I want the money to be paid to my wife after I died, 35 years. For every £1000 p.a. that I want paid me, the insurance company might demand £30,000 from me, being the amount they expect to pay-out. Except it won’t cost them that much as they can get interest on the money I give them which can go some way to offsetting the cost to them of the guaranteed promise. So they might discount that £30,000 to £20,000, reckoning they can get the rest in interest. This is how insurance companies “price annuities”.

Now there are all kinds of wrinkles that effect the price. Your state of health for a start, the insurer should be looking at whether you have an unhealthy lifestyle (smoking, drinking etc.) ,whether you have a history of early death in the family and whether you have any medical conditions that make you likely to die sooner than the average. All of this will bring down the cost of paying you your £1000pa. The insurer can tell a lot from where you live (some Chelsea postcodes have a 17 year longer life-expectancy for residents than some postcodes in Tottenham! And it’s nothing to do with football!).

And as well as health, there’s the question of what you mean by “£1,000”. If you want that £1,000 to keep pace with inflation – then it’s going to cost more. If you think inflation will be 3%pa it might cost 15% more to link that £1000 to inflation, but if you think it will run at 5%, that 15% could go up to 25% more. And this uncertainty makes it even more expensive, because the insurance company has to put money by in case inflation is 7% or even 10%. This process of “putting money by” or “reserving” as insurers call it, is a menace! There are a stack of EU rules about reserving that are designed to make sure an insurance company does not go bust, the trouble is that they mean the cost of an annuity is a lot higher. The extra security of UK annuities makes them almost 20% more expensive than the equivalent America product.

UK Annuities are amongst the most regulated and therefore among the safest ways of investing your money, you can find anywhere on the planet. The trouble is that that safety comes at a price. People considering buying an annuity need to consider whether they want to pay that price and make absolutely sure they get the price down by fully declaring all their medical problems to encourage insurers to drop their prices. People buying an annuity should take quotes from every insurer in the market and they should think long and hard about whether it’s right that the annuity ends with them or whether a spouse, partner and even the kids need some protection if they die early.

As you’ve probably worked out for yourself right now, buying an annuity, like buying a house of a business is not something you do without taking good advice. Many people will need help not just working out what kind of annuity to buy , but when to buy it. You may not need the guarantees now, when you are relatively young, but in ten or fifteen years’ time, things may be different.

So if you’re a beginner- don’t buy an annuity. The people who should be buying an annuity should be experts! A good adviser can make you an expert, you can make an expert of yourself, but if you use your pension pot to buy an annuity and take the first offer that comes your way, more fool you!

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Fear of feedback

Everyone knows what social media does. For every blog there are comments, every forum has its threads, some twitter conversations last for weeks. It is the interaction between author and reader that makes it distinctive. The “Letter in the Times” would look like this if someone pressed “print all”.



And in amongst the cheap jibes and the flaming , will be the genuine comments that take the debate forward, that ensure that the original idea is grounded in popular acclamation or consigned to the virtual paperbin – junk.

We are keen to leave feedback – good and bad. But the impulsion to complain is stronger than the impulsion to praise. Most feedback appears negative but its very existence is a testament to  engagement , no feedback is most dangerous – the parrot may be dead.

So organisations that establish digital services which allow people to read but not comment are running risks that are latent rather than evident.

Let’s say for instance that you run a 30 second video clip about you on You Tube but disable comments. That clip may find itself the subject of derision on any number of sites, you have no control of the content- the comments are with the threads that have sprung up elsewhere- such is the risk of virality!

The loss of ownership and control is compounded by the risk of dereliction. I am currently working on a couple of projects that involve databases which aim to be inclusive and comprehensive, designed to bring choice to the market.

Neither wants to include a feedback system (though there’s functionality for trip-advisor style rating and of course verbal feedback). Without the promise of a qualitative aspect to the listings, the listings will present choice with no direction. Filters can narrow choice but without feedback attaching to the choices, there is no referral system, no means to choose.

Similarly, those who have choices have nowhere to record their experience – good or bad, the natural wishes of people to comment (whether in person or anonymously) are strong. The drivers may be cathartic- to purge a bad experience or exuberant, to share a good one- but these expressions are always typically driven by a strong emotional  response.

Without these emotional responses, the information we post is derelict.

And this is the problem. The fear of feedback is that feedback is rarely measured and objective, it is nearly always emotional and biased. The fear is that the bias will be in the wrong direction and that the wisdom of the crowd may not be the “house view”. Worse , it may lead to litigation.

Without feedback, the information is derelict but with it, the information changes. Reading the comments I will re-read the original posting with new eyes.

Fear of feedback is more than a distrust of one’s public, it’s a distrust of one’s own position. The insecurity that leads to wanting to create a static piece of information stems from a fear of change, both in the perception of the post and of the person posting.

In one of the cases I am working on , I asked the question “what’s worrying you about feedback”.

The answer was fear not of the feedback but of the impact of the feedback on the project

  1. Those advertising would withdraw their listings
  2. Those sponsoring the project would withdraw funding
  3. People would take the comments as advice (with legal liability for the consequence resting with the owners of the database.

To which the counter-arguments are

  1. Those advertising have nothing to lose by being listed – if they are not liked they know how to change
  2. If those sponsoring the project are concerned about the commercial value, they should recognise that the comments are the project’s value and without them it risks dereliction
  3. A simple legal disclaimer, distancing the project from any comment is sufficient to mitigate legal risks to an acceptable level.

Of course a static site is easier to run, it does not need moderation and it will have no complaints (on the site). The complaints will appear elsewhere!

This sign appeared un prompted on the side of my tenement

No stupid people

Just a power-point slide, printed in colour and laminated, half an hour’s work!

Authority no longer sits with those with a title, it is bestowed on those who engage constructively and evidenced by feedback.

Those in authority have everything to lose by social media but everything to gain. Even if you reach the top, you need to be constantly revalidated. That is why Boris Johnson is doing such a great job- he is constantly asking for (and getting) feedback from those around him.

Without submitting ourselves to the judgement of others, our authority has no legitimacy. This is why we cannot fear feedback, we have no choice but to enjoy it.


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I was so much older then (I’m younger than that now)

ytfc kids

Thank goodness for kids- kid journalists for a start.

There is a gang on young journos who actually give a damn about the pensions they are in and are prepared to engage and educate themselves about what makes for a good pension.

I came across this on twitter yesterday

What I love about the article is that it is written from the heart. Kids (by which I mean anyone under the age of 30) seem to care much more about the quality of the pension they are in than people like me – for whom the damage of poor questions may have been done.

Speaking to Michelle, who wrote this article, it was clear she was keen on  her employer’s workplace pension and shocked to find that most employers hadn’t got a clue why they had chosen the pension scheme they had (for their staff).

This reminds me of something I wrote on a post in accounting web recently.

There comes a point when auto-enrolment becomes something that companies want to do,we haven’t reached it yet! But when it is as easy to pay people in pension contributions as it is in cash and when the pension contributions are valued as  part of total pay, then we might be getting there!

I hope that more young staff asking their bosses as to exactly why they chose the workplace pension they did. It is simply not good enough for employers to take this decision lightly.

I stood in front of 50 SMEs the other day and pitched to them. None were older than 40 and most were kids. Everyone cheered at the end, it was great to see entrepreneurs getting into the idea that they could make a difference to their staff’s pension funds!

It depresses me that we talk about pension as “risk” and advertise auto-enrolment by means of “fines” that tPR could dish out for non-compliance.

This is not what you’d do if you were a kid. If you were a kid you would be looking at pensions in terms of the awesome opportunities they gave to invest money cheaply, save tax and build a capital reservoir to spend in your old age.

We must exercise this love muscle that drives people’s decisions to join and stay in a pension.

And we mustn’t allow kids like the ones I’ve mentioned to end up old and jaundiced.

The statistics suggest that auto-enrolment opt-outs are much lower among the under 40s and much higher for the over 50s. Opt-ins by  non eligible are highest among the under 22s.

In pensions , the child is father to the man. I am slowly closing in on my second childhood!


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Safe, stable, regular and for life

I had lunch with Mr Sipp yesterday. Mr Sipp is John Moret and he has done more to pioneer the new pension freedoms than anyone else. I think the dodgy curry and glass of house white I bought him scant reward for the insights he gave me.

The title of this blog reflects the original aims laid down by the then Regulators for income drawdown. John reminded me of them.

Safe- money must be invested in assets that won’t go down the swanny

Stable- income arising from investment must be consistent from payment to payment

Regular- distribution of income should be able to mirror how we get paid when working

For life- an estimate of mortality should be used when modelling the drawdown.

Of course, all this became formalised in what became known as GAD rates, where the freedoms were circumscribed and it wasn’t till the advent of Flexible Drawdown a few years ago, that these restrictions were lifted (and then only for the pension rich).

John’s point was simple;- “safe,stable, regular and for life” appears to be what people want as an income in retirement.

By taking away the need to buy an annuity, live within the GAD  guidelines or have an a priori retirement income of £20k pa, the Treasury have said that there is no further need for intervention in terms of controlling behaviours. It could be argued that it’s done away with consumer protections because it thinks that consumers get it.

As I am writing this, I am sitting in a meeting of the Financial Services Forum hosted at the offices of DMG Media (the Daily Mail).

According to the Mail, 50% of its readers are behind the Guidance Guarantee initiative (a  huge approval rating) but only 10% say they’d trust the guidance. Understandably, people aren’t going to say they trust something they know nothing about. I’d be interested to see these questions re-polled in a year’s time.

If the Guidance simply concentrated on the four features of a retirement income stream, “safe,stable, regular and for life”, I suspect most people would feel very comfortable.

Would you have an alternative to wanting your retirement savings being safe? But what do you mean by safe?

Would you want other than a stable income -but what price would you pay for absolute stability?

If you don’t want a regular income, how are you going to plan your day to day expenses.

If you don’t want an income for life, what’s plan B if you live longer than you expect?

Sometimes the old ideas are the best. Whoever came up with the formulation “Safe, stable, regular and for life” is probably in retirement now (on a gold plated pension I hope!).

What we now have to concentrate in providing people with confidence in the products that they are offered. If annuities are not the answer, are drawdown products?

I worry about the capacity of people to manage their savings as “safe, stable, regular and for life” using individual drawdown and I don’t think that annuities are a suitable investment or insurance for middle aged people.

“Safe, stable, regular and for life” seems a pretty good sales pitch for CDC.



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A tale of two Cities

Law SocietyCity of London




Have you ever turned up at a place and realised you shouldn’t be there – but stayed anyway just to see what it was like?

That’s what happened to me yesterday. I went to an event about the “Future of the City” in Evershed’s posh offices near St Pauls.

The event had been organised by Policy Exchange and the Law Society so it was full of policy wonks and lawyers…and bankers.

Apart from a hatful of ABI-tes, I couldn’t spot anyone with an interest in pensions so I snuggled down and listened to the great things we were up to in Brussels and New York and Singapore making sure that London remained top-dog among financial centres and a jolly good place to live.

Having been told yesterday by Lib-Dem MP for Solihull Lorely Burt (don’t say it with a lisp), that Solihull had been voted the happiest place to live in Britain, I was sceptical of some of the claims for little old London!

London is certainly a jolly good place to live if you have money, and there was a little disquiet expressed about London having 5 of the poorest boroughs in the country (mostly on the outskirts of the City itself).

People like Will Hutton and Boris Johnson’s economic adviser Dr Gerald Lyons made me feel excited to be back living and working in London. Everybody was a bit spooked by an opinion poll that suggests that the Jocks may be off after all and there was much conjecture about what this would mean for us little Englanders left hanging on the fringe of the Eurozone. Other people were frightened about the deliberations of the European Court of Justice that might bugger-up London from trading Euro-denominated derivatives and there was general concern that we kept tabs on Johnny Foreigner who was coming down the Amazon, out of the Paddy Fields and into the financial markets with alarming energy.

After about 4 hours of this stuff, we all adjourned to a bar set up by Eversheds for a few stiff ones before doing battle in the final session on “Financial Regulation”.

With tongues loosened by such libations, the final debate which didn’t wrap up till 7.30, was a Grand Guignol , delivered in polysyllabic streams of consciousness by strategists high on the fumes of their own intelligence.

Grand Guignol

For the record this was the line-up

Chair: Sam Fleming (Financial Times), Chris Allen (Barclays), Anthony Belchambers (Cross Border Regulation Forum), Mark Boleat (City of London), Hugh Savill (ABI).

I have to take my hat off to them all. Male and Pale they were but never stale! Boy could they talk and boy could they fight!

These bankers are schizzo. They have had to wear a public and private face so long that they have developed split personalities.

One face is their City face, where they assume their mantles of masters of the universe, controlling the flows of capital around the globe and ensuring that the politicians understand the implications of their banking decisions.

The other is the public face, where the public moan about being ripped off by PPI, Credit Derivatives and Libor, where financial advice is substituted for “sales target practice” and the consumer is commoditised into “banking hall foot-fall”.

Me and a bloke sitting a couple of rows back tried to point out that what they’d been banging on about for 60 minutes would not play too well  to the consumers, I felt like Swampy and the rows of suits that surrounded us seemed to turn into police uniforms. Would we be kettled out of Eversheds?

But no!  Once we’d got our initial kicking, sense appeared. One chap more or less admitted to me that  “for big-boy bankers to be masters of the universe, little-boy bankers are going to have to stop misbehaving and spend a little less time on the naughty step”.

As I walked out into a late summer City evening, I cogitated on the two cities. The City of London is controlled by the likes of Mark Boleat, they make the money that makes it the most prosperous square-mile in the world. But there is the bigger City we call London but is really a massive conurbation of diverse ethnicities, living standards, religious and cultural beliefs.

London cannot do without the City of London but the City of London needs the great sprawling metropolis that surrounds it – on which it feeds and onto which it defecates its largesse.

It really is a tale of two Cities and I’m glad I’m a part of both.

two cities



Posted in Bankers, Blogging, London, Treasury, welfare | Tagged , , , , , , , , , , , | 1 Comment

What payroll can do to keep away the loan sharks.

loan shark

We all know the sharks that swim in financial waters preying on the weakest and driving them and their families into deeper debt with all the social and health problems that “deep debt” brings.

And I’m sure that if it were within our gift to give the people we operate payroll for, a better option than the 1000% + payday loans, we’d be keen to help.

So when I got an invite from Ceridian to go to Westminster and hear Lindsay Melvin of the CIPP and Treasury minister Andrea Leadsom talk about how payroll can work with credit unions, I rearranged my diary.

And I’m very pleased I did.

There are a number of studies both here and abroad that show that those with acute money problems can’t focus on their work and are less productive as a result. There is a commercial argument for employers to pay attention to this area of staff welfare and many good employers do offer confidential counselling where it is needed.

But the chronic problem with debt can only be solved by getting people to be “money saving experts”. Regular saving can create a capital reservoir that pays for the boiler blowing or the washing machine breaking down. But many find that organising themselves to save is hard. That’s why Christmas clubs exist.

Since the introduction of auto-enrolment, payroll has helped over 4m employees to save regularly for their retirement. The payroll industry had no choice in this and I’m sure that many reading this article will say “small thanks we get for it”. I work in pensions and I know that payroll did the heavy lifting and those I work with right up to the Pensions minister know it too. And there’s none of us who wouldn’t want to praise you for making AE work.

To throw at Payroll a further challenge of organising payroll saving into credit unions may be an “ask too far”. But it’s a challenge that payroll should accept. There is a triple win if we can get payroll saving to credit unions into our DNA.

  • Employees get a means of getting short term security and the back up of access to a much cheaper form of finance if they get into trouble.
  • Employers get to help staff stay away from the sharks, so increasing productivity
  • Credit Unions get a reliable source of funding and a more creditworthy customer.

The CIPP has recently completed a survey of 2000 low-paid employees (the average income working out at just over £16,000). The survey asked

“if you don’t currently save for a rainy day through your payroll would you consider doing so if offered by your employer?”

41% of respondents said yesterday and a further 24% thought they might do.

I personally save into a credit union, not out of altruism, but because it gives me a good return. I found out about them from Martin Lewis

But it makes me happier to know my savings are doing good , than lining banker’s profits and I’m sure many of you will feel the same way if you set up a credit union savings option from your payroll.


Posted in Debt, investment, ISA, Management, Martin Lewis, Payroll, pension playpen | Tagged , , , , , , , , , , , , , , , , | Leave a comment

“Savers who cash in their pensions face charges of up to 20%”

which 4


I repeat the Daily Mail’s headline which is absolutely accurate.

I am glad that they did not use the word “penalties” as this implies a non-contractual lock-in being imposed by insurers. This is not what is happening. Insurers are only applying the rules in the policies we took out in the 70’s, 80;s and 90’s but as Ruth Lythe puts it.

“Most savers will not even be aware the charges exist as they are buried in the small print”

I spoke with Ruth during her research for this piece. She’d picked up on my piece earlier in the week in which I explained just how easy it was to take more commission from a pension policy just by filling in a couple of boxes to your benefit and not the clients, I even admitted to having done this myself. The article’s here

Of course the “reason why” letters always had an explanation for extending the life of pension contracts (and thereby creating early surrender charges) which meant that compliance officers gave such bad practice a big tick. The various regulators were comfortable as long as the boxes had been ticked and the whole charabanc moved on from one record quarter to another.

Who do we blame?

It was not just the guys who sold the policies who got rich, it was people further up the pyramid. Blame needs to be shared but it cannot be ducked.

The comments from Daily Mail readers suggest that they are not particularly interested in pointing the finger at any part of the process or to any particular person- the whole stinking mess is to be avoided.

I remember talking to journalists about this problem in the 1990s and explaining how the policies we were selling then would be maturing in the first three decades of the next century. It was hardly newsworthy. Though journalists could understand what the issue was, they couldn’t make copy out of it and so the practice carried on – unhindered by consumerists, unreported by journalists.

One brave soul in the Mail’s comments tells another reader he should have paid attention to the small print. No doubt he was one of the ones who did and bought wisely (or luckily). But people have got to learn to be better buyers before we can solve the problem of mis-selling.

Who do we praise?

Martin Lewis makes “money-saving-experts” of his readers and teaches them how to buy simple things better. He teaches techniques of bartering, how to use Maths to work out which is the better deal on butter or soap powder, he teaches people to fight back when they have been wronged.

I take Martin as my hero and my website, sets out to make better buyers of small employers who are buying pensions on behalf of their staff. This blog is part of that process.


Are things any better today?

But there are headwinds. We need professional advisors, accountants, financial advisers and the finance specialists within these companies to step up to the plate and become “skilled and knowledgeable”, purchasing with precision.

Instead we get discouragement from a trade body and a pension regulator

Although giving advice to an employer regarding their choice of pension scheme and/or fund is currently unregulated, TPR believes that people without the right skills and knowledge should not be giving advice or expressing an opinion on this and we recommend sticking to fact based communications on this matter.

“There is also a risk of blurring the edges and straying into the regulated advice space, if the individual representing the employer is or will be a pension scheme member, as they could be investing their own money into the pension scheme.

“We believe that the ICEAW have published a handbook which advises their members against giving advice or guidance to employers on the choice of pension.”


Is the new regulation any better?

The regulator has swung through 180 degrees. From the laissez-faire of the 80’s and 90’s to the prohibition of advice from anyone with the chalice of “skill and knowledge”.

I wrote a comment on the thread of the accounting web article that contained that statement and print it in full here

The problem with using a phrase like “skill and knowledge” is that it is absolutely meaningless. I work for a firm of actuaries that have skill and knowledge coming out of their ears, but most actuaries have no means of applying it to 5 man companies trying to choose a workplace pension!

You can have level 6 qualifications as a financial adviser and still not understand how hooking your payroll up to that provider is going to cause problems, you can’t learn the skills of understanding a company’s needs and matching them to the right workplace pension.

The Pension Regulator is “risk-based” which means he would like minimum scope for litigation. The Regulator would like factual presentation without “opinion”. This assumes that employers will be able to look at pensions data and make rational decisions by properly comparing the propositions of NEST and AEGON and NOW and Legal & General.

This is simply beyond most employers., THEY NEED OPINION, they need simple statements like “look- if your average age of employee is over 45, NEST doesn’t look a great deal” or “Legal and General works for employers who want x,y and z”.

Organising all those nuggets of information into one place and then using technology to produce messages which say “employers like you choose x” is very difficult , expensive and risks failure. But it’s what the 1m plus SMEs and micros still to buy their workplace pension need.

Steve mentioned that they can get all this information and come to a decision  (with a thick 40 page actuarial report recording how they got there) £500. He’s right –

If small practices are going to get involved- (and if they don’t who will?), they cannot take the risk of choosing a pension on themselves, they should tell their clients to use a repository of skill and knowledge and get them to click that link.

We can’t all be skilled and knowledgeable, but bosses can be better buyers!

Until we can find a way of making those who buy the pensions for us “good buyers”, pensions will continue to be bought without anyone reading the small print. We need proper information that genuinely helps the 1m employers to take sound decisions for their workers and we need it delivered in a way that suits us in the second decade of the 21st century.

I put my hands up- as a financial adviser between 1984 and 1995 I was part of the problem, as a social entrepreneur in 2014, I am part of the solution.




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Is an annuity an investment product? Perhaps not!



I have been worrying about a presentation I have to deliver to an investment group on the value of annuities.

I have long felt that annuities are a rubbish investment and UK annuities a particularly rubbish investment.

My confidence fell still lower when my chum Alan Higham started tweeting me some heavy doodoo.

Alan wasn’t just talking big- he’d done the maths.

And he carried on….

This last tweet turned a light on in my head.

If the underlying securities which back your annuity are the same in the UK and the US but the income from the US annuity is 20% higher, either UK annuities are considerably less efficient or there is a greater degree of security from our income streams.

15 years ago, I spent some time with Mike Orszag who’s now Head of Research at Towers Watson but was then researching annuity costs at Birkbeck. He concluded that the UK annuity market was efficient, relative to other annuity markets. You can read his research (which has been updated but makes the same conclusions) here.

Last year I went to Kingswood to visit Legal & General who showed me the accounts behind their individual annuity book. L&G are not making huge margins and their business is efficient.

So how can we account for the differential between UK and US annuity rates?

The answer (for me) rests in perception. Annuities are not investments, they are insurances. The pension annuities we purchase are specifically an insurance against us living too long.

Insurance is unfashionable and investment is sexy. Insurance is boring but it brings peace of mind. Investment is flashy and doesn’t! The two concepts are faces of the same coin and many investments are sold as an insurance (against for instance inflation). Sadly annuities have been sold as investments (and they really don’t stack up well).

I could go off on a long tirade against the damage done to the UK annuity market by EU Solvency II and other regulations including the infamous gender equality rules – but I won’t. These regulations are what make for the 20% differential  between US and UK annuity rates but they are the symptom not the cause.

America has a history of institutional failures within financial services, Fanny Mae and Freddie Mac, Lehmans and Bear Stearns and the Savings and Loans crisis all resulted from “under-prudential” financial legislation.

We cannot have our cake and eat it. If the price to pay for guaranteed annuities is the reduction in yield occasioned by reserving under solvency II, it is a price worth paying- if what you are after is an insurance.

My mistake- and I count it as such- is in confusing an annuity with an investment.

The 2014 budget reforms have cleared my foggy brain. If I want to invest, I use flexible drawdown and flumps, if I want to insure I use annuities and if I want something in the middle , I use CDC.

And I think I know what I’ll be saying when I talk at the Investments Network meeting on 16/17th October




Posted in advice gap, annuity, pensions, Pensions Regulator | Tagged , , , , , , , , , , , | 2 Comments

Does anybody care what you think?



I bet you’ve sat in an exam hall , or been asked to complete a questionnaire or stared at the comments box below an article you’ve read and gone “nah-better not”. The rubric is that “your views matter”, but do they really?

Because on these “one to many” responses, you are going to be judged, and while the upside is unclear, the downside is immediately obvious, your opinion doesn’t matter to the examiner, the pollsters and the readership; nor do you. Best stay quiet – best not show off.

I’ve just completed 31 questions asked by the FCA on a consultation about Internal Governance Committees. I’d looked down the list of people who’d be interested in responding and found I could respond as Pension Plowman (workplace pension holder), Pension PlayPen (workplace pension search engine) or as First Actuarial (workplace pension analyst).

I was asking the same question as you “do they care what I think?”

But to answer that question , you have to know who’s asking it. It turned out that the bloke organising this was someone I know , Jonathan Reynolds – who’s a nice decent guy.

This is what the blurb said

We want to know what you think of our proposals.  Please send us your comments by 10 October 2014 in writing or using the online response form on our website.
We will consider your feedback as we finalise the new rules. We intend to publish the rules in a Policy Statement in January 2015

So Jonathan was asking me (Henry) to feed into the final rules that would govern my retirement savings plan, and those of my colleagues and clients. Oh and to the 1.2m customers who might rely on and the 6m people still to be auto-enrolled.

Now this is a specialist interest of mine and I wouldn’t be expecting too many clicks on that online response form link . But I thought I’d tweet the link with a bit of encouragement anyway.

Because whether you’re weighing up whether your company or organisation should respond, or if you’re thinking about whether you’ve got something to say, then you almost certainly have. And even if you don’t say anything original, or say something stupid, you are not going to be doing any harm.

But this is where it gets a bit tricky, because you don’t know who is judging you and you don’t know where it will end. I remember when I was a junior meeting Barbara Castle and telling her that SERPS seemed much more sensible than contracting out of SERPS (to me). And she quoted me in the House of Lords and when the PR firm who monitored mentions of Eagle Star picked up on this , I was invited to see the Head of Government and Industry Affairs who demanded to know what business I had speaking for the company like that.

And of course he was right, I should have said, “the views expressed are my own and not necessarily those of my employer”.

But that was then. That was when we didn’t have senior civil servants washing up your tea mug , or @greggmcclymont sorting out labour policy on @twitter or Martin Lewis getting PPI redress for 4m policyholders from a link on

This is now, and now is Open Government, social media and the empowerment of your voice. Your submission, when it arrives at the FCA, looks exactly like Standard Life’s or the ABI’s. Judging by the feed back published in recent paper (you are as likely to see an individual or at start up like Pension PlayPen quoted as any of the big players.

Now knowing some of the people on the other side of these submissions, I am confident that you will be heard, your opinion will count – and just because you have responded -because you did give a toss- your opinion is that much more valuable.


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Freddie Flintoff’s fabulous comeback; T20 Finals Day


The Blast Finals Day held at Edgbaston is the best value major sporting event of the summer. For £50 you can get a full 11 hours of cricket and a bunch of support acts including the magnificent Mascot Race, a heap of local bands playing on three stages and the awesome spectacle of the Hollis Stand- packed with revellers assembling beer snakes, racing up and down the aisles in fancy dress and singing Sweet Caroline (too many times).


Yesterday’s event was won by the Birmingham Bears (aka Warwickshire and our hearts were won by Andrew “Freddie” Flintoff. We were fortunate to be standing adjacent to Flintoff , as he made his way out. Not a perfect shot – but I wasn’t the only one!



To my 16 year old son, this was extroadinary in itself, but what was to follow will remain a sporting memory for both of us. All afternoon the Hollis had been chanting “ooo Jimmy , Jimmy” and he’d opened the bowling.


After an over of spin at the Pavillion end, Fred was on. His first ball deceived Ian Bell who played through it too early and skied a catch to Parry at long on. Parry snaffled it- right in front of us and Freddy had his wicket. It was a great catch and there were great celebrations.

Twice in the Bears’ innings I was able to glance at a scoreboard to see A Flintoff and J Anderson bowling in tandem.




But that was not it! With Lancashire falling ever behind the run-rate and Woakes recalled for the coup de Grace, Freddie arrived at the crease. After a couple of sighters, he launched two massive sixes into the crowd to leave fourteen off the final over. Sadly the faiy tale did not quite happen and Lancashire fell four short as Freddie lost strike and his partner could only hit two of the final six needed off the last ball- but it had been a great final- Freddy’s final!


Earlier this summer I had been able to watch Nick Faldo and Rory Mcilroy play adjacent greens at Royal Hoylake. It seemed an appropriate handover. Watching Freddy handing over the crown of popular acclamation to Jimmy Anderson had a similar significance. I’m of an age when the inter-generational transfer is happening as my son becomes an adult (and a very nice bloke).

This final is great because of the people and though it is not on terrestrial TV, it is – as an event- the better for it. Sky revenues keep down the price of tickets making this an event for the cricket enthusiast, most of the boxes that line the West and North sides of the ground were empty but otherwise Edgbaston was packed. Packed with real fans.


Ironically, giving the event to mainstream TV would probably force it into the mould of the TCCB events that are so sanitised that they have lost the carnival atmosphere the T20 Blast retains. This was like Notting Hill – an event I’m off too today.

Freddy and Jimmy are only the half of it. My team- Surrey- were pretty poor other than for Jason Roy’s magnificent 58 and the usual whole-hearted performance of Batty and Ansari. Hampshire came and went but in the event Porterfield (my performer of the day) , Bell and the Birmingham team brought pride to Edgbaston and Warwickshire cricket and no-one could begrudge them the NatWest trophy.



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We knew we were cheating our clients.

Faux naive


Mark Wood (now of JLT and formerly of the Prudential) is calling on insurers to relax the early exit penalties on pension contracts set up in the “bad old days” when commission was paid in advance for premiums paid over the life of a contract.

To understand how these exit penalties came to be, we need to understand how these products were sold.

An adviser had a choice, either he could take 5% of the first year’s premium and 5% of subsequent premiums (single premium costing) or he could choose to take indemnity commission where the 5%’s were added up and discounted back to typically an adviser got paid up to a whopping 75% of the first year’s premium with a lttle on the drip after that.

The incentive to “take your money and run” was overwhelming

Firstly, the chances were that you working for someone else and if you left their employ, you could kiss goodbye to any recurring commissions- so 5% was all you got. Even when you had a proper contract (as I did with Allied Dunbar) , the insurer could turn off repeat commissions and there was nothing you could do about it.

Secondly, the way that contracts were established meant that the customer didn’t see any of the damage of your taking upfront commission as (in those days) stockmarket growth was assumed to dwarf the measly 6% pa charge on units purchased in the first two years.

Thirdly, we all knew that the persistency of payments from our customers was unlikely to last long, so even if we did offer a single premium costed contract, we wouldn’t get rewarded for long.

While the adviser had no difficulty taking the decision to get paid up front, the client had no idea that there was a choice in the matter. Somewhere on the application form, there might be a box that could be ticked for single premium costing but we skilfully bypassed this choice and defaulted all our clients into contracts where we got paid plenty of Wonga upfront.

I understand that Mark Wood’s argument on these personal contracts runs like this..

contracts were silent on exit penalties because when they were drawn up no one envisaged that access rules would be changed. People should not be penalised for accessing their cash when legally possible, that would be against the spirit of the contract.

This misses the target by a country mile

Access rules haven’t changed and people were sold access from 50

Every insurer in the 1980s and 1990s was holding out the possibility of early retirement, many showed projections of how by paying extra, you could bring forward your retirement age. In our brave new world, 50 would be the new 65.

But while the sale was about early retirement, the contract would be structured to push back the selected retirement age. There was another box which had to be filled in which determined the selected retirement age of the policyholder. The formula for an adviser to be rewarded was anything up to 2.5% pa of the first year’s premium x the number of years to this selected retirement age.

So for a 35 year old, maximum commission could only be achieved if the SRA was 65. I would hazard a guess that all advisers tried to avoid commission dilution by ensuring this 30 year earn-out, even when it meant pushing SRAs for 40 year olds back into their 70s.

A common trick was to explain to a client the advantages of adding a waiver of premium to the contract that ensured the premiums were paid by the insurer in the event of a long term illness. Since the cost of “WOP” was on a fixed basis, setting the SRA as late as possible was to the policyholder’s advantage (so long as the negative impact of extra commission was not taken into consideration). WOP was a smokescreen.

Insurers and advisers were complicit in this deception

Far from discounting the possibility of early retirement, the industry openly encouraged it, while offering incentives to create penalties which would only become apparent in many years later.

And nobody noticed

For even when the client stopped paying contributions (usually because they got a job where they got a company pension and had to stop the personal one), it wasn’t apparent there was a problem as the penalties did not crystallise.

The point at which clients started noticing something was amiss would be when , even in reasonably good years, the growth on their pension pot was minimal (and in bad years the losses substantial). Many customers tried to escape from these poor performing contracts and this is when the coin dropped.

Because when you get a transfer value, it takes into account all the charges the insurer was expect to take on your pot but wouldn’t (if you transferred it away). Often the transfer value would be substantially less than the premiums paid, always it would be a lot lower than the “notional” value of the pot.

That wasn’t to say that the transfer value was bad value, it might have been good value. I wish I’d cut and run from some policies I took out in the 80s but I hung on , hoping for a miracle.

The early exit penalties that Mark Wood is complaining about are the direct result of deliberate collusion between advisers and providers to the detriment of policyholders. The problem was rife and only the non commission houses (ironically principally Equitable Life) did not indulge.


Arise Saint Mark

So that’s the history; like me, many people have hung on to these minging personal pensions hoping that a miracle will happen. Arise St Mark, to magic away all the exit penalties still applying to these policies! A miracle is on the horizon and we have the saintly Mark Wood to thank for it.

Eagle eyed readers will have noticed that this saintly Mark Wood was on the other side of the fence in his previous life with the Prudential. Infact he had overseen the system by which these changes had come into being! Infact his overall remuneration was  linked to the sale of these policies!

I don’t know what Mark Wood is after. Perhaps he wants to follow other alumni of his era such as Sandy Leitch into the House of Lords or maybe he just wants to win some brownie points for JLT.

Simply penalising life companies is not the answer


But I can’t agree that there exists a prima facie case against life companies which would require them to do a PPI and refund all the monies deducted through non-disclosre.

For one thing, there was disclosure, it just was obscured by advisers who were able to sidestep the difficult conversation about the likelkihood of the client staying in his current job for the rest of his life. For another, the salesmen of these contracts were smash and grab merchants. The old idea of the man at the Pru, with his bicycle clips and loyal round of customers was already an anachronism by the time I started selling insurance (as a financial consultant in 1983).

We knew what we were doing, the life companies knew what we were doing and it seemed that the Regulators were complicit- I never saw sanctions against advisers who took indemnity when they knew a drip approach to commission was in the interests of the client. I never saw an adviser taken to task for extending the term of a pension contract when there was no reasonable cause (and the Waiver of premium argument was typically spurious).

The contracts were wrong from the start

These contracts and their terms had been designed for the professionally self-employed, partners of law-firms, stock-brokers and accountants who could expect to stay in one place and contribute regularly for the whole of their lives.

The honest truth is that the whole system of indemnity commission went wrong when the Government started encouraging insurance companies to re-use these contracts to provide the pretence of security to people who would change jobs and have periods  of unemployment, the vast majority of us unfortunate enough not to be in a company pension scheme.

Insurance companies, coming under pressure from Mark Wood should point out that they simply extended access to what had stood as good practice in a previous market. What could be more Thatcherite than to treat the plumber like you treated the barrister? And what could be more financially ruinous to the plumber’s wealth..

We’re all in it together

Any Government that decided to attack insurance companies on their legacy, would have to explain the complete failure of its Regulators to impose any kind of discipline to the sales of these products between A-Day in 1987 and Z-Day in 2013 (when the RDR finally did for commission).

Nor should journalists, broadcasters or the legion of think-tanks and commentators who have failed to pick up on this muddy stuff be exonerated.

What happened was a systematic process that transferred personal savings from the policies of those who most needed to save, to the bank accounts of insurers and their salesmen. But to suggest that we can escape the consequences of that by dumping the bill purely on the insurers is both unfair and illogical.

Sadly, we must accept that like those expensive colour television sets, what seemed good value then, now appears to be a rip-off. And we must use some of the experience we have gathered from the past, to make sure this does not happen again.



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We must party – it’s in our DNA!


Tonight it’s the Pension Play Pen party and well over 100 people have put their name on the guest list!

If you haven’t worry not- there are still several hours to tell us you’re coming and heh! -mention you read the blog and I’ll be on the door to shake your hand, give you a hug and go whoop!

All are welcome to enjoy a summer’s evening by the Thames, eating,drinking, singing and having a good laugh.

Sign up here

Nearly £1200 has been put behind the bar by our sponsors

Top Dog- Ed Holt

Super Dogs- Andy North, Martin Good, , Andrew Riley, Laura Catterick, Bill Whitehead  and Dianne Beer, Bob Ward (Friendly Pensions)

Excellent Dogs – Andy Agethangelou, Helen Coulson and  Aftab Siddiqui

So why?

It’s in our DNA to want to get together , have fun and relax. We started the Pension Play Pen so that online people to get together in the real world and get to know each other.

So far this year we’ve been to Cheltenham together , played golf together, been to the theatre together and we’ve even prommed together.

We don’t have a budget, we aren’t a charity, we don’t have officers, we – as they say in social media circles- FLUID.

This is no longer a social experiment, it’s a way of fun!

So if you can find a way to be in London tonight, please join us and reinvigorate your DNA!

Partygoers mallowstreet party 032 mallowstreet party 027 mallowstreet party 035 mallowstreet party 019 mallowstreet party 030 mallowstreet party 005 mallowstreet party 002

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Making a buyer’s market for pensions


Organisations such as Which have always charged a subscription for their research. Those prepared to pay a regular monthly amount built libraries of reports which help us purchase everything from groceries to credit cards. Which put its readers in control- made them good buyers -made buying sexy.

Which 2

More recently, consumer research has reached a wider audience, through which has become an online resource for all types of people, rich and poor, savvy and inept. Martin Lewis’ stroke of genius was to demonstrate time and time again that he’s on our side. When he tells us he is making money, he tells us how much , we feel there is a price there, but a price worth paying. Martin makes money saving experts of us all.


There are very few professional firms who have properly mastered the provision of on-line services paid for  through a paywall (Paypal,Sagepay etc). Google “on-line conveyancing” or “on-line accounting” and you get a number of offers , many at a clear fixed price. But this is a murky market reliant on professionals who know what they are doing.

But google “online pensions” and all you get a clutch of Government websites and offers from insurers waking up to the 21st century. Where is the research and the route-map that “Which” or MSE gives you to enable to start and complete your purchase simply and thoroughly?

I know you ‘re awating a flabby crescendo where I advertise (there I just did) but let’s think wider than that. We need a new sales model.


When a company purchases the know how to do something, whether it’s a legal service, accounting or pensions advice, it is asking to get a job done. If you are a lawyer, you do not  add £10 a month to the mortgage payment to get your fees paid, if you are selling payroll or accountancy software , you charge a fixed price (with an optional maintenance package). People know how to buy and sell and if they don’t want to pay their estate agent 2% to sell their house, they negotiate. At least they know what they pay and can assess VFM.

Financial Services has got to get in line with other services if it is to be trusted

Financial services companies are obsessed with charging for their services over time. The only online adviser I found on the first two pages of a search for an online workplace pension , concluded its initial pitch

We work on the telephone and through emails which means we can keep our costs down to £100 per month.  With one payment of £100 and a direct debit mandate to commence on your “staging date”

It seems a small amount but what’s this about? I go online to get things done and by and large I want to be in control. Why should I pay £100 per month?  Answer;-  So that..

you will no longer have the worry and stress of putting something in place, it’s now taken care of

It’s the same old problem with financial services- it’s all so hard you need an expert to take the problem away. But think of the logistics- 1m employers paying £100 pm to have their hand held? £100m a month, £1.2bn a year to make auto-enrolment work?

This financial model doesn’t make long-term sense for anyone.

We have to make financial products clean and that means doing away with our obsession with creating an annuity stream from a defined client bank.

Like Which and MSE, those of us who are selling a limited service should not talk about “our clients”, rightfully they are our customers, they become our clients when they voluntarily return to us to buy again.

The key differentiator between is that we don’t want an income stream from our customers. Sure, we’d like repeat business, who wouldn’t? But our model is “purchase and go”. We have 1.2m customers out there who need to purchase a workplace pension. They can purchase badly or well, with us we’d like to think they’d purchase well and we charge £499 +VAT to make sure the service is good and remains good.

which 4

No kickbacks, no inducements, no commissions, the money is paid by the employer.

If an employer wants to avoid paying the £499, they’re welcome, we aren’t going to come after them with pitchforks demanding a pound of flesh. We’ll be pleased to have helped , though sorry not to have helped more

And we don’t offer any guarantees. We do not guarantee satisfaction because we cannot guarantee satisfaction, we offer our “best endeavours”, or as non-actuaries would say “to do our best”.

It is not just advisers who’ve got it wrong, purchasers have got it wrong. The OFT’s collective jaw dropped when they saw how bad UK employers were at purchasing workplace pensions for their staff.

The answer to better purchasing is better selling. Selling a service which relies on research and is pitched at solving a specific problem does not require remuneration over an extended period (think conveyancing).

The great achievements of Which and MSE is that they’ve made a buyer’s market. With 1.2m employers still to stage auto-enrolment and 200,000 new employers born every year, it’s time we did the same with workplace pensions.

Which 3

Have a look at again, it’s changed – we hope it’s improved- we’d like your feedback!

Oh and click while you’re there – that’s the closest we want to get to you!



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Freddy Flumper gets savvy!



It’s been some days since I’ve reported on the fabulous Freddy Flumper -“fabulous” in the sense that he lives only in the fable on this blog.

For anyone who missed the instructive fable of Freddy and Tony Lamborghini , we left Freddy “chicked up” as his long term retirement strategy of financial prudence left his bitter rival in the gutter (nursing repair bills on his new motor).

News of Freddy’s savviness soon got round town and it wasn’t long before he got a call from the local financial wise guy – Andy (forever) Young.

“Freddy, I think you should take a note of the following link It’s a death predictor!”

Freddy knew where Andy was coming from – the rumour was that Andy was that kind of actuary who didn’t just know when you were going to die but who was going to kill you. No one messed with Andy (forever) Young.

So Freddy, having written down the link on the back of his hand, checked out his life expectancy. It was good news and bad news.

The good news was that Freddy was going to live for a long long time; the bad news was that even with the (heroic) assumptions Freddy was using for his Flump, his Flump would not last his lifetime.

He decided to pay Andy (forever) Young a visit to review his options. He found Andy resting in a hammock on his veranda. The two were old friends so Freddy cut to the chase.

What should I do, Andy old friend? My money looks like it won’t outlive me and I’m keen to be as wise and sensible as you!

The old sage twizzled the cornstock behind his ear and remarked

Have you considered your state benefits Freddy? The State Pension is changing and if  you’re reaching your State Pension Age after April 2016 the amount you are entitled to will change too. All you have to do is go online and get your BR19 -which will tell you what you are due. Here’s the link

Having his Ipad with him, Freddy decided to request the statement there and then. The two friends chatted late into the night and Freddy began to see that what he got in retirement depended on him taking wise decisions now and in the remaining years of his life.

Andy told him that one of the options he could consider was to buy additional state pension and he gave Freddy another link so he could model the cost benefits of this option.

Finally, over a glass of aged Bourbon , Andy told Freddy about a new type of pension that wasn’t available yet, a pension into which Freddy could transfer the uncrystallised benefits of his Flump together with other pensions he might have (so long as he hadn’t cashed them in like Tony Lamborghini). This new type of pension wasn’t guaranteeing Freddy anything , but it aimed to provide him with a steady pension till the day Freddy died.

Freddy was relieved by this but wanted to know whether it might not be a bit expensive. He’d looked at lifetime annuities and decided they weren’t giving him enough to live on.

Andy explained that these new pensions (he called them CDC) were likely to give Freddy more pound for pound than annuities though they wouldn’t give Freddy quite the flexibility he had at the moment. He needn’t worry about the detail and the good news was that the way his money would come to him could still be a Flumps, the difference would be in something Andy called pooling and  Freddy understood to be a bunch of likeminded folk insuring each other against any of them living too long.

Freddy thought about this. Did he want flexibility or did he want to feel comfortable that his money wouldn’t run out in his old age?

Planning for his retirement wasn’t as simple as he thought and Freddy thanked his lucky stars he had a friend like Andy to help him through the maze,


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11 tips for advisers planning for April ’15


Source- Scottish Widows 2014


It’s been four months since the Budget and the aftershocks of George’s pension bombshell are still being fealt.

One by one, the policy decisions which will shape the way advice and guidance will be delivered, are falling into place. Those approaching retirement from April 2015 will be walking on a different moon. The constellation of retirement choices may reconfigure again if the Mansion on the Hill (CDC) gives ordinary people access to its many rooms.

With that splendid mixed metaphor digested, you might like to disagree with my top ten tips for advisers facing up to the challenge that lies ahead (I never find it much fun agreeing on everything!).

  1. Embrace the Guidance Guarantee. This is going to happen and you are either swimming with the tide or out at sea. MAS are looking to put together an at retirement advisor directory, make sure you are on it.
  2. Embrace technology; Skype is a way forward and there are many other ways to deliver advice more efficiently than jumping in your car,
  3. Monitor your meetings, look out for new compliance monitoring tools which can increase the efficiency of your advice, reduce the risks of you getting things wrong and provide your clients with a lasting record. Alexander House’s Nick Kelly is good on this
  4. Understand the new regulations and how they allow differentiated approaches that help different types of client. The HMRC guidance on the new flexibilities  is here
  5. Think payroll. The new means of drawdown are all PAYE, you need to have a strong payroll offering that can do the tax-work as well as disinvest and deliver accurately.
  6. Think about the trade-offs. Risk reduction comes at a price, the key differentiators between the various at retirement options are risk/flexibility and price. If the cost of a low risk, ultra flexible approach to retirement funding is an inadequate income, might the cost be too high
  7. Collaborate; to see us competing and slagging each other off is not edifying. People like Alan Higham got rich working with people like Martin Lewis. Advisory practices can work with pension consultancies, journalists, broadcasters and other mavens who have public support- Ros Altmann for one!
  8. Get out more! Spend less time bitching on social media and more time promoting yourselves- there are 1.2m employers still to stage auto-enrolment, I don’t want them as clients but you might! Use http://www.pensionplaype as your tool to build a retirement practice.
  9. Charge with confidence! The biggest difference between actuarial practices and IFA practices is confidence. Having worked in both, I see no reason why have FIA after your name should make it easier than having IFA after your name. It’s all in the mind!
  10. Congratulate yourselves. If you are in business today, it is because you rose to the challenge of the RDR. Thousands didn’t and envy you your application.

IMO, the new flexibilities introduced by George Osborne made retirement advice relevant to the mass market.

You are and will be talking to ordinary people about extraordinary amounts of money. £30,000 may be too low to replace a living wage, but it’s £30k more than most of us have had to spend at one time before.

Just look at the amazement on people’s faces when they win this amount at a game-show. How people use their retirement savings and organise themselves around the single state pension is critical. It’s a matter of planning and you are the experts.

Over the next twelve months , my firm First Actuarial and my website will get more referred business from IFAs than from any other sector of the financial services industry. We hope to put a lot of advisory work out to tender or simply in the hands of those advisers who we know and trust.

If you agree (or don’t disagree too much) with the 10 points outlined above, why don’t you contact me or one of my friends.

Tip Eleven!

We’d all be pleased to meet, share business plans and work out how we can make 2015 and onwards better for our clients and for us!

Tip 11 is to pick on one of our names and set up a meeting!

henry.h.tapper@firstactuarial London – Basingstoke – Basingstoke – Tonbridge – Tonbridge – Leeds – Leeds – Leeds Peterborough Manchester



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The instructive tale of Freddy Flumper and Tony Lamborghini



As I didn’t dare hope, the Treasury continue down the pension reform fairway.

Having hit a 325 yard drive into position A with their Budget reforms, they’ve hit a 275 yard second to the heart of the green with ‘uncrystallised funds pension lump sum’ (UFPLS)’.

They might have been looking at the legislative equivalent of an albatross if they’d hit on a clever name like ‘Flumps’ but we’re still looking at a regulatory eagle and are back on course for a Championship Win in April 2015.

The  excellent Will Robins has produced a very good summary of the different pension options available which are published on Citywire here. The only issue I’d take with his conclusion  that

for individuals in a scheme offering flexi-access drawdown there will be little difference between taking a UFPLS (Flumps)  and choosing flexi-access drawdown and maximum income.

Actually Flumps looks brilliant for the average Joe who doesn’t want to spend half his time with his adviser and accountant messing about with numbers- tax forms and investments.

What Flumps offers is the tax free cash on a “collect as you draw”, basis and to illustrate its benefits I give you a Pension Plowman fable.

 The instructive tale of Tony Lamborghini and Freddy Flumper

Tony lamborgini

Tony has had an eye on the £30k tax free cash from his £120k  pension savings for some time.

His anticipation increases when he hears that he can get all £120k (less a bit of tax)  from April 2015 (provided he’s 55 or more).   Happy days! Tony was born on April 1st 1960!

Now he’s  eying up a taster motor in his showroom which (along with his little blue pills) will do his status with the “laydeeez” a power of  good.

On his 55th birthday Tony gets a cheque for £84k (he had to pay 40% on the £90k taxable) and invests in a second-hand Diablo (remembering to keep back a few bob to pay for the petrol and servicing).

Tony’s accountant reminds him that he will be liable to 40% tax on any income from these savings but Tony is off chasing the chicks and will be till his next meeting with his accountant in 2016, by which time the car will be back in the showroom and Tony worrying about being 56 with no pension

By contrast, here’s Freddy Flumper, also 55 next April.


He’s   chosen to draw down his pot in bits, gets the first 25% of each drawdown tax-free (or as he says he gets 25% back in tax each month)

And Freddy has had the benefit of tax free growth on all his savings as he didn’t take his big tax free sum- what’s more, he’s continued to enjoy investment growth on his money rather than the puny interest he got from the bank.

But what makes Freddy happiest of all is that it’s all so easy. Deciding what he’s going to pay himself each month is down to a quick call to his  drawdown provider, or a quick adjustment via his provider’s website- heh!- Freddy can even work out what he wants to pay himself using his smartphone.

And because the people who operate the drawdown payment system are payroll experts, they know how to net off his tax and make sure (using RTI) that his Flump and his earnings and his final salary pension are all treated as one by HMRC so he doesn’t have to fill in lots of ghastly tax assessment forms.

For Freddy Flumper, his DC pensions have turned from a nightmare to the sweetest of dreams.

True Freddy is worried that his Flump might run out one day, especially if he lives too long or goes doo-wally in a nursing home. But he’s got an adviser helping him out and he’s looking at all kinds of options that are open to him including these new CDC pensions, the new super-annuities, he’s even looking at buying some extra state pension.

Freddy had a couple of month watching Tony parade his Diablo up and down the high-street and it’s true that all the crumpet wanted a ride- but that was then.

Now the chicks are all over Freddy as he’s the bloke buying the rounds  “steady Freddy” they call him!

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The FCA and Social Media (Canute II)



The FCA have set out their policy on social media which concentrates on the use of Twitter.

It is worth a read, if only to establish why the supervision of the internet is as feasible as Canute’s supervision of the tides. As Canute pointed out to his courtiers, it is possible to observe the shore getting inundated but very difficult to do much about it.

One such example is the recommended insertion of  #ad to highlight a promotion. Nobody hits a keyboard without the intention of promoting something and #ad presumably denotes an overt sales pitch which might relieve you of your cash.

I can see the use of #ad really catching on!

The FCA conclude that they’d like comments on their approach and that they will be consulting with “experts” in this field. It shouldn’t be hard for them to find them for the internet is crawling with lists of such people, created by scoring systems like Klout.

The FCA might have been better advised to start by asking the questions rather than trying to retrofit the existing COB into a new world about which they are clearly unfamiliar.

Indeed , in an excellent article, Panacea IFA point out that

Having been told by a number of influential financial services ’Tweeters’ (identified from our recent ‘Top Tweeter’ awards winners)  that they had not been consulted, Panacea Adviser has submitted an FCA FOI request as we would like to know more around who or what exactly “extensive industry engagement” represents. We have requested some clarification asking:

Who exactly have the FCA had “extensive industry engagement” with?

What is their level of Social Media knowledge, influence and expertise?

What is the FCA’s understanding of how a financial adviser would use Social Media based upon to produce this proposed guidance?

Having been told by a number of influential financial services ’Tweeters’ (identified from our recent ‘Top Tweeter’ awards winners)  that they had not been consulted, Panacea Adviser has submitted an FCA FOI request as we would like to know more around who or what exactly “extensive industry engagement” represents. We have requested some clarification asking:

Who exactly have the FCA had “extensive industry engagement” with?

What is their level of Social Media knowledge, influence and expertise?

What is the FCA’s understanding of how a financial adviser would use Social Media based upon to produce this proposed guidance?

The biggest problem is that this is all “one to many” and unless you create a wall garden- as for instance mallowstreet have, many people will be exposed to what the FCA might consider unauthorised promotions.

The obvious thing for the FCA to do is to talk to people who use social media by using social media but they have chosen to get us to engage with them using the old consultation method,

I had no idea this paper was out and being as active in social media as most people, this shows just how far the FCA are from the coalface.

It’s hard to butt into a concersation to which you are not invited , so I won’t be responding to the FCA. They have a duty to those who fund them, to speak their language and frankly the days of them sitting on their mountain top handing out decrees on stone tablets are over.

Social media should see to that!


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Warning- Flumping is not for cute dogs!

Warning- Flumping is not for cute dogs!

A new word was coined yesterday in the lexicon of pensionology – Flump!

Credit must go to Will Robins of CityWire and Claire Trott of Talbot and Muir.

Many of us know the Flump as a marshmallow and there are other less happy definitions in the urban dictionary but the Pension Flump is a whole new ball game!

Will’s genius is to convert a sorry name to a great idea into something everybody loves- like a kitten!

And now you are totally intrigued- here it gets sad – Flumping is no more than the act of drawing your pension as an

Uncrystallised fund pension lump sum (UFPLS)

Here’s Citywire’s excellent description

Don’t be fooled by this less than exciting name, this is a brand new way to take your pension. Much like the flexi-access drawdown fund you can leave your money in the pot and take it out when you need to.

However, the difference between UFPLS and flexi-access is the tax treatment of both the money you take out and the money left in your pension.

If you have £50,000 in the pension, the first 25% (£12,500) you take out under flexi-access is tax-free and any other money you withdraw after that is taxed as income. The money you have left is then taxed at 55% if you die.

Under UFPLS, the tax works slightly differently. If you have a £50,000 pension pot and you take out £10,000 the first 25% of that chunk you have taken (£2,500) would be tax free and the remaining £7,500 would be taxed as income. So you start paying income tax straight away but with each additional chunk of money you take out, the first 25% will be tax free.

This is not the only difference. Because of the way the money is taxed when it comes out the funds remaining are said to be ‘uncrystallised’ or in layman’s terms ‘untouched’ so it does not incur the 55% death tax if you die, provided the death is before age 75. This means any money remaining in your UFPLS pot can be passed to your family tax free.

Walker said this option would be better than flexi-access for an individual who is concerned about what they leave behind for their family.

‘The way in which you think about pensions may be different to mine, everyone is different. I may want to take some income out and leave as much as possible behind for the wife and kids and if that is the main priority then you should take income out [using UFPLS] and leave as much as possible behind without the government taxing the hell out of it,’ he said.

This looks to me as a very sensible way to draw your pension pot and the good news for those who have DC pots from a proper company pension (including AVCs) is that they too can be flumped!

There are of course some complications and you’d not want to Flump without looking at the small-print. If you’re the kind of guy who wants to cash your pension and then start saving more than £10k pa into another pension- then this is not for you. If you’re the kind of girl who has exceeded your lifetime allowance, then Flumping may not be your best bet.

But for most of us the message is clear and fun!

Don’t get the pension hump – FLUMP!








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Auto-enrolment’s tactical- pensions are strategic



The old questions “are you managing your business or is your business managing you?” and “fail to plan, plan to fail” are annoyingly true- annoying because they are business clichés and doubly annoying as they remind us of the opportunities we failed to grasp because we were “too busy with the day job”.

Part of my job at my company is to provide “strategic input”, for which I am dubbed by my colleagues “the overhead”. You need a thick skin to insist on investment rather than immediate profit-maximisation. To give me strength I remind myself of the note on the payslip of my first employer..


“We invest in our future- this means investing in the future of our employees “

I asked the HR manager what this meant. She was retiring and was known for having introduced a pension scheme for her staff – she told me “that’s to remind my FD why we pay into the pension,if I don’t do that every month, no one else will”.

She was right, within a year of her retiring the company had ceased contributions (1992) and it went out of business in 2009 without reinstating them,

The business didn’t go bust for want of a pension scheme but when the big bad wolf turned up, the house turned out to be made of straw!


The majority of businesses will approach the impending task of setting up a works pension and complying with auto-enrolment processes reactively. They will be driven by short-term considerations- minimising the immediate impact on P/Land  balance sheet. Issues such as the impact on staff relations, future retention and recruitment of staff and the success of the chosen pension in meeting its goals- will be secondary. Today’s numbers dominate conjecture about tomorrow.

But if you look back at the good decisions we took in building our businesses, they will be strategic – investment decisions!


The decision about auto-enrolment is not about whether but how to invest.

Today’s  imperative is that no matter how painful, we must follow the Regulator’s path towards compliance, NO ONE GETS LEFT BEHIND.

But the investment is yet to come. Once payrolls are aligned, an employer is left with a regular payment to the provider which escalates to c8% of payroll. Auto-enrolment turns from a tactical to a strategic issue.

It’s the same for staff. Pensions assume strategic importance to people when the pension pot is valued in thousands rather than hundreds of pounds. Those pots (post budget) no longer need to buy annuities, they can be used to pay off mortgages, buy round the world cruises- those pots are the financing tool for their dreams.

And when the penny drops, staff will ask themselves why it was that you chose NEST or Scottish Widows, NOW pensions or Legal & General.

And if they ask you why you took the investment decision you did- what are you going to say? “Seemed like a good idea at the time?”, “the Government said NEST?” “we’ve always used Aviva?”.

8% of payroll is a lot to pay for a disgruntled workforce!

If you are serious about risk management , you need to be able to say why, but to demonstrate that you took some care about it. As important is another old maxim that “if a job’s worth doing, it’s worth doing well.

The difficulties surrounding staging and setting up opt-out, opt-in and contribution processes will be forgotten, what will matter is the performance of the investment tool.

In a recent survey, the Pensions Regulator found that 63% of the 600 SMEs they asked, said that the choice of their workplace pension was important to them.

The Regulator reckons that more than 900,000 employers have still to choose a pension for their staff and that over 40% of them expect their “business adviser” to help them with decision. It seems that most micros consider their adviser to be their accountant or book-keeper.

I am reminded of the words of the retiring HRD


“If I don’t ……., no-one else will”


No-one’s going to thank you now for insisting your client or your employer takes the pension decisions seriously, but they may tomorrow.


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Why the IMA are so wrong about fund research.

daniel godfry


There had been signs that the Investment Management Association (IMA) was at last coming to terms with the needs of consumers and those who advise them to reveal the cost of owning their funds.

In May , Daniel Godfrey- its chief executive, promised full disclosure of costs and charges and the publication of the portfolio turnover rate of each fund managed. This summarised  IMA research published earlier in the year. You can read this blog here .

But recidivism has kicked in and in the three months between this “blog” and now, the new dawn has faded. This week saw the publication of another blog from Daniel Godfrey, explaining why the IMA weren’t minded to embrace European proposals which would require fund managers to unbundle the purchase of research on markets and stock from the price paid for buying and selling the stocks.

I don’t get it

As a layman, my first question is what investment research has got to do with the physical practice of trading in the first place. The answer, according to those like Mark Lawrence , COO of Fundsmith is that purchasing research this way makes life very easy for fund managers.

Assuming the research is valuable in itself, it can be used to boost the performance of the funds and is therefore seen as a legitimate fund expense that can be charged to the member. So a fund manager can run a fund with minimal research costs to itself and minimal management charges to the consumer. The fund manager is effectively outsourcing his or her research department.

But there seem to me some problems with this.

Firstly, the research is unlikely to be independent. The firms who provide these bundled services are “integrated”, they are typically banks who do everything from advising on M&A, flotations and the sale and purchase of stocks.

Case study

Let’s suppose they are advising on the flotation of a private company that wants to come to the stock market to raise capital, the adviser can give a nudge to those writing the research paper to recommend the fund picks up some of the stock that will be in offer. This keeps the client happy- he has his capital and the share price moves in the right direction. This keeps the adviser happy, his strategy is proved to have added value and he can trouser some healthy fees and it keeps the traders happy as they can offload stock that might otherwise have stuck with the bank (the underwriters of the issue) – as well as generating some commissions on the trade itself.

But is the fund manager there to keep all these people happy? He is not- his job is to keep the owners of his fund happy and it is a basic law of economics that if those on the sell side are laughing, those on the buy -side won’t!

The conflicts of interests created by buying recommendation on what to buy from the people selling you the stuff are obvious to any layman.]

But they are not obvious to the IMA, at least, Daniel Godfrey states in his blog

“Research associated with the use of dealing commissions is not an inducement.  Rather, it raises conflicts of interest, which need to be managed.”

Just how a fund manager is supposed to identify what the conflicts of interest are is not clear. If he gets a note to buy a stock that his dealer needs to sell the note is not going to read.

“Please buy this stock old chap or we’ll be left with it on our books and I and my mates won’t be seeing a bonus this Christmas”.

Untangling the genuine buy/sell note from that sales Spiegel may be a skill that fund managers can boast of (managing conflicts), but why should the manager be devoting his time to second guessing? Why should he not be researching the stock himself?

And then there’s the question of “inducements”.  Everything in this blog so far is based on the research purchased being read and acted upon. But the information I get from fund managers suggests that most of it is treated as junk and ends up in the shredder or the spam box.

If this is the case, why should a fund manager be wasting the money of those who own the funds buying junk?

It may be just a matter of laziness, poor processes, incompetence.

Or it may be that inducements are at work.

Buy my research, charge it to your clients, chuck it in the bin and enjoy the Wimbledon tickets.

Daniel Godfrey may state categorically that “Research associated with the use of dealing commissions is not an inducement” but we only have his word for it. I live , work, eat and drink in the City of London and I know exactly what is said , thought and done by those with the power of these huge chunks of money.

Some manage the conflicts and some don’t, some take inducements, some don’t.

The point is that we as consumers have no protection against bad practice other than voluntary codes put in place by the IMA and the fund managers themselves. And while the IMA are good at producing research papers and blogs that tell us what they intend to do, the fact of the matter is that consumers are still totally in the dark as to what is really going on.

Each month a new scandal is unturned, State Street stealing pensioners money from the Sainsburys Pension Fund, Barclays running dark pools with infra-red glasses, the rigged Libor-market, the mis-selling of swaps to small businesses, PPI!

What possible reason is there for us to trust the banks , fund managers and the IMA to manage the conflicts?

When the boxes at the O2, the Emirates, Twickenham and Wimbledon are packed with managers and brokers, why do we accept that inducements aren’t taken?

Thankfully, this matter will not be decided by the IMA, the fund managers and the banks but by Regulators. The FCA are on the case as are the DWP, they are not in the pockets of the fund managers like the supine NAPF who depend on the fund managers to fund their conferences and junkets. They are answerable only to Government and to the electorate, the consumers who pay the fund manager fees and the costs of the trading and research.


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“Value for money” key to DC Governance say FCA.

FCAThe FCA published yesterday an important consultation (CPA14/16) proposing rules for independent governance committees (IGCs).

The introduction of IGCs was agreed by the ABI as part of a deal with the Office of Fair Trading that fended off insurers being referred to a more serious investigation.

The main purpose of IGCs, as envisaged in this document is to “act in the interests of members in assessing and raising concerns about value for money“.

Assessing value for money involves weighing the quality of the scheme against its cost to members”.

This seems a much simpler formulation than the 31 characteristics and 6 principles on which the governance of DC occupational schemes depends.

Indeed the FCA narrow the “key elements of scheme quality” down to

  1. the design and execution of its investment strategy
  2. administration of the scheme, including communication to members and
  3. governance of the scheme including regular investigation of its value for money

For the FCA, value for money is central to governance and key to the member’s interest. There seems to be an acceptance here that while governance of administration, communications and investment strategy is static, it’s the investigation of value for money – that is where the IGCs contribute on-going value .

So what does an assessment of value for money boil down to in practice?

The Quality of the Scheme can be assessed against just three key services -



This could be described as what a DC scheme adds as value. An IGC that feels comfortable that the contract based scheme(s) it oversees carry out these duties satisfactorily can conclude that it is offering value.

But value can easily be eroded and a large section of the paper deals with its cost to members. (the money in a value for money formulation).

The consultation does not deal in depth with the methodology by which IGCs assess “costs and charges” but it makes it clear that there will be rules that govern the assessment, so that there can be


“public disclosure by firms of their IGC’s assessments in the IGC Chair’s annual report, to enable IGCs to compare their assessments with those of other IGCs”

In a recent comment on an accountancy website, a request was made that


What would be really useful ….is a table comparing the fixed and variable costs of the major pension providers

The value of the FCA’s proposals lies in their simplicity which allows requests such as those of this account to be met.

If we can have a simple formulation for “value”, a simple formulation for “money” and a way of comparing value for money between providers, then people can take informed choices about what scheme to use and whether to keep using that scheme or switch to another.

This will be a great help in making employers to be better buyers, for as the OFT have commented.



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Pension PlayPen needs your digits.

old and new


Digital marketing is something we’re having to learn as we go along.

We’ve got to find 1,000,000 employers who don’t have a workplace pension and convince them of the importance of paying some attention to what their staff invest into.

So we need to be in the eyeballs of the people who take decisions for their staff and the OFT made it perfectly clear last year that they’ve got a bit of learning to do!


If you are worried that the second half of auto-enrolment staging will be characterised by gormless decision making, you will want to help employers become a little bit more savvy. As I’m sure you’re aware, is about engaging, educating and empowering employers to get it right!

So here are three initiatives we’ve started to get to those  1m employers

1. We’re showcased this week in the Guardian , having been shortlisted  for their marketing and PR excellence award. Marketing and PR Excellence 2014: Pension PlayPen Ltd

2. We’re one of 100 start-ups off to Boot Camp for the Pitch 100 awards. This is one you can get involved with by clicking and voting for Pension PlayPen.

3. And importantl8y, we are sponsoring This is there Nobody gets left behind initiative which reaches out to the accountants and finance people of the missing 1m. Check the campaign out here

Social media is about sharing and helping each other out. Whether you are reading this as an employer about to stage, or an accountant or financial advisor, we need your help!

Please like , tweet and retweet what we are doing. We notice every interaction and will try to thank you in kind.

Finally, please take the time to register at

We want you to enjoy the wonder of our site!

Get your digits moving and your eyeballs in gear!

workplace advice




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Good pensions need good bosses!

good pensions .

My friend Steve Bee has produced a marvellous cartoon this morning.

The need to save between 15 and 20% of lifetime earnings hasn’t changed.

The numbers being crunched to come up with the 17.5% recommended lifetime contribution rate should be about the same today. Provided -that is- people accept that few starting saving as a 20 year old, will be able to stop working till they are 70!

Our perception of retirement in 2064 will be as different from todays as ours is from those retiring in 1964 but the fundamental need to save between 15 -20% of lifetime incomes into a pension is likely to remain the same!

But there is a new audience who see saving  differently

Two things have changed since the 50s and 60s, Retirement Annuity Contracts were designed for a professional elite as their alternative to a DB scheme, now we’re all dependent on them -was there ever an expectation that ordinary people would be able to fund their own pensions to DB replacement ratios?

Secondly, nobody in the 50s and 60s could have anticipated the impact of wider house ownership would have on people’s view of security in retirement. The “my house is my pension” is now baked into our culture (even if it’s hard to buy a sausage with a brick).

And we haven’t yet worked this out!

The communication message has become harder as we widen the audience and find people’s view of retirement income changing. Personally I think it is unrealistic to expect people on lower incomes to set aside 17.5% + of income but I think that we need to get back to basics and not allow current AE contribution rates to be considered “enough”.

If we believe that workplace pensions are capable of offering a meaningful enhancement to the Basic State Pension for all UK workers, we must make them as structurally sound as befits that purpose. The reforms currently going through the Houses of Parliament are designed to ensure that is the case.

We must also put the employer at the heart of the process and try to include as many of the pseudo “self-employed” as workers of their actual employers and as such part of employer’s workplace pension schemes.

Ironically the idea of a works pension  with 15-20% contributions into a well organised and managed saving vehicle is pretty well the blueprint for the original DB pensions in the sixties. If we can decumulate what we have saved collectively, we will be pretty well back on track!

So I do believe that with the help of employers and regulators, ordinary people can get decent pensions for themselves.


But we have to tell it like it is!

Now we have got back to basics, we must – as Steve does – tell it like it is.

The British public have been subject to one deception after another- they have been let down by over-expensive personal pensions, by poor advice at retirement and by a regulatory system that has placed the distribution of pensions above their quality.

To have a good pension, it is not enough to be in a pension scheme, you have to be in a good  pension scheme with proper contribution levels.

That way you don’t have to have your house- and eat it!


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One of the great words of the English language, fungibility means that something is replaceable.

What’s fungible and what’s not?

If I give you a tenner, that note is fungible with 10 £1 coins or two fivers.

If I am pregnant for 9 months, I produce a baby, but 9 ladies cannot be pregnant for one month and collectively produce a baby – pregnancy isn’t fungible.

As it impacts on the current debate about whether we deliver pensions singly or individually, the fungibility word is crucial.

If I put £1000 pounds into a collective DC scheme, there is £1000 pounds of pension benefits in the system which I can have back but which in the meantime can be used to pay others income in retirement. That money-converted into benefit is fungible

If I put £1000 into annuity, that annuity is mine and no-one else’s, it is not exchangeable and I can’t have my money back, no one else gets the benefit if I give it up- an annuity is non fungible.

This idea of fungibility is something that hard line individualists do not acknowledge. For them collectives are always at risk of losing their fungibilty and becoming Ponzi schemes where future benefits are guaranteed by the expectation of future income from future contributors.

If you deny the existence of fungibility you begin to doubt some central pillars of capitalism. The principle of equity that underlines the shares we purchase, is that someone in the future is prepared to exchange your paper for cash on the expectation that the paper will give a future income stream and a right on the capital of the company that gives it. You are taking a bet on the fungibility of the asset.

So instead you look for unique items that have a guaranteed value to you and fulfil your purpose- to the exclusion of anyone else’s. A single life annuity is a perfect example, beyond your lifetime it has no valuable, it is perfectly unfungible.

This is why you will always hear objections against collective schemes couched  in terms of property rights.

It is perfectly natural for people to worry about these things. We do not easily trust the financial system to manage our rights collectively, we have a belief that what is ours is ours and that a bird in our hand is worth two in a collective bush.

But this isn’t necessarily helpful. If I go to Zipcar, I can expect to pick up a car on the street that will be the same model and do the same thing as another Zipcar, but it is not the same Zipcar as the last one because someone else has picked up the car I left behind ,driven it and left it in another place. I am trusting that my Zipcar will be fungible with every other Zipcar, I get the collective benefit of only having to walk a couple of blocks to pick my car up.

So I’m exchanging the trust I have in owning my car (which is absolute) for a trust in a system of collective ownership (which is dependent on everyone else doing the right thing).

There are millions of examples everyday of our trusting others to do the right thing- just analyse two minutes at the wheel of your car to realise how much we rely on other people -pedestrians , car-drivers and traffic regulators.

Because no man is an island, there is fungibility in our society but we all accept greater or lower degrees of fungibility. Someone like my friend Hilary Salt, celebrates completing her tax return as an act of collective endeavour, her contribution to society. At the other extreme, John Ralfe begrudges participating in any collective endeavour that does not guarantee him a prescribed entitlement. In between are most of the rest of us.

I didn’t trust Zipcar till a friend of mine told me how well it works, now I do. Collectives, when they work, work very well.

“Achieve by Unity” is the motto of my football club and I do believe that collectively we can do more than we can as individuals. That is because of the inherent advantages of fungibility which allows the free movement of money from one person to another without the interventions that clog up the financial system.

The most efficient pension systems, those that work on a pay as you go basis, are also the most fungible. The basic state pension is super-efficient because of its fungiblity- a function of it being collectively acceptable.

The least efficient systems are those that depend on being super bespoke. The insurance companies are currently reviewing their portfolios of legacy pensions set up in the last thirty years and trying to justify why they haven’t and won’t deliver. These have no fungibility and have failed because every moving part of the system that supports them needs to be individually oiled with policyholder cash.

CDC aspires to the efficiency of the basic state pension while acknowledging that without some individual property rights, trust will be stretched too far and fail.

It is – in the grand scheme of things- merely a rebalancing of the system which has tipped too far one way and has to be corrected.

I do not deny the rights of John Ralfe and those like him not to use CDC and enjoy its fungibilty, nor should he deny me my right to help build an alternative more fungible system for those who are not like him.

Individualists see collectivism as a threat, they must learn to enjoy fungibility!

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fungible 2



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Will CDC be available to everyone with a DC pot – or just a lucky few?


A snag has emerged in the Drafting of the Pension Schemes Bill (that will introduce Defined Ambition and with it CDC).

It’s one of those little things that seems easy to fix but which has potentially huge consequences, a bit like driving a nail into the bit of wall that may or may not have the water pipe behind it!

It would seem that the drafting of the Bill assumes that CDC schemes will be “occupational”, that means that they will be connected with your occupation and by extension your place of work.

If you could only join a CDC scheme if your bosses decided to set one up (or convert their DC scheme), then I doubt many of us would ever have the opportunity of using one.

I had assumed that somewhere in the Pension Schemes Bill would be a little clause that allowed “non-connected employees” to transfer in benefits to the CDC scheme “if the scheme rules allowed”.

Which would make it worthwhile for social entrepreneurs to set up schemes to accept transfers of pension pots that people had built up over their career. My vision for CDC is focused on it being a receptacle for DC benefits that otherwise would have been annuitized, cashed out or transferred to a drawdown arrangement.

But according to some learned friends at a seminar I attended last night, no such provision exists and I get the distinct feeling that, so far, no one has stopped to think of the retail implications for CDC within the drafting of primary legislation.

The fundamental principle behind this is that occupational schemes are sponsored by employers and those sponsors need to be protected from having to subsidise the pensions of any Tom Dick or Sally who walks in off the street.

CDC is different, there are no obligations on an employer, indeed I would argue that an employer is pretty well irrelevant to CDC (other than to pay some money into the pot on behalf of its employees). Could you set a CDC scheme up without a sponsoring employer? Logically yes- but legally no.


So who is CDC for?

I have said before that Steve Webb needs to be clearer about his intentions for CDC. It is one thing to adopt an “if we build it- we will come” approach, another to get support for the project from both the Commons and the House of Lords.

The original intention for DA was to provide employers with a halfway house between DB and DC, but DA has really been taken over by CDC which is the big deal in the Netherlands, Canada, the US and certain Nordic countries.

And the pensions argument has moved on from encouraging a handful of large employers to continue offer something a little better than DC to finding a meaningful replacement to annuities as the way we spend our DC pots.

In my view CDC is the mass means of decumulating just as DC workplace pensions are the mass means of accumulating. These are our defaults for the future and CDC is essential to the success of the budgetary changes now making their way into legislation.

If legislation allows people to convert DC pots to CDC (and I’m pretty sure it doesn’t so far, then there is a ready market of some 18m customers for CDC outside of the few large employers who might sponsor their own CDC scheme.

There is of course a second issue over whether people, once they are allowed to and have the Schemes to invest into- will make voluntary transfers.

Individuals will choose to transfer their DC pots to CDC provided…

  1. CDC is presented as a packaged alternative to CDC that takes the individual investment decisions out of both the accumulation and decumulation of the pot.
  2. That the risks of the Collective approach are properly explained- most importantly the risks of retirement income stalling or actually reducing when times are hard.
  3. That people are able to transfer into a CDC scheme only those amounts they want to provide them with additional income (e.g. they don’t sacrifice their freedoms to drawdown or annuitise part of their DC savings).

To me , CDC becomes an essential choice for people taking Guidance (albeit after 2016 when the first CDC schemes will come off the production line).

The simplicity of the CDC approach which offers predictable outcomes from a collectively managed scheme could in time become the default option for those crystallising DC benefits.

So to restrict their use to employers who have converted to CDC would be an enormous shame.

We can’t rely on large employers to make CDC happen

I heard again last night from large employers who said quite categorically they did not feel any responsibility for the choices offered to their staff after they had crystallised benefits.

This being the case, then a reliance on employers to make CDC happen is misguided. CDC will happen because people need a better way to get their DC pots paid to them, and if they are denied access to CDC, then people like me will be more than a little upset.

Worse than that, political opponents to CDC will be able to point to CDC as an elitist approach that has no value to most people and is not worth the time and trouble that will be spent on it. The Bill will die in the wash-up , if this view prevails.

CDC is too important to simply be debated in the halls of the actuaries. It needs to be promoted nationally for what it is -the natural alternative to annuities and income drawdown.


What needs to happen now?

Those doing the drafting of the Pension Schemes Bill (the one with DA and CDC in it) , must  amend its drafting so that CDC schemes can accept transfers in (without losing their right to be considered occupational).

A precedent was set in Pensions Act 2008 when self-employed people were allowed to become a part of NEST, extending that precedent to allow anyone with DC benefits to transfer them to a CDC scheme is a logical extension.

Secondly, and here I confess not to have looked for water pipes behind the wall, I would like the Bill  to allow CDC schemes to be set up , without any sponsoring employer at all. Such schemes would simply exist to pay pensions to those who wished to convert their DC pots to CDC and could thus be classed as “pure retail” arrangements.

No doubt this final point will cause a degree of regulatory confusion since a retail product , overseen by the Pensions Regulator, or an occupational scheme overseen by the FCA has yet to be created. But we are at a point when tPR and FCA need to work as one , we have aspects of the Pension Schemes Bill which relate to the Guidance Guarantee and the distinctions between retail and institutional are becoming ever less defined.

Thirdly, we need people who read and agree with what I am saying- to take some action now. The Bill is currently being amended at the DWP and we live in an era of Open Government where our voices can be heard.

If you are interested enough, drop me a line ( and I will collate all comments as part of our on-going dialogue with the DWP.


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The NHS may hold the keys to Guidance



I’m indebted to KPMG research for this excellent piece of research.

If you didn’t click the link, here is the text of an article entitled “Can patients get the information they need”.

Patients need information that is often very different from the information that doctors think they need.

Our research into patient groups across the world consistently showed that, what patients felt was crucial information was ignored by clinicians. In fact for some patients groups the biggest gap between what patients needed and what they got was information.

If patients don’t receive what they need to know, they will not be able to be as active in their own care as we need them to be.

Often the clinical explanation is fine but it rarely helps to alleviate the fear and anxiety that comes with a diagnosis.

Information for patients that they can use improves clinical effectiveness, safety and patient experience. It needs to adhere to quality standards, be user-tested, and to be useful it needs to be co-designed and co-produced. Information must also be designed to meet different levels of health literacy.

It is now a basic requirement for organizations to have ways of communicating online and through mobile phone technology. Using clinically accredited apps to support chronic conditions and individual episodes of care, such as maternity care is the next step.

To make full use of this, it will be important to improve health literacy and activation – there is some evidence about how to do this.

I wrote earlier this week about the parallels between health screening and the wealth check that the Guidance guaranteed by impending legislation.

To spell it out

  1. We need to provide information in the Guidance session that is what people actually need, not what certain financial “doctors”, think they need. We need RESEARCH AND FEEDBACK
  2. The “biggest gap” between what many “at retirement” get and what they want is information. THE SESSIONS NEED TO ENGAGE AND INFORM
  3. Information we can “use”, which allows people to be as active in their financial well-being as they need to be. GUIDANCE NEEDS TO EMPOWER people to DIY
  4. Information needs to adhere to quality standards – WE NEED A TEMPLATE and RULES
  5. Information needs to be user tested- WE NEED PILOTS
  6. The Information needs to be CO-DESIGNED and CO-PRODUCED with users outside the financial services industry.
  7. The information must be designed (and delivered) to meet the levels of financial literacy of EACH PERSON guided ( which may be a judgement call from the Guide)
  8. The information must be available on the SCREEN OF A PHONE and at the TOUCH of an APP.
  9. This information is needed on a “CHRONIC” basis (on-going) as well as at the “ACUTE” moment when the big initial decisions are taken.
  10. There is EXTERNAL EVIDENCE of how to do this (and the NHS are pioneering in this respect).

My advice to TPAS and MAS is to get hold of the people in the NHS who are doing this research and learn from them. The financial services industry has more to learn from healthcare than it might care to admit!


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Sign up for The First Actuarial Monkey League -2014 !



You can save yourself reading 644 words of Pension Plowman pontification and sign up for the Monkey League here.

Or you can read the blog and take your decisions at the end.


Here’s why I’m promoting our Monkey League!

I love our Monkey League and so do about 150 of my colleagues and sundry devotees , many of whom have found pleasure -season long- from this  Simian challenge.

We are poor mis-guided fools who believe every season we know more than the monkeys/bookies/markets.

If you , like some of us, fancy yourself- or if you – like most of us- like a good laugh at ourselves and our mates – read on!

Here’s how it works!

The Monkey League asks you to test your football knowledge by beating the bookies who predict the winners and losers in each of our four major football leagues.

All you need to do is pick 2 “good” teams and 2 “bad” teams from each of the four English divisions. Each team is handicapped by the Billy Hill odds pertaining at the start of the season.

For example;-

taps picks


So betting on the trophy teams to do well is no more likely to succeed than betting on the likes of Yeovil Town to do badly. In fact betting on Yeovil Town last season delivered average results even though they finished plum last in the Championship.

All the handicap scores are listed on the entry form as are the teccy bits about points deductions as and when teams go bust.( In fact betting on teams going bust is one way of winning!)


Yeovil Town


You don’t get to change your mind so you don’t need to do anything  throughout the season except watch aghast or thrilled as you teams let you down or do you proud.


Here’s the point!

No matter how good you think you are, you will be humbled. There are 1000 monkeys out there, each with random selections generated by their computer like minds. For you to beat them you need skill or luck.

Each year, those who finish in the top ten are filled with pride and the following year that pride is shown as hubris as they tumble into the lower reaches of the league being trounced by anonymous monkeys!

Nobody has ever been able to do it year in, year out!

So all that skill turns out to be luck!


A comparison we would never make!

I once entered a competition (and won it) – with my definition of “alpha”.

My answer was that

“alpha’s what’s left over when your luck runs out”

and the amount of alpha on display from the 150 monkey thrapping contestants suggests that nobody’s got any alpha at all.

Now of course “alpha” is usually applied to stock-pickers and fund-pickers who are able to choose a fund manager who regularly outperforms its peers- beats at least 750 out of the 1000 monkeys and is therefore regularly top-quartile.

But we would never draw a parallel between expert footy pundits and expert stock and fund pickers.

pension monkey

Stock and fund pickers would never advertise their short-term prowess at beating the markets – would they?

Stock and fund pickers would never keep schtum when last year’s “best idea” turned into this year’s dog – would they?

Stock and fund pickers would never accept that Billy Hill and the boys who make sports markets are able to cream it by taking a little spread on everybody’s bet – would they?

If we accepted  that they would, we would have no choice but to poke our investment consultants in the ribs, and tickle their feet and sing them silly songs.

three wise monkeys

Which we would never do!

The best thing about the monkey league- is it is not played with money. Betting on winners and losers is a mug’s game- though we will never learn!

So to enjoy a happy season, avoid the bookies, put your bets on the Monkey League and if you are going to invest in any stock- bet on the bookies winning!

 So here’s how to enter

The competition is free to enter, and there is a bottle of champagne for the winner.

The whole thing is organised by our actuaries who find the completion of the macros that drive the algorithms, so satisfying that they delight in the delivery of weekly updates to you!

You will also receive humorous commentary and quizzes , usually with a statistical bent, allowing you to further waste valuable working time!

 To enter – you don’t have to work for First Actuarial- and you don’t have to be a monkey (though it helps).

If you would like to enter full details can be found here.













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If we can provide health screening – we can provide pension guidance



Organising the Guidance Guarantee is a daunting task but it is no more daunting than many public welfare initiatives.

Each year the NHS screens and advises millions of us on a variety of health issues. From STDs to Breast Cancer, we have become used to public awareness campaigns that offer us  everything from broadcast reminders to face to face meetings with a recognised practitioner.

The Guidance sessions offered to those at their selected retirement age will be fulfilling the same function  as the  screenings we are used to. While for the majority of us , these sessions will be informative and part of a process we control, for a few, guidance will require an intervention from a specialist – typically a regulated adviser.

KPMG published an excellent blog recently asking

“can patients get and use the information they need”

Reading this , health and wealth guidance could be interchangeable.

Patients need information that is often very different from the information that doctors think they need.

Our research into patient groups across the world consistently showed that, what patients felt was crucial information was ignored by clinicians. In fact for some patients groups the biggest gap between what patients needed and what they got was information.

If patients don’t receive what they need to know, they will not be able to be as active in their own care as we need them to be.

Often the clinical explanation is fine but it rarely helps to alleviate the fear and anxiety that comes with a diagnosis.

Information for patients that they can use improves clinical effectiveness, safety and patient experience. It needs to adhere to quality standards, be user-tested, and to be useful it needs to be co-designed and co-produced. Information must also be designed to meet different levels of health literacy.

It is now a basic requirement for organizations to have ways of communicating online and through mobile phone technology. Using clinically accredited apps to support chronic conditions and individual episodes of care, such as maternity care is the next step.

It is absolutely right to put the process in the hands of the independent agencies, MAS and TPAs. I have great respect for drugs firms but I would not trust them to advise me on my medical needs, I have great respect for insurers but they don’t offer me a view of my options-merely the options that suit them.

I have confidence that just as the NHS provides me with the superstructure under which my health needs are delivered, the delivery may be from NHS staff or from sub-contractors, managed by the NHS.

I am not concerned about the structure of the delivery, I am concerned that it delivers to my needs. The more I can do online, the better for me- I am not happy sitting around in waiting rooms. But I am glad that drop in centres and A and E departments are there for me if I feel the need.

A lot of people say that we cannot recreate through TPAS , MAS, the Citizens Advice Bureaux and Age UK the support mechanism for 3-400,000 people retiring each year.

If we had adopted that attitude when we established the NHS, we would have a healthcare system as dislocated and un inclusive as n the USA. It is because we rise to the national challenges we set ourselves that we progress.

So let’s put aside the prejudices we may bring with us. I know that many IFAs resent MAS for the fees they pay to what they consider a wasteful rival. I know many regard TPAS as a tin-pot chat room for pension do-gooders, I’ve heard the jibes about CAB and the general scorn poured upon the concept of the Guidance Guarantee.

But dissing the project misses one important point – the Guidance Guarantee is the opportunity we have to restore people’s confidence in the retirement process. I was sceptical about the Olympics and was proved wrong, I was equally sceptical about auto-enrolment and I am sceptical about the Guidance Guarantee.

But I loved the Olympics, am loving the way we are steering auto-enrolment forward and am determined that the Guidance Guarantee and what follows it (the development of better in retirement products) will work!

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How retirement products evolve (and revolve).

industrial agrarian financial services


There are three drivers that shape the evolution of financial products – supply, demand and Government intervention.

Between the mid 80s and today Britain has seen a Financial Services Revolution that has been no less dramatic than the agrarian and industrial revolutions that preceded it.

British Financial Services has gone from family owned stockbrokers, local bank managers and bicycle clipped insurance agents to the behemoth that today drives the British economy. In terms of Pension Policy the approach has been to sit back and watch the market forces play out.

For insurers, asset managers and advisers, the last 30 years have been a great success. Success has been linked to light touch regulation and (to a degree) has come at the expense of the consumer. Government intervention, when it has come , has primarily been to sort the mess out; it’s been tactical rather than strategic and involved crisis management (pension mis-selling, Maxwell, Equitable Life and exorbitant product charges)

Auto-enrolment- the first strategic intervention in retirement savings

There has been no strategic intervention in the way we save for the future – that is until the last five years.

Putting aside Stakeholder Pensions which we can now see were “too little too late”, it wasn’t till the introduction of auto-enrolment, that Government made a concerted attempt to change long-term savings behaviour in the UK.

At the same time as tackling the savings-gap, it at last intervened to reform the ailing State Pension System which had been withering on the vine after successive cuts from 1987 onwards.

In the absence of any Government intervention for nearly twenty five years (the legislation permitting personal pensions was enacted in 1987), the balance between supply and demand needed some attention. Workplace pensions , as they had evolved, had fallen into such disrepute prior to the introduction of RDR in 2012 that the larger proportion of them will have to be re-written or wound up following the imposition of minimum standards by the DWP in 2015.

Abolition of commission  and minimum standards was a consequence of auto-enrolment

These changes to workplace pensions will not effect the fundamental dynamics of how we save for later life. We will continue to use equities to protect the long-term savings of workers from inflation and provide funds for old age in a form better suited to provide cash and income when needed.

Auto-enrolment was the game-changer, RDR and the Minimum Standards- followed.


The 2014 budget was a revolution for pensions

The intervention from the Treasury that will result in a revolution in financial products is the withdrawal of HMRCs restrictions on how the proceeds of approved pensions can be drawn. This will lead to a lot less money being invested in gilt-based annuities, a lot more money being invested in equity based drawdown products and more money being cashed out and spent or kept on deposit.

In terms of product evolution, this is going to be much more of an accelerator. In introducing the DWP reforms, Steve Webb explicitly referred to the need to re-balance the interests of consumers and the financial services industry.

Put bluntly , once auto-enrolment had solved the distribution issue, there was no reason for financial products to be loaded to pay for distribution. The DWP reforms are simply tidying up after RDR and AE and are as such evolutionary.

George Osborne’s Retirement Reforms are revolutionary, both in terms of their explosive impact and in the circularity implied by “revolution”. They  take us back to a time prior to the introduction of personal pensions when the savings vehicle paid the pension.

Looked at logically, the disruption  at what HMRC call the “crystallisation event” (the point when tax-free cash is taken ) has never been easy to explain. In an era when the lines between “retired” and “working” are blurred by 50 shades of semi-retirement, the all or nothing dichotomy of pre and post crystallisation simply didn’t make sense. Try predicting your “selected retirement age” and you’ll see what I mean.

Personal pensions always made sense in terms of the cash element, but what should we do with the 75% of the proceeds we couldn’t cash-out? Historically there was no such question, you saved with an insurer, the insurer paid you a pension (SEDA or RAP), you were in an occupational scheme, the scheme paid you a pension.

Individual  annuities were an interim measure to fill a vacuum.

We only saw mass-market for the individual annuity because firms like Allied Dunbar, Abbey Life and other unit-linked insurers would not offer pensions through with-profits deferred annuities.

What individual annuities replaced is set to make a return (the revolution)

Ironically, the with-profits deferred annuity looks like making a re-appearance  as part of the product revolution driven by the Osborne Budget reforms. It will reappear – hopefully- in rather better shape than it disappeared and will be re-named collective defined contribution (CDC).

A sweet irony of the Government’s legislative program is that the Bill that announces changes in pensions law to allow CDC to (re) emerge, also legislates for the introduction of the Guidance Guarantee.

The Guidance Guarantee is only an interim measure

Much has been made of Guidance as a means for individuals to make sense of their retirement options, but in the context of pensions evolution, I would accord it a very small (though important) role.

The Treasury sees the market for the Guidance being all those approaching retirement with a pension pot (rather than soleley a guaranteed pension from state or defined benefit scheme). There are some 18m of us, arriving in cohorts of between 3-400,000 a year and right now, these people have no obvious way to invest the proceeds of their retirement saving.

Annuities are unattractive, income drawdown expensive and unpredictable, cash is tax and investment inefficient.

After 25 years of financial products chasing limited consumer demand, we now have too much consumer demand for the financial products available.

Over the 25 years between 1987 and 2012, personal pensions evolved from looking like de-risked retirement annuity contracts to the alternative to a Trust-Based occupational DC scheme. In the process  it moved from being an advised product to being pretty well non-advised. Investment in GPPs is now pretty well always on a default or “self-select” basis.

The urgency of the revolution created by Osborne’s tax reforms means that 25 years worth of evolution of the personal pension will have to be squeezed into a couple of years product development.

Nature abhors a vacuum and consumers abhor no obvious answer to the question “what should I do”.

Annuities had been that answer but fell from grace. Advised income drawdown will never be that answer as it requires too much care and maintenance- it is not a default solution. Cash is not an answer for the majority of people who get that they need reliable  income more than invested capital in retirement.

So the Guidance is merely an interim product brought in till a new default evolves. The current array of choices requires guidance but when the new default arrives, the need for guidance will fall away.  Currently – with no alternative but annuities and cash- the need for advised products has never been greater, advisers should fill their boots as in the longer term future they will not have the rub of the green that they have now.

The interventions by the DWP, auto-enrolment and the introduction of minimum quality standards are their first meaningful reforms in the long-term savings market since A-Day in 1987, the interventions by the Treasury in the Budget 2014 mark the end of a 25 year experiment with individual annuities.


The creation of a new “in retirement” default product is inevitable

“Man is born free but everywhere is in chains” , claimed the philosopher, “mankind cannot stand too much freedom” said the poet TS Eliot. The reality of freedom and choice will not be personal financial empowerment but the evolution of new products capable of providing a default solution for the savings of millions of us.

These products will synthesise the transparency and engagement of personal pensions with the predictability and collectivity of earlier products. Without this development in product evolution we will be left with the mess we have today – and Guidance


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Three old farts on DC regulation











John Reeve, whose previous comments on DC I have dismissed as the “wittering of an out of touch actuary”, has written a telling comment on mallowstreet. I’m sure he won’t mind me re-publishing it here.

Last week the Pensions Regulator issued his Annual Report along with a summary document (there is a comment here on the attention span that most of us now have for his 152 page documents) . In this he admitted to missing two of his key KPIs on DC Governance.

Frighteningly only 12% of employers surveyed (52% of advisors) were aware of the Regulators 6 principles (target 60%, 90% of advisors). Whilst the way this was measured means that this is smaller employers it is a major failing. In addition 61% (target 75%) of large schemes met 80% of the quality features. For small schemes this falls to 42% (target 50%).

Should we be worried about this?

I think we should. Whatever you think about the DC Principles and Quality Features they are here to stay and the Regulator has set his stool out to see them adopted. With the focus more than ever on DC through AE we can expect the focus of the Regulator to come down even harder on ensuring that these principles and features are met.

Am I alone in fearing that compliance may come at the cost of common sense with Trustees and GPP Governance Committees being forced to focus on jumping through the Regulators hoops rather than focus on the matters that are really important to their members?


I do have some thoughts….

There are two divisions of the Regulator whose work involves DC pensions but you wouldn’t know they worked in the same building.

The Auto-enrolment division concern themselves with the struggle to herd 1.2m cats in an orderly fashion through stages while the DC team struggle on with the 6 principles and the 31 (or is it 32) quality features.

I work with employers with 10-50 employers and I doubt that more than 1% have even heard of let alone care about complying with these principles and features. From now on , all that they are interested in will be that the provider takes care of that for them. Governance is a matter for the Trustees and IGCs.

I see absolutely no impulsion on employers to provide governance for their staff, PQM is totally irrelevant to smaller employers.

What will be interesting is to see for how long the larger companies continue to invest in “own-scheme governance”. My guess is that once commission ,AMDs and swanky defaults are removed, we won’t be seeing much pensions advice from independent advisers and increasingly the responsibility for governance will revert to the provider.

Like it or not, advisers will struggle to add value necessary to command fees equivalent to the commissions they are currently taking.

Increasingly the Regulator will concentrate on the regulation of the handful of master trusts receiving substantial inflows from AE staging ,the small number of occupational DC schemes used as qualifying schemes and the much larger number of derelict occupational DC schemes which still manage a large amount of DC money- but with very variable standards.

IMO- the Principles and  Quality Features are weak and unenforceable, the Pension Regulator should concentrate on enforcing  the Further Measures for Savers in this year’s DWP paper.

The vast majority of the 40,000 own occ DC schemes on tPRs books would be best transferred to well run master trusts using bulk switching. This will leave the hybrid plans with underpins which are properly DB and the DC sections of DB plans and the high quality DC plans which embrace good governance.

I haven’t read the Pension Regulator’s strategy document and will do now.

If Andrew Warwick-Thompson is reading this, please give some serious thought to the budget reforms and ensuring that occupational schemes do a little better at retirement than they have over the past ten years,

The real failure in DC country has been in decumulation not in accumulation, something that was flagged by Roger Urwin and others back in the 90s as inevitable.

In the context of the failures in decumulation, enforcement of the Quality Features looks a red herring!



I have now read the Pension Regulator’s Annual Report and Accounts from which John quotes.

I’m not qualified to comment on DB , my comments on DC remain unchanged but I’d give a triple tick to the Regulators part in the participation in auto-enrolment.

Most of the 152% take up in the use of tPRs website is attributable to SMEs using their well put together AE website.

I’d like to see the promotion and enforcement of the  Minimum Quality Standards at the centre of the DWP’s DC work.

Most importantly, we need to get the 1m employers still to stage auto-enrolment making smart choices on behalf of their staff and not trying to bodge failing schemes into QWPS.

Of the 13,000 employers who’ve staged- let’s make it a 2015 and 2016 KPI that 100% of these schemes meet the Minimum Quality Standards!

That’s not to say we shouldn’t be doing great things to improve DC among the NAPF membership as well but these properly advised schemes probably need less attention.


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“Who’s the we?” – a blog about advice and guidance

It's better when we do it together

It’s better when we do it together

On Sunday I wrote a blog about the ten things I wanted to see in the Government’s response to the Consultation it’s been running following the retirement reforms announced in the budget. You can read it here.

As we’re ten out of ten, we’re pretty happy with the decisions taken, but the announcements haven’t been universally welcomed. Witness this exchange

Several tweeps picked up on Pension Champ (Alan Higham’s) tweet (a rebuke to me for claiming to speak on behalf of others without a mandate!). So I will try to explain what I meant by “we”.

I am trying to speak for 18m people in the UK for whom work is not just a means of paying the bills but also somewhere where they generate income for later years.

When “we” pay national insurance we earn credits for our single state pension, when “we” don’t opt-out , we are enrolled into a workplace pension and many of us go further and use payroll to make voluntary contributions to insure against us running out of money in later years.

We know that whatever we save, we are unlikely to see, simply from our retirement savings, a sustainable income that replaces our previous standard of living. We know that we will either have to keep on working (Ros Altmann’s older worker’s agenda) or cut back or rely on money trickling down from older generations.

The “we”, I am talking about are the people I have worked with since I left college school in 1979, the younger people I work with and those who helped me along the way, many of whom are now enjoying the fruits of their labours in their later years.

And if I am talking about us collectively , it is because we behave collectively. We flock to people who are on our side like Martin Lewis (and Ros, Alan Higham and Paul Lewis)

Alan Higham hit the nail on the head yesterday when he pointed out that even Martin Lewis had fallen for George Osborne’s line that you’ll be able to get free impartial advice about your pension options from April 2015.

Alan’s comment was that 7m people rely on Martin for information, guidance- many would say “advice” and that if he interchanges the words, then it’s likely his 7m readers do too.

The BBC ran its news story yesterday as “New pensioners to get independent advice” though the “advice” has now changed to “guidance, “we” have read “advice”, George has called it “advice” and in every guidance session from April 2015 the question on the lips of everyone of “us” will be “so what should I do?”.

Which is the one question that “guidance” cannot answer but “advice” can. Advice includes the provision of a definitive course of action and guidance doesn’t.

And – coming back to my tweet, 90% of “us” want to be at least 90% right. We want a – solution that we can fall back on if our best endeavours leave us flummoxed as to what to do.

When we get presented with the investment choices on our works savings plan, 90% of us choose the default despite us knowing there may be something better out there.

And when we come to retirement 90% of us will want a solution that is reliable, predictable and understandable, that pays out fair shares and is there or there about in terms of the best rate.

Most of us do not want to plead that we are on our last legs and go for an “impaired life annuity”, most of us do not want to appoint a stockbroker or wealth manager to run a bespoke investment strategy with our retirement savings. We want to do what other people are doing and we want to be protected from the negative aspects of herd decision making by Government and Governance.

Which leads me to my big point. Currently there is no consensus product. We have annuities (on which you should take advice), we have individual drawdown (on which you should take advice) and we have “cash” which is what you take if you are a mug- because you will pay lots of tax and get a depreciating Lambhorgini and a hole in your packet by the time you are 75.

People are going to go to those guidance sessions and come out feeling they’ve been presented with Hobson’s choice, an advised product or the risk of financial impecunity in later years.

And this is exactly how those who sell financial advice want it to stay. A polarised choice between an advised annuity and advised drawdown with the prospect of blowing it if you don’t take advice is the content of the guidance guarantee that most financial advisers want.

But it’s not what “we” want. “We” want something that doesn’t lock us into an annuity for the rest of our lives and doesn’t have the servicing costs and unreliability of individual drawdown.

We want to roll back the years to the day when our pension fund provided us with a pension without us having to do much more than give the bank account details into which we wanted the pension paid. We want to know that the process is properly governed and that the rate the pension is paid is sustainable (eg the money won’t run out).

Most of all “we” and I include myself in this, don’t want to have to bother with our pension- we want it to take care of itself to leave us to go fell-walking or umpiring cricket or writing books on fly-fishing (ok- that’s my ideal and I’m sure you have yours!).

So ultimately people want to be advised about what people like them normally do. They don’t want to be told what to do and they certainly don’t want to be told they have to take advice.

Given the information about what’s out there, and what others are doing, most people will do a little investigation and then they will do what most other people are doing, a few will buy an annuity and a few will opt for advised drawdown.

Right now, no-one is building the non-advised product, and that is because they are scared. Asset managers and insurers are scared about annoying IFAs and scared that a mass market product will reduce their margins. Some insurers hope that by sitting on their backsides – people will return and buy annuities, many see the high margins in individual drawdown denied them from workplace pensions.

Employee Benefit Consultantsand insurers or are busy trying to become asset managers themselves,

Advisers are happy to see the status quo continue.

And the status quo will continue until someone in Government gives a big green light to a Legal & General or a NOW or NEST or someone we haven’t even heard of yet – to allow them to build products that offer non-advised drawdown and ultimately the more radical CDC product.

“We” want that product, the 7m people who follow Martin Lewis want that product, the 18m people George Osborne reckons will benefit from the new pension freedoms want that better product.

And in saying this, I am not dissing advice. Advice is essential for people who want it and for those whose financial affairs warrant it. The market for in retirement advice has massive growth potential but it is not the mass market.

Non- advised products-  the Single State Pension and the workplace pension you’ve saved into, will produce non-advised pensions for most of us.  “We” means both the general population and the people they rely on to provide pensions.

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10 things we’d see in Monday’s Guidance Guarantee!

michelle cracknellTreasuryMaggie Craig


Tomorrow (Monday 21st July), the Government will announce how it intends to deliver the guidance guaranteed to those reaching state pension age.

We want an independent process that helps people  take decisions rather than telling people what to do.

We can’t see how guidance can be ring-fenced from advice, especially in a face to face meeting. But we’ll stick to “guidance” for the moment and hope that common sense takes over from semantics in time!

So, never a blog to miss a chance to stick its head above the parapet, here’s the Pension Plowman’s “GG Wishlist”.

  1. The Government sticks to its promise to provide Face to Face guidance where needed
  2. That for those for whom the logistics of F2F are too difficult, telephony and web-links are available
  3. The offer is made by Government in a similar format to NHS check-ups – e.g. a written invitation that arrives in the post
  4. That a central control is established, preferably with the Pension Advisory Service (TPAS), responsible for content and delivery
  5. That the Money Advice Service provides secondary support using its web-based resources
  6. That the Citizens Advice Bureaux are used to deliver Face to Face sessions
  7. That the sessions are no longer than 30 minutes
  8. That the guidance session is not “one and go” but links to TPAS support (where needed)
  9. That the GG is funded by a general levy on the financial services industry
  10. That it is delivered to time to those at SPA but with the ambition to pre-guide those in the pre-SPA retirement corridor (55 onwards) within the next decade

In a future blog, I will review how many of my top ten GG wishes, were realised!

Right now, take the poll and we’ll see how popular the Government’s preferred solution is!


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What are your CDC property rights?


Some pension promises are easy to value

If I promise to pay you a monthly amount over the next five years, it is fairly easy to work out the value of that promise. At it’s simplest level the value is just the sum of the 60 payments though I may want to apply a discount to the value as by the time I get some of the money, it won’t be as valuable as it is today (inflation does that to money!).

But if I promise to pay you a sum of money over the rest of your life, then the sum is a bit harder as I have to guess how long you are going to live, the discounting will (hopefully ) be over longer.

But in both cases , the sums aren’t that difficult and reference to simple tables allows a mathematician to value the promise in pounds shillings and pence.

 CDC promises are harder to value

But this is where it gets interesting. The new CDC pensions have some certainty, we can value what’s going in and estimate what that might buy you by way of a lifetime income at the point of investment, but what you get is subject to the markets and not to a guaranteed formula..

So every payment made into a CDC scheme buys a right to a share in all the pensions paid out by the Scheme but not necessarily a right to a share in the fund. This is quite hard to get your head around but think of it this way.

Whoever runs the fund is trying to ensure fairness about the way it is spent so that there are rules that people feel comfortable with. Life is not entirely fair, some people find that the timing of investments works against them, others end up spending their pension for shorter than others. It may be that some generations get luckier than others.

Trust , transparency and good rules

But these general unfairnesses are bearable as long as we know the rules. People don’t like negative equity in their property but they accept that the price of a house can fall as well as rise. It’s not particularly fair if you are owning a house in Northern Ireland and see property prices shooting ahead in London but you knew the rules when you purchased.

 Valuing the future promise not the present value

We have got used to valuing our pension savings with reference to a unit price. Multiply the units held by the unit price and you have the residual value of your pension pot. This is what happens on the way up (the saving phase) and this is what happens on the way down (drawdown).

But CDC may not work like this. Instead it may work on the basis of the amount the person running the scheme has put away to pay you your pension, and that value will be dependent on what’s happened before- (the timing and incidence of your payments, plus the investment growth since they were made). It will also depend on an estimate of what’s still to come (how long you are expected to live and the amount of discounting going on).

 With CDC, neither the value of the capital or the pension is constant.

Now this is why everyone is getting so aerated about CDC. Whereas DB offers a guarantee of the pension in payment and DC a guarantee of the capital value of your savings, CDC offers no guarantees at all.

And without a guaranteed value, it’s tough on the tax-man!

How , for instance, can the value of a CDC pension be assessed by the taxman for your lifetime allowance. DB plans have a straight 1 for 20 formula while DC plans are valued on the capital value of the units, but CDC transfer values depend on a whole range of factors , at the discretion of the Scheme manager.

 Discretionary values – a charter for Mr Ponzi?

This is why John Ralfe refers to CDC schemes as Ponzis, because a Mr Ponzi , or Mr Maddorf or any of the other crooks who dish out promises with one hand and spend member funds with the other, could be at work here.

It is perfectly true that CDC depends on trust and John Ralfe and others know that the best way to test trust is to robe and ask the awkward questions.

The really awkward questions for CDC Schemes will always be about whether they are spending too much on people’s pensions or spending too little.

Are they reserving too heavily, or operating at a deficit?

Are the property rights offered to you by way of a transfer value unfair on you or others in the collective?

 The answer is that there are no definitive answers

… the answers to those questions will always be “that depends”.

The dependency is about what will happen in the future, how long the people in the scheme will live, how much support will come from new people joining the scheme and what the markets will do to the underlying fund.

But…and this is the point of this blog.. we are a country that has a very mature attitude to notional property rights. We are a country that understands the difference between a poorly run scheme and a well run one.

When something goes wrong as it did with Maxwell and Equitable and Lehmann Brothers, we accept that these things happen. I am quite sure that a CDC scheme will get into trouble at some point. NEST has been subject to a multi-million pound fraud, State Street nearly got away with stealing millions  from the Sainsbury’s pension scheme, people are living on annuities which are half what they should be.

But we also know that the pension system we are part of is under immense scrutiny from Government downwards and that whatever emerges as a CDC pension scheme will need to be scrupulously managed. Every decision on how to distribute , how to value transfers and pay individual payments must be open to scrutiny and rigorously tested.

Is there enough trust in the pension system to tolerate this?

The slogan of the Pension Play Pen Linked In group is “restoring confidence in pensions”. If people have confidence in pensions, CDC will be given a try, if it fails – people will have the right to feel let down and will rightly point the finger at people like me.

I do believe we can have fair property rights in a system of pension payments that depends on discretion. It won’t always be fair and there will be times when mistakes are made. There will be bad practice as well as good practice but I strongly feel that we live in times when it is easier to see through to the core of things (mainly because of advances in information technology).

May this debate continue, it needs to be had, but may it continue in the public arena and not the arcane corridors of power that obfuscate rather than clarify.

CDC is about trust – not about certainty – and that goes for property rights too!

We can value pensions , we can even value CDC pensions, but valuations must be based on trust and not the spurious accuracy of a purely market based approach.



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……we have a problem, Brighton.


Every so often we get asked questions by  people to whom the answers really matter. I’ll leave you to guess who might be asking these ones!



a)Is there really a problem for unadvised small and micro employers to understand the market and identify pension scheme(s) suitable for them?


We think there is and your research confirms ours. The economics of commission based distribution meant that most companies staging up till now had a workplace scheme but as we move into the back end of 2014, the percentage with a workplace pension reduces alarmingly. (see chart below)




What schemes are in place for smaller employers are often uncompliant with the post 2015 qualifying rules (e.g. commission, AMDs, lack of governance, high charges, no default, and restrictive entry). The problem may be worse than your figures suggest as so many small schemes won’t be fit for purpose


A google search on “choose a pension” calls up a handful of providers, TPAS and tPR. Pension PlayPen is not advertising on this phrase but manage to appear 5th on the google list after yourselves, CAB, this is money and the FT. This suggests we are the primary commercial site for this kind of search.


Short of answering the ads of L&G, NOW and Standard Life there is no way of assessing what is out there!



b)   Are there already solutions to this problem out there suitable for small and micro employers?

The great thing about advising on workplace pensions is that the advice is unregulated!

workplace advice

It is quite extraordinary that with such freedom, there is virtually no comparative advice on workplace pensions to be had.

We know only of only one product and it’s ours! (choose a pension- CAP) which attempts to provide the complete service detailed below. We are “inside”partial services such as Chris Daems’“AE in a Box”and HR Essentials’“AE project management service”.


80% of our business is referred with the majority of referrals coming from accountants and IFAs. The market is moving towards us, we have not got the time, resources and muscle to promote ourselves as we would like to. But so far in July we have picked up 4 national awards as the media begin to “get it”. is often referred to  as “employer facing” and this is true. But we have over 500 intermediaries registered on with numbers increasing by 50 a week.


So what are the alternatives?


Many employee benefit consultancies will offer a whole of market broking service but at a cost of several thousand pounds – assuming a bespoke service to an employer.


Some consultancies are offering vertically integrated products which are promoted ahead of an open market option- some IFA networks (notably Lighthouse) are also offering house solutions.


Principal IFAs suggest NOW, NEST and Peoples as Providers who will accept all employers and Pension PlayPen for those who want to make a whole of market choice.


Our discussions with SimplyBiz, Intrinsic, Openwork and Sesame suggest that middleware is more important to them than the workplace pension and there is still regulatory confusion about when advice on workplace pensions needs to be regulated. Regulated firms seem to consider non-regulated work outside their remit!


The same problem occurs with many of the accountancy firms we speak to. For them, the issue is whether as non-regulated organisations they should be even talking about – let alone advising on- workplace pension selection.


c)    Could existing products or services be made more effective/adapted to address the needs of small and micro employers, e.g. could advisor-facing products be opened up to an employer audience?

The products created for advisers by F&TRC and Defaqto aim to add value through the depth of analysis of product features. There is little alignment with what tPR considers the characteristics of a good scheme, nor is there much alignment with what customers want (referring to your research).

Most advisers are still considering workplace pensions from a sales perspective (concentrating on maximizing contributions rather than focusing on outcomes).


A portfolio of 4 or 5 GPP’s with 50-100 members was all an IFA firm needed to have a successful department. They focused on this sweet spot of the market.


Very few IFAs marketed to smaller SMEs or micros as this was not cost effective.


No IFAs have developed automated selection tools which we consider necessary to deal with bulk enquiries. They have concentrated on providing AE support services which replace the annuity income lost from trail commission.


While writing this paragraph an enquiry arrived from an IFA. We quote it as it demonstrates how far IFAs are from advising on workplace pensions


We wanted to get in touch reference your auto enrolment “playpen”(sic)

As you could probably guess this (AE) is an area we are also working in, both for existing and potential new clients.

Our proposition deals with implementation and where required ongoing advisory services for the pension members via our IFA company. Appreciate there may be some overlap but wanted to ask as to whether there was scope for us to forge some form of alliance in  having an informal arrangement .


IFAs are looking for long-term relationships with a small number of high-value clients. To properly deal with 1.2m new employers they should be offering a light-touch automated service at low-cost with no obligation for the employer to see them again.


We fear that the two models are mutually incompatible.


We have no cross-sell to the 350 employer who have used our service –indeed we don’t even contact them post sale unless they ask us to.




d)   How could visibility of those products best be increased among the diverse population of unadvised small and micro employers? Please let us know if you think there are any barriers to increasing visibility to this sector of the market.


This is our big challenge. We recently met with the head of BBC economic affairs, Hugh Pym. Hugh was under the impression that the only scheme you could use for auto-enrolment was NEST. Clearly issues about choice are not confined to micro employers!


The obvious route is to invest heavily in google though we think that only a small percentage of employers will buy in such a random way.

Assuming that IFAs don’t get their act together (and we see very little appetite to advise on a product with such little certainty of payback, then the next stop is the accountants and HR specialists


Websites such as and , publications such as Payroll World and the various online groups that they spawn are the ideal places to get brand penetration so that micros know the name.


However there needs to be an enormous amount of trust building between the pension providers and payroll, HR and finance functions. Our experience so far suggests that most accountants do not think they can advise on workplace pensions full stop. Until that impression is dispelled (and it’s not being dispelled by ICAEW) then it’s hard to see most practitioners helping in choosing a pension.


We don’t see the majority of small business groups being able to do much more than bring people together (and even here the numbers who attend pension meetings are very small). The Federation of Small Businesses, of which we are a member, seem to see AE as a revenue generator and a chance to promote their in-house IFA.


We would be interested to know how successful they have been with this model but suspect that these organisations are not proving the turnkey some thought. There is resistance to the fees necessarily charged to advise face to face on a bespoke basis.


The scaremongering story that the Pension Regulator is going to fine you £10k a day is a lot easier to market than the long term benefit to an employer of getting the workplace pension decision right




e)    What would the appropriate level of scope and sophistication be for solutions for small and micro employers who want to choose a scheme without the services of an intermediary?


We’d like to say but we are clear we haven’t cracked it yet. The big issue won’t so much be the AMC but the on boarding costs between providers.


The insurers are now mostly charging for implementation and ongoing services on top of the AMC and this is providing a propulsion of new business to NEST, NOW and Peoples which are free to use.


The second major issue is the support for AE from the provider. We are finding that employers are flexing the weightings for admin and payroll support “up”and depressing the weightings of member-centric product features (investment, at retirement services).


We worry that members will be asking employers the criteria for the decision taken “cheap and easy for us to use”may not be the answer the member wants to hear!


We think the scope of any service must include

  1. A means for an employer to do a workforce assessment and model the cost of contributions under the various certifications, phasing and salary sacrifice
  2. A means to understand what providers will offer a quote and a means of understanding the nature of that quote
  3. A means of comparing one quote against each other- we use a balanced scorecard
  4. A way of recording the process into an audit trail which can be used now and in future to justify the decision
  5. A simple means of kicking off with the provider- ideally with an API to minimize fuss and bother.We think that the service must have the capacity to deal with sophisticated employers (we offer pretty well the whole First Actuarial analytics if needed). But it must be presented in such a way that it is idiot-proof and doesn’t intimidate and drive-away SMEs and micros without any pension sophisticationThe Answer of course comes with experience, our own analytics tell us when we are getting it wrong and every iteration of our service is close to what the customer needs and wants.    
  6. You hear
  7. Just look at what the public need and how it plays in the Provider’s Boardroom
  8. There is a system that addresses this problem- we own it! The hardest bit for the pensions industry is to rid itself of the conflicts that stymie innovation.
  9. f)    If you dont think the market will or can address this problem, why not? Please indicate whether these are purely commercial considerations or other more basic/fundamental considerations
  • Simple practical steps on how to choose a pension scheme without having to understand scheme types The Provider hears
  •           You hear
  • were losing our brand here – our USP is our marketing and this is driving a coach and horses through our sales and marketing strategy
  • Practical questions to ask to ensure the scheme is suitable (e.g. can I buy it direct, will it do everything I need to do)The Provider hears
  •           You hear
  • this means people rating what we do and calling us on our deficiencies – weve always had control of what people said about us- thats why we had direct sales forces and had the IFAs in our pocket- this is too scary
  • Shortlist of AE schemes available to themThe Provider hears - “so were supposed to advertise our rivals when weve got these employers eating out of our hands – forget it!          You hear
  • Ability to compare charges and any employer fees of shortlisted schemes
  •           You hear
  • The Provider hears “margin erosion- were not having that!
  • Ability to compare wider AE support offered by scheme (e.g. workforce assessment , communications to workers)
  • The Provider hearswhich means pitting our auto-enrolment hub and supported middleware against integrated payroll solutions


So we think that there is very little appetite from the pensions industry to help here. These conflicts make it impossible for the ABI, frankly the NAPF aren’t at the races, our conversations with Unbiased don’t suggest they are planning on building anything for the IFAs (a cottage industry) and none of the major pension consultancies are interested in sharing their prized intellectual property. As one partner of a rival firm wrote to us



“Frankly you have to be mad to try. The chances of getting your fingers burned are high, development costs are high, the skills needed to offer something as simple as needed without compromising our integrity just arent there


Nor are commercial organisations going to endorse an organization like ours without wanting a finger in the pie and the pie has not got enough fruit in it to warrant fingering.


The price people will pay for a choose a pension service is driven by need. At the moment employers do not feel they need to choose and so plump for whatever claims to sort out the problem.


If advisers and accountants continue to duck the pension selection issue then it’s hard to see how things are going to improve.


It would be helpful of Government to do something to promote choice. NEST is a net beneficiary of “no choice”and we can understand the DWP wanting NEST to pick up business (it has a debt to be settled).


But NEST is not the only fruit and we want other master trusts and insurers to be properly represented

So some kind of market intervention is probably needed.


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Male, Pale and Stale – in your face!


I’m not having this demonisation of William Hague, who is leaving office today at the ripe “old”age of 53. Hague is a top man and a voice of sanity in a UKIPutous world

He is leaving Government so that “Dave” Cameron can show his populist muscles off by employing a right wing nit-wit (Hammond) who will defuse Farage.

So good sense will be replaced by populist clamour and we will throw yet more toys out of the euro-pram, to the great amusement of our European neighbours.

By happier coincidence, yesterday also saw the Cornonation of Tsar Ros, in the secular Cathedral of 1 Coleman St. (all doff your caps- it was in the Legal & General boardroom).

My previous blog was quite nice enough about Ros , but I’m going to be nicer still by reminding her detractors, that her Tsarness is doing her work PRO BONO, which won’t be pleasing Mr Altmann too much (get a proper job woman!).


Like Hague, our new Tsar is of a certain age, she is not male and judging by her French tan, she is unlikely to be pale for some time.

If Hague was being kicked out for being “stale”, past his sell-by-date, perhaps Ros can find him a new job.


Yesterday we heard about National Express who have taken great strides to re-enploying older workers by offering them flexble working hours. Another firm mentioned talked of older workers as “gold-dust” while an organistion called Anchor (who I had not heard of before) spoke about older workers value helping the infirm and demented in nursing homes.

One contributor at an excellent ILC event, demanded more positive storylines about older workers in what she charmingly referred to as “light entertainment”. If this means killing off Norris is Coronation Street, I’m against it -he makes me laugh- but Rita does it for me- we need more of her.


I’m not having Billy-boy Hague being drummed out of politics for being state and I’m not having this line about the likes of Norris stopping decent young folk from getting jobs.

The bottom line is that we create jobs by employing people who increase productivity. Getting people in this country to work an extra year is equivalent to 1% on our GDP. 1% on GDP means more goods and services to be bought and more jobs for youngsters- not less.

So the next time you hear the tired argument “fund your staff’s pensions, it’s the only way you can get rid of the buggers when they’re over the hill” stop and think.

Andrew young

Here’s my mate Andy, just turned 65 and like the clever actuary he is, he’s decided to put off drawing his “old age pension”, because until 2016 you’ll get an extra 10.4% interest for doing so! Andy will be championing all kinds of pension causes for as long as he treads the planet.

He will because, like Ros and me and loads of others, we want to be treated properly when we get to the point when we can’t look after ourselves.


Britian is a kind and fair country which intends to look after its elderly population. Ros is a kind and fair person who champions the causes of those in elder years. There are many like her, the great Dr Deborah Price, Sally Greengross of the ILC,


8th Annual London Older People's Assembly, City Hall, London, Britain - 05 Aug 2010


and yes there are a lot of women else.

And there’s Kevin Wesbroom with the halo over his head (to prove you can be male and saintly)

Infact the Guardian recently published an article that was no more than a string of positive images of older people that you can look at here


I look forward to the day when the the state pension age is a milestone not a buffer, when people approach their mid-sixties calculating how much they want to work, not how much they need to work or worse still- whether there is work for them to do.

I look forward to taking a later life gap year when work doesn’t come into it and I can sit back and consider my options  with a degree of financial comfort

And I very much hope that the current formulation of “male, pale and stale”, will be taken out of the political and social lexicon. Frankly Britain is better than that.



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The internet of pensions

unage of pension

A group of teccies have come together to make the internet of things happen. This is from their press release

The Open Interconnect Consortium (OIC) is focused on defining a common communications framework based on industry standard technologies to wirelessly connect and intelligently manage the flow of information among personal computing and emerging IoT devices, regardless of form factor, operating system or service provider.

Leaders from a broad range of industry vertical segments – from smart home and office solutions to automotive and more – will participate in the program. This will help ensure that OIC specifications and open source implementations will help companies design products that intelligently, reliably and securely manage and exchange information under changing conditions, power and bandwidth, and even without an Internet connection.

The first OIC open source code will target the specific requirements of smart home and office solutions. For example, the specifications could make it simple to remotely control and receive notifications from smart home appliances or enterprise devices using securely provisioned smartphones, tablets or PCs.

Which means we’ll have lower electricity bills, won’t run our of toothpaste and I’ll never forget to double-lock every door (Stella).



So that’s my house sorted, what about my pension? Can I have  readily accessible data on my smartphone,table or PC that is really useful to me, my clients and to the Regulator?

It seems to me that pensions is characterised by the lack of useful data to be had and the appalling load times to get the data from one place to another.

Case Study One,  we went to see a leading pension scheme and asked if they knew what they were paying for their foreign exchange hedging.  The CIO admitted to not knowing . When we asked why he said that his custodian could not collect the data and even if it could, would not provide it in a format he could make any sense of.

It’s called an information asymmetry


Case Study Two, The FD of one of our clients is asked by an analyst for the impact on the funding position of her DB scheme of a one basis point move  in interest rates (I believe this is called PV01). This number allows the analyst to understand the sensitivity to their balance sheets of market fluctuations. This information is only available through a handful of sources controlled by those with intimate understanding of the derivative markets. The FD pays a substantial sum for the calculation.

It’s called an information asymmetry


Case study three; I am planning on drawing a pension from my DC savings. I want to know how short I am of my target income calculated using the best guaranteed rate for an annuity, the lower and higher GAD rates (and here I am looking into the future) the highest lowest and median rates offered from a Collective DC scheme.

I want a number that expresses the amount I need to put into my pension to guarantee myself a pension, know how much I need for the upper and lower levels of drawdown and what a collective scheme will give me.

These numbers aren’t available and you’ve guessed it-

it’s an information asymmetry




Now in all three case studies, the data does exist, what’s missing is the pipe to get it from the data source to an integrated database and the savvy to convert that information into something the CIO, the FD and the everyday member can make sense of.

To paraphrase Eric Morecambe- we’ve got all the right numbers but not necessarily with the right people.


There are many other examples of intelligence that are failing us

  • We cannot go online and using the Gateway get an online valuation of our state pension benefits, what the cost of buying extra state pension and how much extra pension we would get if we were to defer retirement
  • The Pension Regulator cannot get Real Time Information on the number of employers paying over contributions to workplace pension providers in line with the auto-enrolment regulations
  • I cannot get an online account of the residual pensions I have from previous jobs.
  • I cannot get online transfer values for my personal pensions and occupational DC pensiosn
  • I cannot get online transfer values for my DB pensions.

The internet of pensions is pathetically limited and while I can look forward in the not too distant future to knowing if I’ve left the bathroom tap on when I’m on my way to work, there is no prospect that I’ll know what I’ve got, let alone what I need – from my retirement planning.

The Open Interconnect Consortium – pensions need you!



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Carry on nudging!


We may just have been nudged.

We’ve been getting  interested in salary sacrifice. We have been building a salary sacrifice modeller into the workforce assessment tool on by popular demand.

Initially I had thought  salary sacrifice was benefiting employers but following my recent blog on accounting web, I got this tweet.


If this is true, (Ceridian are both reliable and one of the major software suppliers to the payroll industry), then this is important.

Auto-enrolment contributions in the first years of phasing are so small they have hardly disturbed the surface tension that maintains inertia!

But we are still in a period of acclimatisation for many employers and their auto-enrolled staff. While  the implementation went well, they are still getting used to the temperature of the water!

But as smaller organisations become more confident, switching to a salary sacrifice arrangement may be the next stage in the process.

And we are very much in virgin territory now.

Those who think that DB provided universal protection to workforces large and small are kidding themselves. DB take up was typically targeted at  higher earners and those  with low but stable earnings were often disadvantaged if they did join by offsets which depreciated the value of benefits.

Most of the employers still to stage auto-enrolment have never offered a DC let alone a DB plan to staff so any pension contribution is a step in a new (and to many dangerous) direction.

If we can encourage employers to go the extra inch by adopting salary sacrifice, if it gets them and their staff engaged in the workings of pension contributions, then we are another nudge closer to an adequate contribution.


This is how you boil frogs, turn the heat up slowly and eventually you can turn it up faster.

Frog-b0iling may not be as politically acceptable as nudging but it comes down to the same thing. To get to adequate pensions for all we need to nudge and keep nudging and we needs always be careful not to alarm the frogs who still have the energy to jump out of the pot.





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Pension PlayPen overall winner at IMAIA 2014!



Not every swan is black

We do “new”, not because old is wrong but because new is where the future is. So we entered the IMAIA this year at the behest of our friend and mentor Jenny Davidson, the new Reward Director at Talk Talk.

Marketing’s a dirty word in some parts of my company, it is to actuaries what acting was to puritans, a satanic diversion from the job in hand.

While the day job is to pay people’s pensions in full and on time, there will be no pensions to pay if we don’t smarten up our image and make pensions a little more palatable to those who sponsor them.

This is the blurb from IMAIA which caught our attention.

The multi-billion pound investment industry just got  its own set of marketing awards to recognise the innovation and effectiveness across the sector

The Investment Marketing and Innovation Awards (IMAIA), hosted by Investment Week and Professional Adviser, were held on Friday 4 July 2014 at the Royal Garden Hotel in London.

The awards recognise and reward innovation within the sector.

The judges looked for entrants who showed:

  • The appetite to seek new solutions
  • The confidence to make them happen
  • The expertise and determination to turn new thinking into business success

IMAIA is a new type of awards programme. Some awards recognise only creative output; others require quasi academic papers to evidence effectiveness. IMAIA charts a new middle way.

‘The IMAIA categories are designed to embrace the entire investment community. Anyone who can demonstrate New Thinking in any of the categories is eligible to enter. This means a small firm of financial advisers can compete on the same level as global companies such as Fidelity.

‘A good idea is a good idea, irrespective of budget, and that is part of what we are looking to recognise.’

Thanks guys and thanks for the free ticket that meant that our friend Sarah Hutchinson was on hand to pick up three gongs.

Pension PlayPen is the social media organisation of the year

We beat off challenges from  Allianz Global Investors, ContractorFinancials Ltd,Finsbury Growth & Income Trust PLC,MRM and the lang cat (joint entry).

We love the furry Mark Polson of the lang cat who we are pleased to hear was highly commended

Pension PlayPen won the Inclusiveness Award

As we jolly well should have, being the only organisation that seems concerned about the quality of workplace pensions that are being purchased by the 1.2m employers still to stage auto-enrolment.

Pension PlayPen were judged overall winner for reward and innovation in the financial services sector.

This is no small feat. We are barely a year old and have only traded for six months, we employ one person and have no office, no PR and nothing but our digital footprint.

With total capitalisation of £200,000 from the back pockets of its founding directors, Pension PlayPen, is and will be making a profound difference to auto-enrolment. In our thought leadership, our capacity to bring together pension providers and out outreach beyond pension markets, we are doing what we said we would.

It is great to be recognised. I am really sorry I could not be at the awards in person as I support what IMAIA are doing and hope that this new kind of event will flourish.

Thanks to Incisive and to all at the awards- especially Brendan.

If you’d like to find out how to choose a workplace pension for your company or client – register here

If you’d like to come on Lady Lucy, tomorrow, mail

If you’d like to join us for lunch at the Counting House ,EC2 on Monday (July 7th) just turn up between 12 and 12.30. We will be debating whether we need Collective DC.


There were some consolatory factors that mitigated my disappointment. Thanks Masha and all who made yesterday’s trip so wonderful




The delights of Henley Royal Regatta – a Pension PlayPen annual outing!

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Pension PlayPen- Britain’s most innovative pension consultancy

workplace advice


Dawid Konotey-Ahulu mailed me yesterday to tell me we’d been named Engaged Investor’s most innovative pension consultancy. It’s a mark of Dawid’s genorosity that he thought to contact me, even though the firm he started Redington had (along with Aon) been the other firms shortlisted.

It’s quite something for Pension PlayPen Ltd to win a national award only 12 months after incorporation and says much for the judges (the great and on this occasion the good!). It also says good things about digital journalism which is putting innovation at the top of the agenda.


That’s enough sucking up, what is innovative about Pension PlayPen.

  1. That we thought to enter this award is innovative. Historically start-ups wait their turn, given a ten year track record- you might just be considered worthy of inclusion in a long-list but it’s presumptious to consider yourself in the same league as an Aon or Redington.
  2. What we do is innovative. No other consultancy has tried to help the smaller employers in Britain by bringing big-firm analytics within the grasp of the SME. We hope we have done our bit to keep choice alive in a world that could so easily become the domain of NEST.
  3. How we do it is innovative. We realised from day one that what was needed was a business to business portal that allows smaller firms to go about finding a workplace pension and using it for auto-enrolment without having to spend a fortune. DIY was and is the only way to bridge the advisory gap.
  4. How we get to our customers is innovative. We’ve forsaken the tried and tested routes to market, you can find us on twitter and google but you’re as likely to hear about us through Payroll World, or NACUE or AccountingWeb. We’re as interested in Buzz and Vice as the FT and the BBC!
  5. What we charge is innovative. Of the 350 companies who have used our service, only a handful have paid for the due diligence that we charge for. The majority have used us for free and we are happy with that. As our service progresses , we will ask more to pay, but for now we are busy restoring confidence in pensions and that takes an investment.


If you haven’t come accross us yet and are interested in the quality of pension on offer to your organisation, then register at, bang in your company details, assess your workforce, tell the machine what the company will contribute and find out who will provide a pension for you.


The key Intellectual Property is in the ratings of the providers and the scorecard that allows you to weight each rating by what’s important to you. Thanks go to First Actuarial for their due diligence, integrity and imagination in providing us with this reseach.

Whether you are doing this as an employer or on behalf of a client, the system is designed to be as user-friendly as can be. We try , as our name suggests, to make the business of choosing a pension, a pleasurable experience.

We are so so proud to have won this award and very much hope it will encourage a few more employers and/or their advisers to choose a pension our way!

old and new


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Pension PlayPen wins 7 and is shortlisted for a further 9 awards

payroll world finalist payroll world top 50actuarial post

pension age 2pension scheme awardspension awardsengaged investor trusee awardsima awardsthe pitchgbmallowstreet awardsevents-workplace-pensions-live-2014

For the second year running, Pension PlayPen has been short-listed for the Payroll World Technology Award. Pension Play Pen has also been shortlisted for the small schemes auto-enrolment implementation award. These nominations come on the back of Henry Tapper, Pension PlayPen’s founder being included in the Payroll World Top 50 earlier this year.

This is not the first time Pension PlayPen, still in its first year of trading has been nominated. It has been nominated for the best use of Technology in the Professional Pensions Scheme of the Year Award, a finalist for the Workplace and Savings auto-enrolment technology award and shortlisted for Provider of the Year in the Pensions Age  and Workplace Pension Benefits Awards

Henry has been nominated as Pension Personality of the year an incredible 4 times including 2014!

Even more impressively PensionPlayPen and Henry Tapper have won 7 national awards this year alone

  1. Engaged Investor Most Innovative Pension Consultancy of the Year
  2. Actuarial Post Social Media Champion of the Year
  3. Mallowstreet  Pension Innovation Champion of the Year
  4. Mallowstreet Peer to Peer Industry Personality of the Year (Henry Tapper)
  5. Investment Marketing Association Judges Overall Award  (Henry Tapper)
  6. Investment Marketing Association Social Media Award
  7. Investment Marketing Association Innovation Award

Henry Tapper, Founding Editor of Pension PlayPen commented

We love winning awards and we’re really excited about the possibility of being finalists in The Pitch 100 and the RBS GB Entrepreneurs Awards. It shows that pensions doesn’t have to be dull and doesn’t have to talk to itself. There are 1.2m firms still to auto-enrol and they need the fun, energetic approach of the Pension Play Pen, That it’s seven times a winner only goes to show Britain can’t have too much of a good thing!

Pension PlayPen  trades as . It is an online resource for accountants, book-keepers,IFAs and employers to choose the best pension for auto-enrolment and future-proof themselves by providing themselves with a fully documented audit-trail for less than £500.

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The best practice approach to choosing a workplace pension

hi res playpen


The Pension PlayPen has been asked to outline the research process that lies behind the Factsheets and provider ratings on . This is the process.


The purpose of Pension PlayPen research is

  1. To establish the universe of pension providers in the market
  2. To qualify that universe to a researchable list of credible providers
  3. To analyse the offerings of each provider according to 6 metrics
  4. To present this information in a way that makes sense to people who don’t do pensions for a living


To establish the universe of pension providers in the market


We know of 72 providers prepared to operate a workplace pension scheme that qualifies for auto-enrolment. These fall into three broad categories

  1. Providers actively looking for new business with national scope
  2. Providers actively looking for new business with limited scope
  3. Providers not looking for new business but looking to convert existing plans to qualifying plans


To qualify that universe to a researchable list of credible providers

Our view is to research all providers in (1), credible providers in (2) and not to research providers in (3) unless specifically asked to (where we are being paid for the research).

We do not charge any employers for the research we undertake and we endeavour to be entirely independent in our work.


To analyse the offerings of each provider according to 6 metrics

At the heart of the research process are 6 metrics we think important in helping an employer to decide on the pension provider for its staff

These are

  1. Cost; we look at the headline AMC of the default investment option. We do not take into account (here) the other investment costs (fund expenses) as these are analysed in the investment metric. The lower the headline cost, the higher the value we give to the provider’s proposition
  2. Payroll and HR integration; we continue to develop a sophisticated monitoring service that takes feedback from over 50 payroll software providers on the compatibility of each provider to its software. The aim is to provide a software specific rating. Currently we provide general ratings for each provider which are not software specific – the upgrade to software specific is expected in November
  3. At retirement; we look at the options currently available from providers including in-house annuities, open market annuity process, income drawdown and we take a view on their likely adoption of the new options available from 2015. We use feedback from employers to establish the quality of the service offered.
  4. Investment; we use a specialist division of First Actuarial for investment analytics; it has developed a complex rating system of its own based on value for money which looks at both the costs of the fund management (in totality), the investment process, the statement of investment principles, the asset allocation and the quality of the fund management team in assessing the likelihood of the fund meeting its target. We then assess whether the fund’s target is appropriate for the job.
  5. Employee services; this metric looks at the capacity of the provider to offer meaningful information and tools necessary for members to make informed decisions on contributions, fund selection, at retirement options and any special features of the plan which require member choice. The latter might include salary sacrifice, boult on life cover or even corporate wrap.
  6. Durability; this rating looks at the sustainability of the provider’s business model. It analyses the appetite of the provider to stay in the market, its marketing, the success of its marketing, its financial position and the stress that its business model will come under as numbers of new schemes increase. Finally we look at the quality of the Governance infrastructure that underpins the plan

These six metrics are delivered to our external researchers who analyse each provider in the same way to ensure consistency. We use the First Actuarial DC research team in this. This team consists of five dedicated individuals who have individual specialities including, investment, investment strategy, administration, member benefits, risk monitoring and governance.

Research on each metric for each provider is recorded as a score and a piece of narrative. The score and narrative form the basis of a star rating system operating for customers of Pension PlayPen who have paid for research. This research is updated every quarter and more often where a major change in a provider’s proposition is announced.

First Actuarial are a well-regarded pension consultancy who own 30% of Pension PlayPen. They use the same system for rating providers with their own clients and this creates economies which keep Pension PlayPen prices down.

Outsourcing to First Actuarial is important to us, it help us avoid conflicts of interest. Those providers who advertise with Pension PlayPen do not- by dint of advertising influence First Actuarial whose business is sufficient in scale not to be tempted by advertising as an inducement.

We reserve the right to remove First Actuarial and replace them with another research unit. First Actuarial are paid by Pension PlayPen for each use of their analysis.


To present this information in a way that makes sense to people who don’t do pensions for a living


The core data provided to us by First Actuarial is converted into simple to understand info graphics by the Pension PlayPen design team. These infographics contain the narrative and the ratings provided by First Actuarial, they also contain background information on providers that encapsulated the key pieces of information we would expect employers to want to know about the organisation running their workplace pension.

An example of such an infographic is in posted below- the information in this infographic is for illustration purposes only. It is not a current infographic and the information in it should not be relied upon.


Posted in advice gap, auto-enrolment, brand, pension playpen, pensions, Pensions Regulator | Tagged , , , , , , , , , , , , , , , , | Leave a comment

Is there a productivity dividend from auto-enrolment?

Pension PlayPen will give a leg up to anyone who’s trying – even some clapped out old bank that lost the trust of its customers long ago.

So here’s some research produced by Barclays.

Barclays cropped

I have written recently about the causal link between financial well-being and productivity.

Put at its simplest, if staff aren’t worrying about their finances- they do their jobs better”. In my experience, the banks have been the cause of much financial misery in this country over the last few years and have demonstrated again and again they will put their interests above those of their customers, especially where the customer is weak. Witness PPI, witness the mis-selling of derivatives to SMEs taking out loans, witness LIBOR fixing.

But if Barclays are promoting financial well-being in the workplace, good for them!

Because all the evidence suggests that employees who have a clear idea about how their financial future is being managed, are more productive and more likely to stay that way. Witness low opt-out rates on auto-enrolment, witness the success introducing credit unions saving plans by large employers, witness the success of financial education programs by large employers like Unilever, Centrica and Lloyds Banking Group.

This is the pay-back for operating employee benefits. It may be expressed negatively- “don’t invest in your people and they won’t invest in you”, but better expressed by slogans “like happy staff are better staff”.

I am a small business owner and I’m a Director of a medium sized business with 200 staff. I have worked for organisations with tens of thousands of staff. One thing that ties all experiences together is that where my employer invested in my financial well-being, I gave them back more.

There exists today an opportunity for Britain’s SMEs and Micros to do something for their staff. They can set up good workplace pensions and evidence that they not only want to comply with auto-enrolment legislation but go further and choose a good pension.

Any business justification for the extra investment in time and research occasioned by getting auto-enrolment right, has to start with an explanation of the metrics in the graphics above.

On a day that we hear of yet another fine for this bank,  it’s not easy for me to agree with Barclays – but in this – I do!

No one gets left behind – not even Barclays!

Posted in accountants, advice gap, annuity, auto-enrolment, pension playpen, pensions, social media | Tagged , , , , , , , , , , , , , , | Leave a comment