Sagacity – Be a Pension Hero

Sage have chosen and chosen wisely

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I’m proud to see Pension PlayPen’s logo sitting next to Sage’s. I’m proud of Sage for promoting those employers who pay attention to their pension as Pension Heroes.

Be a Pension Hero

Whether you are a Sage Customer or not, you should know about and use Pension PlayPen to help you and your clients through auto-enrolment.

Check out why Britain’s #1 Payroll and Accountancy Software promotes We’re only a click away.

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What is this Pension PlayPen?


When people ask me what I do, I tell them -if they’re in the Pension business- that I am a Director of First Actuarial. If they are not, I tell them I founded a company called Pension PlayPen – to restore confidence in pensions.

There are more than 8000 people in a Linked In group called Pension PlayPen and every week around 5000 people read about 10,000 articles on the Pension PlayPen blog.

But that’s only touching the surface! What I’m about is helping create the conditions for confidence in pensions to be restored. That needs more than words- that needs actions.

This blog is about what Pension PlayPen is doing this very moment to help small employers make informed choices about the workplace pension they offer staff as part of auto-enrolment!

Why we need Pension PlayPen!

We need Pension PlayPen because people are being fed a constant diet of negative stuff about saving for retirement

pensions crisis

negative stuff

And this negativity continues from the very people who should be whooping pensions up

My  monthly update arrived from the Pensions Regulator yesterday. I opened it and found this video

The video lists a number of things an employer “has” to have and “needs” to do to choose a pension.

It promises to provide help in making the choice but at no point in its 65 seconds does it mention anything to do with the member. You would think that the only reason for choosing a pension was to avoid the wrath of the Pensions Regulator.

This video defines the Pension PlayPen by what it is not!

Or to be more positive, it reminds me to remind the 1.5m employers choosing a pension as part of auto-enrolment that workplace pensions are the means to transfer money earned today into money spent tomorrow.

The Pension PlayPen is designed to maximise the efficiency of that process by ensuring that;-

  1. Employers do the right thing by the Pension Regulator (compliance)
  2. Employers do the right thing for themselves (by choosing a Workie that works for them
  3. Employers do the right thing for their staff (by choosing a Workie that delivers in years to come).

The Pensions Regulator’s video promises to make it easy to choose a pension but that promise is broken. Go to their choose a pension webpageGo to their choose a pension webpage and try “find a scheme yourself

This is what you get

Unless you want to use an existing pension scheme for automatic enrolment, you’ll need to find a scheme yourself or get help from your accountant or a financial adviser.

Find a scheme yourself

You should look at different schemes before you decide which is suitable for you and your staff. Some of the options are listed below.

If you have staff who don’t pay income tax, it’s important to check that the scheme uses ‘relief at source’ to add tax relief from the government. You should also know what to look for in a pension scheme – such as whether it will accept all your staff, how much it will cost and whether it will work with your payroll.

Some providers have had their pension schemes independently reviewed, while others are regulated by the Financial Conduct Authority.

The following schemes have said they are open to small employers:

This is simply inadequate to help any employer (whether they know about pensions or not, choose a pension.

The criteria “open to small employers” is meaningless. I could add 20 more Workies that say that, some of which are very good, some utter rubbish.

Employers choosing from this list are buying a pig in a poke. But the price of getting this decision wrong will be paid not by the employer, but by the employer’s staff for decades to come.

The way to restore confidence in pensions

Auto-enrolment has restored confidence in pensions , Pension PlayPen restores confidence in pensions.

We started Pension PlayPen as a way to choose auto-enrolment pensions , more or less when auto-enrolment began back in 2012, we opened for business in November 2013 and since then we’ve helped over 4000 employers choose a pension and twice that number assess their workforce and work out how to set up auto-enrolment.

We have won the confidence of some of the largest payroll software companies in Britain, many accountants use us for all their clients. We are used by IFAs and payroll bureaux and we get a huge number of employers using our system without any help at all.

The cost of getting a fully compliant pension (£199+vat)  is a fraction of what people pay elsewhere. This video, which we produced for Sage (where we are embedded) explains how we go about our work.


Inspiring employers to really help their staff

My hope is that people will start to think like we do at the Pension PlayPen, choosing a pension not because they “have to” or “need to” but because they “want to”.

Providing your staff with a workplace pension which can help them retire in dignity is one of the best bits of being an employer.

We shouldn’t be selling the choice of workplace pension as a chore. We shouldn’t be using NEST because the Government tells us it’s “their scheme”.

We should be engaging our hearts and minds in choosing the most important financial plan some of our staff will ever have.

With Pensions fit for heroes

I have saved all my working life and have amassed what seems a huge amount of money (to me). I am happy to say that I will be able to have a pension when I am 60 of nearly £50,000 a year for the rest of my life. I’ll be getting another £7,500 pa +++ when I get to 67.

I want other people to look forward to their later years with the financial confidence that I do.

I know they won’t get there by saving 1% of band earnings, but it is a start.

If we can build on the platform we have created, millions of people who would have relied on nothing more than state benefits, will have the chance of having a workplace pension that pays out meaningful amounts.

This is the great thing about auto-enrolment. The great thing about auto-enrolment is not the high compliance rates from employers, or the success of payroll integration or even the low opt-out rates (all of which are good).

The great thing about auto-enrolment is that millions of people who weren’t saving for retirement, are saving for retirement. These people are the heroes that make our economy work, they may not be in the news, but they make our country tick.

These people are often no more than “getting by” , but they are now putting money by.

Let’s make sure we provide them with workplace pensions that are worth the sacrifice they are making.


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A little bit of anarchy does you good


Noah – the anarchist.

I’m grateful to my Swedish friend Per Andelius for finding this. Provenance has kindly been provided by readers (see comments).

In game theory, the “price of anarchy” describes how individuals acting in their own self-interest within a larger system tend to reduce that larger system’s efficiency. It is a ubiquitous phenomenon, one that almost all of us confront, in some form, on a regular basis.

For example, if you are a city planner in charge of traffic management, there are two ways you can address traffic flows in your city. Generally, a centralized, top-down approach – one that comprehends the entire system, identifies choke points, and makes changes to eliminate them – will be more efficient than simply letting individual drivers make their own choices on the road, with the assumption that these choices, in aggregate, will lead to an acceptable outcome. The first approach reduces the cost of anarchy and makes better use of all available information.

The world today is awash in data. In 2015, mankind produced as much information as was created in all previous years of human civilization. Every time we send a message, make a call, or complete a transaction, we leave digital traces. We are quickly approaching what Italian writer Italo Calvino presciently called the “memory of the world”: a full digital copy of our physical universe.

As the Internet expands into new realms of physical space through the Internet of Things, the price of anarchy will become a crucial metric in our society, and the temptation to eliminate it with the power of big data analytics will grow stronger.

Examples of this abound. Consider the familiar act of buying a book online through Amazon. Amazon has a mountain of information about all of its users – from their profiles to their search histories to the sentences they highlight in e-books – which it uses to predict what they might want to buy next. As in all forms of centralized artificial intelligence, past patterns are used to forecast future ones. Amazon can look at the last ten books you purchased and, with increasing accuracy, suggest what you might want to read next.

But here we should consider what is lost when we reduce the level of anarchy. The most meaningful book you should read after those previous ten is not one that fits neatly into an established pattern, but rather one that surprises or challenges you to look at the world in a different way.

Contrary to the traffic-flow scenario described above, optimized suggestions – which often amount to a self-fulfilling prophecy of your next purchase – might not be the best paradigm for online book browsing. Big data can multiply our options while filtering out things we don’t want to see, but there is something to be said for discovering that 11th book through pure serendipity.

What is true of book buying is also true for many other systems that are being digitized, such as our cities and societies. Centralized municipal systems now use algorithms to monitor urban infrastructure, from traffic lights and subway use, to waste disposal and energy delivery. Many mayors worldwide are fascinated by the idea of a central control room, such as Rio de Janeiro’s IBM-designed operations center, where city managers can respond to new information in real time.

But with centralized algorithms coming to manage every facet of society, data-driven technocracy is threatening to overwhelm innovation and democracy. This outcome should be avoided at all costs. Decentralized decision-making is crucial for the enrichment of society. Data-driven optimization, conversely, derives solutions from a predetermined paradigm, which, in its current form, often excludes the transformational or counterintuitive ideas that propel humanity forward.

A certain amount of randomness in our lives allows for new ideas or modes of thinking that would otherwise be missed. And, on a macro scale, it is necessary for life itself. If nature had used predictive algorithms that prevented random mutation in the replication of DNA, our planet would probably still be at the stage of a very optimized single-cell organism.

Decentralised decision-making can create synergies between human and machine intelligence through processes of natural and artificial co-evolution. Distributed intelligence might sometimes reduce efficiency in the short term, but it will ultimately lead to a more creative, diverse, and resilient society. The price of anarchy is a price well worth paying if we want to preserve innovation through serendipity. 


Noah’s sometimes right

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It’s good to be Great.


Britain look like beating the medal tally they achieved as a home competitor. In medal terms they will be either second or third most successful competitor on this most elevated of world stages. So why should anyone question a little triumphalism. Why should I fee a little guilty about jingoism?

The short answer is that I shouldn’t.

I shouldn’t be ashamed to be competitive.

Those people who dislike competition have their own reasons. There are loads of great non-competitive things to do like join in Shakespeare 400 or watch some proms or walk in the hills . We have these Olympics once every four years and they are not a burden!

I shouldn’t be ashamed to be British – Great British.

The people who won our 60 something medals, and those who didn’t but performed with such credit show an astonishing diversity. I don’t want to pick out names, but you only have to think of the interviews to realise that the national lottery has made winning at sport , something that anyone can do. Our Olympic success was not honed on the playing grounds of Eton, we had centers of excellence around the country , our winners were as female as male, class, creed and colour has been no obstacle to Great British success.

Britain has turned itself in the past three Olympics from hapless to losers to ruthless winners.

I should be proud to be British – Great British

Whatever we voted in the Referendum, we are heading out of the European Union and will have to stand on our own two feet. For all the problems this will cause, there are new and unexplored opportunities. We will best exploit these opportunities if we are confident – proud even,

I have no problem with Theresa May making political capital out of this success, I don’t mean party political capital- this is nothing to do with Conservative politics, I mean a wider sense of national pride based on the real positives we have experienced over the past weeks.

I like to see areas like Manchester and Yorkshire boast their regional roots, but I’m also happy that these medals were won under a Great British flag that meant you were as much a part of the team if you were from Northern Ireland as England , from Scotland as from Wales. I don’t even stop to ask which regions contributed most – that is not relevant in such a team performance.

The political capital that Theresa May collects will be badly needed over the rest of her term in power and beyond,

Going it alone

I spent yesterday on my boat with a bunch of Brazilians and Italians – a wonderful day despite the weather. Of course I was proud of our performance but they were too.

Our global standing in the world in every sense is enhanced by our sporting prowess (and by the way we conduct ourselves), Our conduct in these games has been awesome.

We have not put the boot into Rio for its shortfalls, rightly so. But the achievement of London 2012 looks the greater for what has often seemed pretty shambolic. We created London 2012 in the four years after the economic collapse and delivered in the teeth of the odds.

Now we are taking on another great challenge, to go it alone without the help of our European trading partners and there can be better statement of intent as to how we go about it than our performance at the 2016 Olympics.

There is a fine line between jingoism and patriotism and we cannot allow ourselves to think there is merit in isolating ourselves. The spirit of the Olympics, like that of the Commonwealth, European and World games should be inclusive. But within the terms of the competition, to be winners, as we are, is something to be very proud of.

I am proud to be British and Great British and incredibly grateful to the dedication of our athletes, the coaches and all the volunteers that make me- and the Nation- feel this way!

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“Transparency – your tide is coming in!”


canute 6

King Canute was a wise king, he died (where I was born) in Shaftesbury, he was a Viking who became our Christian king,  he taught his court that he could not hold back the waves and that there was a greater force that controlled the tide.  Shaftesbury is the highest hilltop town in England.


The British fund management industry and in particular their trade body the Investment Association are building sand-castles on the shoreline and hoping the tide won’t come in.


The tide is technology, it is coming in – what next?

Here is  Oliver Wyman’s prognosis for the growth of the blockchain  (rather more bullish than Robeco’s recent report which I talked about earlier in the month).

In this wave, distributed ledger technology and smart contracts will likely be used in combination to store and share core transaction data.

Distributed ledgers can enable a data environment in which asset managers track their investments, develop products and provide client services.

Given the real-time nature of data transmitted via blockchain, up-to-the-minute risk and performance analytics can be made available to clients. Investors will be able to access their own transactional data through direct ledger connectivity or via vendor-provided interfaces in real-time, providing a new means of self-service reporting.

We expect these Wave 2 applications to be developed in stages and to begin to be adopted in the next two to five years.

Initial pilots may run in parallel with existing processes to minimize any unwanted effects on clients. As the overall ecosystem and end users build up their confidence in the distributed ledger solution, we will see volumes begin to migrate.

Over time, redundant back- and middle-office data infrastructure can be retired, cutting costs.

The really important paragraphs (to Transparency of costs and charges) are the first and last paragraphs.

Distributed ledgers ( of which the Blockchain is one) keep records. They do so in real time, records are immutable , nothing can be hidden. They will result in a more transparent view of what we are paying for funds. As a result we will have a reliable source of data for the “money” element of “value for money”.

This technology will also drive down the cost of intermediation by making back and mid office infrastructure redundant.

Not just funds but fund administration and member record keeping systems will adopt the new distributed ledger technology. I am urging those that will listen to wake up to this and not sink more money into shoring up our sandcastles.

But people are worried, people taught to look at change in terms of risk, see the disruption of our “business as usual” as a threat not an opportunity.

Depending on you glass full/empty perspective, this either means moving people from costing money to adding value, or it means mass redundancies. The immediate impact of Christmas , is not best left to turkey.

The tide is coming in -either you rejoice or you fret

Anyway the new distributive ledger technology will reduce the cost of providing pensions. Let’s think about the positive implications

  1. We will be able to know that any charge cap is a cap on what we pay, not what pension providers want us to think we pay
  2. Pension providers will become more efficient and either hideously rich or a lot cheaper for their customers
  3. People’s confidence in workplace pensions will be increased, they may start to be trusted by the “mass of the market”.

The vision of the Pension Plowman

There are other consequent benefits for other parts of the market. For those running de-risking programs the liability driven investment algorithms will be commoditised, the expensive investment consultancy fraternity will have to hand in their notice and go and do something productive (Redstart for instance).

In the City, the trading floors can become excellent five aside football pitches.

The Investment Association will become a proud flag bearer for a new self confidant asset management industry that makes its money from managing assets – not trading them.

The tens and thousands of people , released from staring at computer screens all day, will be free to do something constructive with the rest of their lives.

Some of this is fanciful, but it is a fancy devoutly to be hoped for.

King Canute was a wise king, he saw that he could not withstand the inevitable impact of the tide and taught others the same lesson.

He got wet doing so – and is often remembered as foolish – simply for getting wet.


But those in the know, see him as something of a hero!





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Very “interest”-ing

For millions of savers, the most important piece of financial news over the past few weeks has not been about the impact of bond yields on pension liabilities or their mortgage interest payments or the state of the stock market. It has been the announcement from Santander yesterday that it is cutting the interest rate on its 1-2-3 account from 3% to 1%. In advertising terms – Jessica Ennis-Hill has gone from gold to silver.

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Some of my readers may find Martin Lewis’ reporting a little over the topMartin Lewis’ reporting a little over the top. But he is read by more ordinary people in a day, than this blog is read in a year.

Money Saving Expert (MSE) is the first place for financial information (and education) for those who don’t rely on financial advisers and this is his advice for savers.

“Many millions of savers across the UK will feel like they’ve been kicked in the teeth. Santander 123 has been a beacon, shining out for those with a decent chunk of cash, as at 3% it pays decent interest. Now it’s halving that, meaning for those with £20,000 saved, it drops from roughly £600 to £300 a year.

Both Lewis’ – Martin and Paul, realise that their readership are more interested in savings rates than mortgage rates and both refuse to endorse the payment of dividends from shares as a way of increasing the income a saver receives.

This is ,of course, because they understand that savers cannot live with the idea that their capital is at risk from a downturn in profits (or that the source of the dividend payments may go out of business).

“Interest”-ing indeed.

Just as savers are digesting Santander’s move, so institutional investors are mulling over a report published this morning from the actuaries LCP. This tells us that companies have been paying too much interest (dividends) and suggest that the money might better have been paid into pensions (though pension schemes rely in part on high dividends to pay out pensions!

The report is timely as it reminds us that had Philip Green spent BHS profits on bolstering the pension, jobs and pensions might still be intact. In BHS’ case – not even other pension funds benefited from the dividends which simply went to buy the Green family a good lifestyle.

The institutional debate is about priorities and the headline from the LCP report is that UK companies pay five times as much to shareholders as they do to their pension schemes.

For hardliners like John Ralfe, any thought that the guarantees within pension schemes could be weakened (as proposed for Tata Steel) is unthinkable

“Why should pension scheme members lose out when shareholders continue to be paid cash dividends? It can only be fair to members if dividends are stopped and they can only start again once the full RPI lost is paid to pension scheme members.


So Santander is being pilloried by Martin Lewis for not paying enough interest on 123 while corporates are being pilloried for paying too much interest – ALL IN THE SAME DAY!

I’ve said it once and I’ll say it again, the proper place for pensions to be invested is in assets linked to the economic prosperity of pensioners. Sticking money into 123 is all very well but the interest is subject to the vagaries of a Bank’s marketing policy.

Companies have a duty to reward shareholders first and their pension schemes should share in the economic prosperity of our companies through dividends. Pension Schemes should not be strapped to the arbitrary returns of the debt market as their sole source of income (much as John Ralfe would like that).

Pension Funds should be free to own equities; executives should be free to reward shareholders with dividends (unless in special circumstances such as BHS, there is no general share ownership). Private Investors should wake up to the fact that they are retired for a long time and that depending on savings accounts such as 123 , is a risky long-term proposition.

Not confusing at all – it’s all about time.

Einstein called time the fourth dimension, time (or duration as investment people call it) is the key dimension for investment. Savers have time to be invested in shares which deliver steady returns through dividends. Unless they need the capital, in which case they are not long-term investors, they can afford to ride out the ups and downs of the stock-market.

Like pension funds, savers looking for interest need to think beyond cash or gilts and consider shares.

Pension funds are being herded into a cul-de-sac where all they can invest in is cash and bonds and they are missing out on dividends as a means of staying solvent. We need to target good outcomes – we cannot guarantee them

Savers are being herded into accounts like 123 and anywhere else where rates are high. They would be better off investing over the long term in blue chip stocks paying regular dividend incomes.

The “Far Off”

Everything comes down to the extent of your vision. If you go to to the Georgia O’Keefe exhibition at the Tate, then you can see how she paints what she calls the “far off”. The Far Off for O’Keefe seems to be a landscape concept , though you sense as you walk the rooms that she is also talking about old age and the spiritual speculation on what happens on the other side.

These are precisely the considerations that we should be having about our long-term savings, especially about our pension savings.

Encouraging investment for the “far-off” means investing in things- investing in the means of production – in land, physical property, infrastructure, businesses and intellectual property. It doesn’t mean jumping from one high interest account to another, or trying to pin the tail on the donkey by tying pension schemes up in derivative contracts designed to limit the downside of interest rate rises (aka LDI).

The Far-off is fundamental- we are all living longer- durations are increasing. We are increasingly investing for the “near-term” – a function of mark to market accounting , capital preservation, loss aversion – investor funk – CALL IT WHAT YOU LIKE!

A new vision needed

I will say it again, we need a new vision for retirement investing which allows people to benefit from the long-term growth in economic prosperity, which aligns investment to company performance so that one fuels another.

This cannot be achieved by rate hopping or by LDI, it requires people to accept capital to be at risk and that pension schemes can- at times- live with more risk than is currently acceptable. It may even mean that some pension promises are conditional on stock market conditions (principally the size of pension increases).

Whether our aim is to make DC savings more certain, or DB schemes more sustainable, we need a new vision which allows investors to benefit from equities with the security that comes from collective endeavour.

I am a Friend of CDC, this is part of the vision of the Pension Plowman. Throw your computer at the wall, if you don’t agree (or better still- comment).

We need the debate.


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Pension Transfer Offers – should you take yours?



I urge you to listen this excellent podcast (skip to 1 minute to avoid the ad). It’s led by Jo Cumbo and has the thoughts of a couple of IFAs (who I don’t know). At 13 minutes long it can only touch the surface of a busy subject.

Pension transfer values have never been higher and occupational defined benefits pension schemes have never been more under pressure. Pension Scheme Administrators are being inundated by transfer value requests, resulting primarily from financial advice suggesting there may never be a better time to get out.

If you want to get the chapter and verse you can go to the Money Advice Service who have a lot of not very snappy stuff which you can access here.

But you are reading this blog to get insider insights and my personal views so please read this first!

My view is that there are a lot more reasons to be careful than are stated in the Podcast, the MAS advice or by (most) financial advisers.

A common myth (dispelled)

Unfortunately the Podcast perpetuates a common myth that at CashEquivalent Transfer Value of a defined benefit pension comes from the employer. It doesn’t – it comes from the trustees and that’s a very different thing. The IFA may have made a slip of the tongue but he should have got it right. What an employer and trustee consider “fair value” can be quite different things.

The trustees answers to the members, the employer to shareholders (or equivalent). The trustees’ idea of fair value is likely to be more member friendly!

Everything I say about CETVs is predicated by my view that they are fair value- even if they may not be a good idea.

Most of us swap pension for tax-free cash without a thought.

People often think that the only way you can take a cash equivalent to your pension , is by taking a full transfer (CETV). This is wrong. Most people in defined benefit schemes take tax free cash ; generally this is considered a no-brainer, but it isn’t.

As the Podcast says (rather often), CETVs are very attractive now as they can offer a cash equivalent valued at 40 times the pension. This reflects the fair value of what is being given up. However the rate of exchange between pension and tax-free cash can be as low as 10 times the value of the pension.  People take tax free cash because it is tax free, but if you are giving up 50% + of the value of your pension for the privilege, you should be asking yourself  “is it worth it”.

If you have been paying AVCs , you may be able to take the AVCs as cash, in which case you should get fair value on the AVCs.  Don’t forget you can still get 25% tax fee cash from any pensions you have built up in DC pensions (workplace or otherwise).

Swapping pension for tax-free cash may be a good idea, but very often it isn’t.

What about the special offers?

From time to time , members of defined benefit pension plans are made special offers to give up their pension. Most people know about Enhanced Transfer Values, where the trustees are allowed (with general agreement from the employer) to increase the transfer values for a limited period. A lot of people have taken these values  in the past (and a lot of advisers would be very nervous if those who did realised what the normal transfer value would have risen to , if they hadn’t).

Another type of special offer is known as “pension increase exchange”. Here the special offer is a transfer or even a cash payment made available in exchange for the member giving up increases on a pension. Since increases on pensions are currently very low , these look very attractive offers (though you are taking a bet that inflation doesn’t take off in the future).

The important thing to remember is that however attractive the cash equivalent, what is being given up is the certainty of the money being paid. There is no certainty that you will be able to manage your money better than the trustees and beat them at their game, indeed the cards are stacked against you.

As the podcast states, the fair value relates to the average person. While no-one likes to think they are average, there are very few people who can predict that they will have below average life expectancy in their sixties and a lot of people who take the wrong bets on their marital status pre and post retirement. Certainty comes at a premium and that premium has a much higher value than those marketing “special offers” imply.

The IFA who likes you to consider , “Good value as an individual and relevant to your personal circumstances”, may be preying on our natural tendency to underestimate how long we will live and our dependent’s need for dependent’s benefits.

Special offers usually come with a catch – why else would you be being sold them?


What about the employer covenant?

It’s generally thought that where someone has a large defined benefit, they are most at risk from being in an occupational DB pension. This is based on the reduction in benefits they’d suffer if the scheme went into the pension protection fund.

But this is a very simplistic view. For a pension to be large enough to be reduced it needs to be £30k pa or more. But a CETV on £30kpa pension is likely to be more than £1m – the current Lifetime Allowance. What you may be doing  by swapping an uncertain pension for certain cash equivalence is increasing the certainty of paying 55% tax. Your pension – so long as it stays that, is valued at 20 times the pension for LTA purposes, your CETV is valued at 40 times.

The disparity may be even bigger with some early retirement pensions which are even more valuable as CETVs but still get the very low 20 times valuation against the Lifetime Allowance.

The scaremongering over BHS will panic some people into taking CETVs.

CETVs may reduce the risk of a clip from the PPF, but they exchange it for the certainty of punitive taxation on the unprotected transfer.


Don’t panic – stay put and only move if you have special circumstances.

One of my college friends (an actuary) has recently died. He spent the last few years of his life living off a CETV which he drew down at a tremendous rate. He knew what he was doing, he knew he was dying.

He is the exception that proves the rule

The perversity of pension freedoms is that they encourage to live hard die young, pensions encourage us to live healthily and long.

People who jump to get the current high transfer values are probably right in thinking they won’t go higher (though interest rates could fall and push them up). But a decision taken in 2016, may have implications for you in 2056.

Please don’t be panicked into taking a CETV , sacrificing your pension increases or even taking tax-free cash. Think about your long-term future, try to think of yourself as average (or better) and think of your family.

Finally – take this advice – which I give you for free -as no-one else will give it you!

The best way to maximise your pension is to have one and stay healthy!

I have no intention of dying young if I can help it and will be buying pension, taking my defined benefits as pension and I won’t be exchanging any pension for tax-free cash.

I consider my pension an excellent incentive not to over-drink, smoke or be lazy in retirement.

If you want to be really savvy and have a pension or an annuity, for heaven’s sake stay fit and don’t put your health unnecessarily at risk.

Jo’s produced a full article on this which you can find at

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Mark Carney v Barononess Altmann

In the Bank’s corner – Mark Carney

Bank of England

In the Saver’s corner – Baroness Altmann

  • Monetary policy is not helping ordinary people and low rates may be doing more harm than good
  • Ordinary savers are being hung out to dry and pension problems have worsened
  • Government should issue more high interest 65+ guaranteed growth bonds – but for all age groups

The latest decision by the Bank of England to cut base rate from 0.5% to 0.25%, as well as expanding Quantitative Easing by £60billion, is supposedly designed to boost the economy.  But millions of savers and pensioners are suffering serious potential income shortfalls as a result of this policy.

I believe the damaging side-effects of low interest rates have been under-estimated.  Not only are significant sections of the population being hit near-term, the consequences for the medium and longer term are also negative.

Bring back special savers’ bonds:   As the banks no longer want or need ordinary savers’ money, the Government could offer better interest rates directly.  Bringing back the special savings bonds that were issued from January to May 2015 for the over 65s, but this time for all age groups, would prove popular.  They had market-beating interest rates of 2.5% or 4% and were the most successful financial product for years.  A new issue of such bonds, but not just limited to older savers would reward savers for setting money aside.  This is vital if we are to sustain a savings culture in this country.  Until a few weeks ago, the Bank of England had been suggesting the next move in rates would be upwards – signalling some relief for savers after years of misery.  Now that rates have fallen even further instead, the authorities need to consider the impact on prudent people who want to provide for their own future.  The Government also needs to consider how to help companies that are struggling with rising pension deficits.  Issuing special bonds for pension funds, offering to underpin investments in infrastructure and housing, would be direct ways of helping alleviate the damage of monetary measures.  The Government needs to find ways to offset the negative side-effects of the Bank of England’s latest moves.

What is the damage to savers?  With interest rates staying so low for so long, and rates continually falling further, savings incentives and savers’ incomes across the economy are being destroyed.  This has two damaging consequences which could actually weaken economic growth.

Lower savings income means savers save less and spend less:  Firstly, many people who have saved over the years for their future are facing further income falls.  This may cause them to cut spending, especially if they are in retirement and cannot see a way for their income to increase in future.  Indeed, many savings account interest rates are being reduced by more than the 0.25% rate cut.  Banks and building societies do not need to attract savers now, as the Bank of England’s decision to introduce its new Term Funding Scheme gives the banks cheap money directly from the Bank of England instead.

Destroying saving incentives for younger generations:  Secondly, many people are deciding it is not worth bothering to save as the returns are so tiny.  People who might have saved but decide not to bother will be poorer in future.  Young people are losing the savings culture that the current older generations often grew up with.  Modern societies still need savers, especially as life expectancy increases and the population is aging rapidly.  This lack of savings, and potentially higher borrowing risks damaging growth in future.

What is the damage to pensions?  Again there are two damaging consequences for pensions, both of which are likely to weaken growth.

Rising annuity costs means less pension for life:  Firstly, as interest rates are pushed lower, the costs of buying an annuity have soared.  People looking to lock into a guaranteed lifetime income will be offered much less pension than ever before.  Even if the value of their pension fund has increase a bit, the cost of annuities has usually risen by much more.  And, of course, once they lock into an annuity for life their income will never recover, even if rates rise in future.  So pensioners will have less money to spend, which is hardly an expansionary policy.

Pension deficits weaken company growth prospects and reduce pension contributions for younger workers:  Secondly, employers who are running final salary-type Defined Benefit pension schemes are facing much higher deficits as a result of the expansion of QE.  As gilt yields fall further, employer pension liabilities have soared.  Just today, the Pension Protection Fund PPF7800 index announced that its measure of pension deficits rose last month to around £400billion.  It will rise further this month as a result of the extra QE.  This will weaken the employers sponsoring such pension schemes, damaging their business prospects, potentially preventing them from investing or borrowing to fund growth and sapping corporate resources away from both their business and employment expansion.  As most private sector final salary-type schemes are now closed, the rising deficits are likely to mean employers have less money to spend on providing good pension contributions for those workers who do not belong to these schemes, – usually younger employees.

Monetary policy is too focussed on financial institutions and borrowing:  Monetary policy seems to be overlooking the negative consequences on households (and parts of the corporate sector).

Low rates do not necessarily help mortgage holders and QE has led to rising rental costs:  Typically, if short-term interest rates fall, borrowers’ incomes increase, and they are expected to spend more (or even borrow more to finance extra spending).  However, falling base rates may not help borrowers as much as expected.  Mortgage payments are a major element of household borrowing, but around half of mortgages are on fixed rates, so they do not benefit from the base rate cut to 0.25%.  Indeed, the other element of monetary policy – QE – has damaged especially younger people because it has caused rising property prices.  Ordinary people have to either take out a much larger mortgage to get on the housing ladder, or must pay much more in rent.  So monetary policy has made them worse off.

The Government could help offset damaging impacts of monetary measures:  Because these changes in Bank of England policy have many potentially harmful side-effects, the latest loosening of monetary policy may need to be offset by fiscal measures.   Certainly, the transmission mechanisms of lower interest rates are very indirect – relying on sellers of bonds to boost asset prices or stimulate extra borrowing.  More direct help is likely to have a better outcome.  The indirect stimulus cannot be relied upon to prevent an economic slowdown, while direct measures to increase household incomes and spending, as well as helping offset the effects of rising pension deficits, will be more beneficial to the British people.

This blog first appeared here 

This is a binary decision – which approach do you favour -and why?

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Your ten point checklist when choosing a pension


Feeling a little helpless?


The law says you have to choose a workplace pension for your auto-enrolment eligible staff. But it doesn’t say how! The Pensions Regulator’s website, while excellent on auto-enrolment compliance, is pretty hopeless in helping you choose a pension.

So we thought we’d produce this handy “cut and paste” guide to choosing a pension, which can sit on any adviser or accountant’s website!

Feel free to share!



The decision you make may have consequences – this ten-point checklist gives you some quick pointers to the kind of pension scheme you should have.

If you want to make an informed choice then we suggest using www, which not only helps you choose, but provides you with an audit trail and actuarial certification of the decision you’ve taken


What to watch out for What you can do about it


Pension providers who don’t want your business Check with who you are talking with that you qualify for their service. Do a workforce assessment (you can do one for free at; share this with your provider.


Though some pension providers say they take everyone –it is best to check – even NEST doesn’t take everyone (See 6 below)


Earning patterns

Low earners with variable earnings and high earners with tax issues


If you have high earners with complicated tax affairs

If you have low earners who pay no tax beware schemes that operate a net pay arrangement (you may deprive staff of tax-relief



Talk with your high-earners about tax-relief , they may need advice and could benefit from a net pay scheme


Age profile

Mature staff with a long CV





Young tech savvy staff

Mature staff may have a number of “deferred pensions”, they would benefit from a scheme where they can bring their pots together and use the scheme to get pension freedoms.


If your staff are mainly young and tech-savvy ,look at tech-friendly schemes which offer phone friendly web-services


Pension experts

Pension gurus on the payroll! Bring them into the decision making process and make sure you have a way to compare all the schemes they’ll ask you to look at!

Payroll issues

Complex payroll periods



Offshore payroll

Speak with your payroll software suppliers, you may find they can point you to payroll friendly providers.

Payroll software companies have huge experience and will  want to help


Declare this to any provider you talk to, Many (including NEST) will only take money from UK bank accounts

6. Financial education Staff wanting guidance and education at work Some providers will allow members to pay for financial advice from their pension fund (adviser charging).


Other providers offer pension training either face to face or thorough distance learning within the standard price. Members cannot be forced to pay for financial advice as this would be considered “commission” and is banned


Special offers

Trade memberships Your or your adviser’s trade association may have special terms with some providers. Examples include the FSB, the ICB and trade bodies for seafarers, charities and social housing organisations.


Even hairdressers have their own “special deal”. Beware , not all these deals are as special as they make out!



Existing workplace pension(s) Take great care. Ask your existing provider if your scheme can be used for auto-enrolment and don’t assume it can. Even if it can, it may not be your best bet, shop around before committing.


If you choose a new provider, check you can move the old scheme into the new one and whether this can be done without getting every member’s consent,



Day traders on your staff Talk with your staff, you may have an investment guru (or someone who fancies himself one!) There are some schemes that have sections for self-investment.

Personal Service Workers

People eligible for a pension contribution you don’t even pay! Just because you’ve assessed those on your payroll, doesn’t mean you’ve assessed your workforce. You need to check your contractors to make sure they don’t merit membership.


Be sure to tell your provider if you find personal service workers, they may not want to include them which could invalidate your scheme as a qualifying workplace pension


And here are a few questions we are asked all the time!


Should I take independent financial advice?

In an ideal world you should pay for face to face with an independent financial adviser, but they are few and far between and regulated advice is expensive. You can get a 95% solution from a robo-adviser at a fraction of the cost.

How can I stay out of trouble if I don’t?

The main thing is that you know what you are buying for your staff and can explain the basis of your decision. You cannot predict whether the pension you choose will work out the best but if you have a proper audit trail of how you chose the pension, you should be thanked by your staff and stay safe from the risks of litigation.


Will we as an employer be giving advice to our staff?

So long as you don’t tell your staff what to do, you are safe. Choosing a workplace pension for your staff is not regarded by either the Pensions Regulator or the Financial Conduct Authority as a “Regulated Activity”.


What can we tell our staff?

The Pensions Regulator is keen that you promote your workplace pension and encourage pension saving. We recommend that you produce a report for your staff to see that tells them how you made your choice. We also recommend you get your decision certified by a professional such as an actuary so that your staff know you’ve followed due process. Both the report and certificate are part of the service offered by


For illustration only – these rating are historic and not to be relied on today!

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The charges of the light brigade

light brigade 1

Charge for the guns he said



The publication by the Investment Association of a report that puts hidden costs in funds on a par with the Loch Ness Monster has been met with elation by fund managers and derision by their customers.


Robin’s right; I remember the pressure on Eagle Star in the early 90s not to introduce “non-smoker” rates on life policies. It was – according to then owner BAT – an admission of a clear link between smoking and death!

In our office we had a sign which thanked us for smoking and cigarettes were freely available from silver canisters on the boardroom table. I remember presenting at one trustee meeting and having difficulty seeing the other end of the table for smoke.

If Hubris increases proportionate to the imminence of calamity, then the days of charging opacity are numbered!

But let’s apply some simple emotional intelligence to the IA’s behaviour. The Investment Association is a member’s association; it is the voice of the members and can say what the members would like to say but cannot.

The guffaw that emanated from 23 Camomile Street when the presser was launched would have resonated through the marketing departments of any number of London and Edinburgh fund managers.

“This is precisely what members pay their subs for- well done the lads for sticking two fingers up to the cheese eating surrender monkeys at the TTF”.

It’s a dangerous card to play.

Dangerous because the “empirical evidence” that the IA underpins its arguments on , is largely discredited. To take an example, the methodology behind Fitz Partner’s Portfolio Turnover Rate (PTR) calculations was rejected by those designing MIFID 1 and has never resurfaced. Calculating PTRs as the lower of the buys and sells went out with the ark.

I will leave it to Con Keating to properly demolish the creaky bark. I’ll focus on it’s kelson.

The IA claim that for an average charge of 1.59%, the aggregated fund manager produces 0.71% outperformance. That means that more than twice as much value is retained by the agents as is returned to the owners. I cannot think of any other industry that prides itself in charging twice as much for a service as it delivers in value.

Even if we were to accept these figures (which nobody outside of the IA’s membership and tame consultants will), this is an admission not a boast.

Only in the surreal world of fund management can managers claim value for money on this basis. VFM, relative to what? Presumably relative to the 2 and 20 hedge fund managers that they aspire to be

A dangerous game

light brigade 2

Lipkin and co have had their fun, the riotous fun of the press release is followed by the hangover and the question

“what have we done?”.

What the IA has done is tied itself to some pathetically inadequate research which provides selective data through an archaic methodology to give the troops a lift.

But they have exposed themselves as a lobbying outfit that has no authority, no integrity and no place in the policy debate. The FCA should look at this shabby document with contempt. The tPR should hang its head in shame that it points those reading its DC Code to the Investment Association’s 2012 Voluntary Code of Conduct.

The Investment Association have no earned authority, no integrity and have no place at the policy debate. Those who sit on the IA’s Advisory Board should stand up, resign and walk away. The Board is a sham and the new Code which the IA has yet to publish is already discredited. It has no place in the policy debate, should have no influence on IGCs, Trustees Boards or in the DWP’s deliberation on what the charge cap v2 shold be.

The IA is playing a dangerous game of bluff and is being called.

It’s strength is its weakness

The Investment Association has always called upon the solidarity of its membership to provide the powerful lobby to ensure it retained control of the costs and charges debate. It relied either on a Labour Government with insufficient gumption to take them on, or a Conservative Government with too many fingers in their pie.

It would seem that the current Government has decided to be on the side of those “just getting by”. The British Fund Management industry is many things but it is not “just getting by”.

The Investment Association’s membership is not the fantastic success story it thinks it is. It has got rich by charging twice as much as it has delivered value. It has done so for years because no-one knows where it takes its money. Now people know where the money is going (and we’ve seen the hidden charges), the game is up.

Like the tobacco industry in the 60’s and 70’s the IA has failed in the last decade to put its house in order. Instead it has made itself the pariah of those it serves. Like the tobacco industry in the following two decades, it will see itself having to re-organise, accept lower margins and adopt the new technologies that it is currently ignoring.

Ideas like the Blockchain which are almost unknown in fund management circles, will make the current inefficiencies a thing of the past. But it will also make thousands of those who work in funds redundant and will render the IA a shadow of its former self

Sometime in the “autumn”, the FCA will publish its market review of the fund management industry and those consultants who serve it. I expect that review to adopt a more sombre tone than the IA press release and for it to be greeted with rather less hilarity by the IA membership than this summertime jape.

For the money that pays for the petrol in the tanks of the Ferraris, is earned by people who are just getting by.


Into the valley of death

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The weight of a nation v the next Philip Green


The DWP Select Committee, currently the only centre of pension’s expertise in the House of Commons, has called for written evidence on Defined benefit (DB) pensions regulation by the Pensions Regulator (TPR), including:

  • the adequacy of regulatory powers, including anti-avoidance provisions

  • the application of those powers, including in specific cases other than BHS

  • the level and prioritisation of resources

  • whether a greater emphasis on supervision and pro-active regulation would be appropriate

  • whether specific additional measures for private companies or companies with complex and multi-national group structures are required

  • the pre-clearance system, including whether it is adequate for particular transactions including the disposal of companies with DB schemes

  • powers relating to scheme recovery plans

  • the impact of the TPR’s regulatory approach on commercial decision-making and the operation of employers

It also calls for submissions about The Pension Protection Fund (PPF), including:

  • the sustainability of the Pension Protection Fund
  • the fairness of the PPF levy system and its impact on businesses and scheme members

The role and powers of pension scheme trustees

Relationships between TPR, PPF, trustees and sponsoring employers

The balance between meeting pension obligations and ensuring the ongoing viability of sponsoring employers, including:

  • TPR’s objective to “minimise any adverse impact on the sustainable growth of an employer”
  • whether the current framework is generating inter-generationally fair outcomes
  • whether the current wider environment, including very low interest rates, warrants an exceptional approach

In each instance, recommendations of potential improvements are particularly welcome.

We can submit our views through the Pension Protection Fund and Pensions Regulator inquiry page.

This is a matter of national importance and the DWP select committee is fit for its purpose.

This is how democracy should work and I hope that those reading this will apply their mental resources and their experience to the task.

My thinking is this. We have a Pension Regulator that knows the scope of its powers and has shown that at time, such as in the negotiations with BHS, its powers are limited.

One of the questions is whether we should reform the powers of the Pension Regulator, or reform the system of corporate governance that allowed tPR to be given the run around.

Another question is how those , like Green and Chappell who game the system, are gamed by society. I use the word “game” as anyone who can employ unlimited legal and financial advice – can play the system.

If we applaud such behaviour by reading magazines displaying the protagonists on their super yachts, we are endorsing the “winner takes all” morality set of the wolf of Wall Street.

If we decide that the yacht owners are anti-social and that their lifestyles have been at the expense of thousands of former employers, then we need to do more than stop reading glossy lifestyle magazines.

What sanctions we can apply to Green and his like are unlikely to be financial, he has- in the eyes of the law- done little wrong, and whatever law we write, Green will find lawyers and financial advisers to subvert it.

A social contract

I think it more likely that we will create an environment where the likes of Greene cannot carry out their casual wealth transference, where behaviour of his kind, is so discouraged that it ceases to happen.

The open media we now has that means that from Jo Cumbo and the FT to the humblest tweeter, the questions that the DWP are asking are openly discussed, leads to answers that are democratically arrived at and carry the weight of a popular consensus.

I don’t mean mob rule, I do mean open Government. A social contract can arise from a society that is properly engaged in the subject at hand. If you include the millions of us who are benefiting from defined benefit schemes (either today or tomorrow) provided by the State, then every member of society has an interest in pensions.

The narrow sub-set of corporately sponsored defined pension schemes (such as BHS) actually cover a relatively small amount of the workforce and they are diminishing fast as the flow of future accrual slows to a trickle.

But the opportunity to redistribute wealth in the playful fashion employed by Green doesn’t end with these questions. You can read about the Gamification of the poor every day on this blog.

We cannot as a society decide that what Green does is bad, when we have an occupational DC industry that tolerates not paying Government Incentives to our poorest contributors.

The social contract I would argue for is one that – as Theresa May would have it- is on the side of those “just getting by”. For the contract would seek to redress the institutional bias that allows money to flow in one direction only.

The weight of a nation

If I can indulge in a moment’s patriotism, I am very proud of being British and having the opportunity to contribute to the DWP Select Committee’s call for evidence.

I don’t think that comment on this subject should be restricted to actuaries and other pension experts, though I suspect they will form the body of responses. I hope that those in retail financial services and more importantly those yet to receive or in receipt of pensions will contribute as participants in the retirement business.

So please – if you are reading this, look at those questions and ask yourselves whether you have views and- no matter how silly you may feel in doing it – make those views known.


He wants to hear from us

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So who gave Mark Carney the keys?

Mark Carney

The man with the keys

Ros Altmann, along with many others is concerned that a side-effect of the measures announced to bounce our economy out of  Brexit blues, will be to require employers to pump money into pensions and not into jobs, research and building new orders.

She’s right, but for all the wrong reasons. Pension Schemes should never have handed the Bank of England keys to their solvency in the first place. They should have stuck to the economic purpose of long-term investment and remained in equities.

Ironically, that is precisely what retail investors are doing in their retirement, choosing to live off the dividends (with limited capital drawdown) and avoiding the death star of annuities.

Of course “purists”, such as John Ralfe will continue to throw the text-book at trustees, demanding they match their liabilities with best fit assets (long term gilts and bonds) and trustees will continue to do so. Those forced to go down this route will either have protected  themselves through derivative based hedging programs, (in which they- to a degree-  immune to the QE virus) or they are now having to return to their sponsors with the biggest betting bowls yet. That’s where text-books get you.

Retail investors are driven by common sense.

We will not invest in annuities or buy long-term interest streams which only guarantee to lose us value in our money.

We will seek out opportunities to set our money to work. People want to invest in real things. They don’t want to invest in IOUs and have no ownership in what happens to their money. Investing in “debt instruments” is fundamentally not what most of us want to do.

I would rather own a house than own the string of interest payments being paid by the house-owner through a mortgage. The house is real, gives me enjoyment and allows me to add value to my investment through home improvements. Sod the text-book, my house makes me happy and owning someone’s mortgage doesn’t.

Institutional Investors have lost their emotional intelligence.

Time was when asset managers managed assets, took pride in ownership and sought to increase the value of the asset through good stewardship. This still goes on in places. If you speak to a good property manager he or she will tell you of how they’ve improved the value of the properties through being good landlords. If you talk to good equity managers they will tell you that the dialogue they have with the senior managers or companies they own is constructive and will point to areas where they have improved the long-term outlook not just for themselves – but for other share holders.

This is akin to the way I run my house, or my business- even if that business has no other shareholder than me.

When a pension scheme sets out to immunise itself from the artificial volatility of its liabilities, it enters into artificial contracts with banks and with counter parties that it knows nothing about. It has no control of where the money goes, its sole interest is in the property rights of pieces of paper.

Don’t employers need pension freedoms too?

Bosses reading the tales of woe from our pension experts, may ask themselves why their businesses aren’t allowed the pension freedoms that private people get.

Why should employers have to invest in annuities (which is what these gilt-based investment programs degenerate into)?

Why shouldn’t they be given the freedom to invest in real things which give returns linked to the value of economic production and can’t be messed about with by Mark Carney and the Bank of England?

Why shouldn’t pensions be restored as a means of long-term investment finance for businesses trying to provide long-term returns for their shareholders?

Why must everything be about debt, why can’t we invest in the future through equity?

No freedom if you’re guaranteeing benefits!

The awkward truth is that the guarantees offered by defined benefit schemes are too valuable to give up. The guarantees would have to be given up by the people who have to take the decisions to give them up. And turkeys don’t vote for Christmas.

So not only do the pension promises line the pockets of the few, but they take money from the many. Nowhere is this more the case than in the vast pension inequalities between the public and private sectors. The private sector, through the taxes it pays from its enterprise, guarantees the pensions of those in the public sector.

These guarantees are not part of the social contract. They are not written down in some economic bible at the dawn of capitalism, they have emerged over the past 25 years to protect the interests of those with defined benefit promises.

I question their validity.

A move to promises not guarantees is long overdue

Last summer, Ros Altmann stopped the construction of the legislation that would have enabled CDC to happen. CDC is a halfway house between DC and DB that might have allowed employers limited pension freedoms. It has long been considered a way of strengthening the DC promise (something employers are reluctant to do). But in parts of Europe and Canada, it is used as a way of rebalancing the pension contracts between sponsor and beneficiary.

As people involved in pension investment know, Canada and the Netherlands and other countries that have the capacity to invest long-term in real things, have been busy buying real things. Hinkley Point is a case in point (for Canada read France and China).

I fear the vested interest in the valuable guarantees which underpin the pension of the rich will not allow us to follow those in Holland and Ontario into a sunnier world. But that should not stop us remembering that such a world exists.

Do I blame Mark Carney? I blame the prophets of Baal

Of course I don’t. The people I blame for the pickle pensions are in , are not those who set interest rates but those who have made our pension schemes slaves to them. I blame the bean-counting accountancy types who cannot see beyond the end of their mark to marketed noses!

I blame the economists who have given us fake laws and call them to Mount Carmel. These prophets of Baal have got us where we are now. They can’t blame Mark Carney for letting them down. They should be exposed for the false prophets they are.



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Pensions Minister in the house – shout out for Richard Harrington!

richard harrington 4

No shit bro!

A new man

In one of the lowest keys of appointments, Richard Harrington crept into the DWP as an under-secretary and inherited all the issues for rather less pay than he’d have got if he’d got the usual ministerial salary.

The pension industry took this as a  downgrade in the perception of Government of the pension problem.

Instead of a pension celeb, pensions got Richard Harrington, who nobody knew much about. Though he looks like he does a good job of “stand up”

Richard harrington 3

just like that

I asked Gregg McClymont of his view on Richard, and with typical candour Gregg gave him the thumbs up. He’d worked with Richard on a Government Finance Committee and found him a businessman, numerate and sharp of judgement. I also got the impression that (despite their political differences) , he liked the man.

This cheered me up (as does this photo of the man in the silver tux). There’s a comedian in there waiting to get out!

caroline nokes 2

gilt-edged humour

A new approach?

money marketing

Richard Harrington hasn’t made much noise since his appointment , but he has given a statement to Natalie Holt of Money Marketing which you can read here. The statement claims to be in Richard Harrington’s own words though I very much doubt that’s the case. It’s carefully balanced not to offend and it covers all the areas of policy that Ros Altmann was tackling before her departure.

What is interesting is that either Richard or one of his policy team, chose to publish through a paper dedicated to IFAs and to others involved in retail financial services. It would have been possible to have spoken to the trade press read by trustees and their advisers.

Those in high places in the pension firmament will no doubt feel doubly snubbed. I don’t blame them, they have long regarded pension policy as something which they informed upon and those in retail fed from the crumbs at the table.

It looks as if that is changing. This is a good thing. We need some bottom up policy making. The people who need to be listened to right now are busy exploring payroll interfaces for auto-enrolment, considering how to use the Blockchain to bring down administration costs (and risks) and working on advising the millions of us trying to work our how to eke our pension pots into adequate income streams in retirement.

A new opportunity


Though we have lost a great campaigner in Ros Altmann, we have gained a minister who is an MP and one who has served in two Governments. I’d hope that his experience of how things work in Westminster will hold him in good stead.


He inherits the DWP Select Committee, under the formidable Frank Field, that is firing on all cylinders. I have great confidence in them, they are holding the DWP to account and Richard is going to get no easier ride than his predecessor did. They are asking the right questions.


i have great confidence in the DWP’s private policy team and though I don’t agree with everything they do (their over-promotion of NEST as a safe harbour, their failure to properly tackle net-pay), I am impressed with them collectively and individually. The head of Private Pension Policy (Charlotte Clark) is a Civil Servant of the highest calibre.

So – despite the noises of misery emanating from the pensions glitterati, I’m looking forward to having a new Pensions Minister in Richard Harrington.

  • The DWP tell me they are working towards a new charge cap in 2017 – bring that on.
  • They have called for help on the auto-enrolment review in 2017 – bring that on.
  • They are busy strengthening the protections we will get when investing in workplace pensions – bring the new Pensions Bill on.
  • They are calling for evidence on how to strengthen the effectiveness of tPR to minimise gaming against the PPF

select 2

Richard Harrington set out his task like this

As Pensions Minister my role is to ensure that pensions is at the top of this Government’s agenda. I am absolutely committed to this. The pensions industry has already done a fantastic job to get us to this point and I see my role very much to ensure our plans stay on track. I look forward to working with you all.

That seems a good place to pick up from where Ros Altmann left off.

fair pensions bucket

a touch of humour helps!

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If you’re going to do it – do it right (now) – yes L&G!


This blog (and the Pension Plowman) have been a fan of L&G for some years. We admire L&G  for its pioneering work on auto-enrolment, for its support of Pension PlayPen and for its work on engagement through what its CEO calls “Beveridge 2.0”.

LGIM, its fund management arm is a clean and transparent outfit that invests in managing its assets and takes SRI and ESG seriously.  We like its management , its ethos  (the commitment to ValueForMoney and we like the way it has gone about its business.

But… (and you knew there would be a “but” didn’t you!).

But I am confused and increasingly annoyed by the mixed messages it is sending to the market around its WorkSave pension and wonder if there are others who read this blog who feel the same way.

Early this year, L&G abandoned its come one come all attitude to scheme underwriting and stated that they would only accept new business application to its workplace pension (Worksave) if they were using links with pensionsync of ITM’s eAsE product. We could see the logic of this, it drove best practice in the market and reduced L&G’s operational costs.

But it was a radical strategy and, to work, needed a massive commitment to this new tech-based distribution. That commitment simply hasn’t arrived. The marketing support needed to make this strategy happen never arrived and what support is given to employers is reserved for a select group of employee benefit advisers and corporate IFAs who can still use the old on boarding route, that the market had been told was being closed.

One app for the rich……

A similarly half-hearted attitude is being displayed to product development. Yesterday we received an upbeat email (either because I am a member of the WorkSave pension or because we have established so many through Pension PlayPen. Here it is.

Screen Shot 2016-08-04 at 06.14.40

(You can’t access the links from the picture , but you can see L&G’s site here.)

Just what “record-breaking registrations” means, I’m not sure. If it an internal benchmark that’s been beaten, then good – but I’m not sure there are any external records as in “the Guinness Book” for registrations to  an online pension portal – perhaps L&G will enlighten us.

The user experience (a case study)

More importantly, what is this mail leading us to? I went to the App Store where an L&G app was waiting for me (It’s called IPS Legal and General) and is supposed to make things simple like this.


I googled the service and found it offered everything I wanted from an online product.

I keyed in my account number but was rejected. I phoned various people at L&G and (after much holding) finally got through to someone in IT who laughed at my naivety.

Silly me- I’d been looking at an entirely different Legal & General personal pension, the one I could manage using a dedicated app!

So, feeling stupid, I went back to the email, “mobile optimisation of my Managed Account”. Well I’ve been looking at my pension on my mobile quite a lot recently, I’m trying to plan my spending plan as I’ll be 55 in 3 months. So I went on again and yes, it did look a little better

Trickett 4

The “optimised” managed account.

But I didn’t feel the service had been optimised.

All that had happened was that I could see things a little more clearly. This was L&G 1.0, what I could see of L&G IPS was 3.0!

I don’t know how rich you have to be to get the service upgrade (I’ve got just over £350k in my Managed Account), but for the £150 per month I’m paying L&G in operational charges, I would have thought I could have got the app!

I’d been sold some lipstick on a pig, some sausage not the sizzle. You don’t get second chances with web-engagement.


By the time I’d done all this, I’d wasted nearly two hours of my day and was thoroughly disillusioned. Far from engaging with my workplace pension on the move, I wanted to get on the phone to the people I know at L&G and tell them what a thoroughly disappointing experience I had had.

Ordinary punters don’t give web-services a second chance – do it right or don’t do it at all!

L&G – get your act together!

I didn’t have a go at the people I know , because I have a huge reservoir of goodwill for L&G, as mentioned at the top of the blog. I didn’t have a go to the people I spoke to at Kingswood as I know most of them too – and they are being closed down.

I really don’t want to deflate L&G, I want them to be as good as they can be- which is very good indeed.

But I have no time for this half-hearted and confusing approach both to distribution and product development. If you want to operate a hard-line distribution policy, don’t go cutting side-deals around the outside and embarrass your mainstream suppliers who are playing by your rules.

If you are going to operate personal pensions, don’t offer an app for one group and “web optimisation” for another. If you are going to take delivery seriously, then get some proper payment systems in place so people can spend what they have saved and if you want to be the market leader going forward, start engaging with the Blockchain.

And if you are reading this as an L&G member of staff, be assured that so will members of your IGC.

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Midsummer Madness as £3.5bn’s lost to real assets!


The Investment Association reported yesterday that jerks kneed £3,500,000,000 out of funds in June – “clearly Brexit has been unsettling, with property and equity funds particularly affected” – the report opined.

Well £2.8bn was lost from equity funds and £1.4bn from property ( a much higher proportion of a smaller funds market). The rest came from multi-asset funds (ironically marketed as a safe haven in times of volatility).

Fools – Fools – Fools

Of course the knee-jerking had horrible consequences, no sooner had the money flown than the market recovered. I haven’t seen a detailed analysis of market timing but you can be pretty sure that a combination of poor execution and panic selling meant that most of the retail money left at intra-day lows and that spreads (especially the dilution levies on property funds) were at their highest.

Look how the peak trading volumes at the end of June aligned with the sharpest dip in the market (FTSE 100)

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So the financial markets will probably have had a good time and the punters will be looking at exaggerated losses. It is ever thus when the herd takes flight.

Who drove the cattle?

Closer inspection of the IA’s numbers suggests that the exodus from funds was organised by advisers.

For the five fund platforms that provide data to The Investment Association (Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) we saw a net retail ouflow of £684 million in June.

While the non advised regular contributions into personal pensions (principally via AE) continued as usual, ISAs from the above platforms saw a net outflow of £464m and  fund of funds £303m.

Meanwhile money continues to pour in. Fund platforms sold £7.8bn of funds in June with wealth managers and IFAs (managing wealth off platform) attracting £3.8bn of new money. By comparison – only £1.3bn arrived in funds directly from the customer.

It’s clear that the retail funds market is now owned and driven by financial advisers, whose monthly , weekly and sometimes daily newsletters are full of reasons to buy and sell on sentiment, rumour and sometimes on hard fact.

There is herding and a lot of it appears to be “jerking”. If I had given discretion to my wealth manager and found he or she had been dicking around with my portfolio around Brexit, I would like to know exactly what made the adviser think he could out-guess the market. If I have been in a diversified portfolio designed to withstand volatility, I’s want to know why my portfolio had been altered , at precisely the time I had needed its defensive properties to cut in.

Midsummer Madness

The big winners out of Brexit so far, are those invested in equities who remained in equities, those who had strategies and didn’t change them.

I am particularly worried that there may have been outflows from managed personal pensions (SIPPs) and that regular drawdown payments may have occurred at the very worst times. I am worried too that the vibes given to ordinary people about equities and property being “too dangerous” will result in a flight to cash.

Paul Lewis will probably point to this Midsummer Madness as further evidence that there is insufficient reward from equities to pay back the risk of disinvestment at the wrong time and I think he’s right. Unless people are prepared to ride out events like the referendum vote and not knee-jerk out of long-term investment strategies, they should never have invested into shares or property funds in the first place.

The Midsummer Madness is simply a symptom of a deep rooted mental insufficiency that is common not just in retail but all investors. “Knee-jerkism” should be prevented by advisers but – as the IA’s numbers tell us- most of the outflows came from fund platforms advised on by IFAs or from the Discretionary Funds managed directly by IFAs.

Why does nobody call this?

Nobody in the funds industry wants to call the problem of short-termism because the funds industry has never had it so good. Despite outflows of £3.5bn – the IA still reported that overall funds under management increased by nearly a Billion pounds in the month.

The IFAs are responsible for this massive surge of investment, nearly 50% of all retail funds are on IFA platforms and a further 34% in DFMs managed by IFAs. The direct investor is a rare breed.

The Fund Managers daren’t call the behaviour of IFAs for fear of reprisals (e.g. loss of distribution), instead they blame individual investors (who were cited as the panic sellers of property funds).

Individual investors are no longer the problem, the problem is the herd instinct of advisers who appear to be to get away with some pretty poor calls with iThoumpunity.

I would like to see some proper investigation by the fund managers (perhaps orchestrated by the Investment Association) into just who’s behaviours were responsible for the £3.5bn  sold out of funds at the end of June (see trading pattern at the bottom of this graph).

Screen Shot 2016-08-03 at 07.07.30

FTSE 100 – trading volume spike at BREXIT

Though it may not be easy for fund managers to say this, I think they will need – as insurers had to over pensions-  take some responsibility for the actions of their distributors.

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“Workie Vicit” – tPR on the state of AE

  Screen Shot 2016-08-01 at 06.40.26

The Pension Regulator has published its snappily entitled Automatic enrolment commentary and analysis report 2015/16

The first question I asked as I opened its 45 pages was “who’s it for?“. TPR’s primary stakeholder is the DWP which funds it and I guess the high level infographics are designed to please those in power who like to be fed good news. And there is good news.

The Pension Regulator is not being overwhelmed, it has a largely compliant employer-set, and though the trend is upwards, this is only to be expected as employers are both more numerous and less experienced (in pension matters). Here’s the iron fist infograph.

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The table that really matters is the revised staging table. This is the one that Government , Providers and advisers are relying on to plan resource around.

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The revised estimate of staging employers differs radically from previous forecasts (tPR now estimate between 1.32m and 1.46m employers being subject to AE duties).

But although the total number of organisations to be bothered by Auto-Enrolment has decreased, there is little change in the number of employers who will need to put workers into a pension scheme, which will be up to 950,000.

The difference is in the numbers of employers reckoned to have eligible jobholders which turned out to be “owner directed” organisations with only the Owner as an employee. This group is excluded from auto-enrolment on the grounds of being “self-employed in disguise”. No doubt HMRC will continue to chip away at this group who are often thought”spurious” business owners by everyone and anyone.

It is a shame that we were sold a dummy, planning for these phantom stagers. TPR deserve some of the blame, though I suspect that they have relied rather too heavily on historic Governmental sources( ONS rather than RTI?).

One of the collateral benefits  of Auto-Enrolment is that we are getting a much better picture of how we work.

But although the total number of organisations to be bothered by Auto-Enrolment has decreased, there is little change in the number of employers who will need to put workers into a pension scheme, which will be up to 950,000.

The net impact of the work so far is to massively increase employer coverage; but the report is clear, the increase in employee coverage results from the low-hanging fruit in 2013-15. The impact of getting new employers involved has been less – the higher up the AE tree we climb.

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The immediate future is a voyage into the unknown; only a tiny proportion of the 450,000 employers staging in the next twelve months have ever had to choose a pension for their staff and the next infograph suggests why.

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So where’s the money going?

The big story here is that mastertrusts are becoming the bottom feeders of choice. Either out of deliberate strategy or from inexperience of the dynamics of small businesses), the insurers have gone from a position of strength (with nearly 40% of employers using GPPs

Screen Shot 2016-08-01 at 06.53.45

To a position of weakness with less than a quarter of new employers using GPPS

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To fully understand how much things have changed, look at these numbers which show how occupational schemes (non master trusts) and large GPPs are being swamped by NEST, People’s, NOW and the new kids like Smart. These numbers are for the past 12 months.

Screen Shot 2016-08-01 at 06.53.04

I’m not sure that all those employers who are now using Master Trusts are fully aware of the implications of their choice in terms of scheme security and member benefits. The numbers are massively skewed by the Government’s promotion of NEST as a quasi-default

I remain deeply concerned by the quality of the decision making by employers, the quality of advice and guidance coming from business advisers and the lack of attention being paid to the pension by the DWP (and the TPR). 

What the Government wants you to read!

TPR want you to read their headlines

·        66% of all employees are active members of a pension scheme, compared with just 47% in 2012.

·        From 16 October 2015 to 31 March 2016, 185,107 employers completed the online Duties Checker.

·   And they’d like you to know that nearly 100% of the various stakeholder are now aware of auto-enrolment and what its about     

90% of Employers are getting Workie

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Awareness and understanding of automatic enrolment is now almost universal amongst business advisers – and more than 9 out of 10 are now helping clients meet their duties

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and Charles Counsell has a right to be chirpy

·       This is the first employers’ survey since large numbers of small and micro employers have began to visit TPR’s website for help in meeting their duties. It’s great to see such positive feedback, with 79% of the employers who used our website finding all or most of what they needed.”

Who’s this for?

I started out asking who this report was for, and ended up thinking it was for people like me. People who need to plan to help employers , advisers and providers avoid a capacity crunch. It’s for the providers themselves, who can confirm their own experience against macro-data from the country as a whole, and its for the intermediaries, the software providers, their partnering accountants and book-keepers, their financial advisers.

The report accepts that Auto-Enrolment is now an almost entirely intermediated business, this report is not aimed at individual employers, though separate statistics I have seen suggest that there is a substantial DIY element among micros (who don’t want to pay their advisers a bean).

And yes, this report is for those who read reports for a living. Those who will use these results to opine on auto-enrolment , to some extent , this report is for global distribution, for the eyes of the world are on the success of our auto-enrolment project and for once, we’ve got a good news story on our hands.

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In line with expectations

But do we really understand the implications of the decisions made by employers?

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I will only feel comfortable with tPR reports , when they start focussing on employer and employee engagement with what they are buying into. That may take some years, but it’s the ultimate measure by which we can judge success.


Posted in accountants, advice gap, auto-enrolment, pensions | Tagged , , , , , , , , , | 1 Comment

Should we block the triple lock?


Ros Altmann speaks out (shock!)

We now have three former  pension ministers making a lot more noise than our current pension minister.

  1. Ros Altmann who we are now realising never should have done the jog
  2. Steve Webb who should be doing the job
  3. Gregg McClymont who had he been put on, to have proved most royally.

Baroness Altmann is fresh to the ranks but she’s lost no time in becoming pension spokesperson for well- er…Ros Altmann. Frankly , I’m more than happy to have Webb, McClymont and Altmann as our “Not Pension Policy Think Tank”. We have the strongest “non-ministerial pension team” in the world, and it’s entirely cross-party!

So here’s Ros at  7am on a Sunday morning speaking to Radio 5 live

We should have a double not a triple lock. She’d like to take away the 2.5% guarantee on pensions increase that she now calls a “political gimmick”. She points out that the triple lock hasn’t applied to other pension benefits such as S2P/SERPS and the pension credit.

She is right of course that the 2.5% doesn’t relate to anything and she’s also right in saying that this extra fillip to our future pensions has allowed us to catch up with where our state pension should be.

The impact of the triple lock , in a deflationary environment, means that the state pension could bankrupt the Government’s capacity to achieve other goals.

Altmann only wants the triple lock to be blocked from 2020 (the extent of the current promise).

Altmann has not discussed with Theresa May, but says the new Prime Minister “knows her views”. Altmann is challenging May to have the courage to take on this “deep seated issue” and to stop “hiding behind the triple lock” as a way of pacifying us wrinklies.

The triple lock impacts State Pension Age

Ros is of course absolutely entitled to raise this issue and raise this issue now. She has every right to speak out not just for pensioners but for pensions in general and anyone who has read the latest Quinquennial Review of the National Insurance Fund, can be in no doubt that we cannot afford to continue with the triple lock without  substantial grants to the DWP from the Treasury.

Unless of course we accelerate the increase in the State Pension Age.

Transparency = Honesty

This blog talks a lot about transparency, in Government transparency can be simplified to “honesty”. We have all the data that we need to analyse the cost of the triple lock in any number of economic scenarios and – of course- in all these scenarios , we could afford to prioritise real increases in older people’s pensions.

But it would be dishonest to rationalise the triple lock as anything other than robbing Peter to pay Paul.

Just as Ros Altmann was holding forth on Radio Five Live, Paul Lewis was tweeting

Ending state pension triple lock ‘obvious alternative’ to tax credit cuts said PMs new adviser  cost £6bn, can’t last

In the Sunday Times article Paul promotes,   Nick Timothy, the prime minister’s new joint chief of staff, is reported saying the “obvious alternative” to welfare cuts was to tackle the triple lock, which raises the state pension for 13m people by whichever is the highest: the growth in wages, inflation, or 2.5%.

nick timothy

Nick Timothy

Downing Street said this weekend that the lock had been a manifesto pledge and “that commitment still stands”. However, it leaves open the possibility of the Conservatives ending the lock at the 2020 election.

MAY we have honesty

The characteristic of the May supremacy that is most obvious is its brutal candour. I was critical on this blog about the way in which the Hinkley Point decision was postponed, but I couldn’t but be impressed by the leaked reports that this was because May did not like the idea.

At this time , with no obvious leadership elsewhere, May’s autocratic style may be the only way through the muddle.

May be be harsh, insensitive and frankly not very pleasant, but I would give up the soft values in return for some good honest decision making and some sensible policy.

The debate about the Triple Lock may be as simple as Paul Lewis, Ros Altmann and Nick Timothy make it sound. 2020 may be the natural break point for that weird 2.5% kicker.

But before we throw out the Triple Lock, let’s be honest about what stands upon the platform of the New State Pension system, that’s a pension taxation system that is grotesquely unfair to the poor.

triple lock22

My triple lock

Savers – just getting by

For me, the price of abolishing the triple lock – which helps the poorest most, is to make private pensions work better for that demographic.

That’s the issue which May must face up to , if she wants to fulfill her commitment to helping those saving for their retirement and “just getting by”.

triple lock2

Locks are very popular

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“The best way forward or the NEST way forward?”

If you are an employer and you have made a decision, there is no liability—that is clear in the legislation. If you have decided to go with NEST rather than NOW: or People’s, there is no liability that can fall on you as an employer”.

Charlotte Clark . head of private pension strategy-DWP

The Department have stated unambiguously that employers are not liable for their choice of AE pension scheme. Legal experts, however, have told us there could be grounds for legal action if employers cannot demonstrate due diligence. -Frank Field- Chair of DWP Select Committee

Every day we get employers coming to who have been told to use NEST. It is what the head of DWP’s private pension strategy team considers the safe option, it is “the Government Scheme” and it has already consumed some £460m of public money becoming what it is?

But what is NEST?

Is NEST the default option? Do employers who cannot make a choice find themselves in NEST? No they don’t.

Is NEST a safe harbour? Nowhere in legislation is there a statement that backs up what Charlotte Clark claims. Safe is not a safe harbour.

Is NEST the best pension, only time will tell, but NEST has some very distinct features that could make it better or worse than its rivals.

Compulsory Restrictions that make it different

NEST currently runs under a number of compulsory restrictions. It has had to adjust its charging structure from the mono-charge that prevailed since the introduction of stakeholder pensions. This was to satisfy the EU that it had a means to pay back its debt to the tax-payer and was not operating under an unfair competitive advantage.

Similarly, for the early years of its existence (and until April 2017), NEST has operated a no transfers in/no transfers out policy. It cannot take more than £4,900 in total contributions per member, per year.

Voluntary quirks that make it different

NEST operates a number of its services in a very non-consensual way.

  1. It’s default investment strategy is designed to dampen volatility for those with many years to retirement. This also dampens potential growth for youngsters. This reverse lifestyle is justified on a behavioural basis, it is assumed that were youngsters to find out their investments were volatile, they would give up on NEST, pension saving and go and do something different instead
  2. It does not have discretionary death benefits, so if you die with a NEST pot and have a reasonable amount of estate, your beneficiaries will pay IHT on your NEST pot, this would not be the case if you were in the usual discretionary trust operated by NEST’s rivals.
  3. NEST has chosen to be a relief at source and not a net pay scheme. By and large this favours those contributing on low earnings but is not as good for those on high earnings. Other mastertrusts (People’s and Supertrust) give employers the choice of tax regime and even the opportunity to split schemes.
  4. NEST deliberately operates a low-touch , hi-tech, member and employer support centre. It prides itself (rightly) in having extremely user-friendly self service support facilities. While this is laudable, it doesn’t suit all employers and employees. (see Pension PlayPen support surveys passim)
  5.  Nest (unlike some rivals)  will not (for money laundering reasons) accept employers with a non-UK bank account. This has been an issue for a number of employers with workers based in the UK but who have an overseas HQ . Employers in Ireland (with workers in Northern Ireland) and employers with off shore payrolls are typical of organisations which struggle to use Nest (thanks Kate Upcraft for this).

The general point is the same, all these distinguishing features are sensible and define NEST as “something different”. But they don’t necessarily make NEST better, NEST is right for a lot of employers but there are many employers for whom NEST is not right.

To argue as the DWP does that there can be no liability if an employer decides to go to NEST has no justification either in a legal or in common sense. 

Employer liability

In a very narrow sense, Charlotte Clark may be right, it is hard to see the Pension Regulator suing an employer for using NEST. But regulatory fines are only one part of the equation. Here’s a quick list of the potential litigants that could go to court against an employer over the choice of NEST

  • the employee claiming NEST was inappropriate for his or her needs
  • the employees as a class – claiming the employer failed to conduct due diligence
  • an employee’s representative – a union – acting on behalf of employees accross a group of employers
  • a purchaser of the business who has been given warranties that the workplace pension was chosen properly

To suppose that these risks are groundless is to ignore the evidence in the USA and other countries where just such litigation is happening today.

Employers face impairment in the value of their business , should litigation commence and they will suffer if employees feel aggrieved.

As for business advisers, while they cannot be sued by the Regulator for advice to use NEST, they should be heedful of the former Pension Minister who pointed out the DWP Select Committee that

anyone advising an employer would “be ill-advised” to formally recommend a scheme.

(Pension PlayPen doesn’t tell employers what to do, we help employers make and document their informed choice).

Commercial arguments that need to be thought about

If you had a choice between investing in an enterprise carrying £460m of repayable debt or one without, you would choose the

debt-free enterprise, purely on the grounds that the debt would need to be repaid before you saw your money back or earned any dividends.

There is a pervading argument that NEST’s debt doesn’t matter, that it is public money and that that money can be written off. I do not buy that argument, nor should Britain.

NEST has set its stall out as a commercial alternative to NOW, Peoples Pension and other workplace pensions and it has received grants (in addition to the debt) to meet its public service obligation.

There exists within NEST’s terms and conditions the right to take money from employers where NEST is unable to manage the relationship commercially without a fee. Employers entering NEST on the basis that “NEST is free” are being naive, uncommercial and if that is what they are being advised, we suggest they speak to their advisers about what they mean.

NEST is currently free to employers, but there is no certainty it will remain so. There is no plan to write off the debt and the National Audit Office are pressing NEST for a commercial plan that shows how it intends to repay the debt to the taxpayer.

Competitive arguments

Monopolies, especially Government monopolies are not seen – in our capitalist world as a good thing. There are some of my friends and colleagues who see the world through another lens and think that NEST should be a state monopoly but they are not democratically elected to decide on policy. Policy has been made in this country by those who were elected and that policy says that employers are required to choose a pension.

As a result of that requirement to choose, new providers came into the market and old ones stayed as workplace pension providers.

They are there to provide something different from NEST and they do.

They are there to be innovative and they are

They are there to keep NEST on its toes and they have.

Finally, they are there either to make their shareholders a profit or to deliver mutual benefits to all involved in the enterprise that supports the workplace pension. This they may or may not do.

To a large extent the capacity of those running non-Governmental pensions (without Government subsidy) depends on their being able to compete in an open market and not in a market skewed towards the Government Pension.

People’s rights

Finally there is a philosophical argument around choice. When Auto-Enrolment was first proposed, many of the decision makers in the DWP wanted there to be only one auto-enrolment pension- NEST.

I remember speaking to Hugh Pym, then chief economic reporter for the BBC in 2012 and him telling me his understanding was the only pension you could auto-enrol into was NEST.

The public often confuse auto-enrolment and NEST to the point that the DWP’s original vision has become self-fulfilling. It is true, many small firms are using NEST as their workplace pension provider for auto-enrolment.

But a very large number are choosing not to use NEST for a whole load of reasons.

  • Some take a very reasoned approach and choose another provider as better for their staff and their business
  • Others take an unreasoned approach and reject the idea of investing in a Government backed enterprise.
  • Others are ushered into other pensions by those with alliances with other providers

Whatever the reason for not choosing NEST, those who do, should not be told that they have created more liability for their businesses by doing so.

They are simply exercising their right to choose. A right that has been granted democratically by act of parliament and a right that should not be curtailed by the DWP.


It’s common sense that to make auto-enrolment to work over time, we need to get contribution levels up. It’s common sense that people will only accept more and more of their salary being siphoned into a workplace pension, if they trust that workplace pension.

The workplace pension is not chosen by the employee (whose money is invested) but by the employer. If the employer chooses NEST because he’s told it’s “no-risk” by his accountant or the Government, he hasn’t engaged in the positive aspects of saving for the future.

The employer will have trouble explaining why he chose NEST to staff and staff will have trouble working out why they should bother with this NEST pension about which the boss hasn’t a clue.

Employers are asked to choose a pension, not in a random way, nor on the basis of it being “no-risk” but as a fiduciary, acting in the best interests of staff. The DWP position is antithetical to engagement , it encourages employers to disengage with the workplace pension.

Whether this is out of blind loyalty to NEST or because the DWP is more interested in compliance than outcomes I don’t know, but either way, there is no tenable argument for dumbing down the employer’s decision in the way the DWP is doing.

A call to action to the DWP

Whether on philosophic grounds, commercial grounds, competitive grounds or purely on grounds of suitability, employers have the right to choose a pension. Not only have they the duty to choose a pension.

Though legislation does not say this, it is expected of employers – there being no reason why they wouldn’t – that they should try to choose the best pension for their staff and their business. This is because we regard the employer as having a fiduciary care of staff which extends to things such as staff welfare in the workplace, compliance with wage legislation, the collection of income tax and a host of other employer duties we could call “fiduciary”.

I have no idea why the DWP want to promote NEST as they are doing. I think it is wrong of them and I think the DWP Select Committee think so too.

Frank Field concludes the section of his Select Committee’s recent report with a call to action for the DWP,

We recommend DWP use their response to this report to make a clear and comprehensive statement about an employer’s potential liability. DWP should also confirm where liability will fall if a scheme performs badly or fails. This would provide reassurance to small and micro-employers choosing a scheme.

We hope that the new Pension Minister Richard Harrington is making that a priority and that he is shown this article as an argument for the promotion of choice in a more reasoned way.


Richard Harrington – the new Pension Minister


Posted in accountants, auto-enrolment, NEST, now, pensions, Personal Accounts | Tagged , , , , , , , , , , , , , , | 2 Comments

Workie off balance-Frank to the rescue!

An everyday story of kleptocratic mismanagement

Here is an extract from the recently published conversation between the DWP Select Committee (Frank Field & Co) and the DWP (under new management).

You are always supposed to read the source material first, so I’ve laid it out as it was published. My little rant is set out at the bottom!

Selecting the right scheme

Employers are responsible for selecting the appropriate AE pension scheme for their employees.

Employers are free to choose any qualifying pension scheme that is willing to accept their custom in order to comply with their automatic enrolment duties. TPR told us that selecting a scheme is one of the most significant challenges for smaller employers:

Concerns include finding a scheme that will accept them, ensuring they make the best choice of scheme for their employees, addressing the risk of challenge from their staff if the scheme is not well run, and making sure that the scheme they choose works with their payroll software.57

32.CIPP highlighted a particular concern among employers about future legal action against them by employees if it appears they selected an inappropriate scheme or could not demonstrate they had taken adequate steps to choose an appropriate one.

58 The Minister (Ros Altmann) told us that anyone advising an employer would “be ill-advised” to formally recommend a scheme.

59 For the smaller employer, reliant upon their payroll bureau or external accountant, there is a distinct lack of clarity regarding where a potential liability for “advice” would fall. They assured us, however, that employers themselves would not be liable for poor scheme performance. Charlotte Clark said

“If you are an employer and you have made a decision, there is no liability—that is clear in the legislation. If you have decided to go with NEST rather than NOW: or People’s, there is no liability that can fall on you as an employer”.60

33.Whilst this answer appears definitive, legal experts suggested the situation may be more complicated. Tristan Mander, a pensions lawyer at Ward Hadaway, said “it would be unwise to interpret such a statement as providing a safe harbour for employers, as it only addresses one source of legal obligations”

.61 His view was that employers will need to be able to demonstrate that they took adequate steps to ensure they selected an appropriate pension scheme:

The courts are very unlikely to decide that arrangement B ought to have been chosen over arrangement A, as that is qualitative decision that is outside of their remit, but they are now likely to find that an employer failed in its duty to follow proper process in taking its decision and hence they will find the employer liable for any loss suffered directly as a result.62

34.Catherine McKenna, Global Head of Pensions at law firm Squire Patton Boggs, told us that there was uncertainty about who would compensate employees for poor scheme performance:

For example should it be the fund provider, the IGC [Independent Governance Committee] if they failed to identify and report poor governance or the employer for failing to appraise the IGC’s adequate monitoring of the default fund?63

She said that clarity was needed on where liability would fall and that DWP should confirm to employers that “engagement and compliance with the minimum governance standards is sufficient to discharge them of liability for poorly performing or failed default funds.”64

35.In her evidence to us the Minister said that employers needed to be very careful to choose a decent scheme for their employees.

65 Tristan Mander told us that “the need to suggest such due diligence implies by itself the potential for liability.”

66 He told us that employers need not go to extreme lengths in choosing a scheme but that they should exercise good decision-making hygiene, take proportionate steps and record their genuine attempts at finding the most appropriate arrangement to utilise, should anyone challenge their decision in future.67

36.The Department have stated unambiguously that employers are not liable for their choice of AE pension scheme. Legal experts, however, have told us there could be grounds for legal action if employers cannot demonstrate due diligence.

We recommend DWP use their response to this report to make a clear and comprehensive statement about an employer’s potential liability. DWP should also confirm where liability will fall if a scheme performs badly or fails. This would provide reassurance to small and micro-employers choosing a scheme.

Kleptocracy  at the DWP

I’ve read this a few times and come to the same conclusion on each occasion. Much as I like Charlotte Clark, she is dead wrong on this business of choosing a pension. I attribute this to an overly protective mother-hen relation with NEST.

NEST is the baby of the DWP and it’s midwives were Charlotte Clark and Helen Dean (now NEST CEO). I am not calling on either to “kill their baby”, but I don’t think she (or Helen)  are best placed to opine on NEST’s safe harbour status.

NEST is a good choice for most employers, a bad choice for some and for a very few, it may be the only choice.

It is not or the DWP to state If you have decided to go with NEST rather than NOW: or People’s, there is no liability that can fall on you as an employer.

That is not in the legislation and any employer who relies on that as an argument, will have “failed in its duty to follow proper process in taking its decision”.

The DWP have highlighted a flaw in the DWP’s approach to workplace pensions. It is the flaw that leads to the crumby choose a pension pages on tPR’s website. If the DWP doesn’t make it clear that there is material risk in not following due process, that NEST is not a safe harbour and that in many cases NEST is not the best choice, then it itself will be open to litigation.

Don’t let Workie become WASPI!

DWP should be only too aware – from the problems it has with WASPI -that sticking its head in the sand and hoping the problem will go away, is not the way to deal with the situation.

The DWP know perfectly well that the private sector is providing resource for employers to choose a pension in an appropriate way and that that resource is now readily available to employers at a reasonable cost.

Rather than stick by its pet scheme (NEST), the DWP should accept that NEST is just one of many good choices and promote choice rather than NEST as the big success story.

In doing so , they will be promoting the employer’s right to choose what is best for staff. This should lead to greater engagement by the employer in its “Workie” and this in turn should lead to greater promotion of workplace saving to employees.

The DWP Select Committee, Power in the darkness -right on!

Well done Frank Field and his gallant crew. Calling for clarification on choice is exactly the right thing to do. Well done for challenging the DWP’s mother hen act with their NEST egg. Well done to Tristan, Catherine , Andy and the CIPP and well done the former Minister.

The consequences of hundreds of thousands of employers sleep-walking into workplace pensions are unknown. Staff have a right to know not just where their money is invested, but why the employer made that choice.

It is difficult for civil servants, for whom gold plated pensions are laid on by the Government, to understand these dynamics, but not impossible. I hope that they will take up the challenge of the Select Committee and that, when they do, they will come and talk to Pension PlayPen.

Power in the darkness

Right on

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Get off your boat, get back to the Regulator, go and write a whacking big cheque.

Philip green

(Sir) Philip Green

A paraphrase of Frank Field’s advice to (Sir) Philip Green, after the publication of a damning report into the failure of governance that Green created in his 15 years in charge of BHS.

Here is his press comment

“One person, and one person alone, is really responsible for the BHS disaster. While Sir Philip Green signposted blame to every known player, the final responsibility for up to 11,000 job losses and a gigantic pension fund hole is his. His reputation as the king of retail lies in the ruins of BHS. His family took out of BHS and Arcadia a fortune beyond the dreams of avarice, and he’s still to make good his boast of ‘fixing’ the pension fund. What kind of man is it who can count his fortune in billions but does not know what decent behaviour is?”

The 60 page report published today by the joint DWP and BIS committees is not going to be the end of the matter. But painful as it sounds, about all that we as a nation can do to restitute the 11,000 jobholders and the 20,0000 in the BHS pension scheme, is take away Green’s knighthood.

Such is the danger of running business on trust and through trusts. The Pension Fund trust that Green sponsored is short a minimum of £570m and by 20th August all BHS stores will be standing empty. The cost of Green’s actions will be felt by those who have least while the boats keep coming, a new one only this month.

Social justice?

This is the first big test for Theresa May’s social justice agenda. If this is not social justice writ large accross the July sky – what is?

A failure of regulation?

Green was able legitimately to flout good corporate governance in return for an easy life in the South of France. He handed over BHS to Chappell with a minimum of fuss for the consequences and was able to do so without the Pension  Regulator even knowing. This came as a surprise to me as I had assumed that I’d supposed the company needed to get “clearance” for such a major change , apparently not.

The report criticises tPR for being slow (it took them four months to respond to BHS proposal for a 23 recovery period. But the report does not blame tPR for the mess nor its clear up. It points out

TPR is, however, yet to receive a single detailed proposal for resolution or an adequate offer to the schemes

Or a failure of corporate governance?

To my mind, the Pensions Regulator stood in a queue waiting her turn to speak. The rules that control the transfer of ownership to fit and proper people did not work. The damage was done well before we got to the pension scheme. Green and his lawyers had found a way to offload BHS and its debts and the law was his friend.

A failure of trust?

The actions of our corporate leaders are governed by an ancient system of trust law that assumes that businessmen will not behave like medieval robber barons. By and large it works and Britain benefits from the light touch.

However, when a Green or a Maxwell takes it in their mind to ignore fiduciary duties, it is dependent on those who are expert and can see what is going on to cry foul.

I know, from writing this blog, that should you point fingers at bad governance, you will get little praise and plenty of dirty looks. You do not get the help of the authorities, you get the attention of lawyers.

A need for a more open and transparent way of doing business.

I do not want to see Britain abandon its finely honed and well balanced system of corporate and pension governance. I want to see it strengthened by ensuring that more people can see what is going on and that bad actions can be exposed without the fear of threats.

We are a civilised country, we should be proud of it. Our country has no place for the vulgar and morally bankrupt Green. He and his Topshop models can pedaloo around the Med, but no decent British person will wish him luck.

We can look to Scandinavia to see better governance at work. We can look to some of our close neighbours in Europe, especially Germany and the Netherlands. Whether we are in the EU or not, we can work to bring our standards of transparent good governance to the standards of these countries.

We cannot and should not abandon the Greens. Field is right, this is not the end of the story. The consequences of their actions are felt by the ordinary people who were “getting by” and now are struggling.

I hope that we will see social justice at work and firm and decisive action taken from the top down. Over to you Theresa.


green shild stamps

Green sheld


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Wake up to the PPF!


It was good to oversleep and wake up not to the lark (metaphorical here in EC4), but to Alan Rubenstein purring about his Pension Protection Fund.

  • Pension Protection Fund figures published yesterday show the lifeboat scheme has £4.1bn surplus and a funding ratio of 116%.
  • The Pension Protection Fund now has £23.4bn in assets.
  • 10,005 new members entered the PPF in 2015/16, making a total of 225,500 deferred and pensioner members.
  • Between 1 April 2015 and 31 March 2016, 47 new schemes were brought into PPF with combined claims of £475.9m compared with £322m in 2014/15.
  • Of the £2.4bn total compensation the PPF has paid since it was established in 2005, £616m was paid out in 2015/16.
  • Despite this the PPF reckon “We are sufficiently robust to continue to pay compensation to pension scheme members who need it for as long as required”
  • The PPF forecasts it will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.

(thanks to Jo Cumbo’s twitter feed for this)

A benchmark for NEST

By any measure, the PPF is one of Britain’s pension success stories. One of the tasks ahead of new Pension Minister Nick Harrington is to explore the future of NEST. My views on what NEST should and shouldn’t do are set out in my response to its recent call for evidence.

Despite being in la maison du chien for my criticism of NEST’s CIO for fronting the IA Advisory Board, I hope that NEST regard me as one of their fans (I am). I want NEST to be as good as the PPF (it currently isn’t) and here are my suggestions for Nick Harrington, learned from the PPF.

  1. NEST needs a target for self-sufficiency, as adopted by the PPF. NEST currently owes the DWP £460m , that debt does not need to crystallise but it shouldn’t be written off (as NOW’s £50m loan from its Danish parent appears to have been). NEST needs a financial plan and a target for getting rid of its debt.
  2. The PPF is not dependent on intermediaries. It has brought its fund management in house , is not dependent on third party administration and has keen control on its strategy , costs and execution. The same cannot be said for NEST, which outsources its asset management, funds administration and member record keeping. NEST should consider following the PPF and maybe even merging its investment function with the PPF.
  3. The PPF’s reporting is clear , concise and focussed on the job in hand. NEST’s reporting is erratic and without the same focus. The simple measures with which the PPF reports (see above) are consistent and intelligible. NEST needs to develop a reporting structure with the same consistency and clarity.

The future of the PPF


Alan Rubenstien of PPF

Of course the PPF is not competing, it is complimenting. NEST on the other hand is competing for market share and competing hard.

Some industry commentators (Kevin Wesbroom at the fore) have suggested that the PPF should actually compete for the running of failing occupational pension schemes and be allowed to take over the management of the assets and liabilities of an occupational scheme and continue to receive funding from sponsors (and members).

The PPF has not jumped at the chance and there are many actuaries , investment consultants, administrators, lawyers, auditors, custodians etc. who would regard the opening of the PPF’s gates to live schemes as a step too far.

But I think more consideration should be given to this idea.The precedent has been set within the LGPS with the pooling of assets to create greater economies of scale. The inefficiencies of the large network of small DB plans is obvious, there is too much intermediation for the good of sponsor or member and the expensive infrastructure small schemes carry is at risk of breaking the back of scheme solvency.

The future of NEST

HElen dean nest

Helen Dean- CEO of NEST

With NEST , things are the other way round. While NEST has yet to achieve the efficiencies of the PPF it is trying to sell its way out of its public debt by taking on assets already in the private sector.

I believe that this is a good thing for it to do but not before it has

  1. Worked out its financial plan and set firm targets for absolute self-sufficiency (repayment of the debt)
  2. Reduced its intermediation by sacking most of its fund managers and bringing some or all of  its administration in-house
  3. Found a way to report to the market which is as clear and useful as the PPF.

I expect that there are a few other things it needs to do as well, such as getting rid of the lawyers who threaten me with Ultra Vires nonsense.

NEST could become Britain’s first and greatest collective “decumulator” of DC pots – or – to speak in English – our default way of spending our pension.

I wouldn’t be against that. The PPF has shown that a competently managed State Enterprise can succeed and NEST has all the makings of being the next PPF.

But it needs to be clear in purpose and (like the PPF) sensitive to the environment in which it operates. NEST is not (as is the PPF) one of one. It is one of many and competes for its inflows with some pretty good competition.

NEST’s USP is not that it is a better pension (it’s good but not that good) , it is that it carries the public service obligation (for which it has been given money).

Post April 2017, NEST will compete with the rest of the market . It has the advantage of having had £460m of our money as a loan and will continue to benefit from that money, however, like the PPF, it needs to prove it is worth the public’s money.

Thank goodness for the PPF

It was good to oversleep and good to be reminded of Alan Rubenstein’s good stewardship as I opened my ears!

It is good to have the PPF and it’s good to have NEST. NEST and PPF should be working closer and NEST should be sitting at the PPF’s feet and learning.

There is a strong argument for the two funds sharing services as well as best practice and I have a misty long term vision is to see pooling of assets between the two.

Most importantly , we should celebrate our successes and the PPF is one. If Richard Harrington want encouragement , he should be aware that it’s not just auto-enrolment’s that’s working.


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So when will Workie go robo?


Channel 4 did a Dispatches this week on the perils for employers in choosing a pension. I think I am off Dispatches’ Christmas Card list since telling them that annuities weren’t a rip-off at the back of 2013. In any event I wasn’t asked for my views, haven’t seen the program and am grateful to Husky Finance who appeared to have flown the flag for informed choice.

Regulatory pass the parcel!

On the same day the program was screened, I received a call from the FCA querying why I wished to take part in their “robo-advice”pilot. I explained that was a way to help small and micro employers choose a workplace pension and – as the decisions being taken, impacted individual people- I wanted to inform and be informed by what the FCA were up to.

The nice man from the FCA suggested I might better be having the conversation with tPR . I explained that the nice man at tPR had suggested I had the conversation with the FCA. In short, neither tPR or FCA see it as part of their regulatory remit to regulate what advice or guidance is given to small employers on how to choose a workplace pension.

Let’s not dumb down workplace pensions

The standard view of the workplace pension, is Workie, a giant cartoon character who is appearing on your screens interrupting BAU in car mechanics, hairdressers and public parks.

I like the awareness campaign, but this is not the warm up for the AE Olympics, this is the real thing. Every week some 50-100 employers choose a workplace pension using and they do not choose on fluffiness, hair colouration or ponderosity (ponderousness?).

Even at robo-prices (£199 folks), Pension PlayPen is ignored by most employers, the majority of whom are scooting off to the big master trusts without leaving any audit trail on how they came to take this retirement shaping decision for their staff.

It’s a bit like taking your maths exam and not showing your working. If you get the right answer- fine, but what if you don’t!

Employers choosing a Workie without showing their working are being dumb to themselves and exposing themselves to their current staff and future generations of staff as numpties.

So my view of workplace pensions and Workie aren’t quite congruent. I would like Workie to lead those about to stage auto-enrolment to places like Husky and Pension PlayPen so that people don’t get Workie- but the right Workie.

Pension choice is already digital- robo- it’s happening!

It is in the FCA’s and tPR’s best interests to study what is going on when employers make decision on workplace pensions. We now have anonymised data of tens of thousands of employers who have either used our workforce assessment (free) or our choose a pension service.

That data shows remarkable things about what employers value and why. It shows the time and effort that employers and their advisers take in making a decision and most importantly , it provides a big data-set on what decisions employers are actually taking.

Pension PlayPen  does not take money from insurers to be included, we cannot be accused of bribery as our research comes from an independent actuarial source- First Actuarial. Our choice process (algorithm) is independently audited and we have been subject to intense scrutiny as a result of third party due diligence.

We want tPR and the FCA to take Workie Robo and we’ll show them how. We are proud of our technology and we’re proud of the workplace pensions that sit on our platform.

People stop moaning – help is at hand.

I haven’t watched the program, but the thread on our linked in group started by the wonderful Steve Brice, suggests that the program moaned a lot about the lack of choice for employers – and means to make a choice.

I do not have a magic wand that can advertise Pension PlayPen to all 1.6m (my estimate) employers still to buy a Workie. I rely for publicity on those organisations that give a monkeys about employers getting the right workie. TPR continue to run a website which tells people choices are available but gives people no means to make that choice.

The FCA continue to run “Project Innovate”, the innovation hub, sandbox and whatever but their focus is on non-advised at retirement decision making 

If Dispatches cannot be bothered to talk to me- then I can’t be arsed to talk with them- they are supposed to be investigative journalists- i am not spending money (and putting prices up) to hire a PR team.

If the FCA cannot find a way to incorporate workplace pension decision making into Project Innovate, then I don’t think they are being innovatory at all!

And if tPR can’t take Workie-Robo, what chance the millions of employers they are supposed to be helping, making informed decisions?

Workie will go robo!

But in case anyone is in any doubt, Workie will go robo, it may not be thanks to Government , it certainly won’t be thanks to the investigative journalists of the Dispatches team, but it will be thanks to the vision of some very important people in payroll and accountancy.

Because there is no stopping auto-enrolment, nor auto-decision making on workplace pensions. Because – in the end – people will see sense and the right thing will happen.

Watch this blog – Workie will go robo very soon indeed.

taps on pension playpen


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No! Pension Minister!

caroline nokes 2

Our new parliamentary under-secretary Richard  Harrington


 Did she jump – was she pushed?

Speaking on Vanessa Feltz’s LBC show this morning  ( 1:17:20-1:31:21) , Ros Altmann said it was a bit of both.

The events since her “resignation” suggest that the role of Pensions Minister was a luxury Theresa May felt she could do without – there will be no pension minister going forward. This blog charts how events have turned out and suggests that the door is now open for the Treasury to take the P out of the DWP.


Baroness Ros Altmann, CBE

House of Lords, London SW1A 0PW

The Rt. Hon Theresa May

Prime Minister

10 Downing Street, London SW1A 0AA 15 July 2016

Dear Theresa,

Congratulations on your appointment as our new Prime Minister and I am so delighted that our country will have the benefit of your wisdom, good sense and experience.  I believe you have the qualities most needed – not least your determination to pursue policies in the long term interests of the country as a whole.

I am honoured and grateful to have had the opportunity to serve in Government and look forward to continuing to advise on pensions, finance and later life policies from the House of Lords benches.

As an economist and investment professional who has been involved in all aspects of pensions for nearly 40 years, I am at heart a policy expert, rather than a politician.  I have spent my entire career trying to help as many people as possible enjoy better later life incomes, encouraging consumer protection and social justice.  

As a Minister, I have tried to drive positive long-term changes on pensions from within Government and ameliorate some of the past mistakes which I have cautioned against.  Unfortunately over the past year, short-term political considerations, exacerbated by the EU referendum, have inhibited good policy-making.  As the country heads into uncharted waters, I would urge you and your new team to enable my successor to address some of the major policy reforms that are needed to improve pensions for the future.

It is vital that we continue to roll-out the successful auto-enrolment programme to ensure all employers offer pensions to their staff.  Regardless of the economic challenges, everyone will need to have some money set aside for later life and pensions are the best way to do so.  We must, too, address the crisis in social care funding and help people provide for potential care costs as well.  In order to help fund this, we should look to develop a ‘one nation’ lifetime pension.

A ‘one-nation’ pension – long overdue reform of pension tax relief:  Our present ineffective and complex incentive structure for pension saving costs over £40billion a year.  It favours the highest earners disproportionately, while leaving lower earners seriously disadvantaged.  We need a radical overhaul of incentives, which can offer more generous help than basic rate tax relief, but as a straightforward Government pension contribution for all, and would end the discrimination against Britain’s lowest earners who are forced to pay at least 20 per cent more for their pension than higher paid workers.  This ‘one nation’ pension would see withdrawals taxed in later life, so that people have a behavioural incentive not to spend the money too soon.

A major review of Defined Benefit pension scheme funding and affordability:  We must urgently assess the future of our Defined Benefit pension schemes.  Given the risks of diverting corporate resources to one favoured group of workers, the need to ensure adequate resources for younger generations’ pensions, the time is right to properly consider the issues facing employers trying to support Defined Benefit pension schemes and potential use of pension assets to boost economic growth.

Fair treatment for women and better communication on State Pensions:  On the issue of women’s state pension age, whilst I respect the democratic decision taken in 2011 by our Parliament, I am not convinced the Government adequately addressed the hardship facing women who have had their state pension age increased at relatively short notice.  They were not adequately informed.  I also believe we must devote resource to widely communicating and publicising the coming changes to state pension age for both men and women.

I remain deeply committed to helping our great country make better pensions policy for the British people and to planning ahead for the long-term future of our ageing population.  I stand ready to help my successor and to offer my policy expertise.   As you set a new course for our country at this very difficult time, I wish you every success.

Yours truly,

Ros Altmann

This is the Ros Altmann’s resignation letter. She will be succeeded by Richard Harrington


Her Ministerial obituary

I am very sorry to see Ros Altmann go, though she may be able to do as much good from the Lord’s benches as she was allowed to do from her position of office.
She was made to make policy but not as a politician. She made no policy in her fifteen months in office though the Pensions Bill is in the making.
During her tenure, she put on hold two of Steve Webb’s ideas, the Defined Ambition and Pot Follows Member initiative which stand like half completed buildings.
During her time , the New State Pension arrived and so did the problems for some women over state pension inequality.
During her time, companies with defined benefit schemes continued to fail.
The major reform she wanted to see, that of our pension taxation system, has not been put to parliament, instead there has been further strengthening of the ISA product with the LISA product.
The idea of a “one nation pension”, mentioned in her resignation letter appears to be flat rate, EET and still-born.
Like Ros herself, the one nation pension taxation system never found a voice. The statements she will be remembered for are those she made for herself, the first at the point when Ian Duncan-Smith resigned, the second at the point of her resignation.

Ros Altmann’s appointment – A brave experiment or a cynical stunt?

The experiment has failed but there are positives. The Pension Auto-Enrolment project continues to prosper, the PPF is going from strength to strength and we look to be making progress through the Treasury towards a pension dashboard.
There are a number of initiatives that struggle on , largely unloved, secondary annuities are still on the table, we are slowly working towards some definition of value for money with which we can measure the performance of our workplace pensions and the Pension Regulator’s DC code is moving forward governance of occupational schemes (including workplace master trusts).
But pensions are assailed by “bad ju-ju”, most especially by scammers looking to “liberate” our good pensions into their back pockets. Pension Wise exists but is not doing all that it set out to do and will need more help if it is to provide the first line of defence, let alone put pension savers on the front foot.
The FCA’s recently published terms of reference for the Retirement Outcomes Review show how un-joined up FCA and tPR regulation still is. The Treasury are more than ever in the ascendency and – as we suspected would happen at her appointment, Ros Altmann’s positioning has simply left the door open.

A smooth handover?


Taking the P from DWP

 As Paul’s tweet shows, there is  confusion about what happens next (suggesting that the DWP weren’t prepared for succession)
Ros Altmann’s departure would have left  the Pension Ministry to either Penny Mordaunt or Damian Hinds .  Despite reports in the pension press that Penny Mordaunt has the post, we were left waiting for an official announcement.
Penny is mainly known for jokes about cocks, appearing on Splash and for comments on Turkey’s likely joining the EU. She is to be Minister for the Disabled

Penny Mordaunt

Damian Hinds is either less or better known (possibly both), he is to be Minister for Employment
damian hinds

Damian Hinds

Caroline Nokes couldn’t get the job , but she is charged with welfare delivery and is an under-secretary.
caroline nokes

Caroline Nokes

Which leaves us with the extravagantly attired Richard Harrington -parliamentary under-secretary for pensions,  PENSION MINISTER! – but not a minister of state,

Richard Harrington

What pensions knowledge there is in parliament , is within the Pensions Select Committee and in the Lords but as the comments below point out, that’s not saying a lot.
In a well judged piece in the Daily Mail, Rachel Rickard-Strauss laments the loss of Altmann and expresses concern that Richard Harrington is not being given the leg up a full Minister of State would have got.
Let’s hope that Richard Harrington ,our new Pensions under-secretary will be supported by the excellent DWP policy team headed by Charlotte Clark. Just as we need an opposition to Conservatism, we need an opposition to the Treasury. Right now, we don’t have either.
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Walk walk walk – not talk talk talk


I have just read an article by Sophie Baxter that puts numbers to the failure of David Cameron to create a one nation Government. It explicitly draws parallels with Cameron’s oration to the nation on entering #10 six years ago. It may even remind us of the abstractions of Margaret Thatcher as she quote St Francis Assisi.

It excited that nervous sense of unease that developed in my stomach as I heard Theresa May talk last night about social justice. We have been here before and nothing much has changed.


I won’t rehearse Sophie’s arguments, but I will draw specifically on my experience of working in financial services in the years since the coalition.

For all the promises of a fairer and more consumer centric pension system, little has changed (for the better)

  • the great defined benefit schemes, forty years in the making, have crumbled as a result of low market returns, negative gilt yields and mark to market valuations
  • the annuity system that underpinned defined contributions has collapsed and been replaced with the freedom to take financial advice, be a fiscal muppet or try some DIY retirement income fix.
  • the costs of our pension saving remains unknown, know fraudsters stalk the savings of the most vulnerable, a financial institutions convicted of fraud administers our national retirement savings plan

Worst of all, our retirement savings system persists in offering tax hand outs to the rich and little or nothing to the poor. We give 45% tax relief to our wealthiest but we don’t even pay the promised savings incentives to the poorest in the net pay system.

This is allowed to happen by the great pension authorities, the DWP, tPR, PLSA, PMI and FCA.

Today the last of these, the FCA has published the terms of reference for its Retirement Outcomes Review.. We will be responding to it forcefully.

We can’t rely on the past to make good the future

Yesterday a senior member of the Investment Association wrote to me , hours before Theresa May got up to speak with these words.

I’ve never fully understood why and when it became so personal between you and the IA, but it’s a shame. 

It is not a shame. What is a shame is the abject lack of accountability of those like me who have been priviledged with a good education, inherited wealth and all that society could give, to help create a fair society for those who are coming behind us.

The point of the Transparency Task Force was not to cause civil insurrection , or to exercise the personal demons of Henry Tapper, but to make it easier for those who own the pension rights, whether insurers, trustees or private individuals – to understand and take control of the costs of money management.


What I have seen in Government (particularly since May 2015) is the failure of those in a position of power, to exercise that power for the benefit of what Theresa May yesterday called social justice.

The burning injustices that May referred to yesterday do not go away by having an easy time at the Investment Association. The difference between “just managing” and not managing , can be down to the amount taken out of our lifetime of savings. It can be down to not getting a Government incentive on your pension contributions, it can be down to having a proper plan to spend the money saved for retirement.

Since 2015, this Government has taken away the opportunity many of us  were giving our time to (at nobody’s expense but ourselves) to create a collective way for people without the means to pay for advice, without a DB pension, to avoid an annuity, cash or drawdown. I am referring to the blocking of progress towards a CDC solution for “decumulation”.

The aims to reform tax relief to make for a fairer means to spend our nations money were deferred from last year’s autumn statement to this year’s budget and then shelved in favour of not upsetting the public before the referendum.

The promise of a fair system of workplace pensions resulting from the OFT report has been all but extinguished with what little hope we had for a proper way of understanding value for money buried by a timid FCA, a plethora of greedy consultants and the dead hand of the Investment Association.

Braver and Stronger

If we are to have that fairer society that Theresa May talked of, we will need to be braver and stronger than we have been till now.

That means doing stuff, not talking about it. NEST should do something about lending their CIO to give credibility to the IA’s filibustering (rather than threatening me with Ultra Vires writs).

Ros Altmann should reinstate the CDC regulations writing so we can have a proper default for spending our DC pots by 2019.

Hammond should dust off the proposals left dusty on George Osborne’s top shelf and  institute a root and branch reform of the taxation system which so unfairly underpins pension saving.

Above all , we should turn the hearts and minds of our nation of small business to the advantages of workplace pensions, what it brings them as employers and how their staff can benefit from the work they do , the money they earn

This cannot be done with words, it must be done with actions. I will continue to do my bit through and through promoting the great work of my employer First Actuarial.

Do I think things can better?

They cannot get any worse than the disaster of the last 14 months.


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

What rights do banking customers still have?


I received a letter out of the blue from Scott Miller, Head of Customer Services at Barclays. It’s a pro-forma and it included a new credit card, if it hadn’t, I’d have not read it.


Not so great I thought, so I looked this Scott Miller up on Linked In and found we had a number of people in common, so I sent him a linked in mail.


Over the last week I got a letter from you about my i24 card, which is now a Barclays Infinite Card.

I signed my agreement with another company but i24 transferred to you some years ago. Since the transfer, the original point of the card has been diminished to the point that it became just another credit card. I guess I stayed with you , because life is too complicated to change.

But your letter has prompted me to ask some questions.

Firstly , I am changing from mastercard to visa – I bought mastercard – what does this mean?

Secondly, I am going to have to change all my payment processes that depended on my using mastercard- this is very inconvenient – I did not ask for this – why must I do it?

Thirdly, what is happening to my existing benefits with i24 – travel lounge, insurance, cashback, concierge and is the amount I have to pay for Infinite the same as for i24?

I am sure that in my mail somewhere is the answer to these questions, but I don’t have time to read your unsolicited mail – whichI get every week. I want to be treated fairly and it may be that I am being treated fairly but I am confused.

I don’t want to ask questions to your Mumbai call operators with their telephone scripts , the call-backs that never come and their lack of accountability. I don’t have time to go through the complicated robotics to speak to the right person.

Instead I want to speak with you Scott Miller, Head of Customer Services and ask you what you think I will gain from having to switch to Infinite. So can you please call me on 07785 377768 or mail me at henry.h.tapper@gmail or simply respond to this linked in mail.

I am a keen blogger and have posted this mail to my site, I hope that we can conduct this correspondence in a pleasant way so that the more general issues I raise about TCF, the rights of customers and the capacity of us as individuals to deal with other individuals is maintained.

Perhaps we can also get linked in!

I haven’t heard back from Scott but I only sent this 5 minutes ago and it’s early in the morning. I will publish our correspondence as I genuinely don’t know what rights I have to what I bought or whether I am simply bound to accept whatever I am given (or hand back the card).

The interesting thing is that I don’t really see the point of retail banking going forward. PayPal is so much easier and I suspect cheaper. The reason I bought this card was I was told originally that if I had a problem I would not have to deal with an overseas call centre and that I’d get a personal service.

Those promises went out the window years ago, The new card- which looks identical to my First Direct debit card,was never part of the script.

Old skool banking

I’d like to think I was part of a banking revolution and that there was an upside to “infinite”, but Scott’s letter itemises only the payment protection insurance that all cards have by law. What makes me laugh is – despite me paying my bills by DD from my bank account, Barclays send me my cashback by cheque!

Here’s the latest one, together with a £50 note – just in case you don’t remember them either! (actually the note is really a serviette but don’t worry about it!


I had lunch with a nice man from the HSBC on Friday and we discussed the point of HSBC to retail customers. They have the excellent First Direct and I pointed out that First Direct do everything I want from a bank and more. I also pointed out how exasperated they get when they have to do things the HSBC way.

My conclusion is that big banking needs to become small banking. I love going to Metrobank, I look forward to speaking to First Direct and I very much hope I will be able to have a constructive conversation with Scott Miller to get answers to my questions.

If you have banking queries of this nature, I’d be interested to hear your views. Please post in comments so we can keep a little dossier. I am not saying Barclays is crap, but I suspect that what is happening to me, happens to a lot of people, and that we are made to feel like crap.

That’s not what should be happening, and Scott- I hope it’s something you can help put right!

Barclays cropped

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

Tactical transparency from the Investment Association


The Investment Association’s terms of reference


Professional Pensions reports that the Investment Association (IA) have appointed senior pension figures to advise the it on a new disclosure code for investment costs.

Helen Morrisey, the paper’s editor is optimistic

I’m sure the process will be challenging but I have no doubt this panel, which also includes representatives from the Local Government Association and the Transparency Task Force, are up to the job of helping to create something that enables schemes to have a truly informed view about what they are paying to who. I wish them luck!

I am not optimistic.

I would have sooner made Tony Blair editor of the Chilcott Report than put the IA in charge of a disclosure code for investment costs.

The Investment Association represent the interests of the fund management industry and (since its merger with the investment wing of the ABI) the insurers. It’s job is to represent its members interests and those interests are to generate profits for shareholders, bonuses for senior managers and to do so out of the funds of unit holders and policy holders.

There could be no clearer conflict of interest.

In order to absolve themselves from these conflicts , the IA are setting up an independent committee. Independence is critical for transparency but this committee is neither independent or transparent.

Firstly it needs an independent chair

Mark Fawcett , CIO of NEST is to be chair of this group, he is not the right person for the job.

I like Mark Fawcett – he is a clever man and I’ve endorsed him many times (see his Linked in profile). However he is not (IMO) – the person for this job.

His high profile role lends the IA advisory board a quasi-governmental authority. It has no authority, the IA is a lobbying association for the funds industry.

NEST is itself in need of greater transparency and I have been very critical of some decisions that it has taken – especially in its appointment of State Street as its funds administrator.

Mark cannot be both advisor on and consumer of an advisory code

Secondly it will be operating under a code of secrecy.

So far we have a press release

Independent Panel to Advise IA on next-generation disclosure for investment costs”

There’s a list of the great and the good to sit on the committee but nothing of any substance.

When Con Keating asked TTF supremo Andy Agethangelou for the committee’s terms of reference, Andy had to admit that he was bound to silence!

Can there be anything more absurd than a confidentiality agreement governing the leader of the Transparency Task Force? Andy appears to have signed his own gagging order against my advice.

Keep your friends close and your enemies closer.

So long as that confidentiality agreement is in place, Andy cannot represent the TTF in this, he can only represent himself, as he has no mandate from the TTF to speak for us.

Thirdly, the Investment Association are not to be trusted .

It is only a year since they booted out their own CEO- Daniel Godfrey– for demanding that the IA adopt a fully transparent code.  Daniel Godfrey is now in the FCA and hopefully will get more luck overseeing the production of the current market review into the funds industry!

The last time the IA put together a voluntary code (in 2012), standards of disclosure actually fell. It is now harder than ever for us to find out how much we are actually paying for fund management. I have little doubt, that with a fair wind, the IA would kick transparency not into touch, but over the fence and into the river.

This leopard has not changed its spots. It is a ruthless organisation that has a decades long history of obfuscation, filibustering and general bad behaviour. It is the enemy of good funds governance and should be excluded from any discussion over codes of conduct.

Too big for the private sector

Taken together, the appointment of Mark Fawcett as Chair, the secrecy surrounding the dealings of the committee and the appalling track record of the IA, make this Committee toxic. It does not have my support even though Andy Agethangelou, in all else -does.

The FCA are reported as wanting the private sector to sort this problem out for itself, but there is no way it can. Even with the TTF and financial consumer groups working together, we would be throwing peanuts at an elephant. The funds and insurance industry laugh at our puny efforts and patronise us with this committee to string the process out a few more years.

The only way that we will see true disclosure is by Government requiring it. It should form the basis of the new charge cap due to arrive in April 2017 (for workplace pensions), it should override MIFID and Prips (both of which look to be post-BREXIT irrelevances). Full disclosure should be the consequence of the call for evidence from the FCA in April 2015 and the outcome of the current market review of fund managers and investment consultants, currently drawing to a conclusion.

It took the Dutch Central Bank to make things happen in the Netherlands and it will take the FCA/Treasury/tPR/DWP to make things happen in the UK.

If any good comes out of this farcical initiative from the IA, it is to show how weak the private sector is in putting its house in order. We need Big Government to intervene, we need proper Regulation with a big R and we need it now.


The Investment Association’s terms of reference

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Property , liquidity and the merit of doing nothing

aviva 3

News that Standard Life , M&G (the Pru) and Aviva have put up the shutters on their property funds is dominating the headlines. We are used to being able to move our money around the market with “impunity”.

I put that “impunity” word in there , because the word is little understood and often misused. It means “without punishment” and if a property fund investor can sell units in a property fund without punishment, it is because of “liquidity”. Liquidity being created either by someone wanting to buy those units or by their being cash in the fund which can be drawn on to meet the demand for a cash pay-out.

What is happening now is that there are not as many buyers and sellers and there is insufficient cash in the fund to meet expected future pay-outs. Rather than sell properties, which is expensive and takes time, the three property fund managers have decided it’s time for a lock-in.

There is nothing wrong with this, there is nothing unusual about this, it should not be headline news- there should be no panic – no run on property and this should be reported responsibly. Let’s hope that people keep calm.



Philosophically, any investment confers property rights on the investor. In practice, most of us haven’t a clue what we own when we write a cheque in favour of a fund manager (did I really say “write a cheque”, that too is an archaic formulation designed to create physicality).

We do not know what we own and have no connection with the profits generated by our investments, we simply see statements telling us of our wealth.

The attraction of property is the tangibility of the investment. One commentator on Radio 5 this morning said that retail property investors are “emotional”, meaning- I think- that they buy and sell with their hearts. I think another word is “engaged”.

Engaged investors want to be in or out of an investment based on fear and greed, in times of greed they fear not being invested, in times of fear, they are greedy for the safety of cash, either way – engaged investors tend to be driven by emotion and they engage with their property rights (to buy and to sell).

It is this small group of engaged investors (and their advisors) who are creating the demand to sell property. I don’t have the numbers, but I suspect that the majority of selling is being done by the discretionary fund managers (DFMs) who buy and sell on behalf of their wealthy clients and use property funds as a form of diversification.

aviva investors


in times of fear, people get greedy for cash (except for Paul Lewis who is always greedy for cash). Now is a time of fear and some DFMs are trying to get liquid rather than holding property. This is odd, as the reason you diversify beyond debt and equities is to create a non-correlated source of return (property often rises when shares fall and vice versa).

I suspect that the reason for people seeking liquidity is that they are trying to beat the market by timing the withdrawal from “property” ahead of what is supposed to be a property crash. This flight to liquidity is exactly the opposite of what long-term investors are taught to do (see Warren Buffet/Terry Smith etc.).

This kind of herd like behaviour is precisely how people (or animals) get trampled on. It is why institutional investors sit on their hands and wait for the panic to subside.

Because when people get greedy for liquidity, the price to “get out” jumps. The cost of liquidity is seen in huge spreads between the buy and sell price. These spreads are no longer published, they are built into the unit price and materialise in your getting less for your unit sale than you imagined.

man from pru

the way we were


The value of doing nothing

There is currently great value in doing nothing, sitting on your hands, remaining calm. This is exactly because our emotions – our intuition – our sentimental side- says “get out”.

But the shopping centre in which your property fund invests isn’t going to stop collecting rents, the warehouse isn’t going to stop storing goods and that office block isn’t going to say goodbye to its tenants. Demand for retail/office/warehouse space may dip and prices may fall back, but the likes of Aviva, M&G and Standard Life aren’t investing in houses made out of straw, the big bad Brexit wolf isn’t going to blow these houses down.

The reason people should invest in property funds is because of the underlying value of property as a means of generating commercial or residential space which is useful for people to work or live in. That value remains – all that impacts short term volatility in the unit price is demand for work or living space.

The great advantage property funds have , is that people can envisage what it is the property fund invests in (even when the actual investment may no more than a derivative!). People know what they are buying into.

People have less ease understanding the purchase of an equity and even less understanding of how to value a bond. I wish that those who act as advisors to retail investors would be clearer about how investments work and about property rights. Too many wealthy people I talk to, tell me of their wealth managers capacity to “hedge”, diversify” and “leverage”. Too few can tell me where their wealth is invested.

I suspect if we knew where our money was, we would be more inclined to leave it there, for that is what investors, investees and the country needs. We need to understand the value of doing nothing.


Since this article was written, a number of other funds have been suspended including Columbia Threadneedle’s, Aberdeen’s and Hendersons’s.

One fund that hasn’t been suspended is LGIM’s. Here is what L&G has to say


Good Afternoon,

In light of recent news, we would like to take this opportunity to convey to our investors that the UK Property Fund remains well positioned in terms of liquidity and asset management initiatives.

Currently the Fund retains over 20% of its NAV in liquid assets – the majority of which is held in cash. In addition to this, the Fund has a pipeline of sales initiatives which will increase its cash position if needed and has a well-diversified investor base.

The UK Property Fund is managed by a very experienced team and continues to receive strong support from rating agencies and advisers alike.   We would like to invite you to join us for a webinar on Friday, 8 July from 9:30am when Matt Jarvis, Senior Fund Manager of the UK Property Fund will cover the following:

  • The current positioning of the UK Property Fund.
  • The Fund’s allocation to liquid assets.
  • Fair Value Pricing and why it is necessary.
  • Some recent examples of ongoing asset management initiatives within the portfolio.





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Brexit not AExit

keep calm and auto-enrol


Disruption of auto-enrolment happened way before the recent referendum and is set to continue as one of the many unintended consequences of a leave vote.

The ambitious legislative reforms put in place by the coalition’s pension minister Steve Webb were pruned only months into the new administration when Ros Altmann called time on Defined Ambition and Pot Follows Member. It was claimed that these policies had fallen victim to austerity (the DWP simply didn’t have the lawyers to go round) but many pension commentators sensed the dead hand of the Treasury and their obsession with the ISA as its savings plan of choice.


These fears proved correct when after a year of consultation, the Treasury announced it was binning its plans to reform the taxation of pensions in this year’s budget. The excuse this time was “market volatility”, though who now remembers the stock market turbulence of the first quarter? In reality, the Treasury were battening down the hatches in readiness for the June referendum. Talk in Westminster was that nothing radical could risk our continued membership of the EU.


So the first 14 months of the new administration has seen a retreat from the Coalition’s radical reforms, the deferral of the tough choices on tax-relief and now the breakdown of normal Government following a plebiscite that went horribly wrong.


What little cheer pensions have had, has been around the introduction of the new state pension, the ending of contracting out and a movement to a new simple way to understand state retirement benefits. And of course the continuing successful roll-out of auto-enrolment which is now entering its fourth year.


But all in the auto-enrolment garden isn’t rose, indeed some of the roses are thought to be developing canker which is why the DWP has been allowed a small but significant Pensions Bill. Ros Altmann is using the Bill as a chance to introduce some much needed regulation around small master trusts, many of which are seen as unfit for the purpose of carrying worker’s retirement dreams through the next four or five decades.


The smooth passage of this Bill to enactment in April 2017 looks like being the next in what is coming a queue of pension policies that don’t quite make it to implementation.


Pension legislation is front-end loaded with difficulty for politicians. It is very rare for a policy to give a quick win (pension freedoms being the exception that proves the rule). Typically, legislative change caused grief today and delivers well after the politicians term of office has expired.


Small wonder then that we currently have neither a pension minister or a shadow pension minister in the house of commons! The difficult truth is that pensions are the Treasury’s political football and Her Majesty’s opposition has been through three pension ministers in little more than a year.


So despite the heroic efforts of the accountancy and payroll professions to help Workie out, the research and development teams from the private and public sectors have been thwarted in creating a long-term solution to the structural issues that beset workplace pensions.


We still have pot proliferation rather than pots following members

We still have no mass market alternative to annuities

We still have no solution to the nonsense of net pay and relief at source taxation systems

We still have a plethora of master trusts with no obvious means of survival.


So the next time you are called upon to help an employer set up a workplace pensions (whether yours or a client), it’s worth considering just what the outcome of the great AE experiment is likely to be.


I share with the Government an enormous optimism for auto-enrolment’s potential, but I am growing tired of seeing the retirement plans of generations to come being put at risk by short-termism in Westminster.


The coalition government of 2010-15 was a golden era for workplace pensions, it looks like this Government will be reverse alchemists, turning gold to lead.


We have exited Europe through a series of political blunders. If we are not careful we will find ourselves out of love with auto-enrolment for failures of a similarly political nature.

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

Women rock

It should come as no surprise to anybody that the two leading candidates for our next prime minister are women. Leadsom and May have survived the BREXIT disaster with their dignity intact and integrity intact.

I would have no worries having Andrea Leadsom as my Chancellor and Theresa May as my Prime Minister .  Leadsom would also make a good Prime Minister.  The idea of this country being governed by women comes as a pleasant prospect after the male dominated “debate” we have just had.

The enormous unlocked potential of female leadership has still to be properly recognised in this country. But as we move from a plutocracy to a meritocracy , we men cannot avoid the obvious conclusion that “women rock”.

My favourite BBC gaffe of recent days is their much tweeted comment


The world moves to the beat of the 19th and 20th centuries when women were subject to this kind of nonsense as a matter of course.

I want to listen to women because they bring a fresh intelligence to the male thought-hegemony that has dominated my world for my past 54 years.

And I am so immersed in that world that I continue to behave like Sid the Sexist, without knowing it! Angela Rayner – who this week is Shadow Secretary for Education, boxed my ears to referring to her as “Colin Meech’s woman” only last Tuesday!

One of the reasons that women rock- is that they can forgive and forget male idiocy like mine! We are all as bad as each other and need re-education!

And so for business as for politics?

Equate the boardroom with the cabinet and the door’s now open, we have yet to see the arrival of equal gender boardrooms but this is a matter of time. The equilibrium will happen as we move towards a meritocracy.

The idea that companies, like countries , can be managed by women, is slowly seeping into our DNA.

The glass ceiling is not being shattered, it is slowly being dismantled. This is not a revolution as I imagined it would be when I was at college, this is an evolutionary progression.

But political and business leadership are just the start. The deepest inequalities between men and woman persist in our social world – in the day to day decision making which regularly relegates the emotional intelligence of women to a distant second place.

Mea Culpa

For us men, recognising that women are natural leaders is not a natural activity. Many of us have sexism hard coded into our brains. We need new circuit boards but we are not going to get them overnight. Instead we are going to have to see the neurological plumbing re-arrange itself over time.

In the meantime- to my female readers – “mea culpa”! And to my male readers, here’s the message

“women rock”.

the sooner we can re-wire – the better!


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Back to business



It will be interesting, when the Pensions Regulator comes to publish its statistics, to see whether the past few days will represent a downward spike in engagement over auto-enrolment. Certainly our stats at Pension PlayPen suggest that less decisions were taken last week then for several weeks before – but ours is too small a sample.

Business needs rules, the source of the rules – Government- needs to be respected. The current failure of Government to govern is worrying. Such a lead can lead to a more general lawlessness.

Auto-enrolment is an ongoing process, we are still only in the foothills, the peaks of 2017 are in view but we don’t need to be dismissing the sherpas right now.

All over Britain , kids are taking exams at the end of term, soon we will be heading abroad and economic slowdown will continue through to September.

With this sense of unreality engendered by the situation in Westminster and in Europe, it is easy to see Britain taking the forebodings of Remain as a self-fulfilling prophecy. There will be nothing easier than to see Britain slip into recession, it doesn’t take any work at all!

I am attracted to business-like people and the talk of Andrea Leadsom is that of a business person. It is why I like Ros Altmann, not just as a person but as a Minister – she is business-like (an advantage she has over her predecessor).

It is now incumbent on those who have created this mess – the politicians – to get their heads down and really get to work. I am actually going to the Conservative Party conference in October and I look forward to seeing some work done there (unlike last year).

Right now – I am sitting on a boat – four miles East of Henley – awaiting day five of the regatta. The highlight (for me), the battle for the Princess Elizabeth Cup between George Osborne’s St Pauls School and David Cameron’s Eton.

While the toffs slug it out on the river, an army  of migrant workers will be serving the blazoured multitude on the bank. What a metaphor for where we are!

Here are the highlights of day four, including St Paul’s amazing comeback against Melbourne!



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The Coalition worked- this doesn’t!

A tale of two Governments

In 2010, after a shock result, Britain found itself Governed by a ConLib coalition. No one gave it much chance of working but it di, The Clegg/Cameron coalition brought considerable benefit to the country and was something of a “golden administration” for pensions.

In 2015 we had another election, this time it gave us a conservative majority (another shock). The markets reacted positively and we looked set fair for five stable years of further recovery from the financial crisis. HOW WRONG COULD WE BE.

The supposed weakness of the coalition was its strength, Nick Clegg and his team kept the conservative party focussing on what mattered – Britain – and away from local feuding.

Since the dissolution of the coalition we have had Britain has seen the most bitter internal division since the War of the Roses (I discount the Civil Was as that was fought on religious grounds). The disintegration of BAU Government over the past three months and the absurd “what do we do now” position we find ourselves in, is a consequence of an unwanted and unloved debate on a subject we know little about and cared less.

As with any war, the people who will be hurt most will be the civilian population and the most vulnerable were (and are) being hit hardest. I am writing to friends in my company who are of Eastern European debate to tell them they are wanted and wanted very much. But a substantial number of the people working in Britain today, will not get such comfort.

The efforts of society to drive out rascism and other forms of intolerance have been set back. It is now politically acceptable to blame the hard working for being hard working and to blame those who have risked much to work in Britain , for being foreign.

The decency of the coalition has been replaced by the new nastiness.

I sensed the change when I went to the Tory party conference last October. The ring of steel was surrounded by angry protestors, inside there was much drinking and self-congratulation but little progressive policy-making. Already the need to help the country had been replaced by a determination to “help yourself”.

As for pensions, instead of the social policy of Steve Webb, we had the “self-empowerment agenda of Harriet Baldwin. The Treasury had walked off with the trophy cabinet and were melting down the hard-won policies of CDC and pot aggregation in favour of dumbed down savings policies that had more do do with re-election than social purpose. The Pension Minister did not make it to Manchester, locked like Rapunzel in her Tower, the key in IDS’ pocket.


Altmann repressed

Can we learn this lesson?

The balancing influence of the Liberals on Conservatism kept the one nation, “all in it together” vision to the fore. Once it had been lost, the Conservatives disintegrated. Now they have no leadership, no vision and no short-term plan to get us out of the mess which their disastrously mis-managed referendum has got us into.

Sadly, rather than acknowledge the role of the Liberal party, the Conservatives decided not just to drop the pilot, but shoot him too. Almost all the great Liberal politicians of the coalition (Cable/Clegg/ Webb et al.) are now no more than commentators, not even commanding a seat in the house.

The ungrateful contempt with which coalition politics has been dismissed by this conservative administration, has no justification. For we can now look back at 2010-15 as a time when politics worked and look at the current Government as an example of how politics does not work.

I am a Liberal and a liberal. I believe in working together, of co-operation. I will support Tim Farron but I will also support this Government in any attempt it makes to reach out to those who it has so harmed and rebuild trust. I will support attempts to reach out to Europe, to Europeans working in Britain and to those who have voted in the referendum who now feel bewildered and betrayed.

Where’s George

George Osborne is lost, he has no credible position. He is the architect of his own downfall and his contemptuous attitude to the people of Britain renders him contemptible. He has only one word that I will listen to. That word is “sorry”. If he can admit he is sorry (as Cameron has) then – as Cameron has been, we can forgive and move on. We may even be able to move on with Osborne in charge of the money (he is competent if not trustworthy).

However, we cannot move on till we have checks on his behaviour. We cannot go back to the situation we have found ourselves in over the past year, where a Conservative Government behaves with such total disregard for the people of the country.

I hope that whatever is left of the Labour party, after they have had their playground fight, will regroup and come to the table. I hope that they will join hands with Tim Farron and the tiny rump of Liberal MPs and then go to Government and offer to help. We need something like a Government of National Unity at this time.

We need something like the coalition we enjoyed until so recently.



I’m afraid so

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A decision that may hurt the EU more.


My prodigal brother Albert (aka Mincer) has been advising his followers on twitter to bet on “leave” – notably over the days leading up to the referendum when we all had concluded “remain” a racing certainty.

Screen Shot 2016-06-25 at 06.36.18

Screen Shot 2016-06-25 at 06.36.51

He was right and the bookies were wrong, so I decided to take a little more notice of his tweets and was struck by this which appeared yesterday.

Screen Shot 2016-06-25 at 06.37.13

Will Europe implode?

Whatever the dream of the European Union, it has never been dreamed over here. Apparently one of Google’s most searched items yesterday was “what is the EU?”.

I very much doubt , if you asked the man in Lens/Augsburg or Pisa what the EU meant to him, you’d get much consistency (or substance). There seems to be a gap between the articulation of the dream in Strasburg and Brussels and the perception of the EU by those not living it.

The question is whether Britain will ignite lated Europhobia, draw the remaining 27 countries together or simply leave to massed indifference.

Judging by the reaction of European people both inside and outside of “dreamland”, indifference looks the least likely option. Many Brits will be surprised by how important they appear to be to the folks accross the channel.

Rather like active fund management, the EU is talked up as indispensable till a Warren Buffet comes along and shows just how unlikely it is to create value from an abstract notion.

Warren Buffet

But like active management, the EU has always been very useful as something to cheer when things go right and jeer when things go wrong. Blaming Brussels is a past-time not just of the Brits and (like active management) Brussels is a luxury item which diverts many from the fundamental problems of their local economies.

I think there is a good chance that calls from within the major European players (especially France and Italy) , for freedom from the perceived millstones of the weaker nation states, will grow louder.

Plebiscites, as Cameron has found are easy to grant but not so easy to control. The threat of contagion is very real and the damage may already have been done.

Will anything actually change?

The other part of Mincer’s tweet that has exercised me , is the question of change in the UK. Cameron has made it clear he doesn’t want to press any buttons to leave while at the helm and that he won’t leave the boat till October. That means that the deadline for exit is October 2018 at the earliest, which is a long time away, for those who want immediate freedom.

Much will depend on the respect that Cameron is given and if the UK Brexiteers are as keen to say goodbye to Cameron as Brussels is to Britain, then the timeframe may be shorter, but any thought of a decree absolute before this time 2018 looks unlikely.

At a formal level we will not be free from the EU for some time, the question is whether much will change in the meantime.

There is real fear among many recent immigrants I know , that their jobs and even their residency permissions may be terminated immediately. This is not fantastical. For all the words from Tory Grandees, it is the barking of UKIP and their everyday campaigners who cause this fear.

I very much hope that we will not turn upon our immigrant population and make them unwelcome. I am sure, in my genteel world, this won’t happen, but I’m not the one who feels threatened by them, my biggest worry is that we will make life so unpleasant for them, that they leave- and take our reputation for tolerance with them.

In practice, firms like mine have benefited from the influx of European graduates willing to work hard and be patient and they have brought standards up among our home-grown graduate intake. I can only speak as I find, our business would be the poorer without ready access to brilliant European students.

I suspect at the professional end of the immigrant job market, nothing is likely to change, but I fear for the livelihoods and lifestyles of those without professional qualifications, who may lose what little protection they currently have.

Power 4

And what of the multi-nationals?

JP Morgan and Airbus were quick to issue pre-prepared press releases threatening job cuts as “changes to business strategy”. We have got used to this kind of behaviour and I don’t think that the nation will be any more scared of corporate reprisals as they appear to have been by the punishment budget threatened by our (current) Chancellor.

Since we are likely to be staying in till October 2018+, knee-jerk closures look unlikely. Most large employers will sit on their hands and watch, changing strategy is an expensive business.

And what of Government?

Here we will see most change (IMO) but only in terms of the faces. The Tory party conference in 2016 will look very different from 2015 and is likely to be considerably less cocky.

George Osborne and his various strategies look to be pretty well underwater. If he is to be re-floated, he will need a very considerate cabinet and a tolerant public.

The big Treasury projects waiting to be enacted – the LISA/PISA/WISA plan, the changes to pension taxation – even the Treasury/FCA FAMR proposals, are all now under threat till we see what kind of Treasury we get going forward. Osborne was a controlling Treasurer with a considerable tenure, if he leaves, I doubt that his successor will drive these projects with the same vigour.


And what happens in the Treasury, will happen elsewhere. I suspect that there will be major change to reflect the failure of Project Fear and the shambolic state of UK Government since this disastrous referendum took over.

It is hard to remember that Nigel Farage has no political office and that the party he represents has only one representative in parliament (none in the Lords). Whatever his PR antics, Farage has little practical way to influence policy.

In practice then, I see inertia in public policy over the next three months and a great deal of noise from politicians. All this at a time when Britain should be at the height of policy making (a year in to a new parliamentary term).

The power we never thought we had

I haven’t heard of read this, but I sense that we have rather over-estimated the impact of BREXIT on Britain and underestimated it on Europe. We may well have done more harm to the EU than we have to ourselves.

This is not me being revisionist , I am sad we did not stay. But I am not going to complain, I am going to make the most of what the new world offers me and find opportunities.

I will not be listening going forward to any filibustering from the fund industry (or the regulators) about “waiting for Europe”. I will reach out to our friends in the Commonwealth , the US and the Far East with greater confidence and I will not be ashamed to show my passport at European airports.

We have decided and I agree to live in this new world. I suggest that we use the power that some of us did not realise we had, to best effect.




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All change – UK votes to leave


I write at 6 am, at exactly the point when “vote leave won”.

There will be many blogs written trying to make sense of the vote, this will not be one of them.

I voted remain and at mid-day yesterday, I was bragging that there was (on Betfair predicts) an 88% chance that I would win. I was so wrong!

At around mid-night, my partner and I accepted that the votes in Sunderland and Newcastle weren’t bucking a wider trend. my Betfair app was as out of keeping with the unfolding reality as I was!

Screen Shot 2016-06-24 at 07.21.32

What is this?

This is the great kick in the whatnots that this country has been waiting to deliver to the ruling minority in Westminster and the City since it all went horribly wrong in 2008.

72% of us voted,  the biggest turn-outs being in the Brexit areas. This was no fluke, this was democracy in action.

The Scottish are already calling for independence and the right to maintain in Europe. So is Sinn Feinn.

The pound has fallen 10% overnight, the stock market is expected to follow suit. I have been walking the streets of the City, taxis are rushing people to their desks, this is a financial crisis.

My memory of the weekend is walking down streets in Thames Ditton where almost every detached property had a remain sticker in its window. The economic prospects for the wealth of the families within, now looks tarnished.

There was a rainbow breaking over Gateshead, the town that links Sunderland and Newcastle.

Whatever this is, this is democracy in action.

And for intergenerational fairness.

This table tells its own story, I don’t suspect we’ve heard the last of this.


And in Europe

This is a sad day for Europe.

The reality is that Europe feels it needs the UK rather more than the other way round. Ordinary families in Poland and other European countries are now in fear for the millions of their compatriots in the UK. No announcement has been made of their status as UK residents but  the tone of our debate has made them unwelcome.

Just how difficult this will be for the European super state is one of the great questions we now have to consider.

And for British politics

This has been a disastrous referendum, I said this yesterday and today. It has not been carried out in a decent way and it has massively backfired on its architects. It has not been good for the Labour party or the Unions and it is heartbreaking for the few remaining Liberals ( of whom I am one).

The new politics will be very different. We will have new leaders and we will have new policies.

Stop press+++ David Cameron resigns within an hour of announcement+++Stop press

Before this vote, George Osborne threatened us with a punishment budget if we voted as we did. The chance of him carrying out this threat look slim.

And for pensions

On 13th June 2016, Andrew Warwick-Thompson Head of Policy at the Pensions Regulator wrote to me rejecting my request to set up a meeting between him and leading figures in the Transparency Task Force.

We note that it is the FCA’s view that this (transparency) will be best achieved as a pan-European initiative (e.g. PRIPS, amongst others) as many UK investment managers operate across Europe, indeed many operate globally.

Pensions, as almost every area of public policy will now have to adjust to a new reality, that we are no longer subject to European initiatives  and are now self-determining.

The immediate impact of this vote on pension scheme deficits is likely to be mixed, assets will fall (disastrous for those in draw-down) but liabilities may fall too – if inflation kicks in.

Where do we go from here?

This is the political consequence of austerity. We have thrown out the post-war consensus in exchange for a very uncertain future.

We have no choice but to accept this astonishing development and we will have to move forward.

I am not going to shout in anger at the people who voted differently than me nor shout at Nigel Farage and others whose views I do not share.

Like tens of millions of others, I will go to work today and put in my shift.


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SMEs pay for pension advice -but not to IFAs


One of the oddest aspects of auto-enrolment is the disappearance of the IFA. There are exceptions of course but when it comes to the core enterprise of the IFA, advising , implementing and nurturing workplace pensions, the IFA is nowhere to be seen.

The much heralded army of small employers have arrived but most financial advisers are most inconspicuous. This has prompted one of my journalist friends to ask me in publicScreen Shot 2016-06-22 at 06.40.12

Behind this simple question were further questions

1)    Advisers are concerned about the margin crunch (and commission loss) on workplace pensions. So how can they deliver corporate advice on pensions and make it cost-effective?

2) What are the long-term benefits for advisers in engaging more with workplace pensions – and with younger workers in particular?

These are questions for the 2017 auto-enrolment review and they do not have simple answers. There is no switch that can turn  commission back on, and as I’ve written on this blog before, it is counter intuitive to spend money to get your staff to save money. Given the choice, most employers would sooner pay more into their employee’s pension pot.

How is the FCA answering these questions?

The Financial Advice Market Review is currently asking what help is needed from financial advisers and I do not hear concern about the lack of financial advice for small employers on workplace pensions as a major theme,

The average age of financial advisers is generally accepted as around 55, there are very few young advisers and a large proportion of those advising could better be called wealth managers than financial planners.

Indeed the idea of advising young savers how to build the pensions wealth that the next generation of financial advisers can manage is pretty well bottom of the agenda for most of the advisers I speak to. The customer , like the adviser, is advancing in years and is more interested in how to retain wealth than save more.

How is the Pension Regulator answering these questions?

The Pension Regulator issues an information pack to employers preparing to stage auto-enrolment, it includes this advice on choosing workplace pensions


If you press the link you will find this rather vague help when you click on “find an adviser”.

If you have an accountant, they may be able to help you find a scheme or a financial adviser that can help.

You can also use the Money Advice Service retirement adviser directory, which contains advisers who can help you choose a pension scheme for automatic enrolment.

To check if an adviser is authorised by the Financial Conduct Authority, search the FCA register.

Financial advisers are an afterthought for the Regulator.

Does this matter?

IFA’s off chasing the mass affluent’s wealth,

employers being nudged into NEST

and no questions being asked.

This is the shocking state of the market. The 1.5m employers currently considering their options are being given next to no help at all.

The Government has set up NEST which must accept all employers that ask to join it- other pension schemes are also available.

Does it matter- of course it matters. As Simony points out – there is virtually no engagement with NEST , nor with saving more than the minimum , nor with the outcomes of the choice which the employer has.

If we are to build a platform for future saving where employees and employers are happy to have substantial proportions of their earnings diverted into workplace pensions, then we need to get employers and employees engaged with where the money is going.

Where can this engagement come from?

I see no reason why IFAs will want to get involved in helping employers with choosing pensions or employees in saving into them, they are better off managing wealth.


Where I see interest in workplace pensions and in the business of pension planning is among those who pay us our salaries, whether in-house or through bureaux. Typically these people are not financial advisers though they are trusted by those who get paid by them over their money.

These people need to be empowered to talk with staff about how pensions work, what staff need to do to get proper pensions and how to go about doing this as efficiently as possible.

In trying to answer Simone’s questions , I realised that the next generation of financial advisors are not already in the workplace- and nobody knows it!

Employers pay for their staff to get paid, if pensions is deferred pay, they are already paying payroll for pensions. If an employer wants to engage with pensions it will be through payroll not through IFAs. Payroll are the new IFAs.

What needs to be done.

I firmly believe that the answer to the problems of engagement rests with payroll. At present payroll people are being given dismal messages by Government about pensions

The Government has set up NEST which must accept all employers that ask to join it- other pension schemes are also available.

It is time this message changed. It is time the Government started encouraging payroll to take the choice of pensions seriously and start selling the benefits of pension savings to their staff.

In my opinion, payroll is ready for this challenge.


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The still small voice of the (BHS) pensioner


A woman walks past a BHS store in Leicester

A woman walks past a BHS store in Leicester

I think back now to the people with whom I worked in BHS – by and large decent and hard-working folk, who had little prospect of ever being well-off unless they won the lottery or their Premium Bond came up.  Retailing often involves long and unsocial hours, and can include hard physical work of unloading boxes, moving counters and racks etc.  Those who worked in BHS did least a 40 hour week, often working at weekends and sometimes in the evenings, and were paid wages that were never going to make them rich – for many just above the living wage.  Yes, they did get a staff discount on merchandise they purchased from the store, but this was the one and only “perk”.  Many of the staff were, and are, women, and a considerable number were part-time, to fit in with family responsibilities.

I contrast therefore those who are now earning approximately £15,000 or £16,000 per annum with the £5m that Philip Green is reputed to have spent on one of his big birthday parties in an exotic foreign location.  The cost of such a party represents about 333 working years’ salary for a BHS member of staff.

Written evidence of Lin Macmillan to the BHS Enquiry

Worlds apart

Philip Green gave oral evidence to the enquiry last week, he seemed plausible, he made promises, he came across as a reasonable man who had been let down by Dominic Chappell. In the game of pass the parcel, he was keen to be part of a pension solution not the author of the problem.

But as Lin Macmillan’s evidence makes clear, the world of Philip Green is so far from that of most of his shop workers, that the Select Committees considering evidence have every reason to distrust Philip Green.

Yesterday Philip Green is reported to have taken possession of a £46m private jet 

Green jet


The abuse of office

If you look behind the curtain and listen to the Chair of the BHS pension trustees (I know him to be an upright man) then you see the almost impossible conflicts placed upon him and his colleague. Documents published yesterday show how the man to whom Green sold the pension scheme abused his trustees

Another document shows how the promises that Philip Green’s holding company, Arcadia, watered down the support it was giving its pension scheme (the document is structured as a succession of drafts, each of which shows the Arcadia covenant deteriorating.

Rather like God with Elijah, the still small voice speaks through the earthquake wind and fire. The truth resonates above the bluster.

Giving the members back their voice

The reason we are having this enquiry is so the voices of the trustees , pension scheme members and ordinary members of staff can be heard. Thanks to the Committee (and the FT’s  Jo Cumbo, who put these documents on twitter), I know the views of those who do not shout loud and do not have a lawyer to brief them on every nuance.

The BHS problem goes even deeper than the corporate values that have been broken, it goes to the heart of what we expect from business owners towards their staff.

At some stage last century, we decided we did not want unions in the private sector and we allowed their power to diminish to a point where they are all but an irrelevance in disputes like this.

Without the union’s voice, who will speak for the member, other than the trustees and the odd Lin Macmillan, who speaks as a member of the Kirk (the Church of Scotland)


Lin Macmillan

If it were not for Lin Macmillan you would not be reading this article and Philip Green would be a little more comfortable working out what he does next.

Society has a way of speaking through the earthquake, wind and fire. We know that through recent events in Yorkshire. We need to listen to the still small voice.

1 Kings 19:11-13King James Version (KJV)

11 And he said, Go forth, and stand upon the mount before the Lord. And, behold, the Lord passed by, and a great and strong wind rent the mountains, and brake in pieces the rocks before the Lord; but the Lord was not in the wind: and after the wind an earthquake; but the Lord was not in the earthquake:

12 And after the earthquake a fire; but the Lord was not in the fire: and after the fire a still small voice.

13 And it was so, when Elijah heard it, that he wrapped his face in his mantle, and went out, and stood in the entering in of the cave. And, behold, there came a voice unto him, and said, What doest thou here, Elijah?




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Don’t tell me “this feels momentous”


We need a leader not a loser

Does this feel momentous to you?

If we remain in the EU, as the bookies tell us we will, we will be  where we were before this sad sorry saga began, with diminished credibility. If we leave, we will be back at square one – as David Cameron put it last night. Either way, we will have lost and not just lost face, we have lost Jo Cox.

I will vote and vote with conviction and I urge you to do so, whatever your conviction. We owe Jo Cox that as her tribute.

Who wins out of this? Certainly not the political parties. If we remain, we have secured little by the referendum and if we leave we will have, according to our Chancellor, at best more austerity and at worst another recession. There is no sunny upland for us to aspire to either way.

Certainly not the economy, whatever structural faults which were present before  we put decision making on leave prior to the budget, are still present. We have lost time by biding time.

Certainly not the British people who have seen fractious debate tip over into violence at home and abroad. We have put on our worst face to the world and our credibility after this appalling debate is surely diminished as a nation. Both sides invoke the spirit of Churchill to their sides, but they might as well call on King John.

This civil war that benefits no-one

This horrendous three months of unnecessary civil war has been humourless (the court jesters – Farage and Johnson aren’t funny any more, “remain” is a bore.

It has also been confusing. We are being asked to vote with precision on statistics that nobody trusts. The institutions of business, the Bank of England , the CBI , the FSB and IOD are ignored as we decide this “momentous” decision on little more than the flip of a coin.

Nobody can feel happy taking a decision on something as momentous as our constitutional and economic future, with so little hard fact and so much overt prejudice to guide them.

I read this tweet and ask myself today- what I asked when the referendum was announced



I do not think we will get a satisfactory outcome on Friday of this week;-why?  I don’t think most of us will have voted with sufficient confidence to know whether our view has won or lost. In this world the best lack all conviction while the worst are filled with a passionate intensity.

I am told that by voting remain, I am failing to engage imaginatively with what leave might look like. But I see in leave the economic equivalence of an over-hasty divorce without even the pleasure of an adulterous alternative.

I am told by voting remain, that I am making a rational decision based on the economic and political success that being in the EU has brought us. But I see no-one within Government suggesting I enjoy that success. Instead I see airports in lock-down against terrorism and a country closing in on a decade of economic austerity.

We are terrorising ourselves out of the happiness we should be enjoying.  I would put up with more economic pain if I felt “leave” brought us together with the world. I would put up with loss of control if I felt remain led to harmony with ourselves and our neighbours.

Britain has changed but the conduct of this debate hasn’t

The British people deserve a leader who can deliver a State of the Union address that is inspirational and unificatory. We should be proud of our country, not ashamed of it.

Nowhere do I feel more ashamed than when I share the streets with people of so many countries of origin and cannot celebrate. Yesterday I was at that most British of institutions, a friendly cricket match, I was in the minority in speaking English as my first language but that did not lessen the experience! Indeed it made it better!

My friend Jenny went to Brixton market for her lunch yesterday for much the same pleasure. I work and play alongside people whose origin is diverse but I regard them all as as British as I am. Many of them came to this country at the time when Enoch Powell was anticipating rivers of blood- it hasn’t happened.


The level of debate

We need to feel comfortable in our new skin

To me, the way forward does not lie in our settlement with Europe, but in our settlement with ourselves. We have learn to feel comfortable in our skin, our new skin. Britain has moved on from the days following the war, and from our entry into the common market. We are a different place (in my view a much better place) than the country I grew up in in the 1970s.

To a large extent that is because we have been part of the world, not detached from it. This morning I heard this point made by Richard Scudamore, who is in charge of our Premier League. When we entered the Common Market in 1973, an immigrant footballer was almost unknown, today, our Premiership thrives and our national teams are full of players from every background.

Whether we stay in or leave the EU, nothing will change this week, we will still have failed to engage with the change that has happened in our society. I am voting not to pull up the drawbridge, but to open our country to the positive influence of global culture and a global economy.

I look to leadership, a moral spokesperson  – and she is dead.


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Please vote – out of respect.

If you read no other article this weekend, read this by the Fleet Street Fox. It says what I was trying to say in an amateurish way yesterday, it talks of Jo Cox’s death as a wake-up call to those of us who care about society to get up and vote at the referendum and connect with our British society.

My blog yesterday ended

Yesterday I wrote on this blog that I would vote to remain in Europe reluctantly. I was reluctant because I felt bullied and that both options were dismal.

Jo Cox supported the “Remain” campaign during the 2016 referendum on Britain’s membership of the European Union.

I will no longer vote reluctantly.

This has been interpreted as me campaigning for Remain, it is not. It was me waking up to my responsibility to participate in the social enterprise of voting. Jo Cox thought it worth going into parliament and President Obama thought it worth phoning Brendan Cox from his aeroplane.

A man is in a prison cell, his life ruined for ruining a life of another -for many others. Hate does not solve anything and hating the man who killed Jo Cox will not solve anything, that is why I  admired what Brendan Cox said on the day of his wife’s death.

The hate we are seeing on the Euro-terraces is not solving anything , nor is the violence on social media , nor is the abuse being dished out between politicians. Anyway – read the article.

This referendum is not turning out well.

Infact it is turning out to be a disastrous political mistake by the Conservative party (now the Government). I guess that they saw the vote as a way of bringing the conservative party and the nation together but it has done anything but.

It has not created reasoned debate, instead it has polarised people. On the one hand are those who rightly see Britain’s economic interests best served by remaining. On the other, those who see our capacity to determine our future without recourse to our European partners as paramount. Both positions are reasonable and we should be able to decide in a reasonable way.

This bitter civil war of words, is not being conducted in a reasonable way.

It is being conducted through bullying by the big beasts (mostly men) who warn us of the dire consequences of not following them. Neither can admit that this decision is finely balanced. Because of that, people are drawn into confrontation and it is not fanciful to say that the violence in the language is reflected in violence in actions.

The mistake of having this referendum was that we do not have the political leadership in place to conduct this debate in a reasonable manner. Our political leadership has been so destabilised by the various frauds exposed over the past few years that Gogglebox has replaced Question Time as the voxpop of our household!

We seem to have two ways of responding – violent laughter and violent abuse. The middle way of reasoned debate – the way of Jo Cox, simply doesn’t get  airtime.

I was asked, by someone in parliament , to use this blog to promote the case for Remain (on economic grounds) and I haven’t. I don’t want to influence other people’s decisions though I am happy to put my own position on the line (see above).

Whatever the decision of the country, I will accept it as my decision. That is because I am part of the British Society. If we vote to remain, I will abide by European rules as we will be part of European Society too (in a judicial as well as social sense).

I have great sorrow when I think of the death of Jo Cox and I have cried over her death, for her family and for the vulnerability we all have to senseless hate.

I would urge those of us who believe in the things that Jo Cox believed in not to raise our voices but be more eloquent by being quiet.

This hatred that has manifested itself in Birstall, is latent in Britain and we know it. We need to pacify and restrain it, not fuel it with angry words.

When we walk-and I hope we will all walk- into the booth in five days time, I hope we will bring to our decision the conviction of Jo Cox. Whichever way we vote, let’s vote. If we don’t we’ve called time on the values this woman represented.

Jo cox


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Cash beats shares for capital gains (but not for pensions).

Paul Lewis has produced a brilliant study that shows how the outcomes of investing a capital sum in cash would have been better than investing in shares over the past 21 years.

Paul is right, the numbers do  not lie and I’ve included the whole of his press release published this morning on this blog. Simon Read’s excellent analysis is widely available (BBC version here).

I had the chance to critique his work over the past few weeks and ducked the challenge, choosing to pass the research to my colleague Derek Benstead who is both cleverer and more articulate on investment matters.

Rather than paraphrase Derek’s argument, I have published his comments on Paul’s research which appear in the final part of this blog.

To summarise; our view is that Paul Lewis is right, but that shares are still the best investment when regularly saving for a retirement income.

  1. Investing a lump sum into shares and converting that lump sum back into cash IN ONE GO – is risky and usually not worth it.

  2. Trickling money into shares and trickling it out again (as income) is usually worth it, if the space between the trickles is long enough.

  3. People who invest to disinvest are probably better in cash (unless they are thinking 25 years +) and are ISA bound.

  4. People who save regularly for a regular income many years hence are probably better in shares and are Pension bound.


(press release only – full research here)

Paul Lewis

Paul Lewis speaks

Money in best buy cash savings accounts would have produced a higher return than a FTSE100 shares tracker over a majority of investment periods since 1995.

That is the shock finding of new research using best-buy cash data which has never been available before.

The results challenge the traditional view that putting money in a savings account is the poor relation of investing in shares.

The analysis also found that since 1995 investments in funds that track the FTSE 100 would have lost money up to a third of the time over investment periods from one to eleven years. Cash in a savings account always ends up higher than it started.

The new research compared returns from a simple tracker fund – which follows or ‘tracks’ the FTSE100 index of shares in our biggest hundred companies – with cash that is moved each year into a best buy one year deposit account with a bank or building society – sometimes called a ‘one year bond’. The tracker has dividends reinvested and the cash is reinvested each year with the interest earned.

It found that money put into this ‘active cash’ beat the total returns on the tracker in 57% of the 192 five year periods beginning each month from 1 January 1995 to the present. The tracker won in just 43% of periods. For some longer time periods the result were even more marked. For example, for investments made over the 84 fourteen year periods from 1995 cash beat shares 96% of the time.

The research was done by financial journalist and presenter of Radio 4’s Money Box programme Paul Lewis. He gained access to best-buy cash data back to 1995 from the financial information publisher MoneyFacts. Data back to 1995 has never been made available since it first appeared in the monthly MoneyFacts magazine. He says this data makes the research unique.

“This analysis of the new data shows that people who prefer the safety of cash can make returns that beat those on tracker funds in a majority of time periods.

“It also confirms that the risk of making losses on a shares investment is very real. Over any investment period from one to five years from 1995 to 2015 there was about a 1 in 4 chance or greater that the value of the investment would fall. Even over nine or ten years the chance of losing money was around one in ten. Few advisers know those odds still less inform their clients of them.”

“I have long suspected that the merits of cash were underplayed by traditional research which compares poor cash rates with often exaggerated gains on investments in shares.”

The new analysis produces different results for three reasons.

  • It uses a real tracker fund so the gains or losses are after all charges
  • It uses new data on best buy cash accounts which has never before been collated and 
  • It moves savings once a year into the latest best buy – what Lewis calls ‘active cash’.

Further analysis of the data shows that for many starting dates from 1 January 1995 investing in shares over any possible period from one year upwards would have produced a lower return than using properly managed best buy cash. That is true for example for the whole of the two years from 1 October 1999 to 1 September 2001 and for four months from 1 October 2007 to 1 January 2008. Money invested on the first of any month on those dates and left for any period from 1 year to the maximum possible 15 or 16 years would have done better in cash than shares.

There are fewer comparable times when shares produced a higher return over every possible investment period:- 1 November 2008 to 1 September 2009 is the longest run and two earlier dates are 1 October 2002 and 1 October 2003.

Overall for investment periods of five years or more there are 38 starting dates when cash would always have produced a better return but only 24 starting dates when that was true of shares.

Lewis adds: “Cash is not right for everyone in all circumstances. But for a cautious person investing for periods of up to 20 years this research indicates that well managed active cash beat a FTSE100 tracker more often than not. And unlike a shares investment it can never lose anyone money.”

Money invested in best buy cash over the whole 21 year period from 1 January 1995 to 1 January 2016 would have produced an average annual compound return of 5.0%. Over the same period the tracker would have produced a compound annual return of 6.0%. The 1% difference is far lower than the 3% to 8% typically quoted for the ‘risk premium’ of investing in shares.

Derek Benstead on why Paul is right and why shares are still best for pension investing

Derek Benstead

Derek Benstead responds


Paul Lewis’s comparison of the historical performance of cash and shares is interesting.  It is interesting precisely because it is a historical comparison.  My preferred starting point is to look at history and see what I can learn from it.  I would rather look at history than at an actuarial or an investment model.  Modelling is very hard to do well.  Financial models are at risk of producing an unrealistic representation of the real world.  A difficulty of financial management illustrated by a model may only be a consequence of unrealism in the model, it might not be highlighting an actual problem in the real world.

Also to be avoided is the giving of an opinion without evidence, perhaps an inherited opinion, learned from others and not checked out.

So, I am very supportive of the notion of looking at historical data as a first port of call to see what we can learn.

I have assumed that Paul is thinking of individual, not institutional investors.  He has used an equity fund which is subject to “retail” levels of charges rather than “institutional” charges.  So most of my comments relate to an individual making decisions about where to save.

Having looked at Paul’s analysis, what would I conclude from it?  That equity performance is very unreliable.  Equities cannot be relied upon to outperform cash over 5 or 10 year periods.  There is even 1 period of negative return on equities over 11 years.

It is dangerous to be committed to making large transactions in equities at a single date.  A large investment in equities in 1999 when the market was very high would not do well, and performance over any period ending in 2009 will also be poor.  As Paul points out, it can take a long time for equities to recover from a trough (up to 42 months), which is a long time to wait to make a disinvestment.  I dare say it is also possible to explore the opposite point, of how long can it take for equities to come down from a boom so it is more worthwhile making a new investment.

If I received a large sum of money all at once (perhaps from a sale of a small business, or an inheritance) then spent it all at once 5 years later (say on a nice house), I expect I would leave the money in cash over those 5 years, and I imagine many people would do the same.  I don’t think I would want to run the risk of needing to disinvest from equities to buy the house at a time the equity market was low.  I also have the risk of investing at the start of the 5 years at a time the market is high, and the problem of making the judgement of whether the market is high or not.

Paul has pointed out in previous correspondence that professionals do not have a track record of adding value from asset allocation decisions, so the average man in the street is not going to be able to either.

In many cases, people will accumulate money gradually and spend it gradually.  So with no knowledge of what an expensive or cheap equity market looks like, one can save gradually into equities and spend gradually from equities.  At times the market will be high and that month’s investment won’t buy many shares, but this will be offset by times when the market is low and an investment buys more shares.  It requires no skill to buy shares at an average price if the money is trickled in gradually over a long period of time.  And conversely for disinvestment.  But this trickle in – trickle out process takes a long time both to pay money in over a wide range of equity market conditions and likewise to withdraw it over a wide range of conditions.

If I am saving for a deposit on a house, it may take a long time to save the deposit, so I could perhaps trickle money into equities, but I would still want the money all at once at the time of buying a house, and to be in equities at that time would not be wise.  It’s probably wisest to save for a house deposit in cash.

I expect the first resort for most people making savings is to save in cash. It is good to have cash on hand to replace a car, maintain a house, tide over a period of ill health or redundancy. If someone starts to save into equities, then I expect this is because they have enough cash savings and want to seek to earn more on money they don’t expect to touch for a long while.  In which case the criterion that equities need time is met.  And there is unlikely to be a need for a forced disinvestment at a bad time.

I have a mortgage, cash savings, and a DC pension invested in equities and property.  This isn’t as illogical as it sounds.  If I paid all the cash into the mortgage I wouldn’t have emergency money on hand, and I have DC pension savings because my employer contributes and it would be stupid to miss out on the employer’s contribution.  The only equity investments I have are in the DC pension.  They arise from trickled in money that I cannot presently withdraw (I’m not quite 55) and do not expect to withdraw from for years yet.

The best way for an individual to get exposure to equity investment is by membership of a defined benefit pension scheme which is open to new entrants.  A defined benefit scheme of longstanding receives income from its assets and contributions which it spends on benefit payments.  There is broad balance in the cash flows in and out and the DB pension scheme has little need to either buy or sell assets.  The risks of buying or selling assets at bad times are avoided.  Of course, open private sector DB schemes are few these days, and the sorry story of the exaggerated appearances of cost and risk arising from poor advice based on poor valuation and investment models is a tale for another time.

Paul’s analysis uses 21 years of data.  I would not use this quantity of data to make inferences for periods over 10 years.  Once the period being examined exceeds more than half the length of the data, there will be years in the middle of the data in appearing in all periods.  As the period lengthens, there is increasing constraint on the start date getting nearer and nearer to 1995 and the end date nearer to 2016.  I would not use this data to make inferences about cash v shares over periods of more than 10 years.  I wouldn’t make the specific point about the boundary between cash and shares being 18 years.  18 years out of 21 is far too constrained and affected by events in the late 90s and 20teens.

I wouldn’t use this data to make inferences about the difference between the expected returns on equities and cash for the next 10, 20 years.  For the next few years, interest on cash is likely to be lower than for much of the past 21 years.

The comments I have made focus on the unreliability of equity performance.  It suffices to look at the unreliability of equity performance only to make strong points about whether and how to invest in equities.  This unreliability means it is best not to make large transactions in equities.  It is best not to have forced timing of large transactions in equities.  It is good to have cash on hand to draw upon if needs arise.  Whatever the long run performance difference between equities and cash for the next 10, 20 years or more, it’s clear from this data that one can’t rely on equities outperforming cash over a 10 year period.  If we trickle money in to equities over 10+ years and trickle it out again over 10+ years, we’re easily looking at a time span of three decades from start to finish.

Paul Lewis will have as much knowledge as anyone of the dangers of “get rich quick” and “something for nothing” schemes and scams. Equity investment is not a get rich quick scheme.  Equity investment is a get rich slowly scheme from money you can spare.

Derek is an actuarial consultant at First Actuarial


Happy now?

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Linked in – the predator’s playground


I suspect that your view of the $26bn (£18bn) cash valuation of Linkedin by Microsoft, will depend on whether your a linked in predator or linked in  prey.

Linkedin is the Serengeti of the social media world, a (cyber) space where the hunters and the hunted eye each other suspiciously. It is also a fecund space where relationships are born and maintained and for those who know how to use it, a source of considerable commercial advantage.

A semi-regulated wilderness


I will admit to being someone who has and will use Linkedin for commercial advantage. You are most likely reading this article from LinkedIn where I am conspicuous.

Once on linked in , it is virtually impossible to leave. No one has published the number of dead souls amongst its 430m participants, but i know a few of my profiles are deceased, it’s also social media’s Hotel California.

Linked In’s weakness is its revenues. In February 2016 Linkedin’s shares fell43.6% in a single day – wiping $10bn  from its valuation as a result of an earnings report.

I use Linkedin as a premium user (there are several more expensive packages), paying extra allows me to annoy more people and be more snoopy, it makes me a super-predator.

I guess those people who are Linkedin to me and reading this, will be reading with disquiet. However there is a limit to my predation. Every now and again I get sent to the Linkedin sin bin for being too predatory and have to lay off sending connections till I have calmed down.


Organised chaos


While most people find some mastery of Linked in over time, a high percentage of Linkedin users come once and never again. Numbers of my friends have managed no more than a handful of connections over the years since I introduced them and greet me in real life with  “still using linked” and “I don’t know how you find the time”.

In truth, Linkedin saves me a whole load of time. It is my filofax and my messaging system, it’s my social club and my advertising board. It’s where I find out what my competitors are up to and it’s where people find me, to have those discrete conversations that bypass their company’s servers.

It may surprise you, but when UK Regulators want to have an off the record, they often get in touch by Linked In.

And of course there are the Groups, the best of which is of course Pension Play Pen (with its various sun-groups). The biggest groups have more than a quarter of a million members, mine run at 4500 (pension auto enrolment) 7500 (pension playpen) and 500 (Bryanston alumni). Why are they important? Groups are the places where content can best be displayed and (for group leaders) they offer a weekly email to advertise matters of importance (such as the few remaining tickets for Henley aboard Lady Lucy).

Is Linkedin worth it?


To say that Linkedin is worth it depends entirely on you. It is a worthless waste of time to many – including many of my colleagues. It is a fantastic playground – even a hunting ground for others (myself included). It has a few rules but not very many so it is still one of cyberspace’s great wildernesses. But it offers some form of organised chaos through its functionality – such as the groups.

I have no idea where the number $26.7 comes from. I am sure that there are people in Microsoft and Linkedin who can explain it. But frankly its a small price to pay for 430m people if you are a predator, and a ridiculous waste of money if you aren’t.

Your view probably places you on some kind of predatory barometer which someone somewhere is building right now!




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From frustration to disruption – how SMEs prosper!

David and Goliath 3

Over the weekend I got a passionate note from a regular correspondent.

Here it is – with the target of his frustration omitted!

  • The concept of a TPA being paid twice is very common.
  • The main culprit is Cxxxxx
  • They have a subsidiary called Cxxxxx TRACING.
  • Cxxxxx work as tpa for many and when the data needs cleaning they are in the trustee board meeting and always push to get the tracing and cleaning done by Cxxxx TRACING

It is an absolute disgrace and total conflict of interests. The more they underperform they more they get to charge to fix their own failings.…Clearly my company misses opportunities in this situation.

How, politically and morally can I raise the double payment /charging without it being seen as company posturing?

Posturing? – Or standing up for what is right?

This is a problem faced by most small businesses and it gets more acute the smaller and less well known you are. This is David and Goliath stuff; David won by being smart and looking at the problem from the left field.

Goliath, like Cxxxxx was a giant, but unwieldy and pretty stupid. He expected everyone to do what he said because he’d set the rules of military engagement. Nobody told David that he couldn’t hit Goliath “point blank- right between the eyes” with a slingshot. Goliath never guessed that anyone would do that to him – David did – Goliath kicked de bucket!

The other good bit about David was that he didn’t whinge, he didn’t spend a couple of years assembling a troop of supporters (I guess he didn’t wait for second round funding!).

David just went out there and took on Goliath toe to toe, and won it for himself (and Israel).

Which is where my correspondent has got to go. He cannot get the Pension Regulator, or PASA or the Pension PlayPen or me to fight this battle for him. He’s got to get to those lazy incompetent trustees and tell them straight.

“Look guys, that money that you are throwing at Cxxxxx is dead money, you’ve already spent it, either get Cxxxxx to put things right for nothing or let me do it for you.”

And I’d make the point that the road to the PPF is paved with bills paid to the likes of Cxxxxx, just look at recent cases.

DAvid and Goliath

Call fiduciaries  if they are failing – no one else will.

One of the worst crimes you can commit is to stay silent , when an atrocity is being committed. As the great poet Ezra Pound wrote

Here error is all in the not done,. all in the diffidence that faltered . . .

David -if he missed – would have been mauled to death by Goliath, my correspondent if he misses may be dissected by lawyers, but surely- if he knows himself to be right – my correspondent must call it as he sees it.

Nowhere is this more important that when it is “other people’s money”. Would those trustees have reappointed Cxxxxx if it had been their private wealth that had been maladministered? Would they have written out the check a second time if they had not been thinking of circumstances where but for the grace of God, they might too have been called for incompetence?

In my experience, the problem that my correspondent is facing is not just with Cxxxxx but with the club of trustees and other stakeholders of occupational schemes who- for very good reason- want to run a closed shop.

The good that SMEs do

David and Goliath2

Cxxxxx must have been a small business once, once it broke down doors and threw stones at its Goliath and it won because it was more sincere, more direct and did a better job. Then it grew into Goliath’s clothes.

SMEs are here to be disruptive, for without disruption, we will be trampled by Goliath. If we play by Goliath’s rules we will be beaten up and we will close. David won because he had the Lord on his side (which I take to mean “he was right”).;

Whether my correspondent is right and Cxxxxx is wrong I don’t know. But my advice is that he reads this blog, takes up his sling and walks out to fight. For nobody is going to fight his fight for him. Not even me!

The good that SMEs do is down to the Davids.


For further inspiration

For a treat, here is Pasolini reading Canto XXXI back to Ezra Pound (in Italian)

Here are the words in English – then Italian

What thou lovest well remains,
the rest is dross
What thou lovst well shall not be reft from thee
What thou lovst well is thy true heritage
Whose world, or mine or theirs
or is it of none?
First came the seen, then thus the palpable
Elysium, though it were in the halls of hell,
What thou lovest well is thy true heritage
What thou lovst well shall not be reft from thee
The ant’s a centaur in his dragon world.
Pull down thy vanity, it is not man
Made courage, or made order, or made grace,
Pull down thy vanity, I say pull down.
Learn of the green world what can be thy place
In scaled invention or true artistry,
Pull down thy vanity,
Paquin pull down!
The green casque has out done your elegance.
Master thy self, then others shall thee beare
Pull down thy vanity
Thou art a beaten dog beneath the hail,
A swollen mag pie in a fitful sun,
Half black half white
Nor knowst ‘ou wing from tail
Pull down thy vanity
How mean thy hates
Fostered in falsity,
Pull down thy vanity,
Rathe to destroy, niggard in charity,
Pull down thy vanity, I say pull down.
But to have done instead of not doing
This is not vanity
To have, with decency, knocked
That a Blunt should open
To have gathered from the air a live tradition
or from a fine old eye the unconquered flame
this is not vanity.
Here error is all in the not done,
all in the diffidence that faltered


Quello che veramente ami rimane,
il resto è scorie
Quello che veramente ami non ti sarà strappato
Quello che veramente ami è la tua vera eredità
Il mondo a chi appartiene, a me, a loro
o a nessuno?
Prima venne il visibile, quindi il palpabile
Elisio, sebbene fosse nelle dimore dinferno,
Quello che veramente ami è la tua vera eredità

La formica è un centauro nel suo mondo di draghi.
Strappa da te la vanità, non fu luomo
A creare il coraggio, o lordine, o la grazia,
Strappa da te la vanità, ti dico strappala
Impara dal mondo verde quale sia il tuo luogo
Nella misura dellinvenzione, o nella vera abilità dellartefice,

Strappa da te la vanità,
Paquin strappala!
Il casco verde ha vinto la tua eleganza.

Dominati, e gli altri ti sopporteranno
Strappa da te la vanità
Sei un cane bastonato sotto la grandine,
Una pica rigonfia in uno spasimo di sole,
Metà nero metà bianco
Né distingui unala da una coda
Strappa da te la vanità
Come son meschini i tuoi rancori
Nutriti di falsità.
Strappa da te la vanità,
Avido di distruggere, avaro di carità,
Strappa da te la vanità,
Ti dico strappala.

Ma avere fatto in luogo di non avere fatto
questa non è vanità
Avere, con discrezione, bussato
Perché un Blunt aprisse
Aver raccolto dal vento una tradizione viva
o da un bellocchio antico la fiamma inviolata
Questa non è vanità.

Qui lerrore è in ciò che non si è fatto, nella diffidenza che fece esitare…

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Theft is theft – however and whoever.

cattle thief

cattle thieves



I have been reading about Messrs Grey and Kelly on the FCA’s website. These two advisers systematically pillaged client accounts;  the FCA has found that Mr Kelly

Kelly scam

what is more

Kelly 2

Clearly these guys were up to no good and no more deserved being called adviser than a cattle thief.

But what they did does not seem to be a lot different than many others in the 16 layers of intermediation between us and our money.

  1. They charged too much
  2. They disguised the charge

Where were the product providers in this?

What appears to have happened was that the product providers were happy to release  money from the client accounts into Grey and Kelly’s bank account. They would argue that they sanction payments (at their discretion) to custodians, lawyers, auditors and all manner of other intermediaries as part of business as usual.

Kelly and Grey only differed in that they were the client facing part of the value chain and therefore the people directly regulated by the FCA. It is the duty of product providers (asset managers) to act in the interests of the fund, that means keeping fees to all these intermediaries to a minimum. If these fees were so high, why were the Product Providers called to account by the FCA?


The capacity of asset managers to pay advisers , (see list above) from the assets of the fund is usually written into the terms of business you sign when you make an investment, or in the case of Kelly and Grey, when your adviser makes an investment on your behalf. The permissions are technically available to be seen because lawyers are able to keep their clients “technically” compliant.

We as consumers trust our asset managers to act in our interests (known as the fiduciary duty) and that means the asset managers keep a proper distance between advisers and call time on what they see as shady practice. On this basis, the City has worked for hundreds of years.

The assumption has always been that were a customer to ask to see the books, the asset manager would be proud to show the fiduciary care being taken on their customer’s behalves.

But the asset managers are now telling us that it would be impossible to fully disclose all these “hidden” costs and charges. They say this because to do so would take too long, cost too much and amount to nothing.

Transparency in all things

Kelly and Grey were found guilty  by the FCA of not disclosing their charges and charging too much (they appear to have forged some documents as well). They will now face criminal charges – presumably for theft.

Meanwhile, senior employees of banks and asset managers walk free having stolen money from client accounts through all manner of illegal activities for personal gain. Their behaviour is different only from Grey and Kelly’s in that the victims of their crimes are institutional and the FCA cannot identify them.

But because you ripped off the Post Office or Sainsbury’s pension scheme rather than some hapless SIPP customers, does not mean that individuals did not suffer. These pension deficits are not just because of rip-off charges but costs and charges have to be paid by someone out of something.

Even when these costs and charges are being paid by Trustees and ultimately large employers, they are being paid out of a pot of money dedicated for the benefit of employees.

These are not victimless crimes

It is easy to have a go at Kelly and Grey, they are small fry. It is not so easy to have a go at the large commercial banks, the trading houses, the lawyers, auditors and the investment consultants, all of whom take money our of our funds without telling us how much and often at rates that make my eyes water.

When you call them, they summon you to their offices – sometimes to their lawyers offices- to intimidate you. I was contacted by State Street a few weeks ago who wanted to discuss things I have said on this blog about them. The meeting hasn’t happened because the person who wanted to meet me had to go to the States- in the meantime I am left hanging…

These large financial entities think they can behave as they like with our money, much as Kelly and Grey thought they could. The only differences I can see between the behaviour of Kelly and Grey and these institutions, are down to scale



Addendum; that FCA press release

press release


The Financial Conduct Authority has banned Mark Kelly and Patrick Gray from working in the financial services industry on the basis that they lack integrity.

Mr Kelly provided financial services to UK customers under the name PCD Wealth and Pensions Management (PCD) and Mr Gray was one of his advisers. Between 2008 and 2010 PCD arranged for over 350 customers to be advised and invested nearly £24 million of customers’ funds in potentially unsuitable investments. PCD also failed to declare to customers the fees it was receiving from a number of these investments.

Mark Steward, director of enforcement and market oversight at the FCA said:

“These two individuals misused pension funds, endangering the retirement incomes of hundreds of people. While further investigations continue, the FCA considers it necessary to prohibit them to help protect consumers.”

Between August 2008 and July 2010 Mr Kelly invested customers’ pension funds in risky investments without customers’ knowledge or consent. The process was designed to prevent customers from discovering where their funds had been invested and without any regard to the suitability of the investments for the customers.

Mr Kelly also received some money from product providers taken directly out of customers’ investments, without their knowledge. He arranged for this to be paid directly into a bank account in his name.

Mr Gray provided investment advice to at least five customers in the knowledge that he had no qualifications or training to do so.  In one case he gave unsuitable advice to a customer to invest in an unregulated collective investment scheme (UCIS).

Mr Gray also recklessly provided customers with misleading information in relation to costs and charges and arranged for customers to sign incomplete investment forms despite being aware of the risk that fees could later be added to the forms (and taken from customers’ funds) without their knowledge.

In addition Mr Gray gave customers pension reports containing false and misleading assurances that they would receive advice on their investments even though, from October 2009, Mr Gray knew that funds were being invested without their consent or knowledge. He also misled the FCA in a compelled interview.

The FCA cannot fine either individual because they were not approved persons at the time of the misconduct. The FCA understands that further investigations are continuing.

Notes for editors

  1. The Final Notice for Mark Kelly
  2. The Final Notice for Patrick Gray
  3. On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA)
  4. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system and to promote effective competition in the interests of consumers
  5. Find out more information about the FCA
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The market-force and where it has a voice.



I spent most of yesterday in company with pension providers at the MarketForce conference in London (and most of the evening whooping it up with my chums in payroll!).

The Marketforce Conference is clearly a big deal- brilliantly organised and a credit to the speakers and delegates. I was there wearing a press pass, presumably because Marketforce are forward thinking enough to consider social media worthy of formal recognition.


Most of the presentations I saw were based loosely on research carried out by the presenter. for instance…

BlackRock had surveyed 43,000 people and discovered they invested too much in cash and not enough in longer term investments.

Just Retirement found that left to their own devices, people took sub-optimal drawdown decisions.

Various back-office organisations found that insurance companies would be better off investing in the technologies they made available so that we could have pot follows member etc…

In short, the societal solutions put forward were happily aligned to the business plans of the organisations commissioning the research and the solutions to the problems emerging were usually to be found in the re-education of the customers.

Counter argument

There is of course a counter-argument, which was not so well represented but was certainly going on in my head, that the 43,000 BlackRocky “surveyed” were not wrong but right and that for them, cash was a happier place to be and provided greater overall happiness than shares.

Similarly, those who were exercising freedoms in the way that suited them at the time might turn out quite happy with the consequences of their decisions.

And that even the insurers who chose not to invest in back office technology , might be investing in other things (such as taking away the exit fees to loosen up the assets_.

Synthetic argument

“Synthetic” is a good word as it implies both a fusion of both previous arguments and a degree of artificial congruity.

I don’t think that many of those surveyed would have come to quite this conclusion nor do I think the Business Development Directors delivering the presentations would have entertained the idea that the people surveyed might be right!

Paul Lewis will be publishing a piece of work next week which shows that people who have stayed in cash of late, would have been proved right to have done so. The equity premium – for them – has not emerged and they may be struggling to get above the cash line before needing to spend the money. Martin Lewis does not suggest equity investments because he cannot predict the consequences. More people take advice from the Lewis’ than the 13,000 wealth managers who are the primary drivers of equity investment.

However Derek Benstead, of First Actuarial has shown me numbers that suggest that managed properly, using trickle in and trickle out contribution and spending patterns, equities could be used “usefully” as a long-term  investment plan, especially for the savers and spenders who prize income over capital.

Which also addresses questions about retirement income planning suggested by Just Retirement. Their thesis appeared to be that retirement income planning was too complicated to be left to individuals and that advisers, who can suggest, implement and manage the complex solutions in the Just Retirement kit bag, are vital to the future welfare of those retiring today and tomorrow.

I won’t labour the point that a penny spent on back end technology for insurance company legacy systems is a penny that might better be spent helping clients get VFM- as I am out of my depth, but you get my gist.


I believe in big data, I believe in crowd sourced wisdom and (probably because I am a consumerist) I think that the customer is usually right.

Marketforce left me with the impression that the customer was usually wrong and that without substantial re-education, the customer base of the UK financial services industry was going to hell in a handcart.

I do not believe this is the case. I believe that customers are usually right and that it is the funds industry, the retirement planning industry and the technology specialists who are not listening to what customers are actually saying, wanting and needing.

Infact it is the business culture of organisations that needs to change to meet the changing needs of customers, not the other way round.

Which is why it was very encouraging to hear the two most powerful people in the room – Nigel Wilson and Ros Altmann, talking a lot of sense and talking exactly the language of the ordinary people who were so silent in their majority.

Ros Altmann new

Ros Altmann

Nigel Wilson

Niigel Wilson

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The Pensions Dashboard (and consumer demand)

Clive grinyer 3

Clive Grinyer


“I didn’t know I wanted this, till I came here – I do now!

This was the feedback from one tester of a dummy pension dashboard , as reported in an excellent presentation by Barclays’ Clive Grinyer at a Pension Quality Mark event yesterday.

It’s a bit like staring at a dirty window for years until somebody lets you see outside.


What’s it all about Clive?

Mercifully this was not a presentation about rival consortia and the struggle to win the Government’s hand to build a dashboard; instead we had a clear articulation of that is going to need to happen for us to see clearly out the window – our retirement finances.

For a dashboard to happen by 2019, three things need to come together

  1. A digital verifier authorised by Government (like an electronic passport)
  2. A pension finder service that can get our data from around and about
  3. A user interface (dashboard) that displays the data in a meaningful way.

The Government has decided we have three years to wait and as it took Clive 8 months just to agree to run this prototype, some will say this is ambitious.

But if the feedback is right, and intuitively I sense it is, the ambition will be worth the hard work that must happen from now on.

The vision for the delivery process was simple and eloquent

  1. You verify yourself online (otherwise get yourself digitally verified in a post office.
  2. You enter your national insurance number (which identifies the vast majority of your pension investments
  3. You see your state pension expressed in £pw, your defined benefits (including annuities) expressed in £pa and your DC pot expressed as a cash sum or a £/pa equivalent
  4. You get a whole set of tools that allow you to model “what if?” scenarios.

On top of this basic service, other things could be built, assets that can’t be identified by NiNo, could be flagged as likely your

“we found some more money that looks like yours”

details of which might emerge if you can confirm a couple more data items. Beyond this low hanging fruit there might be more stuff that could be manually traced.

Talking with fellow delegates after, we talked about ways to “search by CV” – perhaps uploading a Linked In profile to interrogate past employers about lost pension entitlements. That we were being fanciful told me that delegates were genuinely enthused.

Getting in the window cleaner!

The mood music of the meeting was not antagonistic, sure there were worries expressed that some legacy providers would not want to play – fearing that without  (or with reduced) exit penalties, legacy assets might vanish to the stronger pension players.

I thought that legacy providers would not fund IGCs and I was wrong, the legacy provider governance through IGCs is stronger than I dared hope. I do not share the scepticism.

Pots cannot follow members until people engage with the issue of consolidation, educate themselves about how to organise their retirement around their various financial resources and until people are empowered to take decisions using real time information.

I am not sceptical about people taking decisions on how to spend their money. I can walk down Oxford Street day and night and see people doing that in their thousands. If people are given a clean window on what they have, I am sure that they will be empowered to make the most of it, especially when there is a clear pathway to maximising the utility of the savings!

Put more simply, when people know what’s going on, they are quite able to make the  most of it (ask Martin Lewis whose website allowed over 4m people to download PPI claims forms).

The digital game-changer

Sceptics ask why – in 30 years of trying- we haven’t had a pensions dashboard. The Conservative MP Tom Tugendhat answered that question at a recent FCA meeting I was at.

“Digital Technology makes it impossible for these secrets to remain hidden”

As I’ve mentioned above, this was not a meeting where the financial services industry looked back in anger, it was, as Tom was doing, looking forward.

People in the room were responding to that anonymous feedback;-

“I didn’t know I wanted this, till I came here, I do now”

Thanks Clive

Clive-Grinyer 2

Clive Grinyer

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Don’t be passive; just because your tracking


investment consultants 2

Most of us have our pensions invested in passive funds. I use a passive grammatical structure because we do not choose , our funds are chosen by others, hopefully with our best interests in mind.

So the best we – as individual investors can do – is trust that those who look after us- trustees and Investment Governance Committees (IGCs) know what they are doing and are working hard for us.

This piece of work is about helping ordinary people (pension investors) ask questions of trustees and IGCs and for trustees and IGCs to think about when looking at the  investment funds they are employing to provide us with the best outcomes when we retire.

Necessarily I am talking about passive funds as almost all the money in the DC defaults is passively managed.

We start by understanding what we don’t know

We think when we invest in a passive fund that tracks an index, that it will give us the return on the index, less a stated charge which is what we pay for the fund.

There are three issues with this.

  1. Firstly (if we are in a GPP or mastertrust default),  we don’t know what the provider is paying for the fund.
  2. We don’t know how closely the fund tracks its index (tracking error)
  3. We don’t know whether what the fund is actually doing is tracking something different (tracking difference)

Bear with me as I try to explain, this is important and you can’t google it. You won’t get told this in your product literature and most people who you talk to at the pension provider won’t know much about this.

Infact it is all so obscure that you will have to pay an investment consultant a large amount of money to explain what is going on , and since most investment consultants have their eyes on other balls (DB solvency typically), you’ll have to get lucky with the investment consultant as well!

This is why Andy Haldane, Chief Economist of the Bank of England is right when he says he doesn’t understand his pension fund. It’s bloody hard, this article is very long and though I’ll try to make it fun as we go along, I don’t blame anyone on giving up. If you do, you might like to skip to the very end where I sum things up.

1. What is being paid for the fund (and by whom).


What you pay for your pension is not what your pension provider pays for your pension fund.

The cost of your pension fund to the pension provider is subject to an Investment Management Agreement (IMAs) and is secret. It should not be secret, but it invariably is, because of implicit (contractual) or explicit non disclosure agreements.

Even the trustees of the schemes and the Independent Governance Committees don’t tell you about the details of the IMAs. But having worked for insurance companies, I know that the cost the pension provider pays for a fund can be less than 10% of the annual management charge you pay. I hear rumours of IMAs where the cost of the default fund is less than 0.05% while the AMC to the investor is more than 0.50% – ten times more than the fund cost. The rest of what you pay is for the additional services offered by the provider.

Not only does the IMA detail what the pension provider is paying, but it agrees what the beneficiary of the fund is getting by way of services. With an index tracker , you might expect that the member is getting the exact return of the index but that may not be the case.

As we don’t get to see the IMA (and most trustees and IGCs don’t have the time or expertise to read them even if they did), what happens with your money is a matter of trust and – what you as an investor are actually paying – depends on how much of the discount, that the provider negotiates ,is passed on to you as an investor

Generally, the master trust providers and insurance companies drive a hard bargain on the cost of the funds they buy for you. But that bargain may benefit them more than it benefits you, infact the more they screw the asset manager, the more the manager may be screwing you. That’s why Trustees and IGCs are absolutely vital, they are there to make sure the IMAs are fair to all.

Is an IMA good or bad?

A trustee or IGC can only work this out when they understand the total consequence for the member of the Investment Management Agreement.

If the IMA offers a very low price to the provider and delivers low fund expenses and full enhancements (see below) then it is a good IMA. But if the IMA offers low cost to the provider in return for which the member carries all the fund expenses and gets a poor deal on enhancements, then the IMA is bad. If the IMA doesn’t promise standards for tracking error and tracking difference – then the performance of the fund cannot be measured and the IMA is incomplete (and bad).

It is vital that Trustees and IGCs have access to the IMA itself and that they know what it is saying. They should get professional help to understand the IMA.

The trustees/IGCs ought to know what they are choosing for their members and should be clear about what tracking error and tracking difference they should be expecting from the funds. In my experience, most trustees and some IGCs are not asking these questions. Some have never looked at the IMAs and some have never even asked to see them.

Once the provider, trustee/IGC and fund manager are happy with the IMA, a process needs to be in place to make sure that the IMA is being kept to.

In answer to the question, the IMA is good or bad firstly for what it promises and secondly for how well those promises are kept.



Tracking error

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Tracking error is often cited as a key factor in passive fund selection. Tracking error is to tracker funds as goal tally is to a Premiership striker – a fundamental measure of how well the job is being done.

A tracker’s role is to deliver the returns of its benchmark index. In an ideal world, if the FTSE All-Share index returns 10% a year, then a FTSE All-Share tracker will also return 10%. But the world is rarely perfect (mine isn’t anyway), and tracking error shows just how wide of the (bench) mark the performance is.

What exactly is tracking error?

Like so many investing terms, there are many different versions of tracking error and ways of calculating it. It’s therefore often difficult to be sure that two different sources are talking about the same measure.

That said, a reasonably common definition of tracking error is:

Tracking error = the standard deviation of returns relative to the returns of the index.


The lower the tracking error, the more faithfully the fund is matching its index.

When comparing funds, choose the lowest tracking error possible. A tracking error above 2% indicates the fund is doing a bad job.

What causes tracking error?

An index tracker is like an impressionist. It mimics its benchmark but can never quite be a dead ringer, chiefly because of:

  • Costs

Index returns aren’t dragged down by operating expenses, but tracker fund returns are. Therefore you’d always expect a fund to lag its benchmark by at least its ongoing charges. The ongoing charges are deducted from the fund’s net asset value (NAV) on a daily basis, so the lower the ongoing charges, the lower the tracking error, and the better the expected fund return, all things being equal.

  • Replication

Full replication funds that hold every stock in their index should offer zero tracking error as they are the index. (Except that transactions costs incurred when rebalancing ruin the beautiful dream).

Partial replication funds that sample a portion of their benchmark’s securities (because the cost of holding them all is too high) will inevitably generate tracking error, being only a representation of the index rather than a perfect clone.

Synthetic funds use swap-based contracts to guarantee they match their indices’ performance. But the swap fees and collateral costs incurred by the contracts drag down fund performance against the benchmark.

Taxes and transaction costs like brokerage fees and trading spreads add to our tracking error woes, no matter which replication model is used.

  • Turnover

The more trades a fund makes, the greater the trading costs, which ultimately undermines performance and adds to tracking error.

  • Management experience

Although index funds are popularly thought to be so simple that they can be run on a spreadsheet,  better management can rein in tracking error. Trustees and IGCs should look for funds with a long record of tight tracking error.

  • Enhancements

This one actually works in our favour. Funds can earn extra revenue that closes the performance gap (or even turns it positive). Typically this income comes from two sources:

  1. Fees earned by lending out fund securities to short-sellers.
  2. Dividend enhancement – lending out securities to tax-benign territories when dividends pay out.
  3. The extent that these enhancements benefit the investor or the fund manager are determined by the fund manager but should be governed by the IMA. Properly negotiated IMAs will be clean on this , investors should expect 100% of enhancements (without additional undisclosed management fees).
  4. These enhancements carry extra risk (as you may not get your stock back and tax bets can go wrong). Choosing not to enhance the fund reduces tracking error (though it may also reduce the return on the fund (see immediately below)

Is tracking error good or bad?

I found a good chart  to answer this question in a Vanguard brochure.



What this graph tells me is that Fund A is great in the longer term as it is regularly giving me more return on my money. But in the short term, Fund B is giving me more certainty.

Do I want that extra certainty? Well if I’m investing for the short term, yes I do, but generally I’d be convinced by Fund A if I was investing for a long time (which most pension investors do).

Tracking difference.

investment consultant 2

Tracking error is a good measure to know what you are buying but it doesn’t help you know what you are paying.

To do that you, you can use tracking difference as a substitute for tracking error when you want to work out if what you are getting for your money.

Tracking difference is relatively easy to calculate.

Total fund return Vs. total benchmark index return

For example:

If the  XYZ FTSE 100 tracker returns = 1%

And, its benchmark FTSE 100 index returns = 2%

Then tracking difference = 1%

Whatever the IMA says, that tracking difference provides a far more accurate description of the cost of owning that fund.



Trustees/IGCs Look out!

There is one big pitfall to trap the Trustee/IGC seeking a simple tracking difference reading: you must be clear what fund  you are tracking and you need to understand the type of platform you are using

If you are investing using  an institutional funds platform (run by a custodian) ,you can be pretty sure what you see as a fund is what you get.

If you are running a default on a retail SIPP platform (such as Hargreaves Lansdown or True Potential), you need to check whether your fund is meant to hug the Total Return version, or the Price Return incarnation.

Typically trustees aren’t monitoring SIPPs and even IGCs are going to have to warn investors who stray away from the default that they are on their own but they can still be warning investors to be aware that there can be a few different versions of the same index.

If you using an insurance funds platform then the funds you are tracking are the insured versions of the underlying tracker.

  • Some tracker funds started life as insured funds and that’s what you are buying
  • Some insured tracker funds have now been reinsured by your insurer so will be owned by the reinsurer who is responsible for the fund.
  • Some funds started out as ETFs or OEICs, got insured and are now being reinsured.

As a general rule , the more complicated the fund structure, the more likely it is there will be tracking difference. Each wrapper invites more cost and the possibility of errors (which are rarely in the interests of investors). Look for short lines of communication and uncomplicated fund structures.

So what makes for good?

The larger the performance gap between fund and index, the more flawed the product is. Even a tracker that’s trouncing its index is no cause for celebration. Trackers are designed to match the market, not beat it, so deviant performance simply shows the product isn’t to be relied upon over the long-term.

Chances are that the funds with the least complicated structures will also be the ones with the lowest tracking difference. But unless Trustees and IGCs understand the terms of the IMA, they will have no way of gauging the money their members are really paying for their fund.

If they know their IMA they can determine firstly the VFM of the IMA (if they can compare against other IMAs – which they should be able to do)

Once they know their IMA is offering VFM, they need to make sure that the fund managers manage within the agreement, don’t have tracking error that is either too high or too low and that the tracking difference is within the expectations offered by the IMA.

I am not an expert in IMA negotiation, but as a conscientious investor I would like to think those who are my trustees or sit on my IGCs – are!

What makes for good is good governance, which starts with the Investment Management Agreement, continues with the monitoring of the tracking error and tracking difference of the fund and ends with good outcomes for individual outcomes for members.

How can we influence this to happen?

We need to get savvy and start bending the ears of trustees and IGCs. If we are trustees or sit on IGCs , we need to put this stuff into action. We should not shut up, we should be noisy. There is no short cut, it’s our money and we need to kick arse!

This has been a long blog and I’m grateful for Monevator from whom I’ve cribbed a lot.


governance 2



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Who’s afraid of auto-enrolment?

Despite the dire warnings – not that many UK employers

New research from workplace pensions provider NOW: Pensions reveals that UK small firms are relatively relaxed about auto enrolment and the introduction of the National Living Wage with concerns focussed on sales and access to finance.

Here’s the response to their question… 

“What’s your biggest business concern this year?”

  1. Sales                                                                          (34%)
  2. Access to finance                                                   (12%)
  3. EU referendum                                                       (7%)
  4. Government spending cuts                                (7%)
  5. Technology (not being able to keep up)          (6%)
  6. IT security                                                                  (4%)
  7. Auto enrolment                                                        (3%)
  8. National Living Wage                                             (2%)
  9. Attracting and retaining staff                              (2%)
  10. Lack of skilled workers                                            2%)


I know we are supposed to throw our hands in the air and cry “woe” upon these feckless employers ,NOW’s press release  laments that over a third of employers that completed their NOW application in Q1 were either very close to their staging date or after the deadline had passed. 

But I am not in the least worried about this. I am very happy that only 3% of employers are citing AE as a business concern. Presumably 97% are (to some degree) looking forward to offering their staff a workplace pension and an increasing contribution towards their retirement.

Winners mean losers

Not only is stage one of auto-enrolment fulfilled, but stage two, the dispersion of the policy to 1.7m smaller employers is not presenting SMEs and micros with the predicted thread. You may argue (as providers do) that there is complacency and ignorance baked into that “3%” number, but I give SMEs and micros (and their business advisers) more credit than that.

I speak as one of them. We tend to deal with problems sequentially and don’t strategise. If a problem is three months away , it’s a future problem. Today’s problem is sales and sales are impacted by lack of investment finance and the Brexit vote and then there’s a whole lot of other stuff that I know I’ve got to get round to but will probably pay someone else to do for me (cyber-security, auto-enrolment , social media).

Bottom line, auto-enrolment isn’t the big threat we were told it would be. And that means auto-enrolment is winning. Where there are winners, there are losers. The losers are the various ambulance-chasing middleware merchants who predicted carnage at this stage and now see their business plans in tatters.

We do not have carnage at payroll and we don’t have mass non-compliance at the Pensions Regulator and no organisation has or will go to the wall over auto-enrolment. Even the most egregious offenders – step forward Swindon Town FC – have shrugged off their fines and – despite public embarrassment – carried on trading.

The losers are the gain-sayers who said it wouldn’t work.

The new paradigm for auto-enrolment is pensions

kevin hart

Kevin Hart

I think something happened recently. I first spotted it when Kevin Hart of Sage intervened in a BASDA debate and asked us to think of auto-enrolment as a way that Business Software developers could get involved in helping in the public promotion of pensions.

The point Kevin made was that – to the public – auto-enrolment is not about payroll, or straight through processing – or regulatory processes. It is about getting people money in retirement through regular saving from the pay-packet.

That’s why auto-enrolment isn’t a threat but an opportunity. And it isn’t just an opportunity for the backroom boys of BASDA, but a chance for employers to show off that they are part of the solution and not accentuating the problem.

Of course there are still problems with the pensions into which we are investing. But if there’s a new paradigm for auto-enrolment, there’s a Zeitgeist for pensions! The pensions Zeitgeist is the demand from without and within the pensions world for value for money from the pensions we are peddling to these new employers and to those who here-to-now have got what they’ve been given.

Payroll  will eat pensions

By the end of the decade, the question applicants will ask won’t be “do you have a pension?”, but “how good is your pension?”.

Pensions will be part of business as usual whether you work in a chippie or make silicon chips.

Because pensions will be within (almost) every employer, every employee will have to think about them, if only when getting another job or at re-enrolment. They won’t go away.

Those people in companies who know about pensions will become increasingly valuable. I look forward to the day when the pensions officer in a company is a job that’s really worth having. That person can and should be the equivalent of the health and safety function, a really critical part of an organisation’s DNA

It may be the smallest employers will not have such people – but they will know someone who staff can ask questions of, someone who is trusted and reliable and has a track record. In my view, the one person within or without an organisation who fulfils that function is the person who pays us.

So when I say payroll will eat pensions, I mean that we will – I hope – start thinking of the people who pay us now, as the people who hold the keys to our being paid when we hang up our boots.

Who’s afraid of auto-enrolment?

97% of employers do not see auto-enrolment as their biggest threat. Those 3% who see it as a threat are to be congratulated but the 97% are not a threat – but an opportunity for pensions folk.

I know that enforcement is important and that the stick needs to be waved to the reluctant horse, but isn’t it really time we joined Kevin Hart and Sage and started talking pension auto-enrolment up as something that is going to do people a whole lot of good?

Thanks to NOW Pensions, your survey is good news to me and I hope it is good news to those of us engaged in making this great national enterprise work.


Posted in auto-enrolment, NEST, pensions, Pensions Regulator | Tagged , , , , , , , , , , | 2 Comments

Independent and inter-dependent!

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Jo Cumbo- FT pension journalist

Two top journos go nose to nose-  the usual suspects winding them up, it has all the ingredients of the weigh-in  …before a 15 rounder!

But it’s more complicated. Jo is employed by the FT and protective of its business model (she DMs me politely suggesting i make my way to my newsagents when her story’s behind her paywall). Paul is free to listen to, but like Danny Baker (my other fave) he’s freelance, he gets work from the BBC when he can get it. Paul has a different kind of dependence.

We may be independent, but we are all inter-dependent. When the FT published its death by 1000 cuts story as its front page lead, it got threats from asset managers that advertising would be cut. The FT can build such threats into its business model as it prizes independence above revenues (incidentally you can now read this story for free if you answer the FT’s questions) – press the link when you’ve finished reading this!

The BBC too has the strength of a subscription model (the licence fee) that makes it semi autonomous; but as Jo points out, it has the tax-payer to fall back on. Bernard Rhodes , when he spoke on Friday last, railed against the pathetic laxity within the BBC that allowed Jimmy Saville to be revered even as he fiddled. Rhodes refused to allow the Clash to appear on Top of the Pops , putting his principles before his pocket.

But other bands he managed, Dexy Midnight Runners and the Specials were Top of the Pops regulars. You have to wonder about absolutes, as the Clash sang in All the Young Punks

Of course we got a manager

Though he ain’t the mafia

A contract is a contract

When they get ’em out on yer

Strummer/Jones were independent of Rhodes but Inter-dependent. In Career Opportunities Strummer snarled “do you wanna make tea at the BBC, do you wanna be , do you really wanna be a cop?”

Rhodes knew that putting his band on the BBC would compromise the brand, the BBC became part of his marketing machine when he refused to let them appear.

Independent but inter-dependent

Without the BBC, the commercial press would have no benchmark nor nothing to shout against. Jo Cumbo and Bernard Rhodes are as one in their inter-dependency.

Without NEST, the commercial pension providers would have nothing to kick off against. We need NEST not just as a long-stop, but as a sounding board and a trampoline.

Jump on the BBC and see how high you bounce, jump on NEST and see how high you bounce.

The Government and its money is not inexhaustible and demand could be insatiable. NEST could be a victim of its own largesse which is why I am looking forward to the National Audit Office’s report on how that £600m loan from the DWP is going to be re-paid.

The BBC is similarly under scrutiny over value for money. The anger over Top Gear shows how much we care about the quality of our programming and our refusal as viewers to be fobbed off with second rate, lazy journalism.

Paul Lewis is not above criticism , for all his 88,000 twitter followers. He moans at the BBC as if he owned the place, but he doesn’t, we do! Paul is just like you and me and when he moans at having to pay to read Jo’s articles he is being as mean as I am (£2.80 for the weekend edition- shocking).

The only free read in town

I look at my own reading figures, gets around 20,000 hits and has around 10,000 visitors a month. I don’t monetise the blog ;because as soon as I do, I will find myself not saying what I want to say. I try to keep the blog clean, be accurate and say things as I see them. Sometimes I regret what I say, like slagging off Danny Godfrey when he was at the IA, when he was as good as his word. I apologise when I do.

I’m not a journalist, I’m a consultant who commentates via a blog that I do on top of my chargeable time. I need Paul Lewis to promote me and Jo Cumbo to break the news I write. Jo isn’t perfect either, but she’s the best journalist working in pensions at the moment and if all the other journalists reading this take exception to that statement, well tough!

I wouldn’t choose to pay for Jo’s work but I do, because it is good enough. I will only listen to Paul so long as he is relevant and irreverent and is as keen as mustard (which remarkably- he usually is).

But your time is not free

You will only continue to read this blog so long as I am myself, independent but inter-dependent on the very best thought leaders, broadcasters, news hounds out there.

NEST reads this blog as part of its Orwellian media watch; this is a stray internal email which accidentally got posted on this blog a couple of months ago. They too are independent and inter-dependent.

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“Hi guys – nothing much going on here today either”

There’s no such thing as a free read , nor a free lunch. Reading this has cost you time, I hope you found it worth it. The moment you don’t – stop reading. The moment you stop reading (and my May monthly reads weren’t great) , it’s time for me to get more relevant, irreverent and keen as mustard.

NEST sharpens the knife, the FT and the BBC sharpen the knife, we all aspire to be the best and in our complex society, the public and private sectors work with and against each other in peculiar and often brilliant ways.

Paul and Jo scrapping with each other  (like the wind) is part of the process. This is not vanity.


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Ezra Pound , Canto 81

Posted in Fungible, Henry Tapper blog, pensions | Tagged , | Leave a comment

Has a robot changed advice for ever?


financial surfing

Below are the questions I’ve been asked to address next month at the Pension and Benefit Conference.

I hope that when robots go to grammar school, they’ll be able to do a little better framing the question!


The framing of the question suggests that I’m expected to come down on the side of humans, but this supposes that there are people ready and willing to give that advice.

The answer to that question is rather different today than it was three years ago. In the heyday if advice, before the RDR was implemented, there were over 51,000 pension advisers registered by the FCA, that number has more than halved as transparent charging has reduced the numbers willing to pay for advice. Whether the number of us needing advice has decreased has reduced is another story. The pension freedoms are an adviser’s fly-trap.

Some would answer that, regardless of technology, distance learning would have been needed to plug the gap created by the RDR. But the last five years have seen another significant change, the rise of “search”.

We are now used to getting answers to our questions at a click or swipe. If not google, youtube, if not webchat – the bot. The web not only has the gen, but it is increasingly easy to navigate. If you want information, it is now available, it’s free, it’s easy and it’s open 24/7.

From search to guidance

Searching gets us information, but it does not present that information in a way that helps us take a decision. Indeed, the commercial instincts of those who own the social media sites distorts our searches so that we now enter into a game of cat and mouse with the advertisers , our judgement being exercised to sort editorial from advertorial, representative  from selective data.

From guidance to advice

Advice in this context is defined as the provision of a definitive course of action, guidance no more than a fair representation of information necessary to make an informed choice.

With advice comes liability and with liability comes an entirely more vigorous inspection of the circumstances surrounding advice.

The stakeholder pension decision tree was a fairly cumbersome representation of the simple decision taken by a company, a decision tree representing the Nutmeg algorithm would be as different as an aged oak is from the sapling.

The questions posed above are simply scratching at the surface of the complexity of a decision as complex as the investment of a pension pot in drawdown.

But here we have an important decision to take, one that is critical to the FAMR and to the be application of Financial Technology to our financial decision making.

The liability for how we use our robot is far from clear. If the robot has been to the FCA’s sandpit and been deemed a fit and proper robot, should it be let loose on the public without fear of reprisal? Whose is the responsibility for maintenance of the algorithm and the application of the research that informs it ? Is liability for advice time bound or is the benefit of hindsight always with the user?

Too hard to call?

There is inertia in financial services towards the status quo. This bias is understandable. We have had it so good for so long that the threat of a new way of doing things is treated with disquiet. However, the move from search to guidance to advice that is envisaged by robo-advice seems to have been adopted not just outside of financial services but in general insurance, mortgage broking and in the purchase of life insurance. Investments are of course longer term and more capital is at stake than an insurance premium. It shouldn’t be this hard.

The biggest threat to pension providers from robo-advice is probably through the transparency that digital information brings. The pension dashboard will be a reality in 2019, from it will emerge a system of pot follows member. For the system to work, we will need to know not just how to switch but the cost of switching. This will require new levels of transparency from pension providers and asset managers. Concepts such as the “free switch” will need to be tested against before and after scenarios where transaction costs will be laid bare. As these costs emerge, so will a call for greater transparency on the day to day costs of running our pots.

Tom Tugendhat at a recent meeting pointed out that the data needed to operate robo advice is no different from that that powers the pension dashboard or helps us understand our funds on a “true and fair” basis.

The real threat of robo-advice is not that it gives the consumer too little, but that it gives them too much. The challenge is in the organisation of information to enable informed choices and in managing liability so that robots can be empowered to give advice.

I don’t think this is far away. The biggest obstacle to these changes happening – is fear of change. Advice has not change – but the way it is delivered may be about to change for ever.

If you want to see the slides I will be using at PBUK, here they are

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Look before you leap – in all things!

The man on the boundary

I had a very relaxed conversation with a fund manager on the boundary yesterday. The chap I was talking to was a fund manager , conversation turned to the fixed costs of the fund – custody, legal fees, registration fees and the like; the fund’s young and some of the costs may be essential but he reckoned that they amounted to 1.3% of the net asset value under management (the value of the assets less any liabilities).

Of course those fees aren’t part of the Annual management Charge but they mean that the fund will have to grow 1.3% pa before it can show any improvement in the underlying price of the units.

Then of course there is the cost of trading. We know on the “round trip” that buying a share excites costs of 0.9% so if the fellow was trading 50% of his fund , he’d be triggering another 0.45% of costs in day to day activities. Which brings fund costs closer to 2% pa.

And for all the trouble, he’ll need to be paid another 1%pa (which is the AMC) , which is why before anybody wraps his fund or adds platform fees that his fund is needing to make the best part of 3% to stand still.

We are in a low growth market, interest rates are on the floor,  expectations from bonds and gilts are next to nothing, it takes an heroic manager to predict a gross return on assets of more than 5% pa right now. Which means that directly investing in this chap’s fund, your expectation for a net return is reduced by around 60% because of the costs of running the fund.

Put another way, the point of this fund is to reward the fund manager more than the investor.

This is anecdotal stuff, no more than a pleasant chat on the boundary , a good humoured conversation between two people who hardly knew each other but knew we were in the same game and could therefore talk freely of the folly of setting a charge cap at 0.75%.

Daniel Godfrey

I heard on Friday, that Daniel Godfrey has been appointed to work with the FCA to help with the Market Review of asset management and investment consultancy.

Daniel was famously kicked out of the Investment Association, where he was CEO, for suggesting that conversations like the one we had on the boundary, were better had with the Regulator and yes – the investor. That it was time we came clean on the true costs of fund management so that investors could make an informed choice on a “value for money” basis.

The idea that we had a transparent view on what our funds really have to achieve, simply to match market beta (the underlying performance of the assets), was too much for those paying Daniel’s salary. He had to go.

I met with Daniel when he was trying to do this brave work, I thought he was kidding me and said so on this blog. I didn’t believe that anyone was genuinely trying to change things from within. Not taking Daniel at his word and dissing him on this blog is one of the things I regret most. I have apologised to Daniel and he’s graciously suggested we move on. But I’ll do it again publicly. Sorry!

The prevailing Zeitgeist

The word I use to explain the mood that enables Daniel to be brought into the FCA and for the Transparency Task Force to get on the front page of the FT is “Zeigeist”. The mood of the nation, from David Cameron down, is for us to know what we are paying before we pay it and know the risks of not paying these fees in terms of value lost.

It’s a bit like the Brexit debate. Now we know the cost of being “in”, we can think about the cost of being “out”, if we are thinking properly about Brexit we must imagine the world as it would be outside the EC. If we are to imagine a world without funds, we must imagine what it would be like to organise things for ourselves.

For most of us, the answer is a compromise, we want to be in Europe which is run on a saner basis than today or out of Europe but in some collective structure that makes more sense than the EC deal we have today.

I am not arguing that the bloke on the boundary was wrong, his fees may be worth it. Nor am I arguing that investing in the index less a small AMC is right, it may not be worth it. But, just as I want to get my head around a before and after analysis of Brexit, based on proper information, so I want to know the value and the money story of the funds I invest in – based on hard facts.

At the moment , I don’t think I get those facts – and that’s what’s a bothering me.

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A tale of two failures. (BHS and Tata Steel)

BHS and Tata Steel; they have a lot in common

BHS is a  failed retailer, a tired brand with 11,000 employees and a medium sized pension scheme with a hole in it.

Tata Steel is a failed steelmaker, an iconic business (we know as British Steel) with 14,000 employees, a large pension scheme with a relatively small hole in it.

Both businesses are past their sell-by date. They have carried on this long because of the momentum of the past , and they appear to have little or no future without Government support.

We can argue about management issues and no doubt they are where they are for different reasons. The ongoing enquiry into the manner in which BHS conducted its affairs is not going to include Tata. But – bottom line – it is the pension promises of both that have sunk them.

And most importantly, what they have in common is ordinary people who work for them and are paid or will be paid pensions by them. These pensioners have the same deal. That deal is a promise backed by the company they worked for and a lifeboat called the Pension Protection Fund (PPF).

But BHS and Tata Steel are being treated radically differently – why?


Tata Steel seems to be a company that’s worth saving , the jobs must be maintained, the furnaces must remain fired. Yesterday the Government announced a consultation into how we could detox the Tata Steel pension scheme, putting forward a number of options that the nation is asked to consider between now and the Brexit vote (June 23rd).


Screen Shot 2016-05-27 at 07.18.09.png

A large part of the consultation is about the importance of Tata Steel to Britain, presumably the same argument cannot be made of BHS.

BHS is being allowed to slip into liquidation, its assets will most likely be sold off, where a store which is a going concern emerges , it will be snapped up at a discount by Mike Ashley or his like. The jobs at  the remaining stores will go. The BHS Pension Scheme will go into the PPF, pensioners will get the PPF pensioners deal and those awaiting their pensions will get more or less 90% of what they’d hope to get.


A common lifeboat?


I haven’t yet had time to properly look at the special deal being put together for Tata Steel pensioners.   I do not properly understand whether this is a “Tata only” deal or an alternative to the PPF for any employer who gets into trouble and is considered “strategic”. The special deal appears to include not just a switch from RPI to CPI pension increases but a loss of pre-97 GDP indexation and some rights to spouse’s pensions. The technical analysis will come later.

What comes now is the principal -based reaction to the paper.

As I said yesterday, we have a Pension Protection Fund which is solvent, well run and into which there is a clearly defined entry process. If Tata Steel declares it cannot meet its pension obligations and no employer is prepared to underwrite them, the law says Tata Steel’s pensioners go into the PPF and Tata Steel moves into administration.

I don’t want to see jobs lost or blast furnaces turned mothballed. But I can’t see why the Government should intervene on behalf of one set of pensioners and not on another. I can see every large employer in the country turning to their PR functions to plead they are strategic and I can see every large employer in the country wanting the special treatment accorded Tata Steel.

And I can’t see why a case couldn’t be made for Network Rail, Rolls Royce,  Lloyds Bank , British Telecom, Centrica, British Gas, National Grid British Petroleum or any other of the part privatised companies that have been considered strategic enough to get Government Money – turning to the DWP with a pistol to its head, threatening to pull the trigger unless a deal to detox their pension scheme is allowed.

Political expediency drags pensions back into the mud

managers 2

The fragile but brilliant settlement that has been made between private sector pension schemes and the Pension Regulator, that has worked so well these past fifteen years, is under threat. For what?

So that the Government can be seen to be on the side of the Steel Workers. So the romance of the Port Talbot furnaces can be maintained, so that we don’t have a political problem between now and June 23rd.

Once again (the last time being the ditched pension taxation reforms), pensions and pensioners are treated as a political football to be kicked into touch till Brexit is out of the way. At a macro-economic level, the Government’s behaviour is no more than cynical realpolitik.

But much more sinisterly, the policy being put forward puts the jobs and pensions of a steelworker above the jobs and pensions of a retail worker, for no reason at all. The shop worker has the same financial needs as the steelworker, the same rights to work and to pension. Why should one set of workers and pensioners be singled out against another?

Confusing politics and pensions destroys transparent governance


We are seeing a Zeitgeist towards transparency. To my mind that Zeitgeist is about telling things as they are and not dressing pensions up as something else. Andy Haldane cannot understand pensions, small wonder if a Steel Worker’s pension is deemed more valuable than a Shop Worker’s. David Cameron rails against the fund managers for obfuscation but is happy to put his personal and party’s interests (including Brexit) before open Government.

I do not know how this consultation about Tata Steel will turn out, but I fear it will not turn out well. I fear that those who are bargaining about the future of Port Talbot and the remains of our steel industry have already discounted the “giveaways” in the document into their price.

The fragile peace that the PPF has brought to the settlement of the defined benefit conflict risks being shattered by new legislation that further complicates pensions, sets boardroom against trustee, sets BIS against the DWP and drags pension recovering reputation back into the mud.

Trust government

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A Faustian Pact that could hurt us all


Cut is the branch that might have grown full straight

In a potentially disastrous development to the negotiations around British Steel’s pension benefits, the Government is  considering allowing the rights of British Steel workers (including those drawing their pensions) – to be cut.

There is no precedent for this. Pensions law would needlessly be sidestepped for no good reason. There would be many consequences , most of which are yet unknown.

The move would introduce uncertainty around all defined benefits. As Mickey Clark is currently telling listeners to Radio 5 Live, this undermines rather than builds confidence in our pension system.

A Faustian Pact?

In Kit Marlowe’s play , Dr Faustus strikes a deal with Lucifer: he is to be allotted 24 years of life on Earth, during which time he will have Mephistophilis as his personal servant. At the end he will give his soul over to Lucifer as payment and spend the rest of time as one damned to Hell.

A bit extreme?

Yes, the analogy is sensational and deliberately so. Marlowe’s play resonates today because it is a parable about morality , short-termism and the rule of law.

Superficially, this measure is attractive

The (reported) cut in benefits being considered would cut the value of the increases of the pensions, not the pensions themselves and could be considered -in the short term – better news for current employees.

The reduction would reduce pension benefits to a level which the trustees can pay while prudently managing the assets available.

All other defined benefit occupational pensions would be saved a hit to the PPF and potentially increased levies.

But like Faustus’ pact, this has long-term consequences

By throwing away the current framework for dealing with basket-case pensions, the door is opened to other defined benefit schemes to do away with similarly obscure promises.

For instance the statutory minima increases on guaranteed minimum pensions (one of DB schemes biggest current headaches.

For schemes with long recovery periods (British Airways, BHS and many others), the only thing that a sponsoring company would regard as set in stone could be the contribution rate.

Ironically , this is a return to a world where trustees rely on the market and work with sponsors to do their best (best endeavours).  Having decided to put CDC on hold, the Government would have re-introduced it as a defined benefit alternative.


The PPF other alternatives are available

The PPF has been avoided before, most notably by the Trustees of the Kodak Eastman pension scheme who used the ongoing concern, the film company to become an asset of the pension scheme and pay its profits to pensioners rather than shareholders.

For this deal to work, the trustees had to get the a vote of  agreement of those working in the pension scheme to take a cut in pension benefits, which they did. Similar votes have taken place at other private companies where members have agreed to give up pension benefits for job security, Centrica being one.

These hard-fought agreements have been worked out between members, trustees , unions , sponsors , the Pensions Regulator and in some cases the administrators of an insolvent employer.

This is not what we see being imposed at Tata.


The PPF is big enough and strong enough to deal with Tata, BHS and more

The PPF is a well run pension scheme, rather better run than the schemes it has taken over. I won’t criticise Tata’s scheme as poorly run, I don’t suppose it was. I don’t criticise BHS’ scheme for being poorly run either.

But I don’t see any reason why the Trustees of Tata would be able to run the pension scheme better than the PPF would run it for them and there is no certainty that, after taking one hit, some members would not have to take a second hit down the line if the Scheme lost its sponsor in future.

Some members of the Kodak scheme, chose the certainty of the PPF’s reduced benefits to the uncertain benefits of the ongoing arrangement (which might have seen a similar double cut).

These decisions were tough, but were made by people fully engaged with what they were doing. They were not made for them from above.

In his evidence to the DWP and BIS select committees, Alan Rubenstein made it clear that the PPF was in no short term danger of going bust and when pressed on the impact of BHS (and others) gave hope for the foreseeable future. We have a strong PPF.

Having set the PPF up, managed it well and established rules to the game that everyone is prepared to work to, the Government is appearing to drive a coach and horses through the building, to the great peril of those with certain promises.

Time to say something

I hadn’t meant to comment on Tata or on BHS again, but to let due process happen. But the report on this has been leaked through the BBC and is therefore not idle tittle tattle. The FT have also run with this story and John Ralfe and Steve Webb are on the case.

Steve Webb had the same thoughts on Wake up to Money as I had listening. I would be very surprised if John has any different.

Though I differ from John on how we find a long-term resolution to the problems with defined benefit guarantees, I am totally in agreement with the comments he has made on twitter over Tata and its pension scheme.

The Government are going about this the wrong way, putting political expediency over the long term interests of Tata Steel workers, their families and most importantly the pensioners and future pensioners of other schemes



Cut is the branch that might have grown full straight,

And burned is Apollo’s laurel bough,

That sometime grew within this learned man.

Faustus is gone; regard his hellish fall,

Whose fiendfull fortune may exhort the wise

Only to wonder at unlawful things,

Whose deepness doth entice such forward wits

To practise more than heavenly power permits. 

cut 2

Kit Marlowe


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How Mill Pensions help small employers to choose their workplace pension.

Here are a few testimonials we’ve been collecting from business advisers using Pension PlayPen.

We don’t pretend they are unbiased – these are the people who love us. But what’s not to love about a service that delivers more for less.


Why Mill Pensions uses Pension PlayPen

mill pensions


Mill Pensions is an employee benefit consultancy based in Malton, (near York).We asked its CEO, Elaine Tarver , some questions about her service and how she used Pension PlayPen.


1.What auto-enrolment services are you providing to your clients?


Expert help with set up and implementation starting with a free no obligation chat to discuss client’s situation and how we can help. This is followed by targeted assistance with the following


  • Determining how much they want to pay and when( includes providing initial employe assessment and costs)
  • Choosing a provider
  • Communication strategy including drafting tailored specific letters including statutory requirements and Q&A response to queries. Face to face employee meetings if required.
  • Implementation and setting up processes
  • Compliance statement


  1. Why do you use Pension PlayPen?


Pension Playpen provides clients with a process for choosing a pension provider .  It is a quick way of getting specific quotes based on member data . It helps clients to think about what is important to them and the balanced score card helps them to compare providers.


  1. How have your clients reacted to Pension PlayPen as part of your service?


Some find the wealth of information a bit overwhelming but once they have digested it they are generally comfortable in making a decion on the provider to use. It gives them comfort that their decision is based on current facts.


  1. How is Pension PlayPen benefiting you and your clients?


In an ever changing market with a bewildering array of information it provides a source of up to date data based on factual research  and scoring based on consistent criteria.  It provides clients with a clear audit trail showing how their decision was reached. The process helps them to think about what is important to them and their employees.


  1. How did you hear about Pension PlayPen?

I have watched the playpen develop with interest from when Henry was talking about the original concept at a playpen trip to the Cheltenham Gold Cup

elaine tarver.jpg

Elaine Tarver





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A tragic tale of a split pension.


split 5


This is the sad story of how someone, intent on running her finances independently of her “ex”, destroyed her personal financial security. It relates to a former member of my family and I am desperately sorry for her, not least because there is nothing that can be done to put things right. If there is solace, it is that she is ignorant of the financial mischief she had done herself – “out of sight- out of mind”.

In a nutshell, this lady took a slit of her husband’s pension in early 2004 , transferred it to a private arrangement and is now some £400,000 worse off for that decision.

Had she not taken the £42,000 transfer value offered her 12 years ago, she would now be entitled to £10,500 pa (in today’s prices) escalating each year at 5% till she took her benefits and then increasing at the better of  3% pa or RPI in payment  with a pension for her spouse of 50% if she had died before him. The lady is currently in her late fourties. The estimated value of this benefit today is over £450,000 and rising.

Let’s run through the dramatis personae in this financial tragedy and see if there is some lesson to be learned.

The insistent transferrer

The lady was insistent that no matter what the financial arguments to stay within her husband’s scheme , she wanted nothing to do with him, and that included his pension.

The final salary scheme her husband is still in , is the big winner. It will, by the time this lady reaches pensionable age, have been saved at least half a million in liabilities.

The former husband is distraught, aware the ongoing animosity felt to him by his former wife has brought about such financial ruin. There are children involved and the lady has since re-married, so the financial loss is wider yet.

The complexity of pensions

Not all defined benefit schemes are the same. The scheme rules that apply to all members can be improved by individual promises within employment contracts.There are cases of non-disclosure in divorce cases.

But in this case, the scheme rules were clear and there was nothing hidden. Once the slitting order had been agreed, the former husband had no control of the financial decisions taken by his former partner.

I would like to think that transfer values are no longer being taken in such circumstances. That lessons can be learned about the value of guaranteed benefits and the uncertainty surrounding interest rates, inflation and capital markets.

But no amount of disclosure at the point of separation can prevent an embittered spouse from taking a financial decision on emotional grounds.

Indeed in 2004, the prospect of £42,000 taken from a husband’s pension on a pension splitting order may have seemed a triumph.

In the intervening period, his prospective pension has been revalued at 5% pa while the purchasing power of her transfer value has plummeted.  She will lose, as a result of her impetuous decision at least 80% of the value of her prospective pension to her and her family.

The oblivious trustee

When a pension is split, the person receiving the split has – for the first time- an entitlement to a pension.  This entitlement is not a direct consequence of service with the employer , or of personal contributions made by the former spouse, but as a result of a Court Order.

Nevertheless, the entitlement makes the person receiving the split pension, as much a beneficiary of the scheme as the husband who worked for the sponsoring employer. That is the law.

It might be argued that the trustees were negligent in not preventing the financial calamity that is befalling the spouse but that is to put hindsight in charge.

There may have been a financial adviser in the background – we may never know.

How can a trustee act in the interests of the beneficiary in such a fraught situation?


The harsh reality is that no one knows the financial calamity that has occurred other than the spouse (who worked it out when going through his pension statements).

There is no one to blame, this is an unseen financial tragedy, not even the spouse will be aware of the loss (and I advise my relative to keep it that way).

No happy ending

There is no happy ending. Nothing can be reversed. Like a fine wine, once the cork has been removed there is no going back.

Perhaps the former husband can be relieved that the split pension no longer forms part of his pension assets (as it might have created higher tax liabilities for him under the lifetime allowance, but – knowing him- he would happily have paid the tax to ensure his former wife got proper benefit.

At a purely emotional level, this story proves to me that nothing good comes out of hate. If this couple had agreed to work with each other towards what was the best financial settlement for both of them, both of them would have had proper pensions.

Instead, one is no better off, the other finds herself having thrown her golden egg out with the rubbish.


If we do not learn the basic lessons of love and forgiveness , baked into the religions of the world. If instead we live our lives in anger and the hope of revenge, we not only diminish our chances of emotional happiness, we put at risk, through irrational decision making, our – and our family’s financial security.


Posted in advice gap, annuity, pensions, Pensions Regulator | Tagged , , , , , , , | 4 Comments

An heroic failure? – #Airlander is winning the heart of the nation!

Martha Gwyn or the “flying bum” came a cropper on landing after her 100 minute test flight yesterday


My partner and I (who are lovers of pass the pigs) wonder whether this is a snouter or a leaning jowler. Either way it is a landing of comic genius that will propel Martha into the hearts of the nation.

If you are lucky enough to get a seat at the LGIM DC conference in mid September you will have the opportunity to hear the CEO of Hybrid Air Vehicles discuss his struggle to get the flying bum off the ground. Steve McGlennan will be on a panel and I’ll be chairing and I’m very excited.

I knew Steve as a young lawyer making a name for himself  fifteen years ago. We lost touch when he went off on some mad-cap project (we now know to be this).

He’ll be telling the lucky audience and fellow panellists – what you have to do to innovate on this scale. That should be fun!


Stephen’s a canny scot and he knows good publicity when he sees it. The ongoing saga of testing this thing has a long way to run. Airlander is not due to go into production till 2020 and in the meantime, we have our first aeronautical curiosity since Concorde to enjoy.

I am sure I will hear all the details for Stephen before, at and after the conference- he’s not shy. This is Stephen’s good humoured response to my mail of condolence.


We’ll fly on.  You wouldn’t expect any less of me.

Some say it hit a pole , but Hybrid Air Vehicles deny this.

I’m sorry it didn’t , if only because it makes my clumsy joke about bums and poles and penis envy even sillier than it seemed when I posted it last night.


It doesn’t matter – none of this matters – except the insane joy of the dirigible and its magnificence.

Chitty Chitty Bang – Caractacus Pots – you should have been alive in such an hour!

Pensions – we need a dirigible we can call our own!


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Plebicide and Suicide – Con Keating on post-Brexit pensions


In the post-Brexit period, I have listened to no fewer than three investment consultants advocating the immediate hedging of interest rate risk in our pension scheme “as the deficit is likely to blossom in the event of further quantitative easing”, which has now come to pass.

The scheme has total liabilities amounting to £3,476 million, the sum of the present best estimates of all future pension payments. The scheme has assets amounting to £2,087 million at current market values. These assets need to earn 3.77% p.a. to be sufficient to meet the pension liabilities

The present value of the liabilities is £2,610 million using a discount rate of 2.0% p.a. The scheme is 80% funded on this basis. Should discount rates decline to 1.0% p.a., the present value of liabilities would increase to £2,997million, and the reported funding ratio, with no change in asset values, would fall to 69.7%. According to these consultants, this should be cause for alarm and action.

Now, the portfolio of assets is already invested and produces a 4.02% income yield. As this is greater than the required yield (3.77%), the scheme is sufficiently well funded to meet its obligations on time and in full, notwithstanding the meaningless deficit reported (20%). In fact, the scheme will throw up a surplus of £367 million after pensions have been paid.

The important point here is that the discount rate applied to liabilities is immaterial; the rate of return required to meet liabilities is independent of that discount rate. This rate is determined fully by the projected pension payments and today’s asset values

There is a further dimension to this issue, that of cash flow sufficiency. Even though the income yield is higher than the required rate of return, this scheme has cash flow shortages over most of its life. This ranges from 15% of the required pension payments in the current year to 64% in 2043, with investment cash flows exceeding pension payable from 2055 onwards. The scheme will need to liquidate assets. This cash flow deficit is largest in 2026, at £73.5 million. The value of the fund and the relative importance of liquidations are shown in figure 1

Figure 1: Value of fund and liquidation requirements

Screen Shot 2016-08-24 at 08.00.11

By contrast, a scheme which is cash flow positive, through contributions or the income yield of assets, faces the prospect of lower total re

turns when the available investments are higher in price and power in yield. This is the well-known convexity effect in bond markets, where the interim reinvestment rates determine the achieved return, and are responsible for departures from the gross redemption yield.

Few schemes now face this latter situation; the majority are cash-flow negative. These schemes will actually gain from further rounds of quantitative easing to the extent that this succeeds in raising prices since they have a need to liquidate.

The reported deficits may increase but actions based upon these are misplaced; an act of self-harm.

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Brexit- good for people’s pensions. Pensions -worse for Brexit Britain.


Contrary to the received idea, Brexit and its aftershock, the Bank of England’s QE statement , has been good for the pension in people’s pocket.

Ok, we don’t have pensions in our pocket- but if we’re simply valuing our pension pots, the way HMRC asks us to, then most people’s pension wealth will have increased since the Referendum

If they hold bonds as part of their DC pot, then those bonds have become more valuable. If they hold equities, the value of those shares has increased. Cash is (should be) impervious to market risk and we haven’t seen any failures among deposit takers

The news from estate agencies is that residential sales are holding up. Only in commercial property has there been a right down in asset values and this may be no more than a temporary blip occasioned by some irresponsible selling of property funds by wealth managers.

We are actually more wealthy in terms of our retirement assets (ISAs, pensions, property,cash). So far Brexit has been good for our pensions as my friend Con Keating has pointed out to me.

As you know I am an avid Pro-European, but there a several important positives in Brexit for DB – firstly my foreign investments are up about 12% in sterling terms – that alone accounts for an improvement in funding ratios of nearly 4% in my main fund (just under 40% in foreign equity and bonds) and then there is a dividend effect – not just on the foreign holdings but also on the foreign UK listed companies – many of which are “dollar” dividend payers – this has also been estimated (by coincidence) at a little short of 4%.

So why all the moaning?

Most of the money in the pension system is still backing up guarantees issued by pension funds – supported by employers. The cost of supporting these guarantees is going up as the cost of buying bonds to cover the guarantees increases. The increased cost of buying bonds can also be talked about as widening the theoretical “black hole” in pension funds.

As far as pensioners go, there is no loss at all. The chances of those receiving their pension getting their pension clipped  or even of them not receiving their full pension increases, is next to zero.

Again Con is enlightening

The negative has been the reaction of the BoE in cutting rates which is intended as a forestalling device for recession – I happen to think that we will not see recession as a result of Brexit – the likelihood was always quite low and is entirely a confidence/uncertainty thing. The longer it takes to trigger article 50, the less the likelihood. The solvency valuation effect is a nonsense

Where the pain is being felt is on the cash-flows and balance sheets of organisations funding these guarantees. Now here there could be a knock on that impacts ordinary people as employers will have less money to spend on their human resource (us) , having blown part of the budget on increased pension contributions.

This is unfortunate but it is far from clear that pension deficits are driving us into higher unemployment. As Con points out – a lot of the grief is a nonsense.

If there is damage being done, it is being done to the funding of workplace pensions that are taking up the strain for those no longer able to join – or able to build up more rights to the guarantees.

Stop scaremongering!

It is counter-productive to bang on about the increased cost of pensions to employers when the point of pensions to employers and employees is to improve confidence in the future.

We have chosen to require companies to guarantee their pension’s solvency, to pay pension contributions in front of dividends and the funding of acquisitions and we must accept that funding these guarantees are is part of a businesses DNA.

The conversation about how bond yields impact cash flow and the solvency of an employer is a different conversation to that about the cash flow and security of someone’s future income.

Unless we are valuing a DB pension promise, as we value a bond (e.g. on the likelihood of it being met) , we should not be telling people that Brexit or lower interest rates or QE is bad for their pension.

The only time it might be , is if the DB scheme is forced into the PPF because it has made the sponsor bust, or because an individual insists on buying a guaranteed pension for themselves (an annuity).

Start planning!

With regards the final point, if it was possible to buy a guaranteed pension at the same price as a non-guaranteed one, we would buy the guarantee -because it was free.

Currently the cost of guarantees is off the scale – it is as far from free as the Yorkshire Ripper.

So for people wanting “low-risk” retirement income, the amount of pension they can buy is very low and we are faced with this planning problem.

  1. Do we hope that monetary and fiscal policy will come right
  2. Do we educate people to accept a little more risk

I am not sure that we will ever see DB schemes fully solvent, there will always be enormous reliance on employers to fund deficits. By “always”, I mean for the “faraway“.

I am sure that people don’t understand risk and don’t understand the cost of guarantees. If we buy a diamond with one degree less clarity but at a tenth of the price, we still have a diamond and might have a bigger one.

I’m glad to see that I am seeing some common ground with the Pensions Regulator on these guarantees


If people want the brightest of all diamonds, they may have to settle for a much smaller one. The analogy holds good for the type of certainty we buy at retirement.

We need to start planning to provide people with bigger pensions with lower levels of certainty as an alternative to the highest quality of pensions, which ordinary people (like me) cannot afford.

That means re-opening the debate about collective pensions that was closed by the previous pension minister just over a year ago. She would be much better calling for that, than telling us how bad Brexit has been for our pensions.




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The Far Away -Georgia O’Keefe’s perspective.


Georgia O’Keefe


I’m one of many thousands who’ve visited the Tate Modern to see things through Georgia O’Keefe’s eyes.

Although many of her pictures are about minute objects like flowers, there is always something of the far away about them. O’Keefe talks about the far away and what she says in included in the exhibition.

Sometimes she paints the pelvic bone of a wild animal – bleached white by the New Mexico sun. But the eye is drawn through the socket of the bone to the welkin beyond, a bright blue limitless space that talks with the dead bone.

Other times the landscape itself provides the far away, our eyes are drawn to distant vistas that cram the sky against the frame of the painting. The land always seems to demand her eye’s attention.


But the land is not so abstract, real things happen around the Ghost ranch and the paintings of New York in the early years of her career are driven by dynamic action. Some remind you of Lowry in composition, but with O’Keefe, the cityscapes of New York are more optamistic, the paintings more extovert, less meditative.

Everyone who knew O’Keefe seems to have recognised that she was painting as an American her sense of what America was. She died 20 years ago but the exhibition seems pretty up to date in its presentation of America. Maybe that is because she has defined how we see the land and the Indian masks and the bones and the cities and the flowers that define her painting.

When Razorlight sang their anthem to America, they sang it as Brits- it was an anthem from visitors that saw America in musical terms.


When Sprinsteen sings of America, it is with pride and with pathos, even when he sings of 9/11 or Vietnam, he sings of the vital dynamism of the place.

These were my best routes to America through rock music.

But When I want to really get to America, it is to Copeland and his Appalachian Spring. America defines itself through music (something that O’Keefe set out to change.

O’Keefe, who could have been a violinist, painted what it was to be an American. She even tried to paint the sound of cattle on the Texas plains. Her interest in synaesthesia came out of academic study of Kandinsky but its expression, throughout here long career, seems as natural as everything else she does.

O my America , my Newfoundland

My kingdom safeliest when with one man manned

My mine of precious stones, my empery

How blest am I in thus discovering thee

The words are John Donne’s (Come Madam Come) and – by coincidence are sung by Oberon to Hippolyta in the Globe’s production of Midsummer Night’s dream).

They stand for my very personal relationship to the Georgia O’Keefe exhibition, which I have now visited 8 times.

If you are lucky enough to live nearby, grab a Tate membership and go as often as me. If not, plan your trip around this great exhibition

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