What is the point (of tax-relief)?

fine bread

Fine bread- or just the crumbs?


A tired (and possibly emotional) actuary sends me a late night mail which starts..

What is the tax relief deal?  Govt in effect borrows money over 40 years on average to invest in whatever DC investors invest in and gets something like 2/3 back, at a guess. (Allowing for tax free and band slippage).

What is the point of that ?  What exactly are the other policy gains?

The argument is along the lines of the pre RDR “what has commission ever done for us?” thread. But unlike the Romans, who brought lasting improvements to society, neither commission or tax-relief have radically achieved the aim of a strong second pillar of retirement savings.

Tax relief, like commission, is a crutch that keeps the established order in cakes and ale. Without tax-relief we would have fewer conferences, less corporate sponsorship at Twickenham and the “no-brainer” culture of saving into occupational and personal pensions would be stalled if not de-railed.

Thomas Phillipon, the notable American academic, reckons that the Financial Services industry has operated a 2% pa rake on people’s savings over the past 150 years. That is 20% of the growth on a fund when growth is good and around 50% of the anticipated return in the “new normal of 4-5% anticipated growth rates.

My friend’s estimates of the tax retrieval from an EET system, reckon without the financial services tax (which puts George Brown’s 10% dividend tax raid in the shade.

If I was to be as cynical as I ought to be, I would answer my friend’s question by pointing to the quality of bread on his (and my) table. It is made of fine flour and purchased from fine shops.

Tax relief cannot be justified as putting fine bread on our table

The creation of debt to fund tax-relief to put fine bread on the table of the pensions industry, is not- by any measure a “policy gain”.

What is more, Osborne is in a strong enough political position (and ambitious enough) to shoot the lights out.

If you really want to crack the systemic weakness in the British Economy, the enormous fiscal support of the financial services industry, you make that industry stand on its own two feet and compete for savings on a level playing field with direct investment in housing, investment in small business and dis-intermediated participation in the prosperity of listed companies through work-place share save.

This is certainly not what the financial services industry wants to hear but it may be what the country needs to hear – if Osborne is to pull a “killer rabbit” out of the budgetary hat.

Deckchairs on the Titanic

Another person I greatly admire, Paul Lewis, asked me recently why the ABI had converted to a flat rate of tax-relief from its long-held belief that the loss of higher rate tax-relief would spell the end of pension saving.

My answer was that maintaining a credible system of wealth distribution to those paying taxes was preferable to a progressive system of wealth re-distribution – at least for the insurers.

The canny insurers who have pulled up the drawbridge on auto-enrolment and stopped staging new schemes – recognise that shareholders have to wait a long time to see a return on investment in small pension pots. That is why we see nothing of Fidelity, Black Rock and Zurich when looking to place schemes for SMEs and Micros.

There is nothing wrong with cherry-picking. It is what shareholders want and – so long as there is competition at the bottom end of the market- the withdrawal of these insurers from providing new workplace pensions is of little consequence.

But the ABI know that the market in which their members make their money, is highly dependent on the huge injection from both the income tax and national insurance pools, associated with tax-relief and national insurance.

Without commission to incentivise savings, insurers and fund managers would have no lever- were the conventional tax-tilts to be removed – to attract the long-term savings into pension policies.

But the ABI may be doing no more than re-arranging deckchairs on the Titanic

It is extremely hard to argue for tax-relief on any “policy” grounds.

Pension tax-relief is regressive, rewarding the rich at the expense of welfare.

It is partisan, rewarding the financial services industry at the expense of other parts of the economy.

It is wasteful, encouraging inefficiency in the financial services industry itself.

There are – as people like Con Keating point out – other ways to provide people with a firm second pillar to their post retirement savings. Con would point to the German Book Reserve System and David Pitt-Watson would point to the Dutch CDC approach. Neither are perfect, but both are a lot less dependent on state support and less dependent on the services of the City.

What should be done?

Pension PlayPen argued in its submission to the consultation on tax-relief, that nothing short of a wholesale shift away from tax-relief by right would do. In a world where Government knows who is paying what (through RTI), the option to target savings incentives exists (as never before).

A fairer consensus can be built around Government borrowing money to pay people to save – WHO WOULD OTHERWISE BE A BURDEN ON THE STATE.

That is the point of auto-enrolment, a pensions system that – while not as efficient as S2P/SERPS, does have the grudging approval of the nation.

The cost of incentivising the savings of up to 10m new savers will be immense. We cannot afford auto-enrolment and tax-relief (as we now know it).

We should prepare for radical reform and for some severe belt-tightening.

Posted in pensions | Tagged , , , , , | Leave a comment

Let the canny worm lie?

can of worms

The problem with cans of worms is that the cans degrade and in the end the worms get out, and cause a stink.

Over the weekend, the Telegraph that acts as a professional “worm can opener” has been turning its attention again to the issues that are about to emerge from the “cessation” of contracting-out -(of course something as complicated as “contracting-out” of SERPS/S2P cannot come to an end- that would be too simple – it must “cessate”).

But put in straight language, Katie Morley is right, “Four Million People Retiring from this April could get the wrong state pension”. HMRC cannot possibly believe the statement published this morning in FT Adviser.

“no pensioners will lose out” due to faulty data supplied by their employers pension schemes.”

There is neither mechanism nor resource to make good this promise. The data in the private sector is problematic, the HMRC is making  occupational pension schemes a hostage to fortune.

The statement pierces a particularly smelly can of worms!


Will we be able to  COPE?

If you are over 55, you can apply to Government (press this link) for a COPE. A COPE is a statement of what you would have got by way of state pension, if you hadn’t chosen to join a company (or personal) pension scheme which paid this part of your entitlement for you.

We are invited , as Jim Bullen would have put it, to “look at what we would have won”. This may or may not be equivalent to what we can buy from our “appropriate personal pension” or get from our occupational pension scheme.

The Government hope that it will be and say so in their information document (p13) “Your State Pension Explained”.

Most people will find, when the State Pension paid by Government is added to the COPE amount (paid as part of their workplace or personal pension(s)), this will be more than the full amount of the new State Pension (currently £151.25 a week)

This is not quite as strong as the HMRC statement, but still seems more based on hope than evidence!


Case study;- me

I am 54 and have 9 months to wait till I can get a COPE.

I very much doubt I will ever be able to work out  what I was entitled to (for myself). The COPE may help but I expect  I’ll conclude that some years I took good decisions- other years bad.

I would be extremely surprised that my appropriate personal pension, which carries quite high charges and has hardly grown since I last contributed to it in 1990, can provide me with as much as the SERPS entitlement I “would have had” from 1992 to 1995.

My entitlements to GMP are different for my earnings between 1995 and 1997  and 1997 and 2005 and I spent a year in Jersey in 2006. From 2007 till 2015 I’ve been contracted in to S2P (I hope) and of course everything changes in April.

On Trust?

My case study is fairly typical. I had self-employed earnings, worked outside the UK, worked in a company that contracted me out and had times in contracted in employment. Some of the time when I could have been contracted in- I chose to contract out. It’s as bad as those stupid tea towels about cricket.


If you are a foreigner, you take it on trust that cricket is being played by the rules (however complicated). What you don’t want to hear is that the game’s result has been affected by match-fixing.

I fear that the conspiracy theorists are at work as I write, opening cans of worms with the hope of finding evidence that our state pension entitlements under COPE are wrong, or that they are greater than what we get from our contracted-out pensions or that there is systemic unfairness for large swathes of the population.

What is almost certain to happen is that people will be able to point to almost every stage of the change process and find fault with the communication of that change. This is like pushing at an open door (of the worm-canning factory). Since nobody read the Government documents when they were written, it can easily be proved that the Government failed to communicate. That is a premise of the WASPI campaign and it can be applied to just about everything written by the DWP on the subject since 1978.

 “from now on things will be different”.

I have made a new friend over the weekend, he has sent me a letter written to him by Margaret Hodge earlier last year , in reply to his enquiry about the impact of the 2016 changes. It contains this statement

Screen Shot 2016-02-08 at 06.47.20.png

My new friend also sends me a statement made by Alistair Darling at the time when the Government were having to re-communicate changes in entitlement to “inherited SERPS” (a subject for another blog).

The giving of wrong information by a Department is inexcusable. There is a clear responsibility to ensure that the information that Departments provide is accurate and complete. In this case, it was not. Furthermore, even the serious implications of giving the wrong information were not appreciated by the Department. That should never have happened. The previous Government should have sorted the matter out years ago.

Let canned worms lie?

My friend tells me that the National Audit Offices confident statement (above) may have been a bit glib and that it is soon to publish another report stating that there will be losers (as well as winners) from the cessation of contracting out. Of course there will be. There is no way that books can balance unless there are.

The questions are

  1. Are the losers a persecuted minority (as some women of the WASPI campaign are claiming they are)
  2. Was the Government wilfully negligent in communication
  3. Are we being systemically ripped off by the financial services companies with whom our money was invested.

I am quite sure that the Telegraph will find good reasons to answer all three questions “yes” and that the Government will be able to argue “that was then and this is now”.

We have, in the meantime, to cultivate our garden, get on with communicating the new state pension, get on with communicating the pension freedoms (and the mantraps that surround them) and get on with staging 1.8 m employers and a further 5m employers.

I hope that we will be providing a more transparent approach to things going forward, but – having just re-read this blog- I am not so sure!

can open

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

Osborne needs a killer rabbit!

killer rabbit 2

There are two ways to get money into a private pension

  1. you can pay the money in yourself as a deduction from pay
  2. you can have money paid on your behalf by your employer.

Of the two, by far the more efficient is the second as employer contributions to pensions attract no national insurance, can be relieved against corporation tax and are not considered as pay – so not taxed as a pay-like benefit ( a benefit in kind).

George Osborne’s pension problem is that if he does away with tax relief on people’s private contributions, he simply increases the motivation for people to get their employers to pay on their behalf.

Many people (including myself) pay no pension contributions but have a big chunk of money paid into their pension by their employer. I chose to exchange salary for pension , some just get a handsome pension contribution by right.

Of all those who get pensions by right, it is Government employees who get the most. The real cost to the Treasury (and thus to the taxpayer) of paying public sector pensions varies (depending on the efficiency of the scheme and the generosity of the contribution but is typically about 15% of a Government worker’s salary.


Why a simple flat rate is no rabbit!

According to official figures, 90% of the tax lost through tax-free pensions is lost to 10% of the population – the richest 10%.

So the pension system is rewarding the rich and public sector employees disproportionately.  Any change in taxation which focussed on restricting abolishing tax-relief on contributions made by someone on their own behalf, would hurt the self-employed and those who cannot flex pay and pension through salary sacrifice (typically those on low incomes and with small firms with limited pension expertise.

Those who argue for a flat rate tax-relief system on personal contributions know this full well. If we simply chose to tax personal contributions, there would be a wholesale migration to salary sacrifice, a bonanza for pay and reward consultants and a disaster for those without access to advice or the comfort of PAYE.

killer rabbit 4


ISA – the Treasury’s rabbit

The Financial Times is running an article this weekend written by Jo Cumbo that suggests that the Treasury are aware of the weakness of a flat-rate personal tax but scared of abolishing tax-breaks on personal contributions altogether.

The only ways they have to recoup lost tax would be to

  1. tax people on any contribution made to their pot ((notional for DB, nominal for DC))
  2. tax the pension contribution itself

Option 2 is the one Jo suggests is favoured. This would – for all employers committed to picking up the balance of cost on a DB plan, be a simple tax on company profits. To meet the financial obligation, companies would have to pay higher pension contributions, loaded by whatever the tax rake-off was set at. I don’t get how this meets any of the Treasury’s aims for corporate taxation. However I see it as a stealth tax that will keep people happy for now (and like back-end loaded personal pensions), will cause the damage later.

killer rabbit


Will Osborne be seen as the Chancellor who scrapped one set of exit penalties so he could impose his own?

Option 1 seems feasible. We already have an annual allowance which tapers between £40,000 for lower earners down to just £10,000 pa for those with super high incomes. Those with super-high incomes are already in danger of being taxed at punitive rates on large employer contributions. Many are pulling up the drawbridge and choosing to take salary rather than pensions ( pension sacrifice).

I don’t think the Treasury would consider losing the highly pensioned from future pension accrual a disaster. They have plenty of other reasons to vote for him

It is only a simple step from a £40,000 annual allowance to a pension allowance. like the current ISA allowance That lower allowance could be a flat rate pension allowance as we have with ISAs. Contributions within this allowance would continue to enjoy tax privileges, but contributions above that amount would not.

If I was Osborne, I would be peddling the language of ISAs hard in March, they are the only tax incentivised savings people understand. If people think they are getting pension ISAs -he stands a chance of winning popular support.


Expect the un   “X”  pected

Ken Davy has warned advisers to expect from the Treasury, a solution that could be as radical as pension freedoms. There are plenty of odd-shaped rabbits that the Treasury could pull out of the hat.

One such rabbit is the capacity of the Treasury to reduce still further the lifetime allowance, which is a cap on the size of pot (notional for DB, nominal for DC).

But for all this to work- (e.g. go down well with today’s tax-payers, create a lasting political settlement and satisfy the Treasury), there is going to have to be a stroke of genius.

This pension reform is going to have to have the X-factor- as pension freedoms did. There is going to have to be a golden key in the marketing of all this which makes the reforms seem fair, reasonable and workable.

Reading the FT article, I did not sense the golden key has been found yet. But I suspect that after years of trying, the Treasury is close to finding a golden mien that will dis-satisfy everyone equally.

The Y factor

If we can have an X-factor, why not a Y factor? The X factor is a settlement which works in 2016 and the Y factor is one that works in 2019, by which time the 12m people who have started saving through the workplace see their payments increase from 1 to 5% of the pension band.

For someone of average earnings, that is an increase from £200 to £1000, it’s a loss of tax to the treasury growing from £40 to £200 and if you multiply the difference (160) by 12m you get an idea of the tax hit from full auto-enrolment at current opt out rates. Anyone advocating an increase in the flat rate (whether to 25% or as much as 33%) must reckon on the cost of auto-enrolment to the Treasury increasing by between  20% and 65%.

Personally I am in favour of maintaining or even increasing the Government Incentive to those who are and will enroll. A genuine incentive to stay in and a meaningful contribution to the small pots of the least pensioned meets my idea of social purpose.

But I cannot see the rabbit from the hat allowing incentives to increase for the have-nots without attacking the rights of the  “haves”.

killer rabbit 3


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

Choosing our “Workie”- how hard can we make it?

Workie header-video

This week and for weeks to come , I am out and about talking with the payroll partners of large accountancy practices who feel they have no choice but to help their employer clients through auto-enrolment.

I’m doing this work as a guest of Star payroll solutions and the accountants are using Star’s software to help employers stay compliant with auto-enrolment regulations. I am co-presenting with the Pensions Regulator and with Star’s key strategist Howard Hoddell.

It is clear that accountants get auto-enrolment compliance and they understand the capacity crunch, at least in terms of demand from employers exceeding supply of third party support. The accountants I am speaking to are stepping to the plate with intent.


“Workie” – yes! But which Workie?

But when it comes to helping their clients to a workplace pension , they are at sea. Payroll compliance is a core function of many accountancy practices but pensions advice most certainly isn’t.

For decades, the accountancy profession has been taught polarisation- either you are a regulated financial adviser or you stay out of financial advice. It is a surprise to many that advice to employers on “Workie” (workplace pensions) is an unregulated activity.

Even where accountants can see past the regulatory risk, the prospect of civil claims from disgruntled employers (prompted by disgruntled staff) makes the commercial risk of advising on pensions – a service too far.


Not all Workies are the same!

I have listened to the Regulator explaining the process of choice to accountants and I have to say, they have not been impressed. Signposting accountants to the Association of British Insurers membership list or the list of mastertrusts that have paid for PQM ready or MAF accreditation is not cutting the mustard.

Accountants want guidance from the Regulator on how to make sure the Workie their client uses – works for their client.

They can read our Pension Minister warning employers of the need to choose the right Workie (yesterday at a TUC conference)

They can read the Pension Regulator warning against the proliferation of under-reglateed Workies in the FT.

Even  financial advisers are warning against vertically integrated Workies with no provenance, or obvious raison d’etre.

They read the warnings on the Regulator’s website about not using net pay schemes where there is a danger of low-paid employers being enrolled without tax-relief, but there is no list of providers who operate under net pay.

Indeed, two of the super-promoted providers – NOW and Wellness- operate “net pay only”.

Absurdly , one of the leading relief at source providers- Legal & General, can’t be accessed from tPR’s website for its “relief at source”product, but can be (using the PLSA link) for its net pay (master trust) solution.


Why is the Pension Regulator in such a mess on this?

The Regulator might reasonably have expected that by now, a definitive comparison website would have emerged that would have taken the burden of choice from the accountant and taken responsibility for employer decision making upon itself.

The Regulator might reasonably have expected, with all the noise about Fintech Robo-Advice solutions that a low-cost solution might have emerged that used the new technologies to deliver a quick answer based on the client’s specific requirements.

The Regulator might have expected such a service to have been delivered by one of the major pension consultancies with the validation of actuaries governed by their strict code.


Let’s hope they find an answer soon!

I am not averse to using my blog to promote myself or the solutions that I represent. But on this occasion, I will fight shy.

Disruptive measures – such as auto enrolment -need disruptive solutions. The idea that a Government pensions initiative can be delivered by payroll is disruptive in itself. To leave payroll to get to grips with pensions without proper guidance either from the Regulator of from the private sector, is tantamount to dereliction of duty.

A disruptive solution to the problem of choosing a pension is needed and if the Pension Regulator is expecting it to be delivered by the ABI or PLSA or ICAEW or even the FCA, they will wait in vain. The Pension Regulator says it is committed to embracing innovation but actions speak louder than words. Auto-enrolment is no longer in the planning stage, AE is in A&E and needs these solutions now!

I urge the Regulator and Government to accept that the solutions of the future will be forged from the digital smithies of Hoxton and Farringdon, not the sentinels of pension proprietary in the City. It will be start-ups with the agility to deal with new problems who will deliver the goods.

The Pensions Regulator can either accept innovation or it can side with the ABI/PLSA and ICAEW continuum. Currently it is placing its trust in the past and the past is not delivering.

How hard can it be to get proper information on  a workplace pension? As hard or easy as this?

Workie header-video

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

Prepare for a world without pension tax-relief


The concept of “flat rate tax relief” for pensions is now accepted. There is a consensus behind it. Even the ABI, who until recently were predicting plagues of locusts if higher rate relief were abolished, appear to have got behind the flat rate.

The response of the pensions industry reminds me of the French strategy of building fortifications to defend against the Germans – in the wrong place!

I don’t want to characterise our Government as the “enemy”, though “change” is clearly an enemy for those who have the money and continue to benefit from the current system.

The analogy with the Maginot line holds. The French were outflanked by a nimbler opponent who used Blitzkrieg tactics to make the traditional fortifications of the line redundant. Infact the Maginot line became a liability as the French army found itself cut off from its lines of retreat.

As with Pension Freedoms, George Osborne may be outflanking the pensions industry by moving the cheese and preparing to adopt “Pensions Blitzkrieg”.


Pensions Blitzkrieg

Flat rate tax-relief, where we all receive a financial benefit at an equal rate (per unit saved), would of course make saving into pensions less attractive to higher rate tax-payers (who can claim back up to 45% of their contributions at the moment). The flat rate would – at its highest- be set at 33% , the PPI have done calculations at 25% and Legal & General (who aren’t in the ABI) have called for a flat rate of 20%.

The PPI’s work was based on the world as it was in 2013, I suspect that others (including the Treasury) are more interested in the world in 2018. The £6bn a year that the PPI claim would be the net saving from a 25% flat rate may not materialise in 2018-19 (as I’ll explain in a moment.

The alternative is seen as moving to a system where tax relief is granted on pensions in payment (or even on the lump sum payment allowed by the pension freedoms). This is generally considered a “bad thing” even by the Pensions Minister as it’s seen to encourage over spending in retirement (and nobody trusts a future Government not to move to a system of taxed exempt taxed in the future).

I am moving to a view that the idea of TEE – the acronym for putting tax relief on the spending not saving, is politically unacceptable. But I suspect a Pensions Blitzkrieg, I think the Chancellor is preparing to abolish pensions “tax-relief” altogether.

If flat rate tax relief is the Maginot line, RTI is radar!

Of course I don’t think that pension saving won’t continue to be encouraged by the fiscal system, but the “yours by right” version of encouragement looks like going. Instead, I see a system of Government Incentives (“pension credits” as my friend Con Keating mischievously re-branded them) that can be used to target those groups of savers the Government wants to encourage.

The DWP already use this phrase to describe the 1% tax input to the 4+3+1 AE payment. Government Incentive not only sounds better for the Government, but it anticipates a world where the Government operates savings incentives independently of the tax bands.


Theoretically this is made possible by the digital revolution that has allowed HMRC to interact with employers using RTI (real time information). RTI is as important to the Treasury, as radar was to Fighter Command.  It gives Government the information needed to react quickly to changes in economic circumstances.

It’s what is happening already under the relief at source arrangement – a system where those paying no tax, get a Government Incentive – rather than tax relief.


We can’t afford a flat rate- with auto-enrolment.

Pension saving had been in slow decline for a number of years till 2013. Over the last two years we have seen 5.7m new people saving for the future, more than even the Government expected. The success of auto-enrolment has made the potential strain on “tax-relief” enormous. When the majority of those 5.7m savers are joined with as many again (following the induction of 1.8m SMEs and Micros) there will be as many as 12m new savers by 2018.

In 2018-19, the cost of tax-relief, as we know it today, will go through the roof as these 12m workers increase their contributions from 1 to 5% of band earnings.

If a system of flat rate tax relief at say 30% was in place when this happened, the cost to the Treasury would increase from 20% + , by almost 50%. Whatever saving made by moving to a flat rate would be wiped out – and a whole raft of new cost brought to the system.

Small wonder that the pensions industry are happy to promote a flat rate.


We need a more flexible approach

If the Chancellor were to scrap, as I suspect he will, the concept of tax-relief, and move to a system of incentivised saving, he would get back the fiscal levers to manage the problem of auto-enrolment without risk to the nation’s finances.

It may well be that what we get on March 16th looks like flat rate tax-relief. But if the Chancellor is clever- and I think he is- he will not commit the country to a lasting fiscal settlement over which the Treasury can have little fundamental control.

By breaking the link with tax rates and moving from a system based on your marginal rate of tax, George Osborne has the chance to manage pensions on a dynamic rather than a reactive basis. With the wall of money arriving into pension savings in 2018-19, I cannot see he has any other option.


Now is the Chancellor’s time

He has the infrastructure in place-through RTI (his baby) to implement such a radical system. The move to digital self-assessment means that most higher rate tax payers are responsible for claiming their reliefs on line. The PAYE system can now manage change relatively easily  (most pay systems now being digital – and the new ones cloud based).

Self assessment is now a social norm and we are increasingly seeing a move to people claiming entitlements for themselves. The default system for providing these incentives may move to “by claim” rather than “by pay-code adjustment”!

Osborne is showing himself ruthless in driving through change. If there is any doubt, we need only look at his approach to LGPS fund management. The Pension Freedom success will have given him any confidence he lacked.

I genuinely expect radical change- more radical than the Maginot line- as radical as radar was to defending Britain in the Battle of Britain.

The certainty of tax-relief is something that the pensions industry has relied on for 50 years. However it has become complacent with this system and has not made the most of the incentives given it.

A system for DC and DB

The Defined Benefit system is – sadly – a system in tatters. It’s only surviving bastions, the Governmental pensions (funded and unfunded). For contributions made by employees and the employer to be treated on the same basis as the Defined Contribution workplace pension is within the compass of this system of incentives,

Auto-enrolment is a game changer, and with it comes the opportunity for Osborne to sweep away the old and bring in the new. When nothing is ours by right, the opportunity to move the cheese can have extended benefits. I would be surprised if the fundamental apartheid between the “haves” (with ongoing accrual in a DB world) and the “have nots” with limited rights under DC – will continue.

It would not be hard- where tax relief (not to mention salary sacrifice) was no more -for all pension contributions from the employer to be considered a benefit in kind.

A system of incentives could cushion the blow, but the principle would have been established.


Winners and losers?

The pension industry would like us to believe it is prepared for change. I am not sure it has thought the unthinkable and I’m quite sure the Treasury has.

The ideas mooted in this article are not pension sci-fi. They are the kinds of ideas I’d be having if I was the Chancellor.

Not only that, but these ideas are rumoured to be doing the rounds- by authoritative sources.

I suspect that George Osborne will do everything he can to make it seem there are no losers -only winners- in his new world. But with so many new savers lined up for their share of the cake, and with such massive imbalances from the pension apartheid of DB/DC, I can see a lot of teeth gnashing from March 17th.



Posted in pensions | Tagged , , , , , , | Leave a comment

Independence – a “flag of convenience”?


For many years, the financial services industry has held out “independent financial advice” as a brand of best practice. This logo has been touted a kite-mark.


It saddens me to say it, but the IFA badge appears to the public no more than a flag of convenience, a devalued brand, sullied by the opportunism of some advisers and those who depend on them for distribution.

The funds we are asked to invest in are chosen for us by advisers and we pay them to exert a duty of care. But when I see the funds within the model portfolios offered by many financial advisers I question whether the funds have been chose on a value for money basis or for another reason. Let me ask you a question.

What is the difference between a closet tracker and a tracker?

The technical answer is “fees” and the practical answer is a transfer of your savings from your account to the accounts of fund managers and those who recommend them. In America, where the load/no-load system operates, you are aware when a fund manager is paying your money to a third party, in the UK, where wrappers and platforms stand between the investor and his/her money, nothing is so obvious.

The practice of closet-tracking, exposed by the European Securities and Market Association yesterday, is rife. ESMA reckon 5-15% of retail equity funds could be closet-tracking, charging high fees for nothing but higher profits for the manager and big kick-backs for the adviser/platform manager and wrapper.

Where there is no value , but plenty of money, the “independent” financial adviser should be waving the offside flag. Some do, Gina and Alan Miller have been at the fore is quoted in the FT as saying that if you

“buy a Ferrari, you do not expect to find a Fiat engine under the bonnet”

A transparency task force?

Today there is a “symposium” (no less) going on at Newcastle University’s London campus, looking at the transparency of the fund management industry. I was asked to comment yesterday on how transparency should be framed to the outside world.

I could only give the answer the FCA have given us – we need to know what value is, what money is paid and we need to work out if we get value for our money.

The idea of a transparency task force (TTF) is to recruit a body of people who are genuinely independent of the problems associated with opacity (the opposite of transparency). In my book the transparency task force should be recruiting those who hold independence as more than a flag of convenience.

My worry, and I am a big fan of convenor Andy Agethangelou, is that those who represent TTF are utterly conflicted by the need to make money from funds and deliver value for the punters.

I sit on the transaction costs & charges team and here is a cut of my fellow team members

Screen Shot 2016-02-03 at 06.07.01.png

Without singling out individuals, not one of these jobs isn’t dependent on the gathering and retention of assets. Some of the positions represent the interests of fund managers, some platform managers, some advisers running their own funds and some trade bodes tasked with maintaining the status quo.

Can we genuinely expect such people to drive transaction costs and charges (a euphemism for the “money” we pay for fund management), to the minimum? Can we even expect them to want clarity?


Independence is as independence does

There are people on the same list who I consider independent and no doubt the convenors will argue that we cannot have change without the consent of those being asked to clean up their act.

But I cannot see how we will ever have a market driven solution without it being led by those who are genuinely independent of the fund management industry. Since the fund managers and platform managers and wrap managers control the price, they cannot be independent arbiters of value for money.


Whatever happened to the moral supremacy of the independent financial advisor?



The TTF has very little representation from IFAs. There are occasional voices representing the consumer and the odd enlightened “eminence grise” but only a handful of practitioners who might genuinely be held up for selling “advice” rather than “funds under advice”.

Like woodworm in a wooden boat’s keel, once advice is charged for within the price of a fund, it seems virtually impossible for an adviser to let conflicts spread. The result is the fabric of the enterprise is so conflicted that it renders the vehicle unfit for purpose.

Vertical integration is the woodworm destroying the integrity of independent financial advice and commission is only a more transparent manifestation of the practices operated by those offering Diversified Fund Management, Model Portfolios, Fiduciary Management, Managed Defaults , Fund Platforms and Vertically Integrated Master Trusts.

There is nothing intrinsically wrong with any of these concepts – as variants on fund management – but there is something rotten in the state of advice, when it needs to collect its fees through the managers and platforms it seeks to advise on.

A Flag of Convenience

I am one of the “journalists” being asked to sum up the activities of the day. I would like to think I will be an independent journalist (this blog does not take advertising)!

I won’t be at the bulk of the conference as I will be in Warrington this morning helping accountants and payroll understand workplace pensions.

I do not fly “independence” as flag of convenience, it is the product that Pension PlayPen and First Actuarial sells to its customers and cannot be sullied -lest it loses its value.

I think there is a premium in honesty that is the bulk of the “value of independence” and that premium is lost when advisers act as and for fund managers. Advisers are agents of those they advise, our customers are those that pay the fees. When we collect the fees from fund managers, we must take down the flag of independence.


flag 2




Posted in pensions | 2 Comments

#WASPI – did we fail in our duty of care?


The WASPI debate that will happen tomorrow is of some significance. Not only will parliament be debating the particular circumstances of a particular group of women, they will be deciding whether the duty of care Government has, to keep its citizens properly informed of changes in welfare provision, was properly exercised. Further than this, it is a debate around whether a future Government is responsible for reversing actions taken (or not taken) by previous Governments, on a retrospective basis.

As most people reading this will not be experts in the legislation, here is the background to the debate.

The Pensions Act 1995 provided for the State Pension age (SPA) for women to increase from 60 to 65 over the period April 2010 to 2020.

The Coalition Government legislated in the Pensions Act 2011 to accelerate the latter part of this timetable, so that women’s SPA will now reach 65 in November 2018. The reason was increases in life expectancy since the timetable was last revised. It had initially intended that the equalised SPA would then rise to 66 by April 2020. However, because of concerns expressed about the impact on women born in March 1954 who would see their SPA increase by as much as two years as a result, it decided that this should happen over a longer period, with the SPA reaching 66 in October 2020.

Some women born in the 1950s argue they have been hit particularly hard, with significant changes to their SPA imposed with a lack of appropriate notification. However, the Government has said it will not revisit the 2011 Act timetable.

There was a Westminster Hall debate on the issue on 2 December 2015. In a backbench business debate on  7 January 2016, the House voted in support of a motion tabled by Mhairi Black calling for transitional arrangements for women negatively affected by SPA equalisation. However, such motions are not binding on the Government. 1 February 2016, there will be a debate in Westminster Hall on a petition by Women Against State Pension Inequality

If you want to be familiar with the wider context of the debate -overseas comparitors, the history of communication as well as the key statements made in last twelve months – here is the document you must read. (you need to click the box at the bottom of the page for the PDF)


If you read this Parliamentary Briefing Paper on the State Pension age increases for women born in the 1950s (published 29th Jan), you will see that the decision taken to adjust the timetable of reform in 2011 was a very messy business.

Here is the “mea culpa” made by Steve Webb late last year on

We made a choice, and the implications of what we were doing suddenly, about two or three months later, it became clear that they were very different from what we thought […] And so that’s a decision that we got wrong, and in the end I had to go to Number 10, sit around opposite the Chancellor and the Prime Minister trying to get billions of pounds back. So this was a measure to save 30 billion quid over how many years, and we wanted 10% of that back to soften the blow, and we got £1 billion back in the end, and a billion quid is a serious amount of money. 23

What Webb;s statement says is all that can be said, that Government is imperfect and that from time to time imperfect decisions get taken. The implementation of the new SPA for certain women was badly done and the fix was a bodged job  – and that is that

What is done is done- and should not and cannot be undone

You will also read that whatever the Government did to communicate the change was thought proportionate at the time.

The fact is that the £2bn which Webb feels should have been used to soften the blow is now allocated to something else, the money is spent. That something else is presumably sorting out another problem. Restitution -even a relatively small restitution such as the transitional arrangements some are calling for, comes at a price that must be paid by others.

I feel quite strongly that we have a system of Government that- though imperfect – in not institutionally unfair. We need to be Governed and we elect people to Govern us through a proper democratic process. We must abide by the consequences of that process- no matter how imperfect.


And what will be done in future may not be done any better.


You will also read that whatever the Government did to communicate the change was thought proportionate at the time. The distribution of leaflets, the writing of letters, the placing of articles were thought by the DWP to be the proper means of communication of the 1995 and 2011 changes.

There are many changes to come for the state pension- most especially about the state pension age. The Government won’t get all those decisions right either. That’s because the assumptions made on how long people live, what the cost of pension increases will be and what the impact of immigration and emigration will be- cannot be predicted.

Government is imperfect. And what is more communication is imperfect. We may be able to reach a proportion of those in their fifties and sixties by post , but many will not open the letters. We can put Workie like adverts on TV , but many will not watch them. No Government has a foolproof way of telling everyone what is going on.

In the end, we must accept that we- the citizens are responsible for finding out what is going on. This is fundamental to the process and the duty of care we have towards ourselves is greater than the duty of care from the Government.


Under-informed is not the same as being misinformed

No one is saying that what information the Government put out was wrong. Some are saying it was ineffective.

By comparison, much of the information put out by the private sector about personal pensions was clearly wrong, advisers and insurers did not properly explain what would happen on early termination and sometimes they lied.

I hope that this distinction will be made in tomorrow’s parliamentary debate.

No matter how we feel about the job done in 1995 and 2011, we should not consider there a plot to deliberately disadvantage certain people, nor should we conclude that anyone was mis-selling what was going on.

The adjustments may have been a bodged job and the communication under-cooked, these are legitimate observations that may and probably will arise from tomorrow’s debate.

But to assume, as a result of such admissions, that we can roll back the reforms is wrong. We must accept whatever decision is taken by the Government on this – whether we like it or not and move on.

What we can learn

What WASPI is doing is bringing to our attention, the lack of attention we pay to critical decisions being taken on our behalf by those we pay to take them.

The process of consultation about those decisions is part of Open Government and we all have the opportunity to participate and influence debate by arguing from our corner.

The big pension decisions about to be taken on tax, national insurance – on the governance of the private pensions we put our savings into and the way the workplace is used to collect this money- are all open to our influence.

Social media- which allows this blog to be read every day by thousands of people, is part of that process.

We can learn how our retirement can be funded, and how to do the best to make ourselves comfortable. We can learn how taxes can be fairly used to provide fairness across generations and we can learn what we are due and when,

Most importantly, we can learn from WASPI the importance of planning ahead and paying attention to the pension. Which is why I am very grateful to the WASPI women.

I think we have failed in our duty of care and are continuing to do so, but that duty of care is to ourselves, and that is what WASPI can change.


Posted in pensions, WASPI | Tagged , , , , , , , | 5 Comments

“And the language that he used!” Does Workie speak?

rolling stone 

Go to him now, he calls you- you can’t refuse

If you ain’t got nothing- you got nothing to lose!

Great lines taken out of context from Bob Dylan’s “Like a Rolling Stone“. The link takes you to a cover of the song that’s (IMO) better than Dylan’s original.

Dylan is singing about a woman cast out from the high life she’s been leading who has to make a deal  with “Our Napoleon in rags”, the mystery tramp – Dylan’s metaphor for the real world.

The party’s over for Dylan’s Little Miss Lonely and now she’s going to have to learn how to live out on the streets.

I feel the same way about pensions.

“you said you’d never compromise….”

And like Dylan’s Doll, we’re going to have to learn a new language if we’re gong to survive in the “real world”. I met the new Shadow Pension Minister on Monday. She used a word that I hadn’t heard in pensions before “honesty”.  It was a striking word, I’d never thought that we’d have to change to be honest – but she was right, there is a dishonesty about some of the things we do, we are living the high life and promising the same, but our words can give the lie to our actions.

The time is coming when we have to confront reality and…

“he ain’t selling any alibis, when you stand in the vacuum of his eyes”

What has “Workie” got to do with pension research?

I had an interesting discussion on a social media site with an MD of an IFA complaining that I was abusing pensions with the word “Workie”

What has ‘workie’ got to do with this research? Provider effectiveness & sme engagement with AE are surely two different things?

and again….

I must be mistaken. I thought ‘workie’ was the DWP furry animal creation used in an advert to raise awareness. I didn’t realise it had also entered the seemingly endless lexicon of pension jargon to describe workplace pensions!!

Well this is just the point of Like a Rolling Stone. There comes a time when the social whirl unravels and when you come down to earth and then you start meeting some cold realities.

A new way of talking

“Workie” has nothing to do with the ivory tower of pension research but everything to do with workplace pensions. If we can’t find a way to talk about workplace pensions that appeals to those hundreds of thousands of employers who have to buy a “Workie” for their staff, then we’ll be left “scrounging for our next meal”.

Our intention in publishing “Measures of Support” was to explain the differences people see in the Workies of 6 workplace pension providers in simple terms. You can see how well we did (or didn’t) do by pressing this link

Thanks to Professional Pensions for the oxygen of publicity, this is how they reported our meeting yesterday to launch the paper

There’s nothing so hard to embrace as change..

I know why the traditional adviser finds it so hard to advise on auto-enrolment because I am one. It is so hard to learn the new rules of the street when we’ve had it our way so long.

It’s hard for us to accept that a furry animation of a monster might be a symbol of a workplace pension, or to accept that the Workie is homeless, hapless, helpless and inarticulate. Because that implies that we too are ignoring the workplace pension – at least the workplace pension of the future.

Workie is a metaphor for disruption as much as Dylan’s Rolling Stone is a metaphor for the social revolution happening in America in the sixties. If the public take to Workie, then we may have not just a new word for “Pension” but a new honesty about what a workplace pension can do.

Workie is deeply serious, as Paul Lewis describes Pension PlayPen “it’s a lot more serious than it sounds”. We may be playful with Workie and the PlayPen, but we can be in deadly earnest in out intent. At our meeting yesterday Tor Oliphant of the DWP explained just how seriously they are taking Workie, we were advised to do the same.

In the promotion of yesterday’s blog, I asked the question “Is Workie working”, in as much as it is challenging us to ask what the research is for and who the research is for, I think Workie is.


There was one very cute question from the floor (I think from Helen Morrissey)

Will Workie speak?

I wanted to say something about “dumb eloquence”, of “negative capability” but the I remembered the song we sing to opposing fans when they try to wind us up

You say it best – when you say nothing at all


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

Is Workie working? Who’s hot and who’s not in the workplace pension world.


This morning Pension PlayPen launches “Measures of support”. the result of nearly 6 months research into how intermediaries and employers see the workplace pensions they are using to enroll staff.

We will be making the report generally public during the day but this morning we are having a launch to introduce the findings to “key stakeholders”. I like the phrase “key stakeholders”, it’s a phrase that sounds good, means nothing and enables you to move on without letting on you don’t actually know who is going to bother turning up.

Those reading recent blogs will have picked up that there’s an absence of guidance and direction from the top – as to pension providers participating in auto-enrolment and their relative merits.There is also a lack of evidenced data to support the swashbuckling statements by practitioners.

For the first time, Measures of Support, sets out to use data from a sample group of some 250 intermediaries and employers and a hardcore of half that number who provided detail qualitative feedback on how providers are doing.

We intend to repeat the dose every six months through the remainder of the initial period of auto-enrolment (till the end of 2018).


So who’s hot?

The people’s favourite is the People’s Pension, which has consistently shown itself the market leader in support to employers and their advisers over a wide range of measures

Legal & General are also hot, though they cannot quite match People’s. They appear the blue bloods of auto-enrolment with strength in depth.


And not so hot?

Nest fill third place on our grid with support levels that reflect their strong ethos of self-service. NEST are doing what they say on the tin and are valued for their support materials rather than hand-holding.

NOW have been in the pits for much of 2015 having fitted a new engine at the last of the year and they’ve spluttered a little (like Honda Mclaren). There’s a great car waiting to get out, but 2015 results have not been what they (or their supporters would have wanted

The future of the research

We have digital copies of the research available which can be accessed from this link.

As with all projects of this type, it’s value is as much in the longitudinal comparisons as in the snapshots. So v2 of Measures of Support, which we will publish in Q3 2016 will build on the work of this report.

For now, it has been the financial advisers who have been able to talk, we expect the balance of respondents to change over the next six months as numbers of employers escalate and adviser capacity (relative to demand) diminishes.

The future of our work depends on the kind and dedicated people who take time to complete the surveys we put out. If you are one of them, thanks very much. If you would like to work on Measures of Support v2, please drop a line to henry.tapper@pensionplaypen.com .





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

Is the Pensions Regulator creating a false market in workplace pensions?


More questions – no answers!

Yesterday’s blog created a lot of questions from people who shouldn’t have to ask so I reckon it wasn’t clear enough. The blog was itself a voyage of discovery, for as I pressed the various links on the Pension Regulator’s Find a New Pension page, I became more and more frustrated. The full title of the page is “find a new page for your clients” and is part of the business adviser’s section of the website.

In conversation with representatives of the big master-trusts featured on the page directly (and some indirectly through the links) it became clear that the page was integral to their marketing strategy. One told me that the Regulator even had to rotate the order in which NOW, People’s and NEST were presented on the page because the provider top of the list found a surge in enquiries because of the positioning.

If this is true, then it suggests that the Pension Regulator is perfectly aware of the importance this page has in shaping where the business is going. Which makes the fact that contract based providers are relegated to a link to the ABI page even more absurd. In the case of Legal and General (and other non-ABI members) there is no mention of their service at all.

A Comprehensive Directory is not the answer

When the Regulator abandoned the idea of providing a definitive list of Qualifying Workplace Pension Schemes (as it ran for Stakeholder Pensions), I was glad.

Online directories are pointless unless they are tagged and categorised in such a way that people can make use of the information given them. Without any proper research into either the quality or popularity of each workplace pension, a directory can do as much harm as good.

I and others with the capacity to distinguish schemes by category and tag had made a representation last autumn that our services be included on the advisers page. to be clear there are four of us

Defaqto, Pension PlayPen, Husky and F&TRC.

The Regulator heard our call to take down links to the unbiased and vouched for directories (which were cul-de-sacs as most advisers were not interested in – let alone capable of – advising at a reasonable fee).

But to date they have decided that a list of providers who’s parents subscribe to the ABI or who pay fees to the PLSA to be PQM ready is preferable to advertising services that attempt to provide IFAs (and in the case of Pension PlayPen at least, business advisers and employers) with a service that helps choose a pension using applied research on the suitability of each workplace pension to the employer’s circumstances.

What of FinTech and Robo-Advice?

So the ABI and PLSA marketing machines win out over the kind of digital tools that other parts of the Government are trying to promote. I speak specifically of the promotion of FinTech and its subset Robo-Advice aimed at bringing high quality advice to the mass market of purchasers unable to afford traditional advisory channels.

The PQM link’s as useless as the ABI’s

The links to the ABI and PLSA sites are clearly useless. In yesterday’s blog I pointed out how unhelpful the ABI site and – to be even handed- I will now point out the problem with the PQM approach.

To be PQM ready you have to be

a) an occupational scheme- almost certainly a master trust

b) prepared to pay the PLSA (via their PQM subsid) money

c) conform to a set of rules known as the PQM standards.

This is a slightly more quality orientated approach than getting on the ABI’s list (where you just have to be a member of the ABI) but the approach is no good in helping you choose a workplace pension scheme

Firstly, the PQM ready standard is simply another kite mark competing with the Master Trust Assurance Framework. It tells you that you are dealing with a quality pension but it does nothing to tell you if that pension is right for you.

Secondly, by dint of it being a “paid for” service, it attracts the master trusts with the budgets , excluding the contract based plans (and fledgling master trusts) and creating yet more of a distorted market.

Finally, two of the master trusts listed (Atlas and Lifelens) are not for employers choosing workplace pensions, they are vertically integrated services designed to bring assets under the advice of Capita and Towers Watson respectively.

Why would tPR create a bias towards large master-trusts?

Of course the Pension Regulator do not want to be distorting the market but it is clear that there is ample reason for them to do so. Firstly, they exist to regulate occupational pension schemes, master trusts are occupational schemes and creating a bias towards the big master trusts keeps tPR in control

Secondly the DPW is under pressure to keep numbers of firms using NEST up. Only yesterday if came under further pressure to tell the public how it intends to repay the £400m it has borrowed from NEST which needs £20bn rather than the £640m it currently manages- to even break even. Promoting NEST -“uber alles”suits tPR’s paymasters very well.

Finally the Pension Regulator rightly sees all the problems in terms of poor governance and even malfeance in small occupational schemes, any barrier (MAF, ABI or PQM) that excludes the small scheme helps in the fight against the dodgy workplace scheme.

I don’t have a problem with NEST, large master trusts or the Pension Regulator’s war on crime and poor practice. But promoting these things is not to be confused with promoting proper choice in workplace pensions. The market not the Regulator should be the judge.

Why is this wrong?

Firstly master trusts aren’t the only place to find value for money from workplace pensions; tomorrow we will publish research that shows that the standards of support from contract based plans can be every bit as good as that from large master trusts, the workplace GPP can deliver brilliant investment strategies and can be highly competitive in price. There is no justification- in terms of employer or member outcomes for creating a bias to master trusts.

Secondly, even if there was good reason- in terms of outcomes, it is not tPR’s job to move the market. The purpose of Prudential Regulation is to avoid risk and not to shape the market according to the views of a “pensions view”. The market is not tPR’s – it belongs to the 70,000 employers that have bought workplace pensions and the 1.5m + employers who are still to do so.

What is to be done?

The current pages on choice – appearing on tPR’s website – are woefully inadequate, they are not working – in fact they are creating misconceptions and providing short-cuts that allow advisers and employers to choose without proper information.

These pages need to be reviewed urgently and reviewed with a view to creating a level playing field for all workplace pension providers , serious about auto-enrolment.

We do not want a directory that gives credence to miscreants but nor do we want meaningless lists such as the ABI’s , the PLSA’s or – dare I say it- the MAF list created by tPR itself.

Technology exists to provide employers and their financial and business advisers with the capacity to make informed choices, the Pension Regulator should be linking to this resource – immediately.

andy screenshot

The tPR links to the ABI and PLSA (and the usual disclaimers)

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

At last we have a shadow pension minister

It has been too long since the election for Labour not to have put forward a credible and committed pension minister. It would have been too long at any time, but now- with the state pension undergoing fundamental change and the Chancellor about to announce a fundamental overhaul of the taxation system surrounding retirement savings, Labour’s absence from the debate has been scandalous.

The policy that was to spring from work commissioned by the previous shadow for the DWP has yet to be published. It sits unread in the filing system of a Cass computer.

The shadow pensions minister we have had since May, Nick Thomas-Symonds, has been too shadowy by half. On the rare occasion I heard him talk, he read some words prepared him by Frank Field, the only Labour politician who appeared to be trying. Shame on Labour – you were asleep at the wheel.

I am pleased to say that in Angela Rayner, Jeremy Corbyn has found a woman that I suspect will be a great boon to the pension debates we are currently having. I met her at the ILC’s Future of Retirement Saving debate yesterday and I was seriously impressed.

ILC debate

7 women – no men!

Angela Rayner started work at 16 as a carer and found her political legs with Unison who have given the leg up into parliament, where she won Ashton under Lyme in May with an increased majority.

She is feisty , fun, compassionate and highly intelligent. She clearly has the capacity to grasp big issues quickly. She has at Unison , a strong pensions department with the likes of Glyn Jenkins and John Gray champions of ordinary people’s pensions rights, proper and deep thinking unionists who still believe in and understand the value of organised labour.

But if this is to make Rayner sound a firebrand, think again. At the meeting she listened and responded to what she heard. She was in the company of pension experts, but she exerted authority in the room – as well as some gaiety.


There is not a lot that the Labour party can do to influence the budget, but there is much they can do to make sure that whatever changes arise are communicated with honesty. I have not heard this word in pensions for a long time, it – like a shadow minister- has been missed.

Osborne’s every announcement is so surrounded with vainglorious spin that it is hard to work out the honest truth. As my recent article on the introduction of the pension eit charge cap said, we get spin, spin and more spin.

So far, we have had but the Scottish Nationalists to tell it like it is. I admire the way that Black and Blackford have worked so far, filling a gap left by the loss of Steve Webb and Gregg McClymont from the house, but we need more.

Particularly we need someone in the House of Commons leading the pension debate. It is unfortunate that our Pensions Minister is upstairs (as we were yesterday). It is not the same.


We will soon know this Angela Rayner. Though she appears to have bruised every bone in her body, she gave 100% of herself to yesterday’s debate, spoke feelingly of herself and gave us an indication of her power as an orator and debater.

Jeremy Corbyn has chosen wisely.


Posted in pensions | 1 Comment

Pensions Austerity – tougher for the rich than the poor?


Tough times ahead for traditional pension savers

Speculating on budgetary changes is a mugs’ game and I’ve been as guilty as any of trying to second guess not only the direction but the destination of travel – following the announcements last year of a radical overhaul of pensions tax relief.

This weekend (and I suspect for weekends to come) the FT has run a story preparing the population for what is to come.

I am pleased to see a photo of Yeovil strike Francois Zoka has embedded itself into Claer’s advert – (shurely shome misktake-ed).

Claer’s article picks up on Jo Cumbo’s comments, that whether the Chancellor moves to a flat-rate system or goes the whole hog to TEE, the higher earner is unlikely to see pensions as the “wealth haven” it currently is, after march 16th.


Though they have different thoughts on how low we should go, the thought leadership that has led us here has largely been the responsibility of Michael Johnson and Ros Altmann, both of whom have campaigned to reverse the way pension taxation works so that it encourages those on lower earnings to save, rather than providing high earners with a tax shelter.


Pension saving – austerity revisited?

Arguments that without the support of the super-rich, pensions are dead in the water fall on death ears these days. Auto-enrolment is meaning that everyone gets a shot at pension saving, whether the bosses like it or not. Bosses have enough invested in old style DB or well funded workplace schemes for them to be politically appeased. The Government hopes it has the makings of a new tax-settlement.


The old settlement has broken

Paul Lewis made the point to me this weekend that- after decades defending higher rate tax relief as a sacred cow, the ABI appears to have sent it to the abattoir, arguing in a recent paper that a flat rate (set at around 33%) better suits the needs of the nation.

Clearly they are part of the new settlement – or at least a consensus that could make the settlement possible. But I still don’t see the numbers adding up. The PPI reckon that moving the flat rate to 25% would save us around £6bn a year in taxation, but that is based on the current contribution model.

The influx of savers enrolled so far, plus those joining over the next three years is already creating a whole new problem for Her Majesty’s Revenue and Customs. When the estimated 11m new savers move from contributing 1% of band earnings to 5% in 2018 and 2019, then the problem gets a whole lot worse. Theoretically, any gains from moving to a 33% rate would be wiped by new contributions which would actually cost the Government much more than under the current system (where the loss to the Exchequer would be limited to 20%).

austerity 2

Workie – gently disruptive

To run auto-enrolment on a fiscally neutral basis, by the end of this Parliament, the Chancellor will need to find away to book even more savings than the £6bn pa that he’d get from a 25% tax break.

The elephant is now DB – especially for Government officers

That would mean a very different kind of tax return for those contributing large sums to pensions and probably a very large benefit in kind for those enjoying accrual in defined benefit schemes.

I cannot see how Osborne can avoid not the cow – but the elephant. Defined Benefit Schemes have so far been ignored in the arguments about tax relief. I still hear arguments that they are going to get a “carve out” because they are an endangered species, because of the political sensitivities associated with Government Pensions.

But the political consensus on which any new tax settlement relies, depends on it being a holistic settlement that does not exclude a proportion of tax- payers getting priviledged status. To ring-fence those enjoying DB benefits would be to create a pensions apartheid that would be immediately unacceptable to those outside the Laager.

I suspect that the FT know this. The disruption that is coming our way from the March budget , is likely to focus on the fundamental issue raise by Claer Barrett. Pensions are currently the shelters for the rich and the reward for public service. These two special interest groups have had it very good for a very long time but both look extremely vulnerable.

Pensions austerity may be rather tougher for the rich than the poor. Amen to that.

saving 2

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

So what would a pension exit charge cap look like?

exit penalty 2

Yesterday I spoke on Money Box in support of a cap on exit fee penalties from legacy personal pensions. Claire Trott spoke well in opposition and I’m quite sure that the ABI will take comfort in her argument that a contract is a contract. You can listen to the debate here (from about 17.30 minutes).

I am arguing that whatever the contract signed at outset, it has been breached countless times by the failure of the provider and agent to deliver advice and support through the life of the contract rendering the contract invalid.

This has not been tested in a court of law , but it is the only argument that George Osborne can use to intervene and impose a cap on the amount that can be withdrawn from a transfer value by a provider if a policyholder wants to exit the contract early.

exit penalty


Three rules that I would impose

Rule one – a clearly stated cap expressed as a percentage of fund

The amount that can be taken should be expressed as a percentage of the full value of the fund as stated to the policyholder prior to any request to transfer.

Rule two – a cap inclusive of hidden dealing charges

The amount that can be taken must include the costs of executing the transfer (eg all dealing costs impacting the price of selling the units.

Rule three – the cap set at five times the cap on workplace pensions.

The total amount taken should be no more than five times the current cap in place on workplace pensions (5 x 0.75% = 3.75%).

exit penalty 5

Rationale for Rule one

The purpose of exit penalties is to be equitable between policyholder and provider. The provider can recover subsidies in costs given in the early years of the contract.

The charges that are taken out of member’s funds over the years are expressed as a percentage fund. The Government has introduced another charge cap within the past three years which was also expressed as a percentage of the fund. People get percentages of the fund.

Rationale for Rule two

It is very simple to measure and  manage a total charge. The expression of the value of the fund before a request to exit will have been made on an agreed basis. That basis should be the offer price of the units – or if the units are quoted at a single price, the single price.

There is a mechanism for depressing the price at which units are sold which dilutes the price of the units to reflect the cost of the sale. Any attempt to manage the cost of the sale beyond the terms of the bid/offer spread or through dilution levies on the unit price must be absorbed into the charge cap.

This rule prevents providers from circumventing the charge cap through the use of hidden charges.


Rationale for Rule three

The acceptable maximum level of management charges for a workplace pension is 0.75% pa. This reflects what the provider was expecting to make (gross) before pay aways to suppliers – fund managers, administrators etc. It makes sense to use this as the maximum that legacy pension providers could take to cover loss of profits.

The majority of legacy pensions have an expected retirement date of either 60 or 65, the expectation commonly given to those taking out contracts was that they could use the policy to bring forward retirement.

It makes sense to use a default retirement age of 60 to calculate the default financial loss.

Where someone is taking money before 60 , say at the earliest now permissable (55), then the cap can be set at 3.75% with the taper being 0.75%pa with no capacity to make a penalty charge at 60 or older.

This would get round the ridiculous practice of establishing contracts to as old as 75, primarily driven by a wish to maximise commission and not for the benefit of the policyholder.

A straw man for starters

exit penalty 3

The reason we have had this intervention from the Chancellor is probably political, now is a good time to be sounding consumerist, with a contentious budget only a few weeks away.

But the Chancellor has a right to be kicking arse. It’s been over a year since the ABI’s last move on dealing with legacy policies and since then nothing has happened. In the meantime the FCA reckon that 700,000 people have reached retirement , 22% of whom are facing charges of more than 5% and 10,000 of whom are facing charges of more than 10%. These are the FCA figures, the Telegraph quote much higher claiming 62,000 savers face penalties of 40% or more.

Whatever the figures, there is no time to waste. You may be cynical and claim that the Chancellor is only trying to big up his own pension freedoms policy, but that’s not fair on the people who desperately need their money and are paying these huge fees.

If it were done, it was well it were done quickly

This is not a time for fannying about or for complicating the argument with red herrings like with-profits MLA/MVRs. Forget all the fancy talk about the value of waiver of premium or ongoing arguments about point of sale disclosure. The FCA should get on with it, issue a short time-framed green paper, get a group of people (like me) in , who know where the bodies are buried and nail this.

We have plenty of things to worry about already and things will get a whole lot more contentious post March 16th. If anyone is reading this in the FCA and wants to get in touch, I can be contacted at henry.tapper@pensionplaypen.com. I will be seeing the right people in tPR in the next couple of weeks.

exit penalty 4

Thanks to the Telegraph for the images


Posted in actuaries, dc pensions, Pension Freedoms, pensions, Pensions Regulator | Tagged , , , , , , , , , | 2 Comments

Spin, spin and more spin – the Osborne tumble-dryer.


George Osborne’s oral statement that he was introducing a cap on exit penalties imposed on people trying to exercise their pension freedoms is turning out to be a joke, a tumble dryer of spin with nothing but old-rags to be pulled from the tub.


Spin 1.

There is nothing in place to make this happen. The FCA are not about to launch anything- except a consultation on what they should be capping and what the cap might be.


Spin 2

The DWP have not been kept in the loop and it appears the first tPR knew of all this was when they  were approached by journalists.


Spin 3

There is no factual evidence of people being ripped off by providers, only a lot of ill-sentiment from those arriving at retirement because their legacy pensions are not providing the kind of returns estimated at outset.


And bullies special prize…

Budget 2016!

The real issues of what to do with legacy pensions are not addressed by headline grabbing Chancellors looking to warm up the population for the great “savings incentivisation” to come!

George Osborne, if this is the starter, I may be sending the main course back.


A real problem

But let’s be clear, there is a real problem with the outcomes of workplace pensions bought in the 1980s and 1990s. It’s a problem which was partially addressed by Stakeholder’s charge cap and more properly addressed by the RDR, the end of consultancy charging and the imposition of the 0.75% charge cap on workplace pensions.

What goes on above the table is now dealt with, though that is no comfort for those who bought the services of a financial adviser (for the lifetime of the plan) and ended up with massive back end loaded charges and no service whatsoever.

What goes on below the table by way of the hidden costs of pensions (charges to the net asset value of the fund not included in the AMC , dilution levies etc) are not addressed by any current legislation, though we have been promised “charge cap 2” in 2016/17.

The reality of charge cap 2 is that like a lot of Webb’s initiatives, and like the FCA’s April 2015 call for evidence – this work has been mothballed.


Action speaks louder

What we are getting from the Chancellor is rhetoric , what we are getting from Government is initiatives in reverse. Since Martin Wheatley left the FCA and Steve Webb left DWP, we have seen consumerist policies in reverse and the return of the life company and investment association’s lobby. Goodbye Martin Godfrey – hello spin.


The reality is that many people, especially those who did not have the protection of a super-buyer like a caring employer or proper trustees (acting for members of occupational schemes) were sold rubbish products that are now showing rubbish outcomes.

As part of the settlement between the life companies and the OFT (which headed off a full blown referral to the Competition Commission), the life companies agreed to properly review legacy policies and do something when they found malpractice.

Well I have one or two of these policies – a General Portfolio WealthBuilder 226 pension and an Allied Dunbar Personal Retirement Plan, neither of which, 25 years after I stopped contributing, are showing cash-in values as high as the money I paid into them. Presumably there are many people like me. But these policies of mine were invested in managed funds which promised to pay between 8.5% and 13% returns according to the SMPIs (which I still have). If I had received 8.5% pa on my money since 1990, I would have seen my funds treble in value. As well as the annual management charges on the units I purchased , these pots have clearly been ravaged by hidden charges so that they are actually showing a loss.

The policies are in the bottom drawer and clearly they are in the back of Zurich and Reassure (the respective owners of Allied Dunbar and General Portfolio).  Reassure and other Zombie Life companies were set up with no aim other than to manage through to claim books of these shoddy policies, there are others like them.

We hear nothing of what is happening to the pension pots of the customers of firms like Lloyds Life, Trident Life, Merchant Investors, Irish Life, Liberty Life, Target Life of General Portfolio- nor do we hear from the investors, they do not have the capacity to organised themselves.




They deserve more than the shoddy headline-grabbing spin on display this week.

We need the FCA to show its teeth and get to work to ensure that wherever the money within this vast legacy book is, it is properly accounted for and looked into. That’s what the ABI have been supposed to be doing and if we don’t have proper answers from this legacy review, then we need the Government to take charge and ensure that when people come to take their benefits, the transfer values reflect some value for the money the investors have paid in.

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

No way to run a private pension system



How can the lifetime allowance possibly be part of  a sustainable system of pension taxation?

Good news for those unprotected pension savers who have more than £1m in your pension pots- you probably won’t be paying 55% exit penalties – oops – crystallisation tax.

The bad news is that that’s because you’ve probably seen your pension pot shrink by 20% since Christmas after a stock market crash.

So what do you lie awake at night about?

Success and more tax?

Failure and less savings?

According to figures published by Aviva, up to 1.5m working adults, about 5% of us, are heading towards paying 55% on part of our retirement savings when we get to spend it (or even if we don’t). The Telegraph amplify the findings.

To hell in a handcart?


This should make sobering reading for those who regard maintaining the tax status quo as the best way to restore confidence in pensions. If you’re going to hell in a handcart, you’re probably grateful for some traffic lights – even a road block!

The current pension system is taking us to hell in a handcart. How do you tell someone saving hard  , working hard and trying to replace their earnings in retirement that penal taxes await them if they succeed – a lower standard of living if they fail? How can that be an incentive to move from debt to saving?

Those who are likely to be hardest hit (according to Aviva) are those on more than £80,000 pa, which seems like a phenomenal amount of money to those on average earnings (£26,000) but is a level of income a high percentage of young people now aspire to. The current pension system isn’t rewarding aspiration – which is most un-conservative.

Rewarding abuse of the national insurance system?

ni abuse

Yesterday, a friend to this blog, David Yeandle and a former Pension Minister  Stephen Timms MP ,tabled questions in the House of Commons on just how much national insurance is not being paid so that the amount going to our pension providers can be maxed.

National insurance is money paid by those who are working to those who aren’t. It is a key way we redistribute from the “haves” to “have-nots”.

Losing the right to exchange national insurance payments for extra payments to private pensions may hurt private pensions but bolster welfare.

It is surely perverse in the extreme that we are running a pension system that is reliant on depleting our welfare system. This is no way to run things

I’m very proud that this blog inspired David and Stephen to prompt a proper debate on the fairness of this.


The net pay lottery


Regular readers of this blog will now how incensed I am at the complacency of those who run our occupational pension schemes who pay a fortune to maintain the benefits of a few and ignore the pension saving of their poorest workers.

As I write, many people earning under £12,000 who were promised a Government Incentive for being “in” the pension system , are not getting that incentive, because they are contributing to pension schemes that run on net pay. Were they in relief at source schemes, they could see their contributions boosted by 20%.

These people have no idea that they are missing out or why they are missing out. I suggest that when they wake up to what’s going on – there’s going to be trouble.


No way to run a pension system

The current means of taxing pensions is all wrong. It rewards companies for not paying national insurance, it penalises people who save hard and it allows for freakish injustices like the non payment of incentives to the poor.

It is time we forgot about tax relief and focussed on incentivising saving. Time we stopped robbing the national insurance pot to bolster private pots and time we targeted incentives on those who need them most.

Yesterday I spent a profitable hour with Carol Knight, COO of  TISA, (Tax-incentivised-savings- association). She talked about the need for a savings culture and we talked about restoring confidence in pensions.

I know that the Budget announcements in 2016 will not please those who work in pensions, but I suspect they will benefit those who don’t.

The pension system has to change, it just isn’t fit for purpose.



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

“A bit of a balls up- to be frank!”

HM TreasuryDWP entrance 2

If you turn left out of the back of the Treasury and walk down to Caxton Street you’ll find the offices of the DWP. If you turn right out of Caxton Street, you’ll come to the Treasury, it’s a five minute walk, you can do it online using street maps

But whether it’s by megaphone, carrier pigeon or more conventional means, it seems that civil servants in the Treasury, can’t talk to civil servants in the DWP, before issuing a press release.

Yesterday the Treasury announced to the press that it intended to introduce a cap on exit penalties on legacy pension products. After a quick telephone call from a journalist, it emerged that this only applied to personal pensions. After what must have been an “in the thick of it” type panic in the Treasury, a further announcement was made that

the Department for Work and Pensions and the Pensions Regulator will work to ‘mirror’ the FCA’s exit fee cap.

The times we live in..

We will be able to understand pensions when we are ready to listen and when Government is prepared to talk. Instead of it being a “public service obligation”, talking effectively must become what Government does. By that I mean Government must start enjoying the process of telling people what is going on and indeed telling each other what is going on!

This can only happen through leadership. Some of the people I meet at the top of the FCA and TPR are brilliant leaders – Christopher Woollard, Lesley Titcombe for instance. I cannot think that they could ever countenance condoning the balls up in the title of this blog.

The problem is in the DNA of the Treasury (and the DWP) where there appears to be a failure in our Body Politic, I’m hoping that DNA can be changed but I’m not sure it can. It will take a huge cultural shift in behaviour to get the Treasury and DWP to walk those few hundred yards and it’s going to take an even bigger shift to get Government properly talking to Citizens.

This is not the Treasury’s fault, not the DWP’s nor Government’s nor Citizens’s. The breakdown in communications is about a change in the times. To solve the problems we need to move with the times and start adopting new attitudes and behaviours better suited to the times we live in.


Posted in pensions, Popcorn Pensions, Ros Altmann, social media | Tagged , , , , , , , , , , , | Leave a comment

Insurrection and resurrection! A sideways glance at pension titillation.

Thanks to Martin Baker – fellow Yeovil Town enthusiast for this nice juxtaposition.

The Lord Giveth-and the Lord Taketh Away -these articles appeared within four days of each other.

Perhaps Express newspapers worked out that putting “Pension ” on the front page was almost as good as getting “Penis”.

I wouldn’t be surprised if the hidden penis in pensions wasn’t the word’s principle marketing point. This is of course the day that Suki Waterhouse posted super-sexy lingerie shots on Instagram (thanks again Express newspapers – I’m following)


Punk poet John Cooper-Clarke penned the immortal line

“you’ll never see a nipple in the Daily Express”

nor will you see a penis, they’re just suggested!

Bear 1 – Baiters 0

Talking of penises, I spent some of yesterday afternoon watching the bear-baiting that is the Work and Pension Select Committee. The bear being baited was Baroness Altmann and her tormentors were a pack of baying Parliamentary mastiffs, ranging from Frank Field (an old male member) to the post-pubescent Mhairi Black.

If you want to see our Pension Minister – ( with decolletage) in action, here she is

I’m happy to say the Bear survived and added a little to the Pension Minister’s reputation with an assured performance. If Ros Altmann had the confidence that became her intellect, compassion and decency , she would be the pension minister we want her to be.

It was greatly to her credit that she didn’t give former pension minister Steve Webb, a kick to the cojones, but she didn’t. She has been abandoned and let down by her former friends, but this column will continue to champion her – prick she ain’t!


Death and Rebirth 2

But back to the Daily Express and its pension headlines. Once I’d stopped being diverted by lovely pouting Suki, I discovered that these two headline grabbers were both based in fact.

This is based on a survey by pension consultancy JLT and reminds us of what we all know, that if you are in the private sector, you are on your own.

I was amused to see that one of only three DB pension schemes surveyed that showed a surplus was run by Tullet Prebon and sponsored by Terry Smith of Fundsmith. Terry, the old rascal, has had the temerity to invest his pension scheme in real assets and has invested for the long  term putting two fingers up to those who consider pensions an “exercise in risk management”. What a penison! (shurely shome mishtake-ed)

From insurrection to ressurection

I wonder how many more kinds of erection I can wring out of the Daily Express this morning, but be thankful- I have a meeting to go to!

Death and Rebirth

Only four days before we heard of the death of the decent pension, pensions got a viagratic stiffener thanks to the “news” that

MILLIONS of people will be better off thanks to a state pension revolution being launched in April.

Well I never, pensions on the up!

Sadly markets fall as well as rise and between the two stories we’ve been treated to an Expression of catastrophe

World economy MELTDOWN: China stock losses spark panic sell-off and FTSE drops £113BN

and Pensioner Robert Downing robbed of any savings he thought he’d made when switching to ExtraEnergy

Pensioner’s shock £400 bill from new supplier

Perhaps Robert should realise than when you get to later life Extra Energy is hard!

After so much innuendo , you’ll be pleased to know that this is the end of this scurrilous blog, tomorrow normal service will be resumed – till then I leave you with this saucy dollop of equine frivolity!

5o shades



Posted in pensions | Tagged , , , , , , , , , , , , | 3 Comments

Government Pensions? Who’s money is it anyway?

Flood defence system

The vast majority of the money outstanding to those who work and have worked for Government is to be paid as pension. The Government’s pension debts – for its own people – have been estimated in the Whole of Government Accounts (2013) at £1,300,000,000,000 (£1.3tr).

This debt does not sit on the public balance sheet as it is backed by the assets the state owns, which are worth a lot more. We are in no danger of not paying our civil servants!

Nigel Wilson, the CEO of L&G called at the time of the last election as a matter for political debate. It never got to be discussed , beyond the pages of the FT, it is indeed an elephant in the room. Unlike the state pension, the liabilities of which can be managed by messing about with the State Pension Age, the pensions of our police and fire people,our civil servants , teachers and those in the NHS are all paid out of future tax receipts.

And a very good thing too!

The alternative is the Local Government Pension Scheme (LGPS), a disaster in the happening.


The LGPS – the trough from which the pension industry has drunk too long!

The unfunded public sector schemes may not be perfect, but they are at least efficient. A huge number of people are paid a certain income in later life by a very few administrators , a few actuaries and no fund managers or investment consultants at all.

By comparison, the money in the LGPS -set aside to pay those working in and for Local Government is used to pay not just pensions but an army of actuaries, administrators, fund managers and investment consultants – who collectively diminish the fund to a such an extent that there should be a little segment of our council tax  “Where the money goes” pie-chart just for them!


The Government is now asking some awkward questions about just what all these people are doing with tax payers money. The questions come in two parts

  1. Why are you taking so much for yourselves?
  2. What social purpose is behind how you invest the money?

While the actuaries and investment consultants and fund managers and sisters, cousins and aunts, fight a rearguard action to defend their fees, the Government are pressing ahead getting the money out of funds which have little or no social purpose and into funds which are invested to make sure that we can travel our railways at rapid speeds, drive on roads not blocked by landslips and live in towns not threatened by local rivers.

This form of investment has been branded “infrastructure” and deemed a bad thing by many. The many in question being the people who make about as much money out of those kind of investments as they do from the pensions paid to those without a fund – e.g.nothing at all.

The arguments being deployed by the lawyers representing the vested interests (and the lawyers are a further vested interest) have managed to get Michael Klimes of Professional Pensions to argue the case against the Government moving money into infrastructure using this handy “at a glance” graphic.

Screen Shot 2016-01-18 at 06.43.52

This uses a tried and tested journalistic ruse, you make the first bullet point factual and hang on it a couple of spurious conjectures in the hope that people will see this as a factual extension. The second and third bullet points are of course – tosh.

Why member’s interests are not undermined by transitioning to infrastructure

As the Government point out with regards their unfunded pension liabilities, deficits are backed by real assets, things that the Government could sell to pay the pensions if tax receipts fell below the level needed to pay our pensioners.

If an investment in infrastructure fails, the member’s security is not reduced, we’d need the country to fail for that to happen!

The argument in Michael Klimes’ article argues that the Government, the highest legal authority in the land, is being high handed in using its powers to take these assets away from the sisters and cousins and aunts (SCA) without due consultation. An eminent lawyer is appalled that he will not be able to make a large amount of money in this process.

The reason that the Government is just getting on with it, is because the lawyers and the SCA have been filibustering for decades while enjoying a healthy meal at the taxpayer’s table. I am surprised they have appetite for more but clearly their’s is an unassuageable appetite for fees, fees and more fees.

Members have exactly the same security of Government Guarantee, however the assets of LGPS are invested. The question is whether the utility of those assets is enjoyed by the public or the financial services industry. This is public money and should be used for public good.


Conflicts of interest

The second argument (beyond that of supposedly decreased member security) is that if the Government uses the money in the LGPS funds to improve infrastructure it is creating conflicts of interest for itself.

“Under a private sector pension scheme, the trustees are not generally allowed to invest more than 5% of their assets in employer related assets,” Hanratty continues. “What is happening here is the government is investing heavily infrastructure to support the government. For example, you would not let the British Airways Pension Scheme buy a fleet of airlines and then lease them to British Airways.”


This is utter nonsense. The reason we don’t want British Airways investing in British Airways planes , is because of the concentration of risk on the sponsor. Companies like BA can go bust.

BA bust

But behind LGPS is Local Government and behind Local Government is the Treasury. Ultimately there is no more chance of these pensions not being paid as there is a chance that Britain becomes the next Greece.

Of course pulling the money out of funds and into infrastructure will mean that some of those assets will not be independently controlled, but do we have any idea how they were being controlled, what the investments were achieving, how we were benefiting? We have no idea at all. My interests are best served by not being flooded – being able to drive my car without hitting a pot-hole and being able to get on a train with confidence it will reach its destination on time.

Give us back our money please!

This article is not about the benefit structure of Government pensions- we can deal with liabilities elsewhere, it is about the utter nonsense being used as a smokescreen by part of the pensions industry dependent on BAU at LGPS. Business is not as usual, Government is riding rough shod over the interests of the LGPS SCA and rightly so.

In footballing terms, the current management of LGPS has more in common with FIFA than a well run body and it is time it had its funding taken from its control and put in proper hands.

The proper hands have yet to be determined- and I leave it to proper people to make those determinations. The Government has shown with the PPF (and to a lesser degree- NEST) that it can set up financial management structures that work. Let’s see it happen again.


shark in his house

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

What is salary sacrifice and why’s it under threat?

salary sacrifice 2salary sacrifice 3

If you read Jo Cumbo’s piece on possible changes to pensions tax relief in the FT yesterday, you’ll have seen references to the abolition of pension salary sacrifice.

Pension Salary Sacrifice is quite legal and both the DWP and HMRC offer detailed guidance on how employers can save substantial amounts by allowing employees to exchange salary for extra pension contributions.

salary sacrifice 5

As the payment of  salary leads to national insurance payments (by employer and employee) and as pension contributions don’t. There is good reason for employees to swap. And they are persuasively marketed…

salary sacrifice 4

The Treasury is very coy about publishing figures showing how much national insurance is being lost as a result of pension salary sacrifice. Part of this may be because national insurance is income hypothecated to pay for the benefits offered by the DWP and the two departments are supposed to be at arms length.

National Insurance is officially not a tax. But the Treasury has long regarded national insurance as the “tax that dare not speak its name”and they are quite happy to stealthily adjust (e.g. increase) national insurance in lieu of increasing income tax. We might regard national insurance as a stealth tax.


Avoiding paying national insurance through salary sacrifice/exchange is not complicated – but it requires employers to be careful on a number of fronts;

  • they have to make sure employees know the implications of paying less national insurance
  • similarly they have to point out that (for credit purposes) they may be seen to be earning less – if they show a lower salary
  • they have to avoid sacrificing low-paid employees below the minimum wage
  • they have to follow a recognised process which gives the employees the option not to opt in to salary sacrifice.

I’ve written lots on the pros and cons, most pertinently in Accounting Web

As my articles keep banging on about, salary sacrifice is an endeavour not to be taken on lightly. Indeed it is very popular with larger employers with the means to profit from it and the resource to implement and manage it, and not very popular with small firms without these advantages.

salary sacrifice2


Which is very much “red rag to a bull” to the Government’s small business agenda. If it were possible to put small and large businesses on the same footing and increase the tax  (sorry) national insurance take, then this would be a “170 finish” with the final dart hitting the bull!


Without a “whingeing Webb” to stop him, and with the new pension minister “upstairs” and out of the way, now is the time for the devious Chancellor to strike – or so the conspiracy theory goes.

As the Treasury will not tell us how much it (sorry) the DWP is losing from salary  sacrifice, we don’t know what kind of a windfall could be achieved by banning the practice. Which is quite handy for a Chancellor engaged in a pensions three card trick (as speculated on by the FT).

three card trick




In the whole game of pacifying the various factions involved with changing pensions, national insurance (and especially salary sacrifice) is the joker (as well as the 170 finish). For the really important benefit for those who are most vulnerable (the lowly pensioned) is a benefit funded entirely by national insurance.

The national insurance fund – a theoretical pot of money managed by the DWP and measured by the Treasury (the Government Actuary) is going bust. It will be bust by 2020 unless the Government can manage its liabilities (e.g .unpick the triple lock) or increase National Insurance contributions.

I think it politically impossible for the opposition to argue against the diminishment or even the abolition of salary sacrifice.

But what of employers? The Federation of small businesses may not be overly bothered (see above- this is a big company perk) but the CBI should be very worried. Pension costs for large employers would increase in real terms by anything up to 10% (where the employee contribution represents the majority of what’s paid to “Workie”.

The fragile alliance between employer and Government has been kept in place by the tacit acceptance of this nice little earner for employers.

But what’s coming over the hill – is most certainly a monster. Whatever the Chancellor hits employers with, when he makes his announcements on changes to tax relief on March 16th, will make the loss of salary sacrifice appear an afterthought.

I suspect that March 16th is a very handy time to lose bad news. Any investigative journalist reading this report (or the PLSA), might want to file a request for information on how much is currently being lost to the “national insurance fund” from pension salary sacrifice.

It might be a number that could prove handy in the weeks following the budget.

salary sacrifice



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

The pension gravy train heads for the buffers!

The FT is seldom wrong on matters of public policy. Only a few weeks before the promised budget announcement it headlined last night…

Screen Shot 2016-01-16 at 06.39.10

Which is precisely what everyone in pensions worried about and what the rest of the country is going to vote on in 2020.

The FT is clear, that Osborne’s motivation is political, Osborne and the Treasury will argue that it is in the national interest and – bizarrely – it is.

I say – bizarrely – as we have got so used to self-serving policies designed to conserve the status quo that a genuinely radical policy that takes tax-breaks from the wealthy is a shock to the system. It is quite extraordinary that in the long years of Labour Government , neither Gordon Brown or Tony Blair were able to take on the bulwarks of pension privilege. It would be even more extraordinary if the “lads from St Pauls and Eton” were able to do just that.


So what of the detail?

I still see the destination as TEE but what is being presented through the FT’s research is the Treasury looking to displease all stakeholders in equal measure. IF TEE – as we have it in ISAs is clean and understandable, what is emerging is quite the opposite.

The flat rate solution with Government top-ups replacing tax relief has more to do with relief at source than net pay. It looks like the cost to the National Insurance system from salary sacrifice will be squeezed making pensions more expensive to many employers who benefit from “flex” and it looks like the heady days of higher rate relief are gone for ever.

How this is going to work in practice is still under discussion but my understanding is that this is going to be extremely messy.


How will the opposition see this?

Well they really ought to be applauding. The dirty work is being done by the posh boys while the labour hierarchy are the right side of 60 for this to be (from a personal viewpoint) academic- I mean -look at them

Posted in pensions | Leave a comment

Would you buy a recovering alcoholic a large vodka?


Offering IFAs the prospect of commission is akin to running a meeting of alcoholics anonymous in a pub.

Screen Shot 2016-01-15 at 06.38.30

Yes, Tracey McDermott has ruled herself out of being the long term boss at the FCA and no I don’t think that the argument is closed but even the prospect of solving the problems with delivering sensible financial solutions to the mass market of British Citizens by reintroducing  commission is awkward.

It is as awkward as scrapping the investigation of Banking Culture, something that the FCA did just before Christmas. I suspect that re-introducing commission and inviting Banks back into the FCA’s good books are symptoms of the same malaise.


We should not underestimate the RDR and just what a dramatic change it has had on the way financial services are sold in the UK. The Financial Advice Market Review has been set up to survey the new advisory landscape. It seems to be concluding that life was better before January 2013 and the solution is to roll back the years- to put a drink in the alcoholics hand.

But the cold turkey that the financial advisory industry has been going through has been painful and constructive. We are only three years in but already we are seeing genuine advances in the delivery mechanisms for new products. Robo-advice would not happen if advisers were able to be paid for turning up and completing forms. Workplace pensions would not have been delivered at 0.75% or less (nor will they) if commission is readmitted.

And the reintroduction of commission will nip in the bud the new collective solutions that could have introduced a default means to invest our retirement savings and spend them without recourse to advice.


My partner will tell you how I sat at home two nights ago , shaking my head and almost in tears. I had been at a meeting with the CEO of an advisory business active in helping clients take informed decisions on workplace pensions.

His firm has been firm supporters of doing it the right way and has used our Pension PlayPen service consistently. Then the stream of business stopped.

What has happened was that the advisers had found a way of getting paid via a workplace pension provider and – by carefully crafted agreement wordings were now taking adviser fees instead of member borne charges. It turns out that the provider’s default fund is hardly ever fit for purpose and that advice – paid for by members – is critical.

Now this provider is being recommended almost exclusively by this provider and of course the adviser fees are rolling in (as if they were commission).

The members are now in “member specific investment strategies” and of course there will be a need for annual reviews of those strategies, at the member’s expense.

I am sure that all parties believe that overall value is being added by these reviews and that the adviser charges will be more than compensated by improved performance. But I am not a party to this way of thinking.

I sat and shook my head and was pretty inconsolable. I felt like going down the Cockpit and drinking myself senseless.

alcoholics 2


Of course I woke up yesterday  morning and decided to move on.  I cannot control what the FCA decide to do with FAMR. They may open the floodgates and allow commission to flow , as the rivers flowed through Hebden Bridge, Leeds and York.

The Banks and other commission junkies , may be allowed back in the pubs and crack-houses and the deleterious effect on people’s attitude to advice will be immediate. All that has been done – at such cost – can be unwound with a stroke of the keyboard.

Thomas Phillipon, the French economist, has established that every time the financial services industry looks to have made a tiny step to disintermediation and genuinely lower costs of owning financial products, that step is retraced. In 125 years , his analysis shows we have consistently paid around 2% pa of the value of our investments to third parties- to manage them. In a low growth environment, we might as well put our money under the bed (though I sense that the banks would charge us bed insurance!).

It looks like he is being proved right again. Nature abhors a vacuum and financial services cannot abide charges under 1%. If the market can tolerate a 2% pa intermediary charge, then we will have 2% products, despite the cost of the product wiping out any nominal (let alone real) growth.


There is no sense at all in introducing commission. The desire to do so, is what underpins the financial empowerment mantra which assumes that because people have been told to do the right thing, they will do the right thing. The reality is that you can tell people to watch out for sharks but they will still go swimming, you can tell an alcoholic not to go to the bar, but if you invite him to the pub, he will drink.

The long-term answer to the problems the FAMR is trying to address rest in there being good products into which people’s money is invested that do not rely on financial advisers managing them. The long-term answer is to take intermediaries out of the mass market, where they do little good and a lot of harm and replace them with sound default products and collective education on what makes for good.

That is what FAMR should concentrate on, not the regression to commission.

alcoholics 3

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

All at sea! TPR’s “Trafalgar” for maritime and offshore workers.

Fleet maritime

We should all be a little happier today with the news that the Pension Regulator has won its case against Fleet Maritime Services, meaning that many thousands of employees on overseas contracts will be treated as UK based and thus eligible for auto-enrolment.

The Pensions Regulator has won a landmark legal victory against an employer who argued it was not obliged to meet a new pension duty for staff because they worked on cruise ships.

Fleet Maritime Services, a Bermuda-based employer, had argued that many of its UK staff were not covered by automatic enrolment as they worked in international waters and could not be said to “ordinarily work in the UK”. However, the High Court on Tuesday said it agreed with the regulator’s position that the workers were covered by automatic enrolment.

Thanks as usual to Jo Cumbo of the FT for tipping me off on this!  Well done Lesley Titcombe and hurrah for our best naval victory since Trafalgar!

lesley titcombe2

Lesley – boss at tPR


For those in peril..

You might think it  random for me to be banging on about Seafarers but bear with me. In my pre-financial services days I spent some time in Iceland as a trawler man. While latterly my seafaring exploits have been confined to the decks of Caribbean Cruise Liners, I’ve got a weather eye for those in peril on the sea.


If you want to read about how this all started , flip back to my blogs a few years ago.


The plight of the offshore contractor.

But I’m even more pleased for the thousands of British workers who are working in the UK on low wages who are missing out on auto-enrolment contributions because they have signed offshore contracts. These can range from cleaning jobs to supply teaching, what all the “offshore workers” have in common is that because their employment contributions originate from places like Sark in the Channel Islands, the employer doesn’t have to enrol them till April 2017.  The BBC exposed some shady practices and I wrote about the pension issues back in 2012. Indeed I called it a pension scandal in the making

So one teacher on an onshore contract’s been enrolled for three years and another still has a year to wait! No one explains these things to you when you are given your contract.

I remember visiting the London offices of one offshore manning agency and listening to the sound of piped seagulls, apparently many of the contractors calling in , assumed that the office was indeed in Sark!

But seriously…

Had tPR not won this ruling, many people would have missed out on auto-enrolment and we could have seen a surge in offshoring contracts meaning that people currently enrolled could have found themselves disenfranchised.

Crow’s NEST

Jo broke the story at the bottom of an article in the FT on NEST. Not a lot of people know this, but NEST can’t be of much help to workers with offshore contracts as they are required to turn away any employer which pays its staff using an offshore bank account. Not surprisingly, the offshore payment companies such as Fleet Maritime Services, keep their bank accounts offshore, not to do so would prejudice their priviledged tax status (vat mostly).

So weirdly, the Seafarers and the contract workers who are on offshore contracts- some of the most disadvantaged workers in the UK, are ineligible for NEST – a perverse twist to the “public service obligation”.

I hope you enjoyed this magical mystery tour into the weirder edges of auto-enrolment. I hope the people who will, as a result of this victory for tPR, be getting a Workie, will be told and I hope that the nasty business of offshoring people’s contracts to save a few quid in UK taxation, will suffer further setbacks.

crows nest

nowhere for seamen to NEST?

Posted in auto-enrolment, now | Tagged , , , , , , , , , , , , , , , , , , , | 2 Comments

Pensions need to be sold for the sausage not the sizzle.


A great observation from Steve Groves, CEO of partnership this morning.

By “buying” Steve means “buying annuities”.

If you are filling in your self-assessment forms this month, you’ll have come to the section on whether you are in receipt of a pension. I would like to know what percentage of this year’s over 50’s are still receiving income from employment while enjoying a pension, I imagine it is quite high.

You could look at the number with a hopeful or a jaundiced eye. Those who adopt a hopeful attitude might see these people as “winding down”, those adopting a jaundiced perspective might see them as the losers who smelt the sizzle but ignored the sausage.


The sizzle

I remember the easiest way to sell a personal pension was to offer the prospect of putting up one’s feet at 55 or even 50.

“When are you planning to retire?”

“Oh I dunno- 50 would be nice”

“Well put 50 in the box and we’ll talk about how you’re getting on when we meet this time next year….”

Of course most of these “clients” were never seen again, either the adviser moved on or the employee changed jobs, locations or just forgot to renew the discussion.

The expectation had been set, the saving process begun but the result – as has been shown by what is happening at retirement – is that we save enough to buy a lifetime annuity at 55 of around £1000 pa.

Sid’s been mis-sold a lifestyle Sausage!

Steve Groves reckons this is a “Big Government” mis-selling scandal.

The capacity to take your personal pension at 50 , brought in with the pension reforms that established personal pensions in 1987, was founded in a genuine belief that standards of living would continue to improve, that the stock markets would continue to flourish and that technology would enable us to retire how we liked – when we liked. We were in a period where personal financial empowerment was the mantra.

Tell Sid- he can make a bomb buying BT shares, he can buy his council house- Sid can retire at 50.

Well Sid is probably not earning enough to need a self-assessment form.

He may be on a zero-hour contract, he may be technically self-employed, he may be an eligible job-holder, but one thing that Sid is not – is pensions rich!

Has Sid been mis-sold a pension? Sid’s been mis-sold a lifestyle! He bought the sizzle and forgot about the sausage.


No one to blame but ourselves

Those of us who earn enough to warrant being asked to self-assess, are likely looking at that “are you in receipt of a pension” with a rueful eye. Like WASPI, we are disappointed, mystified and probably angry. We are looking for someone to blame.

The reality is there is no-one to blame. We voted in the Governments who told us what we wanted to hear. We believed them because it was pleasant – it got us through, even if we knew that we were building sand castles that would be washed away if the tide came in.

13% pa growth rates, annuity rates converting ten pounds into a pound’s worth of lifetime income, early retirement at 50 – it was all part of the package of delight dished out throughout the final quarter of the 20th century.


Now for the hard landing

The reason that WASPI is so important – the reason I write these blogs – is because the generation currently at or approaching retirement are waking up to the difference between a hope and an expectation.

We have no hope of retiring for 30 years after working 40.

The average person is cashing in or buying a pension far too early

These things should have been said in 1986 and repeated for the next 30! But they weren’t.

And for the next generation?

If you have a WASPI Mum, you might be asking yourself just how dumb you’d have to be to get that distraught about losing a couple of years of the state pension.

But you wait! When the realisation crystallises that you are  “old” enough to retire but can’t. then what will you do?

There are two answers to that..

The first is that a sensible youngster won’t fall for false promises and won’t create unreasonable expectations.

The second is that through current pension policies, particularly through auto-enrolment, we are building false expectations for another generation who are no more likely to retire on their “Workie” than we were on our

“get rich- retire quick – personal pensions”.


Posted in pensions | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

“Confusion rife!” and not just over the new state pension.


The DWP Select Committee has published its report “Understanding the New State Pension” this morning. The accompanying Press release calls for clear statements of entitlement while stopping short of calling for changes to those entitlements.

The Work and Pensions Committee’s report on the New State Pension calls on DWP (Department for Work and Pensions) to make urgent changes to the information they are sending to people reaching retirement age.

It’s left to Frank Field to tell it as it is

“Successive governments have bungled the fundamental duty to tell women of these major changes to when they can expect their state pension. Retirement expectations have been smashed as some women have only been told a couple of years before the date they expected to retire that no such retirement pension is now available.

We are also concerned about the accuracy of existing information that is being sent out to women about their state pensions entitlement. Groups representing this grotesquely disadvantaged group of women have suggested a pension entitlement notice. And so have other experts who have given evidence to the Committee. We expect the Department for Work and Pensions immediately to call into the department these witnesses, hammer out a new pension entitlement notice, and begin supplying all women with accurate information on their pension entitlement.”

manager 3


And that’s before we move on to occupational schemes


The problems for the DWP do not of course stop there. The introduction of the new state pension brings new issues for occupational pension schemes, in the public and – in particular the private sector who are struggling to do for their member’s contracted out state pension alternative, what the Government are doing with the State Pension.

This separate can of worms (known as GMP equalisation) is still on the DWP’s drawing board. Goodness only knows when occupational schemes will be told what they have to do and when they have to do it by, but with April 2016 a couple of months away, the answer will undoubtedly be “too much too soon” – certainly for the administrators , trustees and employers involved.

 And that’s before we move on to pension taxation

As usual, the equalisation issues emerging today are crystallised by these pensions being shortly due for payment. The women most “grotesquely treated” are those who are now 61 and 62 who might in the old world be “receiving their giros”.

The problems looming for those not getting their “government incentive” from auto-enrolment are further away and impact people who have less capacity to complain (those on lowest incomes). Nonetheless, the injustice with net pay occupational schemes differs only from those mentioned by Frank Field in that we can do something about it now!


The ghosts of pensions past, present and still to come

Whether it be the miscommunication of the past (State Pension Age entitlements)


Whether it be the miscommunication of pensions of today (GMP equalisation)


Pensions still to come (Net Pay schemes – especially those auto-enrolling those on low incomes)

the problem is the same.

We have no reliable communication infrastructure that can educate ordinary people about what they’ve already been told, about to be told or will be told in years to come.


We all should play our part

I feel very strongly that this is not a problem for the DWP and its pension minister Ros Altmann.

The responsibility for educating the public about what these matters is a general pensions problem for which a general solution must be found. The issues of GMP equalisation are matters that the PLSA and PMI and the SPC and the ACA should be addressing with the DWP with great urgency. They have a key part to play in this – what help are they giving the Government?

The responsibility for sorting out the net pay fiasco that looms rests with the administrators of DC pensions. What are they doing with HMRC and the DWP to ensure that we do not have another scandal on our hands?

The responsibility for sorting out the State Pension is the DWP’s and the DWP’s alone, but the communication of the new entitlements rests with us all. That’s everyone from Paul and Martin Lewis, right through the advisory chain to the youngest paraplanners helping financial advisers talk to their clients.

Don’t sack the manager


manager1Garry monk

We know how football clubs, when they find themselves in trouble, point the finger at their manager and sack them. Just look at Swansea.

It does not make any sense to sack a manager unless that manager was the cause of the problem and is preventing it being sorted.

There will be plenty of people, as this current wave of troubles breaks, who will point to Ros Altmann and call for her removal.

I think that this would be quite the wrong thing to do.

Firstly, Altmann has spent the last 9 months getting into a position to understand the problem. She is very competent, any replacement is not going to get to the same degreee of consequence till the end of 2016 (if ever).

Secondly, Altmann is a brilliant communicator. If ever we needed her skills to tell people what they are entitled to and why, it is now. We need Altmann.

Thirdly, the effectiveness of our Pension Minister depends on her capacity to talk and our capacity to listen. If we spend our time shouting at her, she cannot talk and we cannot listen.

I have said it before, and I’ll say it again, we have precisely the right pension manager/minister in place and her name is Ros Altmann. Now is Altmann’s first big test and she will not succeed without the dressing room. Those in the DWP need to get behind their minister and those of us who work with occupational schemes and with the general public need to do our bit to help people understand what is going on.

Ros Altmann spurs


Here are the recommendations being made by the DWP Select Committed to make the current entitlement statements easier for ordinary people to understand.

  • statements should be limited to one page in length;
  • key messages should be highlighted in boxes to ensure they stand out clearly;
  • statements should prioritise the current value of state pension built up, state pension age, the date that age will be reached, and how to build up additional benefits;
  • state pension age should be highlighted in a prominent position, especially for those whose pension age has changed;
  • means of getting further information, such as a full breakdown of NI history, details and calculations of NSP starting amounts, and calculations of deductions for period of contracting out should be clear and that information should be readily available;
  • the term ‘Contracted Out Pension Equivalent’ should be replaced by ‘contracting out deduction’; and
  • the contracting out deduction should be explained as such, making it clear that it is a reduced state pensions as a consequence of paying reduced NI contributions but may be compensated for by the individual’s private pension scheme.






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

The FCA report on the use of Pension Freedoms – sad but not shocking.

TrabantTony lamborgini

The data that the FCA supplied last week about the choices people are taking with their retirement savings isn’t surprising – but it’s still shocking!

Nearly nine in ten savers accessing their retirement pots under the pension freedoms are using new flexible arrangements

Just 13% of savers are now buying annuities to turn their fund into an income in retirement.

More than two-thirds of pots accessed by savers between July and September were fully cashed out.

Here’s the raw data…

A total of 178,990 pensions were accessed during the three-month period, and 68% of these, amounting to 120,969 pensions, were fully encashed.

The remaining 32% of pensions that were accessed were taken to provide an income.

Most (88%) of the pensions where the money was fully taken out were worth less than £30,000.

£17m a day is being withdrawn under new pension freedoms


What’s shocking?

To put it bluntly, it’s shocking that nearly 90% of pension pots assessed were worth less than 90%. The promise of the portable pension didn’t arrive.

The analysis covered 95% of the monies arising from personal pensions (contract based plans) and they simply didn’t deliver what they said on the tin. Let’s be clear- when people signed up for one of these personal pensions, they would have been given an illustration of what the likely benefits arising would be. I doubt that many (if any)  projected less than £30,000.

The assumptions on these plans were based on a continuos contribution history as certain as tax and national insurance. There were no illustrations of the actual what ifs…

What if I change job and my new employer won’t pay into this pension (like my current one does)

What if I fall on hard times and have to stop saving….

What if I lose touch with my current financial adviser and have to start another pension to pay the fees of the next one…

I could go on… The insurance companies who run these supposedly portable personal pensions have known since the early 90s that “persistency rates” were shocking. That people would pay a few contributions into a pot and then move on , starting another personal pension and another.

Many of these plans were forgotten about and form part of the great estate of “orphan assets” which benefit no-one but the insurance companies who continue to draw their charges against pots diminishing in real terms.

When people say that pension are a rip off, this is where they point to for evidence. These broken promises they received from pension advisers backed up with statements from properly branded insurance companies stick in people’s memory. The advisers are gone, many of the insurers are gone, people are now happy to salvage what they can from the wreckage.


It’s not shocking that people aren’t buying annuities

This graph from the Daily Telegraph shows  that between 2003 and 2015 the amount of income has fallen by over a third. The fall is even steeper if you compare 2008 and 2015.

Annuity rates over the past 10 years for buyers aged 60 (dark blue), 65 (blue) and 70 (green)

Based on a single person with £100,000


People see the accident of “getting lucky” or “being shafted” by annuity rates as a trick played on them by people in the City. They aren’t particularly interested in explanations about quantitative easing, low growth forecasts or financial crisis – what is that to them?

They look at insurance companies as insuring them against bad things happening, not exposing them to these kind of risks.

For the 90% of people who escaped having to buy an annuity at ridiculous rates, the pension freedoms are good news not bad. Money salvaged from the wreckage.

 Should we be surprised that people won’t take financial advice?

Most people were coerced into these personal pensions by financial advisers. Most people know that financial advisers mad a lot of money from their “sales” and that there is a link between the commissions they earned and the lower than expected cash values of their pensions at retirement.

They are now being told that they should take more financial advice. Unsurprisingly, people see little point in returning to the scene of the crime where they understand the people who robbed them last time around are waiting for them.

They have landed on the monopoly square that tells them to go directly to “go” – collect £200. That’s what most people will do, are doing and have done ever since they’ve had a chance.


Many people see Pension Wise as spies.

When I say “most people”, I mean most people who haven’t got the financial literacy or the inclination to go to Pension Wise. People have nothing to lose by going to Pension Wise One person I spoke to over Christmas told me he

“didn’t fancy going to the Citizens’ Advice Bureau as the people there “didn’t know anything they didn’t – the people there were Government spies-and that anything he told them would prejudice his chance of getting benefits in the future”

He had been told this by his friends. I am sorry to say that most of the people at the bottom end of the “socio-economic scale” are extremely careful about sharing anything with Government and this chap was acting under orders.

Hand wringing is not much use

It was sad to read in Katie Morley’s article in the Telegraph, comments by Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline.

“No-one wants to see retirees run out of income and face debt in later life – but these figures show that many could face this worrying prospect.

“We have also raised concerns that retirees who are already in financial difficulty could be left without the information and advice they need to choose the best pension products for them.

“While general guidance is available from Pension Wise, many people with unpaid debts and smaller pension pots will struggle to afford professional product-related advice.”


Taking care of those who cannot care for themselves.

Those in financial difficulty do not have “pension products” designed for them. The graph on annuities took as an annuity purchase value £100,000. Of those who are buying annuities (the 13%) , two thirds bought from their providers- suggesting that old habits die hard and there is a hardcore of people so reliant that even the open market option looks too hard.

That 64% of people buying annuities didn’t shop around tells me that there is still vulnerability at the bottom of the market. I’d like to see a further study to find out why these people bought into annuities as they did.


The best pension product for those with small pots?

Quite clearly, the State Pension is what most people cashing out pension pots under £30,000 are going to rely on. As Paul Lewis calls it- it is their Pension Lamborghini. Were we able to liberate it – it would buy as a Lamborghini!

Were people taking their pots at state age able to access professional financial advice, they might be best advised to defer taking their state pension and use the money from their pension pots as a bridge. They might be well advised to buy extra state pension rather than sink the money into an annuity. The State Pension is a brilliant pension product and the options to defer and purchase more are rarely advertised (especially to those on low incomes)

We should right now be working on a mass market way to help people with small pots to spend their saving but that work was put on hold earlier this year when the Government mothballed CDC.

This is not the time to rehearse why this was such a short-sighted decision. But now is the time to draw a conclusion from the FCA’s findings.


What can we make of all this?

  1. It is shocking that personal pensions have come to this, almost 30 years after they started out, they are simply not delivering to those they promised so much to
  2. The behaviours of people cashing out their personal pensions is not shocking- it is entirely understandable
  3. The failure of the Government to do anything to help those with small pots to find a better way to spend their money than annuities and advised draw-down is a disgrace.
Posted in pensions | Tagged , , , , , , , | 1 Comment

Can the Government tough it out with #WASPI?

Mhairi Black

Mhairi Black kicks off yesterday’s debate

The Government were defeated on a back benchers debate 158 votes to 0. The vote was over the introduction of changes to the state pension age for women, resulting from legislation introduced in 2011.

The Government’s response appears to be to drown the news in noise. Yesterday saw the FCA publish statistics on the use of Pension Freedoms,

today sees the publication of two important reports by the DWP.

It looks quite clearly that the DWP and Treasury spin machine is operating at full capacity looking to bury bad news.


Will WASPI go away?

The question is whether they will be able to silence the WASPI women. Even if they turn down the debate that the WASPI petition calls for, they will find it hard, I suspect that WASPI has gripped the popular imagination.


Case study!

I was talking to a senior actuary yesterday who had spent the past few days promoting the (important) changes to the final salary scheme which he advised to the members who were going to be impacted. Apparently, his talk had been met with the dull resignation that people have when hearing bad news about pensions.

When it was time for questions, hands shot up, not to ask about the technical changes to the company arrangements, but to get a better understanding to the changes to the state retirement age. As my colleague pointed out, this was not in his brief!


Pensions Industry out to lunch!

The pensions industry is being caught on the hop as much as the Government and no doubt it will hope that news will focus on its “Business as Usual” agenda which is all about company and private pensions.

Nothing on this from the PLSA and precious little from any professional body!

I met with a financial journalist working in the IFA trade press on Tuesday, she did not know what WASPI was.

But the tale of yesterday was that the general public are indeed more interested in knowing about their state pensions than arguing over how pension freedoms are being exercised.

It’s the first time I can remember a UK pension issue trending on twitter and the noise was not coming from the “usual suspects”, this was not “business as usual’. If you believe that there’s wisdom in crowds, then – there’s your crowd!


What are the Government up to?

It is too early to tell whether the Government can tough this one out. That not a single MP traipsed voted against the motion, suggests that there was a concerted attempt to make this debate a “non-event”, but reading Jo Cumbo’s excellent account of what was said, by who and how, the debate was passionate,well-argued and could have run as long again as the 150 minutes it was allotted.

As the picture shows, very few conservative backbenchers showed up.

House divided

Lack of Tories on the left

If you want to read the full transcript of the debate from Hansard, here it is.

What is more, the opposition to the precipitative changes introduced in 2011 came not just from the opposition, it crossed benches.

The arguments from Conservative politicians were often specious

This statement is both speculative (the Government has made it clear it has not decided on what route the reforms will take) and disingenuous (George Osborne is clearly out to reduce tax relief not to raise the retirement standards of working women).

There appears to have been some showboating from financially literate Tories

But the passion and emotional intelligence came from elsewhere.

That is not to say that the arguments were all one way. I found Richard Graham’s comments intelligent and his arguments compelling.

Labour is in a weak position on this as the majority of the period of miscommunication, was under their watch.

Indeed – in the absence of any Liberals in the Chamber, it was the SNP who demonstrated the core opposition to Conservative apathy.


What does this come down to?

The key dynamics of this debate are moral (that women have been shafted) and economic (that there is no money to put this right). One voice not heard was Ros Altmann (who cannot attend Backbencher debates) sitting as she does in the Lords.  The other voice not heard was George Osborne (who was very vocal elsewhere warning us to get ready for another bout of austerity).

The next few days will tell whether the monstrous regiment have been silenced, or whether they will continue to make their voices heard. I don’t think that they will read the vote (158-0) as anything for a vindication for their position.

This story has however failed to cross-over to front page news, meriting a mention in the Telegraph but not much more. Only Simon Read in the Independent, gives the debate proper coverage.

For me the Government still has it but…

My position remains with the Government, the debate itself is hugely important but the moral and financial arguments are ultimately with the position Webb adopted in 2011.

However, I am not happy to see the Conservative party, attempting to drown the debate by publishing consultation responses and key statistics to drown it out. There is no doubt that the Government have not done all it should have in public education on this matter and no doubt that the electorate are not happy.

A little more humility from Government, an acceptance from the DWP that they failed consistently to do what it is paid to do and a formal apology would be the very least that the WASPI women should expect.

But it may be too late for that, the water is swelling at the flood gates and the next few days will tell whether WASPI wash through.

Posted in pensions, WASPI | Tagged , , , , , , , , , | 8 Comments

Austerity, WASPI and the middle way.


This morning George Osbourne has taken the opportunity to remind us that any enthusiasm we might have generated from his upbeat autumn statement should be tempered by the prospect of austerity to come. Osborne points to China , to political turbulence in the Middle East and must have in mind the impact of the coming debate on Brexit. Now is not the time for irrational optimism.

Today is also the day when Parliament’s youngest member will debate whether the increases in the state pension ages for women  introduced in 2011 are fair. This is how the debate is characterised in the House of commons Library

The Pensions Act 1995 provided for the State Pension age (SPA) for women to increase from 60 to 65 over the period April 2010 to 2020. The Coalition Government legislated in the Pensions Act 2011 to accelerate the latter part of this timetable, so that women’s SPA will now reach 65 in November 2018.

The reason was increases in life expectancy since the timetable was last revised. It had initially intended that the equalised SPA would then rise to 66 by April 2020. However, because of concerns expressed about the impact on women born in March 1954 who would see their SPA increase by as much as two years as a result, it decided that this should happen over a longer period, with the SPA reaching 66 in October 2020.

Some women born in the 1950s argue they have been hit particularly hard, with significant changes to their SPA imposed with a lack of appropriate notification. However, the Government has said it will not revisit the 2011 Act timetable.

This is not a debate on the WASPI petition, if that debate happens, it will happen because there is sufficient energy in the debate at the end of the day. The parliamentary petitions committee will be the judge of that.


The cold fact of an empty purse

The Government’s position, articulated by the Pension Minister Ros Altmann is that there simply isn’t any money for a change to the transitional arrangements announced in 2011, let alone for the wholesale rollback called for by WASPI. The argument is grounded in fact. The National Insurance kitty is pretty well empty, denuded by several years where the Government has paid out under the triple lock, an arrangement where pensioners and future pensioners see increases in the state pension in line with the highest of 2.5%, inflation or wage increases.

This triple lock has been a positive bonanza for the state pension seeing it rise well ahead of wages and inflation for the first time in decades. The quinquennial review of the National Insurance Fund, published by the Government Actuary 18 months ago made it clear that we are overspending on pensions and that the Fund would be bust by 2020 if we didn’t rein in these real increases soon.

The Government’s reluctance to roll back the years to meet WASPI’s demands should be seen in this light.


A problem of engaging, learning and understanding

I am not a zealot for austerity, but I recognise that we cannot have cakes and eat them quite as we would like (post Christmas waistlines testify).

Ros Altmann knows this too. The Treasury has a limited budget and the DWP are getting a smaller slice of the departmental cake as other budgets are ring-fenced.

Against this is the real and very poignant plight of many women who’s life goals have been turned on the prospect of a pension at 60. It is a magic number with emotional as well as financial significance. The attachment to 60 as a fulcrum of change is not fanciful.

This is where the problem lies. The Government’s failure to engage both women and men in the “why” as well as the “how” things have to change is a big issue. It is understandable. If you run a departmental budget, you run it agains the KPIs you are given and those KPIs, in a highly politically charged environment, are as short-term as the politician’s horizons.

Typically the horizon is no longer than the perceived tenure of office of the Minister and- till the heady hegemony of Steve Webb, that was – for the Pensions Minster- typically a couple of years.

It is extremely unfortunate that the weight of all the failures of the past are loaded on the shoulders of the current pension minister but there it is. I consider Ros Altmann to have the broad shoulders to accept the responsibility to take wise decisions. She must balance the cause of WASPI against the wider issues of the Treasury and determine accordingly.


A Middle Way?

There is a middle way, one which Labour’s shadow minister Nick Thomas-Symonds can safely hunker down. He’s articulated it properly in the Daily Mirror.

It focuses on the women most affected, those born in 1953 and 1954 and accepts that the rest of the WASPI women simply have to sit down and shut up.

I very much doubt that the WASPI women will, nor do I suspect that the Government will be much interested even in this “middle way”. I expect that we will see this debate ending in a testy stalemate with the WASPI debate to come.

Whether that second debate happens depends on a range of powerful undercurrents that we, not being in the river, cannot feel. I sincerely hope that the Minister can stand firm on the ground she chooses to take and is not swept off her feet.

If that ground is where she has stood so far so be it, if there is room for concession, as their was on the credits issue, let that happen. What we cannot let happen is a polarisation of positions which leads to a breakdown of trust in Government and the way it treats its citizens.

I very much hope that we will find a sensible way through to a settlement and believe this can best be achieved by the debate(s) we are about to have. Most importantly, we need to raise awareness of the issues surrounding old age and financing the needs and wants of older people.

This is an ongoing debate and I hope neither “austerity” or “WASPI” will have the final word. The final word will follow the creation of a consensus and we are very far from that right now.



Posted in pensions | Tagged , , , , , , , , | 5 Comments

Auto-Enrolment must learn from WASPI


Pension AE

spelling it out!

Over 100,000 people have signed the WASPI petition demanding that Government review the increases in state pension age for women in their fifties.

I admire the WASPI women for bypassing  the usual channels and  making  their point directly to Government. They’ve proved that using social media, they can do it yourself.

They were spurred on by the lack of engagement from the pensions industry in women’s rights – not least the right to be kept informed. The  knowledge of our complicated pension system is in the hands of a  small number of civil servants and pension experts and  they could be argued that WASPI’s grievances are as much the problem of the pensions industry as the DWP.

I am sure that most advisors would see no public service obligation in their work, their job focusses on the needs of those who pay them and does not extend to telling the general population about changes in the state pension. I’d agree with them.

There is an important issue at stake here. The private sector has no obligation to explain public policy except where the terms and conditions with which it engages its clients include a promise to do so.


Many financial advisers, accountants and payroll bureaux are currently extending their terms of engagement and client agreements to include the management of their client’s pension auto-enrolment.

Inevitably, small employers with no previous experience of pensions, will demand help with the selection of pension provider and ongoing management of the relationship with the provider.

For many advisers, accountants and payroll bureaux, the recommendation of NEST as the default pension provider is deemed a means to by-pass this responsibility. The argument goes that as with the state pension , it really is none of the private sector’s business how NEST performs  – “that is the Government’s problem”.


If only life were that simple.

Employers using NEST are urged to read and agree to NEST’s terms and conditions. In particular they should be aware of Pages 7 and 40 as these assert the right for NEST to directly charge employers for the use of NEST.

Specifically we read  (p7)

The Employer will make such payments to the Trustee …as may be payable by Employer under the schedule of employer charges which the Trustee determines to be payable in order to recover from Employers the costs of the administration and management of the Scheme which the Trustee determines to be attributable to the acts or omissions of Employers.

The schedule of employer charges (p36) states

NEST can charge employers to recover administrative costs caused by them. For example, we may incur a cost if an employer doesn’t pay contributions in full, on time, or doesn’t pay by Direct Debit. Currently we’ve decided not to use employer charges but we may do so in the future.

NEST has not got a bottomless resource to bail out maladministration. It has already drawn down two thirds of its £600m loan from the Government and the administrative strain of the next three years makes it highly possible that NEST will have no alternative but to charge employers for poor administration. The National Audit offices’s otherwise highly complimentary report on auto-enrolment (and NEST) included a note of caution on NEST’s profitability calling on the DWP to

review NEST’s role in the market and its impact on competitive restrictions, and continue to review the long-term sustainability of the current funding arrangement.


Cuckoo in the NEST?

The DWP should not rely on private sector advisers to issue warnings on the sustainability of NEST’s pricing structure, nor should they allow NEST to continue to promote itself as “free”. (Several tweets were spotted on NEST’s twitter feed over Christmas saying just that).

The two lessons that we all should be taking from the WASPI campaign are that

  1. People cannot be relied on to find out about Government policy from the private sector
  2. People expect to be told the whole truth by Government

The DWP should review its promotion of NEST. Currently people are reading the twitter headlines and not reading the small print of the Terms and Conditions.

Advisers, whether IFAs , accountants or payroll bureaux, should be pointing  out to their clients that NEST may be free to use today, but could prove expensive tomorrow.

They should also do as the Pension Regulator requests and point out that- unlike the state pension NEST is not the only option – other workplace pensions are available – (which may be better)!

For – unlike the WASPI women, employers will have terms of engagement letters to turn to. Advisers, not the DWP, may be in the firing line – should NEST not remain free,




Posted in pensions | Tagged , , , , , , , , , , | Leave a comment

Aren’t we our century’s spoiled brats?

pensions crisis

Another year,another sensational headline from your “pension puncturing” Daily Express.

It’s not a new story, its facts are from the Pension Institute study published last year. So long as interest rates remain low, pension liabilities will be inflated and pension deficits will loom.

We have the best pensions in the world because we guarantee every penny, down to the last basis point of the consumer price indexes baked into our entitlements. If we didn’t have guarantees on everything, we’d have CDC, a system where employers pay in a set amount and people get out whatever the fund can afford.

Sooner or later we reach a crunch, we have the guarantees , with the risk of them sinking the sponsor (the employer) or we don’t. If we move to a system of conditional indexation, where pension increases are dependent on there being money to pay for them, we no longer have the best pensions in the world, but at least we know they will be paid.

So here’s a choice

Would you rather have 100% of your benefits with 90% chance of them being paid or would you rather have 90% of your benefits with 100% chance of them being paid?

It’s the kind of gamification that’s become very trendy.

Here’s another one.

If I promised to pay you a pension for twenty years, would you rather have that pension paid between 60 and 80 or 65 and 85?

That’s an easy one – you’d rather have the money up front- cash in the bank (Frank).

But if it was your bank (Frank) would you be so sure?


Are pensions in crisis?

So long as we have an expectation that we are entitled to guarantees- we will be in crisis. If we were to guarantee house prices increased by inflation every year,we would have a housing crisis- same with the stock-market, same with wages.

We simply cannot expect that things will happen as we want them to, because someone ,somewhere used the G-word.

The only two guarantees are death and taxes.


Why 20 years?

Presumably, Redington, the pension consultancy “leaking” this news, has worked this out as the length of the “glide-path” to “buy-out” for its typical client – the large corporate Defined Benefit Scheme. But huge as the liabilities of these schemes are, they represent only a tiny percentage of the overall liability we have in the UK for our elderly.

Those in the schemes quoted in the article represent the lucky ones, behind them- in varying degrees of relative penury – come the rest of us!

In reality, the duration of the pensions crisis will be determined by the time it takes for us to work out we cannot afford guaranteeing things , the cost of which we do not know – nor the guarantors. That duration could be short – if we wake up and smell the coffee – or it could be much longer- if we continue to kick cans down the road.


The irony of immigration

Let me explain..

Those who want guarantees on the state pension age, on pension indexation and on the payment of benefits need to be aware that those guarantees not only have to be paid for, but generally have to be paid for at the expense of something else.

There being only one Treasury, one UK system of taxation and only one UK population, these guarantees will have to be paid for by our children. Or (ironically) by the immigrants to this country who are the main source of hope that we will have the money to pay the benefits in 2020-30-40-50.

It’s ironic-because the bulk of the prejudice against those arriving on our shores – is from those who have it all to lose. Little do they understand, that without the endeavour of those arriving from the Middle East, Africa and the poorer end of Europe, the money to pay for our declining years, simply won’t be there.

Entitled and spoiled by it!

The loudest and most strident voices in our society are those of the “entitled generation” those – like me –  in our fifties and sixties who have had it all. We are the great beneficiaries of Britain’s post war posterity, we have enjoyed the peace dividend earned by our parents and grandparents. We have benefited from free schools and free higher education. We are the most entitled generation this country has ever seen.

And now – some- just some- of our entitlement is being pulled back. We are no longer getting the free tax-ride of by-to-let, we are not getting our state pensions guaranteed from 60, few of us are accruing defined benefits from our jobs and it looks as if the over-generous tax hand-outs to the most entitled- will be taken from us on March 16th.

Much as it make readers angry. We really must take a step back and ask ourselves if we are not behaving like spoiled children. Generations to come may well condemn us as just that.

Posted in pensions | Tagged , , , , , , , , , , , , , , , , , , , , , | 6 Comments

Mutatis Mutandis- WASPI won’t work (because we do)



Mutatis mutandis, is a phrase meaning “once the necessary changes have been made”. It  is the optimist’s assumption that order will prevail, even where chaos currently reigns.

When awaiting execution, the poet Ezra Pound was kept in a cell with no roof.

“The rain also is of the process”,

he wrote in a long poem. This sense that order will reassert itself is at the heart of neo-platonic thought and is central to our culture.

Ezra Pound

Ezra Pound in later life

If we stop everything at a certain point of our society’s progression then the world will keep on moving and we will be left shouting

“stop the world, I want to get off!”.

There are a few times when the world seems such a stupid unfair place, that people try to get off, but the unfairness and stupidity and incompetence is

“also of the process”.


By way of an example

A few years ago I applied for a mortgage, the term of the mortgage was – I was told- not to be beyond my state retirement age. My state retirement age being 67 at the time, I applied for a mortgage term to my 67th birthday.

My application was rejected because the HSBC (trading as First Direct) recognised my state pension age as 65. I eventually did take out the mortgage on this reduced term but only after several conversations with mortgage underwriters for whom “rules were rules”.

I wrote about this at the time and remember thinking

“if HSBC don’t get the changes in the SPA- how the hell are the rest of the public!”

This part of  HSBC lending policy was based on misinformation about when their customers were going to retire. The announcements from Government (that are at the centre of the WASPI case), had not touched the sides of lending policy.

My frustration then was that I knew more than the HSBC and was being told that I was being imprudent in wanting to borrow when I had no earnings capacity. The retirement age of 65 was so hard-coded into the HSBC’s lending policy that no amount of links to Government websites proving I was write would make any difference.

This is at the heart of the case that WASPI have. We simply have not made sufficient effort to promote the changes in retirement age and their implications to the nation as a whole

We not only need to understand what the State Retirement Age is – but why it is– and that includes the mortgage underwriters of the HSBC.


The blame game?

So should I have blamed the Government or should I have blamed HSBC or should I just sit down and shut up?  Sadly, sitting down and shutting up was and is the only realistic option available to me- other than to go elsewhere for my mortgage (which I didn’t and don’t want to do).

There is a process of escalation for complaints like mine, the Banking Ombudsman but I considered that the HSBC were morally right – they wanted to lend prudently and their rules were consistently enforced. It was incompetence , not immorality, that concerned me.

The Government has not been immoral in its mis-communication of the increases in state pension age, they have been incompetent. But they are our Government. WASPI has to consider the Government, as I consider HSBC, as the ultimate source of finance – we are the Government.

As WASPI’s petition nears 100,000, I wonder how the debate can go any further than my debate with HSBC. Rules are rules – the law is the law.

mutatis 2


WASPI is of the process

What we need is a proper debate on how and why we have the state pension ages that we do. This is a debate that should allow people to engage with the really hard issues about getting old. These include the worsening dependency ratios, our capacity to keep people healthy for longer, the cost to society of having healthy people not working and the cost to society of those who are unable to work because they have lost their cognitive or physical faculties.

This is a debate that so far has been carried out within the DWP but not- sufficiently- in public. Elderly people should not be a problem, they should be the most valued members of our society – our elders. We are in danger of making old age into a problem (as HSBC did) not out of wickedness but out of ignorance.


Everything dies honey, that’s a fact

As I keep saying, the WASPI petition is of great importance, not for what it is arguing for but for what it is arguing against. It is arguing against change though change has already happened – just as HSBC were.

We are mostly healthy in our fifties and sixties and seventies -we can be productive and we don’t have a right to put our feet up.

When I reach 65 I will still have a six figure debt to the HSBC, I expect to be working and I imagine that if I am neither able to work or to service my debt I will use pension freedoms and die.

For those who cannot work and have nothing, we must make sure we have the money for a proper NHS and for the long term care that’s needed.

Things change. Sickness will come , death will come- but till they do our job is to keep working for those who can’t.

Posted in pensions | Tagged , , , , | 7 Comments

NEST’s ministry of disinformation.

Sometimes you read a statistic and you don’t know what to think of it…

And sometimes you read a statement and you want to punch the screen.

What  can be said for NEST is that it has a large number of the employers who have staged and have used it.

Employers who set up their auto enrolment pension schemes with NEST end up feeling pretty good about it all. It could be the quick and straightforward set up. It could be that it’s free to use. Or perhaps it’s knowing that NEST has been set up by the government specifically for auto enrolment.

Every employer in the UK will have to offer their staff a workplace pension scheme. Over 34,000 employers have already chosen NEST to help their staff save for the future

That’s from NEST’s website – its opening gambit. NEST has been set up by the Government and its “free to use”. Free for whom? NEST is operating at a loss and is already over £400m in debt. Who is going to repay that debt and who is it a debt to?

This is disinformation on an Orwellian scale. Disinformation that glories in its Goebbelian self-confidence.

NEST – a brave new world of  a the sump for unloved workers?

So what exactly is that 41% referring to? Are they the lucky 41% of those enrolled who had employers who chose NEST? Many of those 34,000 employers who chose NEST in 2012 and 2013 used it as a dumping ground for workers they didn’t want polluting their pristine occupational pension schemes.

For many large employers NEST served and is serving a public duty as a “pension sump”

And what of the 59% who appear to have no confidence in pensions? Are they enrolled in schemes which were chosen by employers who perversely did not choose NEST for their staff.  Employers who thought pensions were free – like NEST – only to discover that it costs money to run a pension scheme.

Let’s be clear about this, NEST is no more free than banking is free.  NEST comes at a cost to members and a cost to employers who are not – to use NEST’s phrase – “self sufficient”. Self sufficient means doing the pension thing using the NEST instruction manual and not much else. As we all know, you can go a long way with an instruction manual – ask any user of Apple products. But NEST and Apple and your bank account are not free if something goes wrong. Infact putting pensions right like fixing a broken Apple product or paying bank charges when running an overdraft –  is anything but free.

NEST is running its own overdraft in the form of a loan from the tax-payer but you wouldn’t think it reading this cocky nonsense.


NEST’s members may be portable, but the liabilities aren’t.

And now for the biggest lie in the pack- the new twitter campaign claiming that NEST is portable. Let’s be clear about this. When an employer signs up to NEST , they complete an employer admission agreement where they agree to certain liabilities as an employer. These are the employers “terms and conditions” as defined in the NEST  “orders and rules“.

Now I hate to get all legal on you, but these terms and conditions contain this paragraph

The Employer will make such payments to the Trustee as may be required under the Scheme’s payment schedule applicable to the Employer and such charges (if any) as may be payable by Employer under the schedule of employer charges which the Trustee determines to be payable in order to recover from Employers the costs of the administration and management of the Scheme which the Trustee determines to be attributable to the acts or omissions of Employers.

Which I read to mean that the employer is potentially liable for the costs of administration of the scheme as a whole which includes the cost of administering all the little pots that are created by members who have left. Pot may follow member in some ways, but liabilities sit with employers.

The terms and conditions are very clear – ultimately participating employers in NEST are on the hook for the costs of the scheme.

Which makes me wonder why any employer thinks that NEST is free, that they have no residual liabilities for the costs of deferred members and that NEST communicates in a fair and decent way. Not like this

A very high proportion of those members that NEST has taken on so far are never going to have pots big enough to be “self sufficient”. In many people’s opinion, NEST cannot be self sufficient as it currently operates. NEST is a brilliant thing that keeps auto-enrolment on the road but the statement

Employers who set up their auto enrolment pension schemes with NEST end up feeling pretty good about it all

Reminds me of this



Posted in pensions | Tagged , , , , , , , | Leave a comment

“Hier Stehe Ich” – Frances Coppola on woman’s financial rights in later years


This blog restates and amplifies comments made by Frances on this blog and elsewhere . If you are a woman, advise women or have women you know who are impacted by the changes in the state pension age, you should read this blog.

This blog first appeared on Coppola Comment

My view of the women’s state pension age problem

I described the women’s state pension age problem in some detail in a previous post, so I shall only outline it here, along with my view on each part of this complex problem.

Recent changes to women’s state pension age are these:

  1. The 1995 Pensions Act raised women’s state pension age (SPA) from 60 to 65, the same as men’s. To give women time to prepare, the transition did not start for 15 years, and it then raised the age over the course of 10 years, from 2010 to 2020. The effect was that women born prior to 6 April 1950 would remain eligible for the state pension on their 60th birthday, but women born later than that would see their eligibility gradually delayed. NO woman born after February 1951 would retire at 60, and all women born on or after 6 April 1955 would retire on their 65th birthdays.
  2. The 2008 Pensions Act added a year to both men’s and women’s SPA. The rise was to run concurrently with the 1995 transition. As a result, most 1950s women – including those subject to the 1995 transition – suffered an additional rise in their pension age.
  3. In 2011 – after the 1995 transition had already started – the government, under pressure from the EU, brought forward completion of the 1995 transition by two years in order to complete the transition to the extra year by 2020. This created sharp increases in the SPA for women born 1953-4. In response to campaigning, this second SPA rise was limited to a maximum of 18 months. However, coming on top of the 1995 and 2008 changes, it did result in very large total SPA rises at short notice for some women.

My considered view on all of this is as follows.

Firstly, I regard the 1995 transition as fair and generous. I see no reason whatsoever to overturn it. I also, on balance, regard the 2008 change as reasonable, though the Government could have taken longer to implement it.

However, the 2011 change is a different matter. Shortening a fair and long-established transition process after it had started was unfair, and the concession was inadequate. As a result of this, some women face difficult financial circumstances for which I think relief should be offered.

Solving the 2011 problem

For me, the case for transitional relief for some women facing hardship due to the 2011 change is overwhelming, and I have been trying to think of ways of providing targeted relief for these women. I do not think that reinstating their previous state pension age or offering compensation in lieu of state pension will be remotely acceptable to the present government, since this would be expensive, a major loss of face, and potentially open the floodgates to other claims for compensation due to ill-thought-out and badly executed government policies (ATOS testing, anyone?). So I believe a more practical approach would be look at specific adjustments to working age benefits to help these ladies, such as relaxing JSA and ESA jobsearch conditionality for over-60s. I know it isn’t what they really want, but I genuinely think this would have a better chance of success. In the end, if their need is for money, does it really matter whether it comes in the form of a pension or a working-age benefit?

I admit that I have another agenda too. Enhancements to working age benefits for over-60s would drive a wedge into the government’s policies on working age benefits, which are causing major hardship and distress for a lot of people, including men born in the 1950s who of course were never able to claim state pension from 60. I was horrified to hear recently of a 60-year-old man sanctioned for 6 weeks for missing job centre appointments when his wife died, and another man sanctioned for failing to attend an appointment after suffering a heart attack while waiting for that appointment. Ending this misery for over-60s of both sexes would be a job well done.


But to take this route, the women affected would have to accept that they are not pensioners. They are working-age women whose problem is lack of work and/or lack of sufficient savings to enable them to retire earlier than their SPA. This is very different from the WASPI approach, which is to define them as pensioners who have been “robbed”, and demand restitution.

Nonetheless, on the unfairness of the 2011 change I am broadly in agreement with WASPI. I simply disagree about the solution.

The WASPI demand: a much bigger issue

But the WASPI campaign does not limit itself to seeking transitional relief for women facing hardship due to the 2011 change. It has a much more far-reaching agenda.


The WASPI demand, as expressed on their Facebook page, is as follows (for the avoidance of confusion, this is a genuine screen print from their Facebook home page):



I interpret the first paragraph as meaning that not only the implementation of the pension changes, but the CHANGES THEMSELVES, were unfair. And not only the 2011 change, but the 1995 and 2008 changes too. This causes me a serious problem. I do not regard the 1995 and 2008 changes as unfair. In my view, equalisation with men is fair. So too is raising SPA as people live longer. As I shall explain below, it is the working young who pay state pensions. We have a responsibility to them.

I interpret the second paragraph as demanding financial compensation for all women born between 6 April 1951 and 31 December 1959 for loss of their right to a state pension at 60. For these women to be restored to the financial position that they would have been in if they had been able to claim the state pension at 60 (as women born on or before April 1950 did), the amount paid to them must be the difference between the total state pension they would have received if they retired at 60 and the total state pension they will now receive. That is up to 6 years of state pension payments for each woman, paid as a lump sum.

This amounts to restoring a state pension age of 60 for all women born in the 1950s and delaying the equalisation of men’s and women’s pension ages for a further 10 years. I have been told by WASPI representatives that this is not the intention. They say they are in favour of equalisation of men’s and women’s pension ages. But I can’t see how this demand can be interpreted in any other way. I have asked repeatedly for clarification, but so far have received none.

The late notice problem

WASPI representatives say they are only seeking general compensation because the DWP failed to give 1950s women sufficient individual notice of the changes. The DWP did not start to notify 1950s women of their new SPA until 2009, and the bulk of the letters were sent 2012-13. Some of the letters apparently failed to arrive because awful record-keeping by DWP and HMRC meant addresses were wrong. It was, in short, a dog’s breakfast.

I would be the first to agree that the DWP’s communication in this, as in so many other matters, has been abysmal. The DWP is utterly incompetent, and I have repeatedly criticised it. However, inadequate notice due to incompetence does not of itself create grounds for compensation. If there is no material loss, then a simple apology would suffice. As I shall explain, I am unconvinced that the case for general compensation has been made.

Firstly, I accept that the notice given by the DWP was inadequate, but this problem is not limited to women in the 1950s. Younger women have not been notified either – including those born in the 1960s. It is not clear to me why a woman born on 31st December 1959 should receive compensation for late notice, but a woman born on 1st January 1960 should not. One day’s difference in a birth date cannot possibly turn totally inadequate notice into adequate notice, especially over a holiday period. In setting such an arbitrary end date for compensation, WASPI creates a cliff edge for women born in the 1960s which could – if 1950s women obtain full restitution as WASPI demands – be as much as 6 years. This is grossly unfair to them. It is a greater injustice than the injustice WASPI seeks to rectify.

But far more importantly, what financial difference would more notice have made to 1950s women? They say it would give them more time to “plan”. But it is not clear to me what plans they would have made. Again, I have asked for explanation, but received none.

Whether more notice would have made a material difference to 1950s women’s financial position seems to depend entirely on their personal circumstances. For women on such low incomes that they couldn’t save, more notice would have made no difference at all: after all, if the problem is no spare cash, giving more time to accumulate spare cash isn’t a solution. So more notice would not have helped the poorest women. An earlier state pension is not a solution to women’s pay inequality: since many of these women don’t qualify for a full state pension due to insufficient NI contributions, all it does is enable them to live for longer on a lower pension than a man or a better-off woman. I wonder how much of the support for the WASPI demand from women who say they are on very low incomes – and the anger they express at their state pension delay – comes from an unspoken belief that the state pension is some kind of reward for a lifetime of drudgery? If this is right, I feel terribly sorry for them. No-one should have to spend their entire life doing work they hate. But this is a perverse view of the state pension. It is not justification for granting it earlier.

More notice would have given women on higher incomes time to save more to cover the gap between their corporate pension age and their new state pension age – assuming they intended still to retire at 60. But since the whole point of equalising men’s and women’s pension ages is to keep women working for longer, why should topping up these women’s savings so they can stop work early be a priority?

And if course if a woman gave up (or lost) her job expecting SP at 60, she is now unemployed and facing the brutal JSA and ESA regimes. These are the angriest and most frightened ladies, and with reason. I have huge sympathy for them. But I’ve already said, here and elsewhere, that these benefits regimes desperately need adjusting. They are far too harsh, not just for ladies in their 60s but for everyone. So we should adjust them, not compensate these women while neglecting men and younger people. Similarly, women who are carers should claim carer’s allowance, another benefit that desperately needs reform – for a 35 hour week it pays £62.10, which is far below the current minimum wage let alone the new Living Wage. The hardships faced by WASPI women are an opportunity to fix the benefits system. I’m really disappointed that WASPI ignores this and chooses instead to pursue an impossible goal.


But aren’t these women entitled to their pensions?

There seems to be a prevalent view that 1950s women are “entitled” to retirement at 60 (or equivalent financial compensation). The entitlement arguments seem to run like this: 1) they’ve paid in to a state pension all their lives, they should now be able to draw it out 2) when they started work they were promised retirement at 60, government should honour that promise.

But there are real problems with both of these arguments.

The first argument is simply wrong. People don’t “pay in” to an NI fund that is invested on their behalf. There are no “pension pots” made up of individual NI contributions. UK state pensions are unfunded. That means current NI receipts from working people pay current pensions and contributory benefits. And no, this is not because pension pots were “raided” by Brown/Blair/Major/Thatcher (take your pick). The UK state pension has always been unfunded. What are called the “NI Funds” are in reality just clearinghouses, and their surplus is the accumulated difference between NI receipts and payments from the funds.

The NI funds built up a surplus when wages were rising, the UK working population was rising and payments to pensioners and benefit claimants were not keeping pace: that surplus is invested in UK government debt, which is the safest form of investment for UK residents. But now that wages are stagnant, the UK working population is stable, the pensioner population is growing due to people living longer and pension payments are being uprated, the NI funds are running deficits and their accumulated surplus is fast diminishing. This is simply due to demographic shifts, poor economic performance and policy decisions regarding pension and benefit payments. It is a known hazard of “pay-as-you-go” pension schemes, especially those where the funding is shared with contributory benefit schemes.

Now, turning to this idea that people are “entitled” to state pension at the age promised when they started work. The problem with this from the WASPI point of view is that it equally applies to younger women. After all, women born 1960-79 also had a retirement age of 60 at the start of their working lives. Once again, this argument founders on the arbitrary WASPI end date.

But more seriously, this argument is wrong too. There is no “promise” of state pension at a particular age, or indeed for a particular amount. All NI contributions buy is the right to a pension of some amount at some age. Both of those can be changed by Act of Parliament – just as entitlement to other NI-funded benefits such as JSA can be changed. So government is not bound to honour either the retirement age or the pension amount in force at the start of an individual’s working life. And as far as I am aware (though I believe WASPI is obtaining a legal opinion on this), it has no obligation to give any particular notice of changes. There certainly isn’t a “rule” that 10 years’ notice of changes must be given, though this government has said that future governments will give such notice.

So the “entitlement” argument doesn’t stack up either.


Moral considerations

The story of the equalisation of men and women is one of enabling women to take responsibility for their own financial affairs, rather than being dependent on men. This must surely include keeping up with legislative changes that affect them. Many women DID know about the 1995 change – indeed according to a 2004 DWP research paper, 72% of 1950s women knew the SPA was rising. And people have been able to check their SPA with the DWP since 2001. Unions, trade representatives and HR departments of larger employers also would have been able to advise.

In view of all this, I find a claim for compensation for 1950s women on grounds that they didn’t know, hard to swallow. Apart from the fact that most of them actually did know, this rewards women who did not take responsibility. It is a form of moral hazard. I realise that there are all manner of reasons why a woman might not manage her finances well, and I do not wish to judge: but if women are to be truly equal with men, they must accept the same responsibilities as men. Saying “I was too busy with job, childcare and housework to pay attention to current affairs” is to reject the equality for which women have fought so hard, incomplete though it is as yet. And expecting SPA to be the same as corporate pension age – and therefore not checking SPA until the last minute – is just folly. Sisters, we have to do better than this.

I’m also seriously concerned about the cost of such compensation. I do not like this government’s penny-pinching attitude, but the reality is that this is the government we have for the next 4 years and possibly longer. Given this, I am unable in conscience to support paying “compensation” to well-off women knowing that the cost of this will inevitably be born by the poor, sick, disabled and unemployed in the form of higher taxes and deeper cuts to working age benefits and essential services. I regard general compensation for 1950s women as morally suspect when the working poor are being hit so hard. I would much rather see targeted relief to women in difficulties than across the board compensation.

The moral issues run well into the future, too. If it is to be sustainable, we must change the way we regard the state pension. The state pension was originally envisaged as an insurance scheme: everyone paid in, but the majority never claimed because they died before reaching their SPA. Now, the majority of people claim SP: 91% of women live to 65 and 86% of men. And they claim it for a long time, too, A woman retiring at 60 can expect to live – on average – for at least another 20 years. In an attempt to keep a lid on rising costs, George Osborne recently limited the proportion of someone’s life that they could expect to spend claiming state pension: “UP TO one third”, he said, explaining that the SPA would continue to rise in line with life expectancy. But “chinese whispers” – including among WASPI ladies – promptly transformed this into “SHOULD spend up to one third”. This is how unreasonable entitlements are born. How much of their incomes will future working people have to pay in tax and NI, if this becomes a general expectation that government must “honour”? For how long will they be willing to do this, knowing that when it is their turn, they will get much less? What is the responsibility of older people towards future generations? This needs serious discussion. The unborn, and the young children of today, have not agreed to the “entitlements” and “promises” claimed by older people. They have no voice. Who will speak for them?

A better way

For all the above reasons, I cannot support what I understand to be WASPI’s main aim, which is for all 1950s women to receive financial compensation for the loss of state pension from 60.

I do, however, support targeted relief for women facing hardship, especially (but not necessarily limited to) those affected by the 2011 change. And I would like to see constructive debate about how the needs of these women can realistically be met in the current climate.

I do not know if WASPI will take me seriously. But I have now stated my position clearly and unambiguously. I am not hostile: but I will not support their campaign as it stands. It is the moral arguments against it that I find overwhelming. We cannot fight injustice with injustice, and promote equality by perpetuating inequality. There has to be a better way.

And indeed there is. This problem would be entirely solved by a universal basic income coupled with a sensible progressive tax system. Can’t we stop fighting over scraps, and campaign together for a really radical reform that would benefit everyone?


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

For 2016 – A desideratum (from my friend)


I don’t know why my friend wishes to remain anonymous. Maybe because he is too close to the action- perhaps because he knows too much. I know him to be independent of financial services providers and – as a pensioner – of the pensions industry.

I can only call him an enthusiast, the pensions equivalent of the man who gives up time to reopen railways or write articles for Wikipedia. This is what he wrote me yesterday.

I would love to believe 2016 will be the year when the UK pensions world world woke up from its dream/lethargy and realised what a dire state of future provision it has created, supported, went along with, distracted by irrelevant minutiae.  

The OECD say through it though, and hopefully Mercer Melbourne will push us into the relegation zone by properly recognising the risks in DC rather than over optimistically projecting the outcomes from it.

And then perhaps we will understand that we are heading for a world where:

(1) state pension will be at around 25% of average earnings from age 67 and rising.  And headed for cutbacks even at hat level.

(2) private sector provision is risky.  

(3) whilst the risk from scams is appalling, the greater risk is the fundamental one of investment returns.  The industry needs to engage with Aon’s analysis of what DC would have produced over the past 55 years, and the variability thereof.  Once again, over focus on the periphery of the issues.

(4). And the EXPECTED outcome is probably overestimated, given the prospects for returns assumed from typical default funds.  But might just provide about 20% of lifetime average earnings – so say 10-15% of final salary.  Who knows.  

(5). Perhaps, just perhaps 2016 will be remembered as the year when the DWP kicked off the first real investigation of State Pension Age and it was carried out by a new Adair who dared to challenge this cornerstone of our system in protecting the elderly.  And returned it to that.  And away from what it has become, which is a for many an added encouragement to stop working when they could be contributing to society.

(6). Let’s hope it is not remembered instead as the year dominated by GMPs and all their trivia.

Like the man on the moon in the advert, he sees things with perspective,he has the integrity of independence and the experience of years at the wheel.

The trivia of course pays the bills for many thousands who reconcile GMPs and I indirectly benefit from that work. The rearrangement of deckchairs involved does nothing to save the Titanic but it makes for an orderly retreat. Once the ship has gone down, we will be left with lesser crafts, but at least those craft will be more manoeuvrable, less vulnerable to icebergs.


I’ve spent the Christmas period in the company of two 80 somethings, learning how they organise their lives, keep active and make the most of their considerable mental (and in my Mum’s case physical) energy.

I’ve come across organisations I never knew about like u3a.org.uk making things possible through the internet for older people who might otherwise have been stuck on their own.


My friend is only at the start of the adventure which is later life, I am not even there yet. But I sense that it is not- for him – nor for my parents, a coda but a final movement, not an appendix but a great last chapter. Maybe a series of movements and chapters.

Another friend, Debora Price, who has recently taken up a post at Manchester University, is bringing together research on later life using all the tools at her disposal (including social media).

These are the people the Government should be turning to, to understand how to protect the elderly, these are their champions.

My new year resolutions will be focussed on the need to make the system protect the elderly, invest with social purpose and ensure that another generation does not approach retirement as unengaged, under-educated and disempowered as ours.


Posted in pensions | Tagged , , , , , , | Leave a comment

When will I get my state pension? – ask @Savvy_woman

Sarah pennells

Over the next few days there will be plenty of debate on this question , prompted by the “monstrous regiment of women”, now nearly 100,000, who have signed the “Women Against State Pension Increase” or “WASPI” petition.

We are due a debate on the issue on 7th January, led by the redoubtable Maori Black (who John Knox would definitely have disapproved of. We are likely to get another debate as a result of WASPI.

The success of the petition lies mainly in its ability to tap into a felt injustice among mature woman that pensions has been a man’s world and they have not been treated with justice. In a slightly more detailed way, the columnist  Sarah Pennells (aka SavvyWoman) explains what WASPI is about.

This short (1 minute) video explains very clearly what is going on – how it effects women – and why so many women have grounds to be angry.


WASPI  has a weak financial basis

There are a lot of matters brought about by EU equality legislation that do not make sense. For instance we are no longer able to provide men with better annuity rates than women, despite men generally living shorter than women. Similarly the Government Actuary cannot give men a better state pension than a woman based on men getting less payments.

So women are generally winners in the equalisation game, though at a strictly financial level, equalisation does not make sense.

The gap between male and female life expectancy is narrowing, probably because less men are dying from occupational illnesses resulting from spending a working  lifetime down a hole in the ground or fixing asbestos ceilings. Men are also becoming more sensible about drinking and smoking. Women have always been more sensible – or historically were not given the same opportunity to screw up their lungs and livers.

So men and women are – actuarially speaking- looking more like each other. The financial arguments for equalisation are getting stronger.

WASPI has a weak moral basis

But it’s the moral argument to equalise the state pension age for men and women that is – to my mind – critical. It simply doesn’t make sense to have equal rights in the workplace without having equal rights when leaving it.

The injustice (to men) of having to work longer is no longer morally acceptable as women now have rights within the workplace that are equal to their male counterparts. I am aware that there is still a disparity between male and female pay – one that I object to – but this disparity is also narrowing. There are now more women in the Boardroom (though not nearly enough) and there are less women who work for pin money.

I cannot see how the moral argument for equality is well served by WASPI. Nor can I see the specific arguments that WASPI makes about there being a conspiracy of silence about these changes, holding water. There have been mistakes communicating change but these mistakes are endemic to all aspects of financial education. We are financially illiterate as a nation, relative to our literacy levels in other areas and relative to the literacy levels of other European nations. The failure to engage and get educated about State Pension Reform cannot be laid wholly at the Government’s door.

In my opinion both the financial argument and moral argument’s that fuel WASPI’s fire, are over-stated.

WASPI – a force for good.

But what WASPI does, and does brilliantly, is bring into focus a whole raft of issues facing both men and woman in their fourties, fifties and sixties. The promise of a comfortable work-free retirement is a chimera and has been for many years. The lifestyle promoted by the brochures of the tour operators of a silver generation floating through retirement on an ocean liner is a false promise.

How about this agenda from a friend of mine

I would love to believe 2016 will be the year when the UK pensions world world woke up from its dream/lethargy and realised what a dire state of future provision it has created, supported, went along with, distracted by irrelevant minutiae.  

The OECD say through it though, and hopefully Mercer Melbourne will push us into the relegation zone by properly recognising the risks in DC rather than over optimistically projecting the outcomes from it.

And then perhaps we will understand that we are heading for a world where:

(1) state pension will be at around 25% of average earnings from age 67 and rising.  And headed for cutbacks even at hat level.

(2) private sector provision is risky.  

(3) whilst the risk from scams is appalling, the greater risk is the fundamental one of investment returns.  The industry needs to engage with Aon’s analysis of what DC would have produced over the past 55 years, and the variability thereof.  Once again, overfocus on the periphery of the issues.

(4). And the EXPECTED outcome is probably overestimated, given the prospects for returns assumed from typical default funds.  But might just provide about 20% of lifetime average earnings – so say 10-15% of final salary.  Who knows.  

(5). Perhaps, just perhaps 2016 will be remembered as the year when the DWP kicked off the first real investigation of State Pension Age and it was carried out by a new Adair who dared to challenge this cornerstone of our system in protecting the elderly.  And returned it to that.  And away from what it has become, which is a for many an added encouragement to stop working when they could be contributing to society.

(6). Let’s hope it is not remembered instead as the year dominated by GMPs and all their trivia.

The uncomfortable truth is that the flip side of our better health is a demand from society that we work longer and contribute more to the GDP that will fund our extreme old age. If the forthcoming debates in parliament focus on these issues rather than the inadequacies of Government communication, then they will be worthwhile.



Posted in pension playpen, pensions | Tagged , , , , , , | 6 Comments

Is NEST “preaching from the pulpit with its trousers round its ankles”?

noisy nest

sweet – but properly fed?

Give us this day our daily bread

I have referred to NEST as a scheme that gives a Government Incentive to save to all who use it, regardless of employment status. I believe it to be a true net-pay scheme.

But for some time there have been those at the sharp end of pensions – those who pay people- who have been telling me there are those within NEST who cannot get their Government incentive.

In comments on yesterday’s blog, the formidable payroll polemicist and thought leader, Simon Parsons wrote with some feeling

.. But are all entitled when in RAS? Those with NEST don’t get the promised ‘Government Incentive’ if the NINO is not known or they are new into the country and don’t have one yet!! The government are complicit in the problem.

No national insurance number, no incentive? But surely this is about the Inland Revenue (HMRC) and their system of enforcement – Real Time information(RTI)?

Here’s Simon again.

NINo causes no problems for RTI. It does helps in DWP having a correct contribution history, but date of birth and other identifying information suffices. NEST will point the contradiction finger at HMRC. The irony is that a foreign employee who is not resident in the UK is entitled to RAS on their contribution even if they have never been in the UK. NEST have no data item for when a NINO is not present for a UK worker. Only those under 16 and overseas workers who are not in the UK!

If the complicit government are planning on pointing fingers at compliant employers who have implemented a qualifying pension scheme because of the stupidities of contradictory pension relief schemes then they may live to regret their own complicit contradictions.

If employers should be liable for operating schemes that deprive the low paid of the Government Incentive, should that include those employers who use NEST without properly checking whether their staff have NINOs or not?

I am quite sure that NEST is discriminating against recent immigrants awaiting their NINOs but surely it is only a matter of time before the NINO’s come through and a backdated claim is made by NEST on their behalf. Simon is on the case again…

Not according to NEST. But according to HMRC you can. But only NEST can do that and in the past they have been unwilling to do so! Maybe they don’t have the systems to do it properly. But then why do you need a NIÑO at all for a RAS bonus? If your a foreigner overseas you don’t.

So NEST’s position, in the eyes of one of our leading payroll practitioners is at odds with the principal of a universal Government incentive. It looks to be at odds with EU legislation on the treatment of migrant workers and it appears to be an example of this quasi Governmental organisation hiding behind its public service obligation to mask its inadequate systems capacity.

I take as an example of NEST’s cavalier approach to the subject this little infographic – taken from NEST insight 15

nest contributions

There is no point in producing fancy infographics when something as fundamental as  20%  of the member’s contribution goes a begging! (and I’m not endorsing the apples and pears comparison either!)


Is NEST preaching from the pulpit with its trousers round its ankles?

To test this allegation, we need to hear from those using the Relief at Source system about their experience. So if anyone is reading  this from People’s, Supertrust or anyone operating a GPP – including non-insured SIPP providers such as Hargreaves Lansdowne, please comment or speak to me independently at henry.h.tapper@firstactuarial.co.uk.

We need to know whether, in practice, you can operate relief at source without a NINO and whether you can make a backdated claim for the incentive once the NINO has arrived.

For most of us reading this blog , the issue is not personal, it is about fairness and in particular it is about treating those poorest in our society with respect. A promise is as much a promise to the disconnected person without a NINO as it is to the CEO of NEST, the Pension Minister or the head of policy at the DWP.

So Helen, Ros and Charlotte, let’s get answers to these questions and – if NEST is- as Simon says, let’s have a level playing field so RAS mean RAS and Government Incentives are fairly applied.

Perhaps a polite but informal comment on here would help!

Come on Helen, put down your mince pie and get on your keyboard!!


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

Net pay schemes – 5 chances – then name and shame employers!

Ros #10

The Pension Minister is threatening to require employers who run net pay pension schemes that disadvantage staff to compensate those low-paid individuals who lose out on tax relief.

The majority of the tax relief foregone is on contributions to Government schemes so this is likely to go down as well with the Treasury as a burnt Christmas sausage. But the Minister is absolutely right. If no one else will stand up for the 180,000 people who the DWP estimate are missing out, Ros must.

I don’t see any sanctions that can hurt these employers other than the negative PR of being named and shamed. A list of employers who are culprits would not be that long, especially if you took the principal mastertrusts involved as entities (rather than publish the participating employers – who don’t have much say in the matter).

The principal master trust – or more rightly- multi-employer scheme – that creates this problem is the Local Government Pension Scheme (LGPS) together with the Teachers Scheme, the Pensions Trust, The Social Housing Pension Scheme and other defined benefit arrangements in which lowly paid people find themselves, often as part of TUPE arrangements.

Second in the queue are the super large occupational  schemes run by companies because they say they are better at doing the job than insurance companies. Ironically, many of these schemes actually sub-contract investment administration to insurance companies but they retain the administration  of contributions and member accounts. Almost universally, these large occupational schemes are run as net pay. Many include those auto-enrolled – (typically in DC sections) and a high proportion of those auto-enrolled in 2012-13 will be in large schemes.

Third in the queue will be the  mastertrusts set up specifically to meet the demands of the new legislation. Most important of these is NOW pensions, but almost every scheme other than NEST and People’s Pension runs on  net-pay.

The problem is bigger than the DWP figures suggest.

My understanding is that the DWP estimate of 180,000 caught in the net-pay net is an under-estimate. It is based on Government numbers of those who have joined voluntarily or through auto-enrolment net pay schemes and are now paying no tax. It is assumed these are people who earn from £10-11k pa. But in practice, anyone with a salary below £11k (including all those on zero hour contracts, is in jeapordy, provided their employer uses a net pay scheme for auto-enrolment,

This is because assessment for auto-enrolment is based on the earnings in the current pay period (which could be weekly, monthly or fortnightly). One spike in earnings over the pro-rated threshold for that period bumps the employee into a pension scheme. That pension scheme could operate under net-pay or it could be relief at source.

Remedy one

The Pension Minister could require employers to set up a relief at source scheme for all employees earning under a certain level (let’s say those with pro-rated earnings under £11k). This would become the auto-enrolment scheme for low earners. Ideally it would take the contributions of those currently paying into a net pay scheme and earning under £11k- though this is going to be disruptive. The disruption isn’t helped because NEST cannot (till 2017) take the already accumulated pension pot as a transfer.

Remedy two

Payroll software (and middleware) should be required to postpone employees spiking into auto-enrolment by default. I understand that some software (Ceridian) already has this built into  it. This means of preventing accidental enrolment would further reduce the problem. For employers who are happy that they are enrolling staff into a relief at source scheme (a GPP,NEST or People’s pension) then the option not to pospone could be chosen as the default.

Remedy three

Those schemes that offer either relief at source or net-pay as an option, should have relief at source as the default with net-pay as an option. There are only two of these that I know of (People’s Pension and SuperTrust). I would be happy to learn of othersR

Remedy four

For employers who are setting up new schemes, better information should be available and warnings given where a pre-assessment flags there are non-eligibles and entitled workers who might be caught in the net-pay net.

Remedy five

Current net-pay schemes should be encouraged to switch to relief at source for their administration. We understand that many employers are reluctant to do this because their is a high upfront cost in changing the administration of their systems or the systems of third parties.

If employers operating net pay schemes are not prepared to foot the bill, they should adopt one of the four previous remedies. Either they should set up a new relief at source scheme, make sure their postponement facility is properly working, switch net pay to relief at source (where applicable) and they could make sure that new schemes set up are set up with due regard to the workforce.

Salary sacrifice is not the answer

Large employers who run sophisticated salary sacrifice arrangements (that include those in the “at-risk” group, have already sorted this problem but I do not suggest taking more into salary sacrifice is an answer. For smaller employers without complex and robust systems, salary sacrifice is fraught with risk and will save little (above its fixed costs), for larger companies there are wider public policies at play (relating to the current review of salary sacrifice announced in the Autumn Statement). With the sword of Damacles hanging over the head of salary sacrifice, we suggest it is not the solution to the net-pay problem!

Compensation as a last resort

I don’t like the idea of compensation by employers. It is not right that large employers, which have borne the brunt of auto-enrolment, should be effectively fined for a problem that has risen accidentally – mainly because of the emerging gap between the AE earnings threshold and the income tax nil-rate band.

But if employers (and master-trusts) refuse to address the problem, then I see grounds for compensation, not least that it heads off the threat of class action from ambulance chasing lawyers acting on behalf of the impacted members.

It shouldn’t come to that.

I was alarmed, in reading Jo Cumbo’s most recent article on this that the “Government” are playing down the problem.

The government said this week it was committed to keeping the net pay issue “under close review”, particularly in light of the outcome of the Treasury’s recent consultation on pensions tax relief.

Whatever the outcome of the recent consultation, it will not impact what is going on this tax year and I hope that it won’t impact next year either. This sounds to me like civil servants at odds with their own pension minister who is saying precisely the opposite.

Keeping net pay under close review means more than waiting till 2018-19 (the earliest I would reckon a major tax reform could be implemented). After all, the DWP themselves estimated that it would be a three year job to set the detailed rules for the defined ambition agenda.

The DWP should crack the whip now. They have in Charlotte Clark and Lesley Titcomb, two admirable whip-crackers. I hope that both will be listening to the sage words of the Minister and not allowing them to listen to the Sir Humphries who spoke to the FT.

Naming and Shaming the answer

As I said earlier, the list of employers who operate net pay arrangements is quite short and they are all in the Pension Regulator’s database. They can be surveyed and confirmation received at tPR that one of the remedies mentioned above is in place. Those who do not respond or who refuse to take action should be NAMED and SHAMED.

It’s not good enough that employers who use “trusts” to run their pension scheme, cannot be trusted to act in their low paid employees best interests. It is no use blaming the Government, if you didn’t know about political risk then you should have don- it should be on your risk register and if you don’t want to take it you should not be running your own scheme.

As for master trusts, I’d make it a condition of the Mastertrust Assurance Framework, that schemes audit the tax position of their members and ensure that they are getting everyone tax-relief one way or another.

I have written about a sensible way of getting round the problem by switching to relief at source using Real Time Information from the Treasury and a retrospective sweep.


No more excuses

The occupational pension scheme industry has been slow to pick up on this. The PLSA, and their DC acolyte PQM have been pretty well silent. TPR and DWP have continued pumping out literature to employers that makes no mention of the problem and implies that the Government incentive is available to all who enrol. The major consultancies (Towers Watson excepted) have been quiet (conflicted as they are also TPAs?).

We’ve had enough excuses from the usual suspects. This farrago is going on too long. It is now time for firm action to be taken and that has to come from the top. Ros Altmann is standing up for the people who have no voice and we should be right behind her.

Ros #10 =

Posted in pensions | Tagged , , , , , , , , , , | 5 Comments

All I want for Christmas is dew (relentless rain won’t do!)



The reference to “Dew” is from memory of this lovely medieval poem

I syng of a mayden

That is makeles,

king of alle kinges

to here sone che chees.

He cam also stille

Ther his moder was

As dew in Aprylle,

That fallyt on the gras.

He cam also stille

To his modres bowr

As dew in Aprylle,

That falleth on the flowr.

He cam also stille

Ther his moder lay

As dew in Aprylle,

That falleth on the spray.

Moder & mayden

Was nevere noon but she:

Well may swich a lady

Godes moder be.



It was a wet old Christmas here in Shaftesbury, “the wetter the better” we said as my Mum , Glen the Dog and I piled out of the yellow peril in Fontmell Magna, North Dorset.


I’m not sure we felt the same way at all times in the next three hours but we dried out quick enough in the Fontmell, Nobby’s pub on the A350 – packed with admiring Londoners- admiring that is of my Mum.

I’ve said it often – I’ll say it again , the woman is in her mid eighties but she vaulted the stiles that abound as you climb up to Fontmell Down and she traversed the windswept slopes on slippery paths like a mountain goat.


Glen the Dog was suffering vicarious post traumatic stress syndrome for his master Greg, who had mysteriously slipped on a cattle grid on Christmas Eve , his ample leg had slipped into the abyss and Greg was laid up along with brother Rupert (recovering from a hip replacement) and the Old Man – lurking on the sofa. The big beasts had deserted Glen the Dog.


The valleys that run down to Compton, Fontmell and Iwerne from the Upper Blandford Road are as grand as anything you’ll find in England. Spurs run from the ridge along which the road run, the most Northerly connects with Melbury Beacon, the spur we climbed opens out onto what once was the whackiest nine hole golf club in Dorset and the final spur, which we descended – takes you down to the Springhead Trust – curated by the Gardeners to the culturati of North Dorset.

In Summer, these valleys are the habitat of rare butterflies, but yesterday they were menaced by a stiff westerly carrying rainclouds off the Blackmore vale which swept up their slopes like the sweeps of a painter’s brush.

As a teenager, I had tramped these slopes at night with friends James and Olivia – pursuing all kinds of strange phenonema including the mysterious caravans painted with question marks. Yesterday, I struggled with dog and mother on what seemed a wall of death!

We made it back to the yellow Peril (Mother’s Citroen C1) and into the pub for a pint of Burford and a tomato juice. Glen the Dog kept out of harm’s way till a lady stepped on his tail and we made our way back to Shaftesbury, elated by our conquest of the Down.

Christmas was the better for our walk but made by the delights of being with our family and by the pleasure of texts from others sharing the delights of their day.

Glen and Hen

No church this year, but to glory in the hills of Dorset was all the spiritual uplift I needed!

Today Yeovil play Plymouth and I’m on the coach down from the Huish with Miss Tuppence and the die-hard fans who are the best in the land.

Here are some wonderful pictures of their jaunt to Leyton Orient including one of my son Olly.

Leyton Orient v Yeovil Town 191215

Leyton Orient v Yeovil Town 191215


Happy Christmas- and for those for whom relentless rain is making Christmas a misery – relief is due!

Posted in later life | Tagged , , , , , | Leave a comment

2016 – Time for some pension warming!


My pension – a big splodge of cash!

Today is the last business day before Christmas, and if you’re reading this you are either scything off work or bored with your holiday freedoms. If you have any more time, have a read of John Kaye’s wonderful Christmas blog in the FT  in which he argues that the more rules you make, the less you need to waste time puzzling over right and wrong.

Kaye evokes the ghosts of the Cambridge classical scholar, FM Cornford who published Microcosmographia Academica and  the precursor to the CIA that published the Simple Sabotage Field Manual to show how serial filibustering, pedantry and the liberal use of commas can turn a moral debate into bureaucratic stagnation.

“Bureaucratic stagnation” is a phrase I’d apply to the state of pension taxation right now. It has become so pedantic, complex and full of commas that we can hardly move for the possibility of unforeseen consequences.

But worse, much worse than the stagnation, is that we are stuck in treacle that ensures that pensions make the rich richer and keep the poor in poverty. To use one of Michael Johnson’s favorite phrases, pension taxation is fundamentally regressive and leads us back to a world where for the poor retirement is nasty, brutish and short.

Here is the view of an economist I very much admire

It’s not just the 25% tax free lump sum…the following are examples of why tax relief is not revenue neutral. 

Higher rate taxpayers comprise around 10-15% of all taxpayers and get higher rate relief on their entire pension contribution in most cases.  Only around 2% of pensioners pay higher rate tax when they retire, and only on the top slice of their income.  That alone cannot be fiscally neutral.

Tax rates have fallen significantly over the years, so again relief was given at far higher rates than the tax paid on withdrawal.

QROPS is another area of leakage – HMRC often don’t recover any tax and those schemes are becoming tougher to obtain but will only be used by higher earners of course.

These are examples, doesn’t take a rocket scientist to spot the tax leakage – but of course that still doesn’t necessarily  mean the system has to be changed, that is a judgment that must be made.

The final point is telling. Just because tax leaks to the rich, doesn’t mean that tax policy is wrong. It depends where you set your moral compass.

The moral compass of the pension industry is set against tax reform in April. Ideally we would continue with the current status quo- including the ridiculous incompatibility of net pay and relief at source as it is working very well – so long as you are wealthy (particularly if you make your money managing wealth).

The argument goes that if you cut off tax relief – especially higher rate tax relief- you cut off the oxygen supply for saving. This argument ignores the fact that most ordinary people now save into ISAs where there is no tax relief on contributions.

These comments are from Johnson’s April paper “Time for TEE”

Over the last six years, stocks and shares ISA subscriptions have increased by 90%, to £18.4 billion in 2013-14, taking the total market value to £241 billion.2 In the same year, an additional £38.8 billion was subscribed to 10.5 million cash ISA accounts, taking the ISA cash mountain to £228 billion. Clearly, engagement with ISAs is high, confirmed by industry surveys, and acknowledged by the Chancellor when he raised the annual subscription limit by 30%, to £15,000, in the 2014 Budget. Importantly, the ISA brand is still reasonably trusted.

Conversely, over the same period, the amount contributed to the EET world of private pensions reduced by 25%, to £7.7 billion in 2013-14, a figure which includes basic rate tax relief.3 Official data excludes SIPPs and SSASs, which attracted perhaps another £6 billion

Since the outcomes of ISAs and pensions are increasingly the same- a big splodge of cash, it is curious that the wealthy need their own way of getting there.

To return to Kaye’s argument, pension tax relief legislation is not about right or wrong, it is about making sure that nothing changes. The moral compass is set at true north- towards the barren tundra where permafrost persists ad infinitum,

My hope is for some “pension warming”. I want to see a Narnia like revelation next April where the icy grip of winter is broken, snow falls from the tree and spring returns. I don’t expect to see it all happen in 2016, or in 2017 for that matter. I don’t expect to see a fair pension taxation system implemented till 2019 – because it takes a long time to thaw permafrost from the ground, it takes a long time to scrap that many rules, it takes a long time to change processes and systems.

It’s been a long time coming – but change is going to come

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

Confusing intermediaries

confusing 2

The title is intentionally ambiguous.  Intermediaries – especially financial advisors – active in advising on pension saving and spending, are both confusing and confused.


In an article in the Daily Telegraph, former pensions minister Steve Webb was reported as telling Government

‘advisers’ secret deals cost savers thousands’

This appears a bit “foot in mouth” as Webb now works for an insurer famous for being the adviser’s friend and there has been plenty on twitter about whether the confusion was created by the advisers or about the advisers.

Webb  said thousands of advisers who claim to be independent have in fact formed “cosy” commercial networks where pension firms reward them with large upfront fees. I agree with him and have written about this on this blog.



I have to deal with employers who are being asked to take near impossible decisions about workplace pensions which even an IFA would struggle to help on.

Here are the default choices that Aegon offer employers proposing to use its workplace pension. This was sent to me by an employer past her staging date and still to hear whether her existing Aegon GPP can be used to enroll eligible , non eligible and entitled staff.

Screen Shot 2015-12-23 at 06.54.01

Unsurprisingly, employers are finding difficulty making choices with only Aegon’s website to help them. You might reasonably expect a financial adviser to be on hand to help the client. In this case, the IFA- still taking commission – was not around to help.



In one of the most confusing threads I have ever moderated , IFAs have been discussing just how employers are supposed to choose the default investment strategy in workplace pensions such as the one above.

It gets even more confusing when the next question is whether, even if a choice is made, the pension provider will offer the workplace pension to staff not already in the group personal pension .

Again, picture yourself as an employer being asked to fill in this form without the help of an adviser.

Screen Shot 2015-12-23 at 06.54.30

The whole language of the questions is geared towards experts. In this case, the accountant cannot help, knowing little more than the client and the client is being approached by consultants demanding thousands of pounds to get her out of the mess she is fast approaching.


Why this confusion?

Amazon - Brazil, 2011. ©Neil Palmer/CIAT

If anything is clear, it is that insurers are still leaning on IFAs to implement workplace pensions and help manage investment choice as part of the underwriting process. It would appear that many IFAs are no longer willing to do this work in anticipation of there receiving no further commission beyond April 2016 and because of the incentives to work in more lucrative areas of the market (see Steve Webb’s comments).

The confusion is coming about because the insurer’s, reasonably in my opinion, are expecting help from advisers they are still paying commission to. The IFAs who don’t help are really in dereliction of duty but neither employers nor insurers seem to have any legal power to enforce the IFAs co-operation.

What is to be done?

Insurers are going to have to make up their mind whether to buy the services of an adviser, (in which – to a degree – the adviser and insurer are tied) or to treat the advisers as independent. If they want independent advisers, they are going to have to stop dishing out “most favoured nation” deals where advisers are promised they have got the best possible terms from an insurer.

Steve Webb’s point is that the deals have a price attaching to them and typically that price is paid by other consumers in roundabout ways.

Steve Webb’s reported argument is that

a saver who buys a flexible pension from a “tied adviser” – meaning they have specially negotiated deals with certain pension companies – may pay far more than someone who buys the same pension from an adviser who doesn’t have such links.

Thus there are two forms of disadvantage: savers are at risk of over-paying, but also at risk of being recommended a pension that isn’t the best for them.


Deals that help no-one

Special offers

Whether we are talking about saving (accumulation) or spending (decumulation) the issue is the same.

Insurers who try to buy the market end up distorting the market and prejudicing consumers. It is better to have independent advisers who are assessing value without the distortion of special deals.


There’s a difference between “vertical integration” and “rewarding efficiency”.

The recent practice of the mastertrusts who are offering reduced prices to employers who stage with the help of intermediaries is a different affair. This is effectively a recognition that an intermediary is likely to reduced the strain on the provider’s support mechanisms.

Providers who are not offering intermediary discounts are either offering limited support or subsidising direct customers (who cost more in hand holding).

I encourage this kind of open pricing, not least because it reflects operational economics and is not driven from a desire to buy business. But advisers are bound to question the sustainability of the business model of providers who don’t offer differential pricing, as we do with NEST and Legal & General – neither of whom dual price.


Efficiency and Self Sufficiency are the answers!

Our conclusion is that in the long-term, price should be aligned to support levels and should not be used as a lever to attract new business. Loss leaders on products designed to last 30 years + are irresponsible. Only if a provider can achieve 100% employer sufficiency can the NEST/L&G approach be sustained.

Those providers who do not buy market share but use their marketing budgets to create genuinely efficient take on and scheme management tools, will ultimately have the lowest support costs and will be able to sustain low pricing.

Organisations who continue to prime the distributor’s pumps with special deals will be the long-term losers.  Where the IFA fits in a world of employer and employee self-sufficiency is a different question. IFAs are resourceful and agile. They will find a way to make money, they do not need hand holding from providers. Providers who have IFAs who they are paying who do not help their clients have every right to cry foul.

In that I am with Steve Webb!



Posted in auto-enrolment, pensions, Pensions Regulator, Politics | Tagged , , , , , , , , | Leave a comment

Paying for other people’s pensions


I’ve said it before on this blog, but I’ll say it again. The amount of Council Tax many people pay to fund other people’s pensions exceeds their own contributions into pensions, even when they’ve been auto-enrolled into “workie”.


“You keep saying it- does anything change?”

Michael Johnson, who grinds axes for a living, has returned to this theme and produced a remarkable report.

The LGPS is huge: it matters. At end-March 2015, it had assets of £214 billion and 5.17 million members, more than 10% of all adults in the UK. During the last year, had employer contributions not risen substantially (by £833 million), cashflow would have continued its long-term deterioration.  This unambiguously signals that the LGPS is unsustainable. Given that employer contributions are predominately taxpayer-funded, a surreptitious state-funded bailout has commenced. But….over the next decade the scheme faces a perfect storm, due to a combination of:

  • past under-funding;
  • the end of contracting out rebates (April 2016; costing some £700 million per year);
  • potentially sclerotic investment returns in a post-QE world;
  • employers opting out of the scheme;
  • destructive demographics (the membership is both living longer and ageing);
  • mis-aligned cost and income drivers;
  • a crippling accrual rate (increased by 63% in 2014); and
  • ten year grandfathering from 2014, which effectively renders Lord Hutton’s (cost-saving) proposals impotent for a decade.

And while 2013’s £47 billion deficit is expected to increase at the next triennial valuation (March 2016), it is negative cashflow that is likely to be the LGPS’s undoing.”

Fabulous numbers!

The paper concludes with “league” tables that reveal an incredible range in the operating costs of individual LGPS funds.  For example, Cheshire’s reported total costs per member are nearly 19 times those of West Yorkshire’s.  The tables are fabulous, they demonstrate chaos within the LGPS.


I inserted the link to the meaning of sclerotic- one meaning is “rigid and unresponsive – unable to adapt”. This is at the heart of the problem. For years, those governing the LGPS have been aware of the underlying problem – Local Government has promised too much- but have been unable to do anything about it.

To be fair, many of their problems are of big government’s making. The settlement implemented in 2014 won votes by avoiding strikes but left the problem for a new Government and simply increased the pension apartheid between those paying for and those paid for.

Some of these problems are of economic accident. The probability of funds surging out of trouble riding the wave of freak investment returns is all but zero. We have no stock or bond market boom to look forward to, and no alleviation of valuations from a sudden spike in interest rates.

Those running our Local Government Pension Scheme cannot be held to account for these macro-calamities.


But they must be held to account for their failure to manage the costs they incur which are borne for the most part, by ordinary council tax payers. Put simply- they don’t know what they’re paying.

The LGPS is unable to evidence adherence to the old adage of what gets measured gets managed. Cultural change is required, but that could take another decade to materialise.

To use the chant of the terrace

You don’t know what you’re paying- You don’t know what you’re doing!

A case study in sclerosis

in 2013 and 2014, I visited the offices of several Local Government Funds, spoke with many of their advisers and asked the question.

Would you be prepared to review your fund management expenses at no cost to you other than a percentage of the savings that were made from the review?

I was working with an organisation prepared to work on a “no win no fee” agreement. Even then we met with massive resistance to the idea that anything could be saved. Nobody wanted to take us up on our offer. When we probed as to why we got a number of answers including

“we have signed an NDA (Non disclosure agreement) not to reveal our fund manager’s fees”

“we have excellent relationships with our fund managers and do not want to jeopardise them”

“we already carry out the work you intend to do and see no point in doing it twice”.

These comments are taken verbatim from our meeting notes which I’d be happy to share on a non-attributed basis.

These are indeed the comments of  organisations suffering “sclerosis”. For as we were meeting, so big Government were getting tough. This year, for the first time, some parts of the Local Government Scheme started reporting the true cost of fund management.

The 89 funds, in aggregate, reported a staggering 111% increase in fund management costs per member over the last six years. Some – like West Yorkshire – reported virtually no increase in costs. Others like Tyne and Wear found a staggering amount of cost they knew nothing about..

Screen Shot 2015-12-22 at 07.06.00

I am not sure at this point whether I should be applauding West Yorks for their cost control and Tyne and Wear for their honesty. I suspect that others may take a more cynical view.

The question is whether fund costs are actually spiralling out of control or whether reported costs are now reflecting actual rather than misquoted costs.

(Managing) money is the root of all evil

It may be that fund managers, in a last hurrah, have decided to take as much out of the tax-payer’s purse as they can (before being sacked). I’d like to think this was the case as it would mean that we had not been ripped off in the past. But I suspect it is the other way around.

My dealings with fund managers (part of the same project) , demonstrated to me that there was often no intent to provide customers with value for money. There was little control of where money was leaking from funds and little interest in stopping it. The managers I spoke to were intent on demonstrating alpha through case studies of decisions they had got right but not keen of talking about the cost of executing those decisions. This might explain how the “alpha seekers” were so often under-performing the markets they were supposed to beat.

Does this “really”matter?

This matters- it matters a lot. The cost of LGPS to the council tax payer is too great. It is too real – it “really” matters…

It closes day care nurseries and libraries and it stops roads getting repaired. I reported last year about a whole community in Dorset that was virtually cut off when a landslide closed the road into the village. Dorset County Council said it had no money to make the road safe. It blamed the cost of its pension fund.

If you read the council tax statement and see the segment of the pi-chart of total expenses that is going on paying other people’s pensions, you are filled with wrath. There can be no sustainable consensus where the have nots pay for the haves.

change ahead

This is why things have to change – and are beginning to change. At last, Government is taking on – not those within these schemes – but those managing the money within these schemes – and demanding better value for money.

As Johnson brilliantly demonstrates, the patient is sclerotic. The patient is about to undergo major surgery and the fund management will change. We await to see if the operation is successful.

In the meantime, we must ask whether we can do enough , quick enough, to avert the calamity that negative cashflows carry with them.


Posted in de-risking, Financial Education, governance, infrastucture, investment, leadership, pensions | Tagged , , , , , , | 3 Comments

Why now’s the time to get behind our Pensions Minister





van gaal

Van Gaal


Good pension ministers, like good football managers are hard to find and harder to keep.

They are hard to find as it is a job few that are up to it would want. They are hard to keep because if you can manage the pension ministry , you can probably handle a whole lot more.

The ghosts of ministers past!

We have two extremely good pension ministers (Steve Webb and Gregg McClymont) working in the City at the moment, almost certainly enjoying a cushier life with a bigger salary than Baroness Altmann.

There appear a number of people who consider making life for our current Minister as miserable as possible. These people take delight in finding inconsistencies between positions adopted by Altmann in her life as a consumer champion (and before that a banker) and her current role.

Some are paid to write stories, some find delight in poking fun on social media, the majority find “Minister moaning” a pleasing  way of passing the time at networking events, in short- we love to bitch.

It does no good. It does a lot of harm. What is more serious is that it undermines her credibility within her own ministry and her bargaining power – on behalf of the pensions lobby, with larger departments – in particular the Treasury.

Under Steve Webb, the Pension Minister had unprecedented power. This was largely down to Webb himself who was an extremely effective parliamentarian (he was voted parliamentarian of the year by his peers in his final year of office). It was helped- by his recent admission- by his being a Liberal in a coalition where articulate and capable Liberal ministers were in short supply. Webb punched so far above his weight that he handed over a job to his successor that she had no chance of following.

I made the mistake of supposing that Altmann would be able to continue to promote pensions with the same freedom that Steve Webb had done  (in the latter years of his tenure). It may be that Ros altmann, towards the end of the decade does indeed reach out as Webb did, but clearly she is neither able nor willing to do so now.


Scared of the person she used to be?

Webb had the advantage of knowing the ropes, being an elected MP and having had some time to prepare for greatness. It would appear that Ros Altmann has not.

It is almost as if she is fighting her former self. But it is important that we help her to help us, not make the transition worse!


Steve – please stick to the day job!

For all these reasons, I think comparisons between what happened in the past parliament and what is happening now are invidious.

But I would go further than that. Steve Webb had the great advantage of writing the legislation, Altmann has the great disadvantage of delivering it, Not only is Altmann having to deliver to someone else’s specification, but she is being nobbled as she does so by the architect of her grand design who is busy telling prospective tenants the building isn’t fit for habitation!

But the building – namely the new single state pension and all that goes with it, is the building. We cannot have its architect redesigning it now it is built. We have to live with what we have, and live with criticisms of its design, because that is how great enterprises get constructed.

So I think Steve Webb could be a lot more helpful by sticking to the day job and sticking up for Altmann , not making her life more difficult.


We only have one Minister, let’s make it easy for her to help us

Ros Altmann, for all that we might like to bitch about her, is the Pension Minister we have and one who quite obviously has the interests of the consumer at heart. Read her article this week in the Telegraph and tell me the contrary

Why she took the job I don’t know, but I am very glad that she did. I say that because I have more confidence in her than any parliamentarian I have met.

Returning to my opening remarks, we have seen one great football manager driven from a great footballing job this week. We may see another one go next week and see both clubs weakened in the process. Those who drove Mourinho to the madness of writing his own death warrant (what he did on Monday night), now show themselves for what they are and will be considered the worse for it by Chelsea’s fan base.

The same could be said for those who are undermine Altmann. By undermining her, they are undermining the Pension Minister’s job and handing yet more power to the Treasury. The critical counterbalance to Treasury interference is the skill and experience of the DWP.

Most of all the DWP should be behind its minister (I hope this is the case but am not always sure of that). If the DWP do not have confidence in their own minister then it bloody well should have.

Altmann is not an open book,  her strengths- her compassion and her deep understanding of how people are and what they want, are not easily understood. She grew up in a tough world and she has operated for most of her adult life in a confrontational environment – much of the confrontation of her making. She can look after herself and doesn’t need me blogging on her behalf.


Stand up for the Minister

But I am speaking up for her now, because I can and because I think there’s a fair chance she will read this and take courage. Ros Altmann is fifty times the man most men are, what’s more she is a woman, which brings an emotional intelligence to her work that few men can comprehend, let alone match. We are lucky to have her as a pension minister. We have no idea of what she is doing within her department or in wider government but we must trust her to be doing the right thing and doing it as well as she can.

So I’m backing Ros and hope that she will give herself the full five years of her tenure (maybe more) . She is our best hope as pension minister and if we drive her from her job by making it so difficult she doesn’t want it, then we have failed her and more important those she represents, the consumers.

I suspect that the majority of her knockers don’t care a damn about ordinary people, she does – and so should they.

Posted in pensions | Tagged , , , , , , , | 3 Comments

What if? ……Investment reporting for the future…


What if…..

when I opened Google Earth and ran the cursor over my home town/county/country , I could see

Housing stock being built

Brownfield sites being redeveloped

Start ups igniting into action

Listed companies adapting to a new cleaner  greener cheaper world.

with my money?


It would make me ask these questions..

Why should I have to wait till a 200 page report was stuffed into a letterbox of junk mail, when I could tab my phone and see what my pension savings were doing to improve things?

What if I , and all the people who chose to invest with an asset manager, could ask that asset manager how the investments were doing as we viewed them?

What if all the people who swan around investment markets were put to work answering the calls of the people engaged by google earth or however this might work?

And I’d want pome answers

If , as I do, we saw the business of asset managers as managing assets , rather than compete to out-manage each other in the trading of these assets-

If , as I do,  we saw the new business function of an asset manager as finding new opportunities into which the asset manager might invest, rather than attend endless beauty parades competing for new money from old customers.

If we see the business of investment reporting as a matter of interaction with those using funds to get their money into the right places at the right time, rather than rows of numbers designed to convince new people to buy and old people not to sell.

Then I need some answers.


Not some marketing gimmick

Every so often, some asset manager tries to convince themselves they are changing the world by adopting some marketing gimmick. They call themselves something disruptive and then set out to win the same awards at the same award shows so they can cram glass cabinets, fill a powerpoint slide and send each other congratulatory tweets.

This is doing nothing except re-spinning the wheel. Change will not happen this way.


Change driven by customers with the means to ask..

Change will happen when people are allowed to see what their money is doing and interact with those doing the work in a meaningful way. I see investor relations as the growth industry for asset managers in the next 25 years, not because asset managers want to communicate with the people whose money they invest….

But because, if we can get the people like me, who are busy saving for later years, to wake up and tap their phones, then they might start asking the awkward questions posed in this blog.

  • Like what are asset manager doing to make Britain a cleaner, greener and cheaper place to live?
  • Just how are asset managers going about helping small companies become global leaders?
  • How are they helping redress the imbalances in gender, race and age in the boardrooms that govern the companies we work in?
  • How do we monitor and manage the spending of the public sector?

I know I can ask these questions on my blog, there will come a time when people will be asking these questions of those who manage their money on their phones.


The difference between dreaming and delivering

Yesterday, I spent 45 minutes in the company of a man whose company manages several trillion pounds of our wealth. By “our”,  I mean the wealth of people like you as well as overseas sovereign wealth funds and the money of the Monte-Carlo billionaires.

We discussed these questions in an urgent and excited way. I realised that this man, the CEO of one of the largest investment management firms in the world, thought about the same things as everyone else (how Newcastle beat Tottenham last week). He told me that he had over a million interactions on his google hang out last year- I asked him if he was any the wiser for it – we laughed.

It was “clear and vivid and real” – as it should be. And I did feel privileged, because there was nothing this person could gain from meeting me, other than to share what he thought he should be doing to make the things we talked about happen.

The difference between him and me is that I dream about these things, he can make them happen.

He asked me what I wanted of him- I said I wanted him to make these things happen.



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

Why I’m excited about second hand annuities.

second hand

According to Royal London, we’ll be able to buy and sell each other’s annuity payments from next April. Presumably this article is on pre-release as I read April 2017 but who am I to argue with “Batman” Phil Loney or “Robin” Steve Webb?

Like Royal London, I’m pleased as punch that there will be a market for unwanted annuities and that people who – for whatever reason- would rather have capital than lifetime income, can make that choice.

Philosophically, people stopped believing the money in their personal pensions and their defined contribution pension schemes was “theirs” and this happened because they had no say in how they could spend it. The decision was taken by Government, an insurer, an annuity broker. It was not something that they had much choice about. Indeed if people tried to break free and buy a drawdown policy, they were knocked back and told they hadn’t enough money. In short- the business of spending their retirement savings had become degrading and was seen as a rip-off by millions of policyholders.

This has changed with the abolition of the tax-rules that forced people into purchasing annuities and this has been generally accepted as a step in the right direction. People now buy annuities out of choice and not out of reluctant acceptance the they are the rule.

Not many people are choosing annuities. This is partly because they are too expensive (according to Alan Higham, 20% more expensive than in the US). People don’t get that they are too expensive because of the higher quality of the guarantee. For most people a guarantee is a guarantee, the credit rating of a promise is not a concept that most people understand.

The memory of the Equitable Life’s near collapse (because of the lack of credibility in its guarantees) is becoming a distant memory but the truth is that if you are an annuitant in the UK, you hold a promise that is of a better quality because of the Equitable. This – I am sure – will be recognised in re-sale prices.

We didn’t know what we were buying

Not only are our personal annuities very high quality, they are very much in demand. Many employers need a way to buy their way out of their obligations to their retired workers to whom they have made promises. Currently there is no currency that pays off these promises. The second hand annuity market creates that currency and provides liquidity that frees up companies and charities – to do what they need to do- which is generate profits or do good works. Of course, in the short term, getting the promises off their balance sheet is going to be expensive and might put a blip in plans, but if we can get DB scheme liabilities transferred to insurance companies using the secondary annuity market as a lever, then in the long term this is good for the economic and social fabric of the company.

Finally there is a more deep rooted issue, the question of how much responsibility we can be allowed to take for our financial condition. The old paternalistic world where we worked, got pensioned and died is dead. We live longer, work shorter and we have much more wealth (relative to other generations). While we may not be wiser, we certainly have more scope to take choices and the Government’s big challenge is to free up choice and give us the means to make informed choice.

Part of this must be to give us choice to exchange the old annuity for some kind of new annuity which pays more with less certainty. Along with discussions on how we can sell out of the old, we need discussions about how we can buy the new. I’m encouraged by recent noises from Brussels that suggest that the stringent solvency rules that have made the cost of providing insurance in the UK so expensive , are being relaxed. If Solvency can be eased, we may be able to bring back guarantee light annuities which do what I hoped CDC could do, provide a target pension at a higher rate with an acceptable level of security.

When the Pension Freedoms were announced, I wrote that I feared for the millions who had bought annuities through the period of depressed interest rates. For them, the annuities would pay too little and would be seen as an unnecessary encumbrance, a loss of freedom denied to others. The secondary annuity at least addresses the loss of freedom. Sadly there is no way to make those annuities as valuable at resale as they were at purchase and people will lose in the sale. They will have to accept that like a house, the value of an annuity can go down as well as up.

At least we’ll find out what we’re selling!

But in working out how annuity prices work, people will at last be engaging in the key issues- longevity, the impact of long term interest rate expectations, the risk of investing in gilts and the risks of investing in other assets. People will – because of a secondary annuity market – start to understand pensions – as they understand other markets – the housing market being the obvious comparator.

It will take a generation for the problems we have created to work out. Many of us saw the train coming round the corner and watched as it hit the buffers. We are now watching as the casualties emerge from the carriages and it won’t be pretty. From April 2017, we will see people having brutal conversations about annuity valuations, but at least these conversations will be in the open.

Transparency is the great disinfectant, but disinfectant- when applied to an open wound- can be painful. It is however the only way we can recover.

I doubt, when people understand what they bought and what the alternatives are, that many annuitants will sell – but it only takes 10-20% to create a liquid market that benefits defined benefit schemes and those who run them , allows those with need for capital to have it and enables the few who really know what they want to exchange the old annuities for the new.

Who knows, there may even be a new default emerging from this – a default which people who don’t want to take decisions, can find does pretty much what they want pretty much all of the time.

target pensions

by guarantee or best endeavours?

Posted in pensions | Tagged , , , , , , , , , | Leave a comment

Auto-enrolment limits – what the DWP aren’t saying!

Screen Shot 2015-12-16 at 06.22.13

The DWP’s paper on the Earnings Trigger and Qualifying Earnings Bands(QEB) for auto-enrolment next year is very well written and gives an insight into just how much thought is going into managing the conflicting needs of employers, workers, administrators and…HMRC.

I put HMRC at the end because, though they aren’t mentioned as a driver, their presence is the elephant in the room. The recent postponement of the auto-enrolment phasing increases by 6 months was dressed up as an administrative alignment but everyone knows that the £840m saving it created in tax relief was what that was about!

The success of auto-enrolment is creating an unexpected problem. UK Plc cannot afford the extra tax relief that will be granted when we move to full throttle contributions and have enrolled another 5m+ into the system.

But let’s have a look at what the DWP has decided upon


The only threshold that changes in 2016/17 compared to 2015/16 is the QEB Upper Limit.

You can translate these annualised amounts for common Pay Reference Periods, with the help of this table provided by Cintra’s Ian Holloway (thanks Ian); thinking in terms of pay periods is important (see below)

( this doesn’t yet apply to employers in Northern Ireland who have to wait for their rate).


What this means is that more people will be enrolling below next year’s Earning’s threshold (£11,000) and more people will have the right to opt-in (earning over QEB lower limit). Because the QEB band has been stretched at the top but kept at previous levels at the bottom, more money will be paid into auto-enrolment schemes.

All this is good news for workplace pension provision except….

Here is my letter to the DWP which expresses my concerns

I found the document produced on auto-enrolment trigger levels and the band calculations a really easy read and a very good analysis. Thanks for the clear language , the right tone and the excellent explanation of the various factors that go into your decisions.

My  criticism is that you could be underestimating the numbers caught by the net pay problem. your analysis supposes that only people earning between 10,000 and 11,000 could be enrolled into a net pay scheme. In reality, anyone who earns more than 10k (pro rated) in a pay period can find themselves enrolled (unless postponed). They then have to opt-out even if their earnings fall back below their bands in subsequent pay periods.

Have you done analysis of how many people are earning below £11,000 and are accidentally in? I accept that those who voluntarily opt in are doing so at their own peril but would still point out that many of them will be doing so under the assumption they will get the “Government incentive”. 

While I don’t want to be alarmist, i suspect that the constituency of people in net pay schemes who should be in RAS is higher than your analysis supposes and that, as you suggest , employers should be asking questions about the tax relief on offer. This is particularly the case for large employers with occupational schemes who have been ignoring this issue. 

 For  employers new to workplace pensions, warnings need to be in place for net pay schemes. We are now categorising workplace pensions not as trust and contract based but as Net Pay and Relief at Source schemes. This is more meaningful for small employers who can choose an occupational scheme like NEST or People’s Pension which will offer relief at source.

Isn’t it time for some clear guidance to be issued for the 1.8m employers still to stage auto-enrolment and for the 73,000 who already have? If the existing channels are proving ineffective, I will be happy to step up to the plate and make sure www.pensionplaypen.com does its bit!

I’m assuming that your wider analysis of auto-enrolment costs assumes “accidental enrolments”. While sophisticated payroll departments probably dealt with them through postponement, I am not sure that employers going forward will have the same care and attention paid to low earners with fluctuating payments.

The DWP is calling, (as this blog has been calling all year), for employers to “ask their provider about the tax implications before taking a decision about the scheme they chose”.

But where is this information to be found? I see no wealth warnings on net pay provider products warning against use by those earning less than £11k. What’s worse, I see no action from the PLSA and its constituency of large occupational workplace schemes, to convert those operating on net pay to RAS. They are asleep at the wheel.

The beneficiary of this inaction is going to be the HMRC which is going to be let off paying the “Government Incentive” to those on low earnings in net pay schemes and the losers are going to be those who have least, those on low variable earnings, people on zero hours contracts, those on unusual shift patterns, the personal service workers with irregular billings and part -timers with regular earnings of between £10-11,000 pa.

These people should not be in net pay schemes, the Pension Minister says this herself.

And she is being listened to..

The Pensions Regulator has indeed updated its website, but a fat lot of good that is for those already in and a fat lot of good it is for workers about to go into net pay schemes with witless employers taking decisions prompted by witless IFAs/accountants and intermediaries.

When I say “witless”, I mean “foolish and stupid” and perhaps I should qualify  this by saying that it is their behaviour that is witless – intermediaries are not inherently foolish and stupid!


Getting off tax-free?

This chart appears in the DWP’s paper. It shows the tax relief payable next year against employee contributions running at 30% (280/910). Let’s hope that that calculation includes the substantial number of workers who will get no tax relief against their contributions.

The DWP calculate the shift in the bands will only cost an extra £3m in tax relief – I suspect the HMRC were pretty happy with that, but I’m not sure I am.


Screen Shot 2015-12-16 at 06.22.13


Posted in accountants, auto-enrolment, Payroll, pension playpen, pensions, Pensions Regulator, Treasury, welfare, Workie | Tagged , , , , , , , , , , | 2 Comments

Choice – we love to have it – we hate to use it!

x factor x factor 4 x factor2 x-factor 3 x-factor 5

Choice – a mass of contradictions

I’ve noted before that choice is something we feel we cannot do without but is something we generally cannot deal with.

It is rare that the phrase ” I had no choice” is used in a positive sense, but how many times do people tell us they were faced with an impossible choice. People aspire to make informed choice but we know that even when they do, they are beset by “regret risk” for the choices they could have taken.


It becomes harder with age!

As we grow older, choices become harder, as we know the consequences of getting it wrong outweigh the upside of getting things right. There are more losers than winners wherever- X-factor, the FA cup, Strictly come dancing, workplace pensions.

Faced with the slim chances of making the right choice on their own, most people look for advice, I looked at the twitter profiles of the three x-factor finalists last night and found that one had more followers than the other two together. If there is wisdom in the crowds, Johnson will win tonight, I choose winners.

If we ask the audience, it is the shape of the graph we look at, we don’t ask whether there is a bias in the audience that makes them collectively wrong, we assume they will collectively be right. The audience’s wrong answer is an even dispersal of choice.

These proxies for collective wisdom are obvious in all forms of web-based decision making. But to be wise,we need perfect markets, markets that aren’t distorted by short-term bias. Which is why I have been concerned by the perception among many of our introducers that NOW and People’s Pension are no longer good choices for their customers, because there is an overt cost of support. Conversely NEST and Legal and General have become better choices for there being no barrier to entry or use (in terms of direct fees).


Inefficient markets lead to distorted choices

The behavioural bias surrounds the difficulty for an intermediary in the direct payment to a third party other than the intermediary. The decision to recommend People’s or NOW involves a sharing of a spend on its service. So does the cost of employing Pension PlayPen or purchasing or renting software to manage auto-enrolment compliance.

The natural choice for an intermediary is the choice that captures revenue in its direction. There is a bias towards reward that is mitigated by an awareness of risk. The longer in tooth the intermediary, the less likely he or she will be to take reward for exposure to undefined risk.

Nowhere is risk higher for an intermediary than in the choice of providers. The intermediary has two options- firstly they can limit choice, typically through the use of a default workplace pension, or they can outsource choice – to an organisation prepared to take the risk of making recommendations. There is a third option which is to become an expert and deliver choice but this requires an investment.

What we are seeing in the auto-enrolment market is very little investment in the skills and knowledge needed to make choice, a large number of intermediaries looking to eliminate choice and a small amount of outsourcing of advice to those considered “expert”.


Choice and “informed choice’

There is a lot of concern that expertise is in short supply and what expertise there is, is being delivered in unconventional means (robo-advice). The barriers to choosing a workplace pension using a computer algorithm appear high, virtually speaking. The challenge for both the vendors and purchasers of “online due diligence” is to accept that both the research and the algorithm that delivers the recommendation “stacks up”.

Since it is now accepted that there is an advice gap between what the market wants and what the market is getting, it appears obvious that eventually robo-advice will get traction and people will come to rely on research delivered through “on-line decision trees”.  But will the transition to computer driven recommendations be fast enough for the market, or is the rush of decisions needed to be taken by employers staging auto-enrolment in 2016 going to overwhelm market capacity? Will we have a capacity crunch?

That I think depends on the market’s capacity to promote choice in a way that makes it easy and natural to take.

Critically it needs the market to reform in a radical way around certain trusted sources. It is clear from all research that around 70% of decisions taken by employers on workplace pensions will be reliant on intermediaries, input from accountants, book-keepers and payroll agents looks critical to 60% and around 10% will be using conventional financial advisers.


Default or whole of market? A false polarisation

Currently, the majority of intermediaries (of all persuasions) are using default workplace pension providers with a “whole of market” option in reserve for insistent customers. By and large whole of market is out of the financial reach of most small employers.

I don’t think this polarisation between default and traditional whole of market advice is healthy, it is what is known as Hobson’s choice, where both options are unsatisfactory. What is needed is a way to access whole of market choice at a reasonable price, which is what robo-advice is designed to do.

I’ve no doubt that in a couple of years, with the Financial Advice Market Review, endorsing services like Pension PlayPen, people will be paying to use software that guides them down the right lines, documents the process and delivers staff with a reason why they will be investing as they will.

But will traction be quick enough, to prevent many employers making uninformed decisions or even ill-informed decisions? To a large extent , the market will decide. I believe in markets finding ways. Rivers flow to oceans , Johnsons win X-factors , the cream rises to the top of the bottle.

To the extent that choice – or at least affordable meaningful choice, is denied to those taking decisions, we have short-term market failure. Regulators need to be concerned about this and I know they are. The Pensions Regulator is calling on intermediaries defaulting employers to a single provider to issue a warning that “other providers may be available and may be better”. This is a start, it is unlikely to be enough.


Delivering the means to make informed choices

As I stated at the start of this blog, choice is contradictory, people love it and hate it. They love to have it, they hate to take it. The only way to square the circle is through presenting information in a way that enables people to make an informed choice.

That means getting inside the heads of decision makers and understanding how decisions can be made easy

That means ensuring that the decision making is high-grade and not just based solely on low-grade stuff (such as initial support costs),

That means getting the means to making choice available – available!


A reformed market

The reformed post RDR, post commission, post face to face advice market has yet to reform. I believe that it will reform around a few organisations capable of reaching the mass of intermediaries. It will include traditional payroll giants, most notably Sage but also Iris , Moneysoft, QTAC, Star and a handful of others.

It will be informed by the leading accountancy networks such as 20/20, ICAP, ANS, Peak and Tax Assist.

It will be informed by the Institutes, ICAEW,ICAS, ACCA, ICB and CIPP.

The remaining IFA networks -Intrinsic, Openwork, Lighthouse and the compliance networks of SimplyBiz and Three Sixty have a small but important part to play -at least in organising and delivering advice into the market.

But ultimately, there has to be conviction, skill and knowledge that is translated and delivered from the current “experts”, the large pension consultancies- to the fish and chip shop, to Flo the florist and those nannies and small business owners appearing on the Workie adverts.

People want and expect choice and if they don’t get it, they get disillusioned. They need to have choice made simple , but they will regret it if they find choices they were never offered which turn out were right for them. They may even ask why they weren’t offered those choices.

The means to take choices on workplace pensions exist, it is ready for action and awaiting deployment, if you have read this article, agree with its argument and want more information, you can send me an email on henry.tapper@pensionplaypen.com .


Who will win the X-Factor?

Oh and take the poll now and check tomorrow if your choice matched that of the nation!

Posted in Payroll, pensions, x factor | Tagged , , , , , , , , , , , , , , | Leave a comment

Problems? Is AE technology an end or a means?

Problems 4

It’s something of a joke in the Pension PlayPen that if anyone is going to break our systems and processes , it will be the Pension Plowman. I have an uncanny knack of finding weaknesses on our development site and getting stuck. Far from regarding me as a problem, our developers have come to rely on me to demonstrate what is likely to go wrong in the future.

I take no credit for my utility, my genius is my incompetence and my consistent ability to press the wrong button and miss the support that is staring me in the face from “help” on our web-pages.

If mine is the user experience, it is not until I can choose a pension consistently, that the user experience is credited with being pushed live.

Nobody will ever build a user experience that isn’t capable of losing some customers. I am reminded of Johnny Rotten’s pithy couplet in “problems”

Bet you thought you solved all your problems – but – you – are the problem

Problems? The problem is you – what you gonna do!



Talking with a leading pension provider yesterday, I asked what his main concern was for the future. His expressed belief was that his insurer were relying too heavily on intermediaries to answer questions from ordinary users of his pension and the technical support services.

Talking with NEST’s CEO last week, I asked how she would characterise the difference between NEST’s approach and that of rivals such as NOW and People’s. Helen Dean’s answer was that NEST require a degree of sufficiency from their users.

On both occasions I was tempted to sing the Sex Pistols lyrics out loud!

PRoblems 3


The responsibility of our Providers

It would have been unfair. The insurer in question is busy insourcing its customer support and reducing its reliance on third parties to answer the questions that it considers are its proprietary problems. NEST make no bones about it, the cost of supporting employers through NEST, will be higher to third parties than if the client has access to NOW’s or People’s support centres. That cost is not overt (yet), but it gives the lie to any sense that NEST is free.

Support is required because no matter how good you make the user experience, people like me will f**k things up.

Problems 2

When I talk about the responsibility of our providers, I mean their responsibility to make clear the level of support available to users – whether employers or members and to be clear what the limits of that support will be. I do not think NEST irresponsible in offering limited support, but I think people who suggest that NEST should be the default offering to employers, without offering the support necessary to meet the user’s needs are being irresponsible.

One of the things we try to do with http://www.pensionplaypen.com is point out the true costs of using each provider- not just in overt fees, but in care and maintenance. If that care and maintenance is not paid for overtly, then it needs to be accounted for on someone’s P&L.

“I will look unto the hills- from whence cometh mine aid”

Help is needed and is being provided. Typically at a cost. Both NOW and People’s Pensions charge for support, NEST don’t charge or provide the same level of support. Most insurers are now charging for support and those that don’t (such as Legal & General) are making clear the parametres of support will change.

Fully understanding what you are getting from differing providers, and how sustainable that support is over time , is critical to making a decision on which workplace pension provider to choose.

It might be argued that the issues of “inter-operability” and “member support” are the most critical to get right and should be the primary drivers in pension choice. I think this wrong, they are critical to a successful implementation- but a pension is for life and not just for staging!

If not from the provider, where can an employer get help? I have written this week about what a responsible IFA looks like, I know many firms of accountants who take the business of supporting clients through payroll very seriously. I know software suppliers, big and small who are peopling their contact centres. I know TPAS and TPR who above all other Government agencies are gearing up to provide support to members and employers respectively.

Understanding how to tap into these support services is part of offering enrolment support. If you are looking unto the hills, this is where your aid will come from!



Technology can only reduce the need for support – not eliminate it.

When we were planning the Eagle Star (to become the Zurich) DC platform in around 2000, my wise boss David Lynch set out a vision for a service that was 100% self-service, where we needed no contact centre because our customers could access everything over the web.

We were very far from delivering on this, though I think we went further than others both in ambition and delivery. I see similar visions from the technology players in the pension and payroll space around auto-enrolment. They can get further towards that goal, but they still cannot reach it. So long as there are humans , there are bugs.

Guess you thought you solved all your problems but- I – am your problem

Problems – the problem is me- can’t you f*ck*ng see!



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

The Nigella Lawson of workplace pensions

hayley jagggers

I met Hayley Jaggers at a recent Capacity Crunch Conference and linked in with her. We agreed to meet at our Tonbridge offices and we had a business meeting yesterday. She has re-defined my expectation of what can be achieved by a dedicated and professional independent financial advisor providing help to small employers auto-enrolling their staff.

Hayley is accomplished, her CV lists her qualifications, she is quietly spoken but authoritative. Obviously well organised, she is personable and she has a grasp of the key aspects of what matters not just for employers, but the workers for whom auto-enrolment matters the most.

Like Nigella Lawson, she has the complete enthusiasm for what she does that makes her compelling listening. I don’t mind admitting I was blown away.


Auto Enrolment Solutions

Her service is not expensive. £700 gets you started with a choice of workplace pensions and a full report on what is best for organisation’s circumstances. There is conviction in the report and it comes with the authority of a regulated entity (Automatic Enrolment Solutions). That means the advice being given to you as an employer has special status.

Her ongoing service costs between £35 and £55 per month (with extras where there are special needs). Importantly, she understands payroll and has payroll literate colleagues. In our discussions I felt confident that she can find solutions, even where it means reaching beyond the comfort zone (hence the meeting).

So far, Automatic Enrolment Solutions has helped 70 organisations through auto-enrolment, the largest having over 1000 employees. I have no doubt that any client contracting with Hayley, Automatic Enrolment Solutions and its parent Holden Holcroft, would receive a high level of service.


As good as Pension PlayPen? – Better!

Pension PlayPen won’t be doing business with Automatic Enrolment Solutions any time soon. She does what we do (almost as efficiently) and with a greater eye to detail on issues such as salary exchange. Her work on workplace provider analysis is of a high standard and she has a semi-automated manager selection tool that (other than ours) is the best I have seen on the market.

Hayley’s is a different business model to ours. We aim to help hundreds of thousands employers and Hayley hundreds. Her service is bespoke , our commoditised. The quality of our work is similar but – as I say again and again – there is something that Hayley can offer which Pension PlayPen cannot.

If you can find a great IFA – and I have no doubt that Hayley is one – hang on to them! They are rare and brilliant and inspirational. Hayley doesn’t know this, but she raised my bar and she will be a touchstone for me going forwards.

Many people think that actuarial firms are arrogant and dismissive of IFAs, I think many are. But I’d like to think that we (First Actuarial) aren’t. They bring an emotional intelligence to finance that cannot be delivered through a computer algorithm or a utility function. They are the bedrock on which people build their financial plans and -when they are as good as Hayley – they are the most important cog in the financial machine.

It doesn’t surprise me that others put their faith in what she and her firm do. She has access to the support of firms like Royal London (and keep their favours special). I can admit that we do not have that support for the reasons mentioned above.

An unequivocal endorsement

So I am happy, humbled and deeply in awe. I hope that I will continue to meet the likes of Hayley Jaggers as we go through the staging of the 1.8m and that her business goes from strength to strength. She is doing something I cannot do and were there more of her, you would hear less of me!

Auto-enrolment solutions

Meticulous attention to detail

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

Can the pension insurers win back their customers’ respect?


It’s been a long time since the mainstream insurance companies really spoke for their customers.  Nowadays, if they talk to the market, it is with the help of an outside agency. Scottish Widows have recently spoken through the PPI, when Aviva wanted to speak about pension choice, they did it under cover of Defaqto. It is as if they are embarrassed to speak for themselves.

Ros Altmann, apparently speaking to Will Robbins of Citywire, is reported as saying

“Traditional providers must do more to engage savers and not just rely on advisers or government policy to boost business”.

I would whole-heartedly agree. These insurers have abandoned their traditional roles as the moral authority on financial prudence and become “asset gatherers”, the passive receivers of other people’s efforts, reliant on brand for continued success.

Not for the first time , Altmann put her finger on the nub of the problem. Insurers are making minimal steps to promote freedom and choice at retirement. Instead, grimly hanging on to assets

“I have had it from my own experience that the wake up letters people are being given are simply not driving people to Pension Wise, they are driving people to provider’s own in house team”

Altmann is accusing insurers of passively accepting money and passively retaining it, they simply are not engaging with customers along the way so customers end up unengaged, under-educated and disempowered.

It’s a business model that is almost entirely based on doing nothing.

What Altmann stops short of , is a remedy. But remedies are available. Yesterday I spoke at a packed meeting of fiduciaries who cared enough about the subject to listen to me and a colleague berate insurers for their passivity, sloth and failure to promote external governance through IGCs.

Instead of promoting the IGC as reinvigorates of their brands and promoters of the value of strong external governance, IGCs have fallen under the dead hand of procedure, of cronyism and of the conflicts that so beset financial services.

Unless I am missing something, the insurers will soon be counting IGCs as part of the cost of doing business and complaining of them as a Regulatory Burden.

Disengage- under educate and disempower. Hide behind the Regulator and intermediaries, maintain the status quo.

I think this characterises what many people think of insurance companies, including it would seem, our Pension Minister.

IGC’s – an opportunity in danger of being wasted.

IGCs could be the remedy, but they are likely to become part of the problem, unless good people stand up and ask for better. The IGCs were set up as the last chance saloon to avoid the insurance companies being referred by the OFT to the competition commission. They either succeed or the trigger will be pulled.

Ros Altmann is right to turning the screw, we cannot have the nation’s pension legacy being run by suits whose attitude is so cynical and slovenly. Instead we need the kind of insurers characterised by Nigel Wilson’s vision for the investment of our money and talked of often on this blog. A vision which re-engages customers with their investments, educates them on the importance of their savings, both to them and to our country and empowers them to take an active part in managing their finances.

Look to the work Momentum is doing in enabling financial literacy through the use of new technology (MoneyHub). Look at LV with Cora – a means of helping customers take choices at retirement.

These initiatives are rare glimpses of genuine financial innovation, set against a very average background of mediocrity where insurers and their trade bodies the ABI and the AI self destruct as they see their moral supremacy crumble.

If you are interested in the improvement of our financial literacy, our engagement with our money and if you want to see our insurers strong again, now is our chance. The IGCs which have been set up, have so far published only their terms of reference. They are ours to use and not the insurers to castrate.

By the 31st December these IGCs must have submitted to insurers their plans for the publication of their first annual statements in April 2016. To my certain knowledge, they have not consulted with policyholders on this and whatever comes out next April will be without any input from me or any like me.

I am a policyholder, I want the IGCs to speak with me because insurers do not. I want to speak through my IGC both in my capacity as a policyholder and on behalf of those other policyholders I represent through my firms governance committee.

The agenda I have for the IGCs is outlined in the presentation we gave yesterday.

You can download it here

Posted in governance, investment, later life, leadership, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , , , | 4 Comments

TEE(n) – Why would Osborne do anything else?


I was re-reading Steve Webb’s article in the Daily Telegraph where he outlines why he thinks Pensions ISAs would be a disaster. The more I read it, the less I get it.

Taxes 3

Let’s go back to basics. It is generally considered a good thing to have a strong first pillar of pension savings paid for out of general taxation and providing a safety net for the poorest and a platform for the rest of us.

It is also considered a good thing to have a second pillar of savings, typically called workplace pensions where people’s basic state pension is supplemented. Typically employers and employees have shared the risk and Government has incentivised this with tax relief.

There are other things that people can do to give themselves security in retirement (the third pillar- such as buy-to-let, entrepreneurial business activity etc, We can call this the third pillar- I think these pillars are the idea of the OECD (but Con Keating will probably correct me on this!)

Three pension pillars (of wisdom)

So we have three pillars, of which the second is the one under consideration today. I learned from my friend Ben Juppe some twenty years ago that the Government has no business interfering in how people save other than to ensure that people do not leave themselves a burden on others by not saving.

If there is an argument for compulsion it is that “reasonable force” can be applied in the public good – but only as a last resort. Throughout the 90s and noughties, we struggled with the idea of a compulsory state pillar and rejected it in favour of auto-enrolment. If that didn’t work – we told ourselves- we could make pensions compulsory.

In a great book called “Savings Sense” (commissioned by Steve Bee when he was at the Prudential, Ben Juppe concluded that tax relief was an incentive to save for those who paid tax (especially those who paid a lot of tax) but a rubbish incentive for those who paid not tax.

The Government ignored Ben and part of the Stakeholder Pension “revolution” that so conspicuously failed, was the granting of tax relief to those who didn’t pay tax. The Relief at Source taxation system did not increase take up from those who paid no tax, it was used by savvy taxpayers to provide pensions for their non-taxpaying children/grandchildren.

So Ben was proved right, tax relief does not incentivise those who pay no tax because for them tax relief is so abstract a notion that they fail to engage with it and anyway, they feel they have no means to save.

Auto-enrolment succeeded where tax-incentives failed

Taxes 2

Auto-enrolment has proved to be a much more successful strategy as it shows that those who feel they have no means to save, find themselves saving despite themselves. Like the reluctant swimmer, standing on the edge of the pool, they find the water quite nice, once they have been nudged in. As with people who claim they “don’t have time” most of us who claim we have no means to save actually mean we have no “will to save”.

Now we have pretty near universal coverage through auto-enrolment, almost everyone will be saving – though between 8-28% of us may opt-out (the higher number being the DWP’s current worst case scenario).

With such high savings rates, the need to provide tax relief diminishes, especially for those who don’t engage with tax and don’t understand how tax relief works or benefits them.

Osborne can’t afford EET and auto-enrolment

Taxes 5

As has been demonstrated by the numbers released in the autumn statement, the extra cost of giving tax-relief to a whole bunch of people auto-enrolled into 4+3+1 pensions from 2016 is £840m for 6 months or £1,680,000,000 for a year. That is a lot of extra money for the Chancellor to find, especially as it increases in line with the AE thresholds (earnings).

Any Chancellor lying awake at night could reasonably consider that with auto-enrolment, the job is done. There has been no compulsion, there has been maximum inclusion and the need to fund the tax relief is minimal.

Not only this, but the people who are doing all the moaning about moving away from TEE are the people with the big fat pension pots in the first place. Why should George Osborne continue to supplement the pensions of the people way over the destitution levels that might make them a burden on others? Hasn’t he got better things to spend his money on- like propping up the creaking NHS which is gong to have to take the strain of all of us living a lot longer?


Special pleading from the financial service industry will fall on deaf ears

The big losers from a move from EET to TEE are those who manage the wealth of the wealthy – and the wealthy. Osborne has shown no worry hacking off the wealthy- he’s doing it by smashing up the offshore tax shelters and by laying into buy to let. He is quite capable of smashing up EET in the same way so that people will get tax exempt savings rather than tax-exempt contributions.


This may not be what the Pensions industry wants to hear, but I don’t think that George Osborne is particularly worried about that either. He is a very radical Chancellor with no interest in being loved by the financial services lobby.


Teen– age kickers

Steve Webb’s final point is about the behaviour of those of us receiving our retirement pot tax-exempt. He points out that currently only a muppet would blow their savings on a Lamborghini and be left pawning the Lamborghini to pay the resulting tax bill. He isn’t quite right here, a lot of people who aren’t muppets have taken their money early and paid the bill- one of my best university friends is currently cruising the world on his pension savings, he having a life expectancy of less than two years having been diagnosed with terminal cancer in his early fifties. There are many with similar stories,

But leaving this aside, it is true that paying tax is a disincentive to blowing the cash at once, especially where you can take much of your money with little tax to pay, if you take it in stages.

Michael Johnson  tells me that the best argument to encourage good behaviours (eg not to blow it all at once) is to incentivise behaviours at retirement. He advocates TEEN, where the EN stands for “enhanced”. In other words, you get a “Georgie bonus” for spending your retirement savings sensibly and don’t if you blow it. Obviously the bonus is paid for out of the tax savings from not giving you (and others) tax relief on contributions.


Four simple conclusions

This is all highly speculative, I have no idea what will happen in March 2016 – when we have our budget, but I am coming to these conclusions;

  1. It is auto-enrolment that is disrupting EET and forcing the Chancellor to radical measures
  2. Flat rate EET does nothing to help the Chancellor as most auto-enrolled would get more rather than less tax relief
  3. Most auto-enrolled aren’t incentivised by tax relief , they simply needed the “means to save”
  4. The best way of dealing with at retirement behaviours is to give incentives at the “point of sale” eg – when people are deciding what it means to be Pension Wise with their pot at retirement.

All of which leads me to consider EET totally unsuited to the new pensions world, TEE to be a much better option and TEEN to be the best option still.

As for all the special pleading about the complexity of transitional arrangements – this is piffle, the financial services industry has been happy to embrace change when it has been in their favour, this time they will have to stomach change even though it isn’t.

Taxes 6





Posted in Pension Freedoms, pension playpen, pensions, Politics, Public sector pensions | Tagged , , , , , , , | 5 Comments

“10 years too early, 10 years too late” – CDC stands on on an empty platform

empty platform 2

Nearly eight years ago, the Government Actuary ‘s Department produced  a paper that effectively killed CDC. It argued that CDC could not be relied upon to deliver benefits with the same certainty as our DB system and that there was no problem with the way that DC worked.

It was a fatuous paper that was contested at the time by people who understood the gathering storm that would lead to Pension Freedoms , to the near collapse of our private sector DB schemes and to the inequalities of pension provision that prevail in the public sector.

My colleague, Derek Benstead ( formerly a teacher, re-trained as an actuary) produced a reasoned argument to show the short sightedness of GAD’s approach. This document found itself onto Steve Webb’s desk, and to his great credit, he read it, understood it and did something about it. Derek’s argument put CDC back on the table.

Had Steve Webb done no more than enable CDC to be used as “DB without the guarantees” or as a means to spend DC pots as “target pensions”, his Defined Ambition project would have been his greatest legacy. Unfortunately, he chose to voices off and threw into his Defined Ambition paper a host of unlikely variants to CDC , justified by the phrase “in my garden I want a thousand flowers to bloom”.

Instead of blooming, the garden is now blighted, the good flower was strangled by the others and now nothing is growing. I said this at the time of the publication of the DA paper and we see the consequences now.


Easier DB or a more robust DC?

For many, (I suspect that among them was the current Pension Minister), a non-guaranteed version of DB was a way for private sector DB to survive the introduction of contracting out, (now just a few months away). It hasn’t been delivered and contracting-out is delivering the coup de grace to what remains of corporately sponsored DB.

The original time-table for the delivery of CDC would have meant that the DWP could have offered employers with DB schemes the opportunity to beef up their DC schemes into CDC schemes, returning us to a system of DB relying on “best endeavours” not the insurance and capital markets. The failure to deliver a credible alternative to DB is the Government’s – not the private sector’s fault- as I will explain in a moment.

Steve Webb held this vision, based on the premise that if he built it they would come. But employers didn’t trust Government and they didn’t come. They had been bitten enough times by the dog that didn’t bark, to know that you don’t put your balance sheet at risk to please a politician. If Webb had been able to offer CDC as a way out of DB in April 2016, CDC would have happened, but he had to consider what that would have meant to the public sector.

In retrospect, had the vision Webb had for DB been presented to the pension industry when it was conceived  in 2005 then it would have been timely. It would have meant the then Government taking on the Public Sector on Pensions and crucially Gordon Brown ducked this challenge.

As it was, it was the Treasury (where GAD sits) that killed CDC in 2008.  CDC was a private sector initiative that was sacrificed to protect the status quo. Government must accept that CDC was not 10 years too late, it was conceived by the private sector on time, it was Government that aborted it.

It would, to follow the logic of “ten years too early, ten years too late” , have to wait well into the next decade before we have the radical alternative to our current binary system of guaranteed “pillar 2” pensions  or pension freedom.


Is there any hope for a third way?

At the time of writing, I see no alternative. The current Government has chosen to focus on financial empowerment of the individual to choose his or her way and to put “collectives” in the draw marked “tomorrow”. The Financial Advice Market Review looks to extend the concepts that underpin Pension Wise- Guidance, sign-posted advice and individual sufficiency.  There is nothing wrong with promoting better guidance and more accessible advice but as an advisor with 30 years experience, I’d point out that financial literacy levels have not improved (in my experience)since I started advising in 1984.

I don’t think that we can make our nation pension savvy in a parliamentary term, or indeed in a generation. All the academic work , emanating from the US, Europe and the UK suggests that we cannot make us all our own pension managers. We need default pathways which we can follow to reasonable outcomes. People who want to stray from the default path should be allowed to do so. The default path has to avoid the extreme risks of pension freedoms and the extreme risks of a fully guaranteed approach. There needs to be a third way to spend our pension savings.

So unless that the FAMR concludes that we need a default and not just better signposting to existing products, then we will be back where we were in 1987, when we embarked on the brave new world that led to personal pensions, annuities , mark to market accounting and guaranteed pensions and compulsory indexation.

The Government has not only failed to come up with a credible alternative to DB, it has aborted the best attempt of the private sector to come up with a credible default pathway through the Pension Freedoms. We are ten years too late for the DB crisis and ten years too early for the DC crisis. Thanks to the continued procrastination of Government we will have two pension crisis’ for the price of one.


What’s needed is a proper understanding of acceptable risk

Our pension system is in the hands of two groups at loggerheads with each other. On the one hand are the extreme libertarians, who argue that we should be empowered to spend our savings as we like. On the other hand we have the guardians of financial rectitude who want total certainty of outcomes.

Somewhere between here and Beveridge, we have lost the clear voice of pragmatism that tells us we cannot have both of these things at the same time but that we have to find a middle ground which accepts that the future cannot be certain but that we cannot allow people to become a financial burden on others through financial recklessness.

The default path that steers between the philosophical polls of GAD’s certainty and Osborne’s freedoms has been lost, overgrown by a thousand useless flowers and by the false premises of those with an ideological addiction to self-empowerment.

What’s needed is a balanced position that brings the ideological polls together and offers the ordinary person , who knows nothing about pension theory, the opportunity to have a comfortable retirement with the minimum of financial worries.

empty platform

Posted in advice gap, CDC, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , , , , , | Leave a comment

50 shades of “Workie”.

workie ignore

Are all Workplace Pensions the same?

Can we distinguish one “Workie” from another?

Are all Workies equal – or are some Workies more equal than another?

For those not familiar with the adverts- Workie is a Technicolor creature, designed by the DWP to make employers aware they should not ignore the Workplace Pension.

For employers Workie can be a nuisance. Installing a workplace pension presents a series of challenges for payroll. Managing the rhythms of auto-enrolment demands not just adherence to process but a tolerance of third parties that simply don’t get payroll.

How employers judge the value of the workplace pension they have established is largely through  feedback coming from payroll.

The “member experience” is for the moment secondary. This however is likely to change over time. There are three reasons for this;

  1. As managing the workplace pension becomes “business as usual” , the initial strain should  diminish.  Over time –  Workplace Pension should also get better at understanding payroll’s needs .
  2. As member contributions phase upwards in 2018 and 2019, members will pay more attention to the pension, some may opt-out, others will start asking whether they are getting value for their money.
  3. As member’s pots increase in value, people will start seeing their Workie for what it might give them later in life- rather than a payroll deduction. Pension Freedom helps people think of their pension pot as something to look forward to and value.

The member’s perception of what makes for a good Workie will be based on what the Workie offers in terms of “interest” (technically investment growth), how easy it is to spend Workie’s pot at retirement and how much is taken from the pot to as management fees.

These are the measures of Workie’s outcomes and will eventually be the measures by which workplace pensions will be judged.


So much for the future – what about today?

In the short term employers and their business advisers are determining who are the winners and losers among workplace pension providers .

Pension PlayPen surveyed over 100o employers and advisers about their experience of working with the leading workplace providers. You can read the full survey by copying this link into your browser  http://goo.gl/mhlrm8

Just under 150 respondents had sufficient time to fully complete our survey, (adjudged a statistically significant sample).

There was consistency among business advisers about which providers were cutting the mustard.

Measures support services

Pension PlayPen – Measures of Support




And consistency among employers about what they considered important in selecting a workplace pension.P

Measures employers

Pension PlayPen -Measures of Support


What this tells us is that those Workplace Pensions that are cheap and easy to set up and run, are more valued by their purchasers (the employer) than those that promise better member outcomes.

It seems that in the first three years of auto-enrolment, employers have used a large number of workplace providers .

measures use

Pension PlayPen – Measures of Support


Although NEST is most used – it is not the clear market leader by use. Instead we see employers and business advisers choosing pensions on the basis of ease of use, cost of set up and on going support.

This represents a healthy advance on the situation described by the Office of Fair Trading in 2014.

“The buyer side of the DC workplace pensions market is one of the weakest that the OFT has analysed in recent years”.

But not everything in the garden is rosy.

Although  employers (mainly through their advisers) appear to be making rational purchasing decisions, members investing their salary may feel their outcomes are being ignored.

Employers may consider that a workplace pension that works well for payroll will probably deliver good member outcomes and they may well be right.

But there are nagging doubts. The Pensions Minister spoke passionately at a TUC pension conference about problems with net pay taxation and the low paid. The Pensions Regulator has expressed concern that small master trusts that do not adopt the Master Trust assurance framework are all but unregulated ; and we’ve found clear evidence that pension fraudsters are eying up auto-enrolment  cash-flows for “liberation”.

Employers need to be wary of choosing workplace pensions on cost and ease of set up. It is much harder to judge providers on their investment merits but a purchasing decision that ignores “member outcomes” is leaving employers (and advisers) vulnerable in future years to criticism.

While neither employers nor their advisers can be responsible for the investment performance of their chosen workplace pension , they should be careful to leave an audit trail when they purchase that shows that proper attention was paid to the member’s pension.

workie + man

Workie-Don’t ignore it



Posted in pensions | Tagged , , , , , , , , | Leave a comment

Essex earthquake and hurricane appeal


A major hurricane (Hurricane Shazza) and earthquake measuring 5.8 on the Richter Scale hit Essex in the early hours of Saturday with its epicentre in Basildon . Victims were seen wandering around aimlessly, muttering “Faaackinell”.

The hurricane decimated the area causing almost £30 worth of damage. Several priceless collections of mementos from Majorca and the Costa del Sol were damaged beyond repair. Three areas of historic burnt out cars were disturbed. Many locals were woken well before their Giros arrived.


Essex FM reported that hundreds of residents were confused and bewildered and were still trying to come to terms with the fact that something interesting had happened in Basildon . One resident – Tracy Sharon Smith, a 15-year-old mother of 5 said, “It was such a shock, my little Chardonnay-Mercedes came running into my bedroom crying. My youngest two, Tyler-Morgan and Victoria-Storm slept through it all. I was still shaking when I was skinning up and watching Jeremy Kyle the next morning.”

Apparently looting, muggings and car crime were unaffected and carried on as normal.

The British Red Cross has so far managed to ship 4,000 crates of Special Brew to the area to help the stricken locals. Rescue workers are still searching through the rubble and have found large quantities of personal belongings, including benefit books, jewellery from Ratners and Bone China from the Pound shop.


This appeal is to raise money for food and clothing parcels for those unfortunate enough to be caught up in this disaster. Clothing is most sought after – items most needed include:
Fila or Burberry baseball caps
Kappa tracksuit tops (his and hers)
Shell suits (female)
White stilettos
White sport socks
Rockport boots
Any other items usually sold in Primark.

Food parcels may be harder to come by but are needed all the same. Required foodstuffs include:
Microwave meals
Tins of baked beans
Ice cream
Cans of Special Brew.

22p buys a biro for filling in the compensation forms
£2 buys chips, crisps and blue fizzy drinks for a family of nine
£5 buys fags and a lighter to calm the nerves of those affected.


Rescue workers found a girl in the rubble smothered in raspberry alco-pop and were worried she had been badly cut…
“Where are you bleeding from?” they asked,
“Romford” said the girl, “woss that gotta do wiv you?”

Please don’t forward this to anyone living in Essex – oh, sod it, they won’t be able to read it, anyway.

Posted in pensions | 2 Comments

Being British

I was driving along the M4 yesterday when i heard an explosion from the back of the car. A tyre had burst and my car wobbled nervously from the fast lane towards the hard shoulder. To my relief, a signpost to junction 18  appeared and , like the hapless formula one driver I’m not, I managed the car from motorway to the A46.

Within an hour, I was a guest of Briant’s excellent tyre shop thanks to guidance from the AA. It was great getting my tyre changed, watching  great lorries and tractors  being re-trod, chatting about football with the mechanics and trying to forget my 4pm appointment in London.

Three hours later I was sitting in St Paul’s Cathedral listening to Evensong and shortly after I attended the St Pauls Feast at the Hall of the Mercer’s Livery Company, dining with my mother and the fine company of parents and students of my son’s school.

As I cycled up to Euston this morning, I was trying not to think about what I didn’t follow in parliament yesterday – the WASPI debate. There flashed upon my inward eye (that is the bliss of solitude), remembrance of my road trip and of the great kindness that had been shown me.

I can hardly call it an epiphany, that’s  too grand a word, but I did feel a little overwhelmed when I considered how lucky I am to be living at this time, in this place called Britain, that has such people, such places and such history.

It would be wrong of me to brag,  I hope you don’t think every day is made up of such happy diversity, but I think the word “celebrate” is the one I’m grasping at. Though the events of each day seem random, the outcome of my days is consistent, I feel I have a sense of purpose that I cannot remember at any time in my life since I was at school.

This fulfilment is- I am sure- linked to being a part of something much larger, an enterprise of State that covers a payroll seminar in Bristol, a tyre-shop near Bath, the great St Paul’s cathedral and a livery company with a heritage dating to the 14th century.

We are all a part of Langland’s “Field of Folk“, a part of this enterprise. The enterprise is no different to when Peirs Plowman saw society laid out before him from the Malvern Hills. Today’s Pension Plowman follows, less poetically, in Langland’s tracks, his vehicle an ageing BMW and a South West Train.

Along with all who have arrived in Britain since the late 14th century, I’m living this dream, conscious of my good fortune to be British.

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

#WASPI and “the woman’s place”


Today is WASPI day,when the women petitioning parliament (now well over 130,000) get their voices heard.

I was asked last night whether or not the petition misleads (thanks Cathe) and yes I think WASPI is weakened by confusion within its ranks as to what kind of outcome they are expecting from Government. There is a lot more of an ask to roll back the 1995 reforms than the 2011 amendments and a lot less involved establishing a transitional settlement that might give partial relief to those worst affected.

But I don’t think it’s weakened much because I don’t think the Government are going to give an inch, whatever is asked for. That said – I am not a politician and I don’t see the wider picture – I may be wrong.


The woman’s place

What is far more important is that we are having a debate in parliament on the importance we in society place on the contribution of women to our economy and how they should be rewarded in later life and in particular whether we have been fair to women in managing the equalisation of state pension ages.

This is a debate which is long overdue and one that we are now able to have with strong women conducting it. On the Government’s side is the Pension Minister , for the official opposition, Angela Rayner and for the SNP, Mhairi Black.

Women are now in most of the principal positions of Governmental and quasi Governmental Power. They run everything from the PLSA to the DWP (and all stops between). This is not from positive discrimination , but because we are at last giving women the right to participate that was previously forced out of men’s hands by exception. Barbara Castle and Margaret Thatcher (in very different ways) made it possible for Rayner and Altmann.


And can we doubt society is  not the better for these women in power?

“Better listeners, more emotional intelligence, a care for the outcomes of these pension schemes we manage

This is how one male friend of mine described working for a predominately female management board.

It is in the context of the current female assertion, that I view the last forty years not just as a lost opportunity for women, but a lost opportunity for men.

That men not only set the salaries , but determined the promotions and the pensions that arose, is patently a bad thing. We have denied women the right to manage and we (men) have done management jobs that women could have done better.

WASPI may be seen in retrospect as having more significance in the general context of the assertion of womanhood in management, than in the particular injustices it is highlighting.


For men – now is the time to listen and better understand.

I am very pleased we are having the debate we are having in the house of Commons today. For once, women have been granted the right to set the terms of the debate and will lead it, it is for men to listen and better understand.

The words that are being used to frame this debate – “honesty” – “compassion” and “justice” are not words that men use to any great degree. Nor are the arguments about fairness couched in the aggressive terms of male debate.

For once the debate we are having is being conducted (save for some social media exchanges) with a dignity that I find moving. I have found WASPI’s arguments more compelling for this tone and am coming to realise what an enormous opportunity has been lost,by more men not listening to women.

I am not suggesting the capitulation of the male portion of society, but I reckon it’s time we stopped blustering and started really engaging in what place we have in society relative to women – not the other way round.

Posted in #WASPI, pension playpen, pensions | Tagged , , , , , , , | 1 Comment