DB Transfers all but triple in a year.

Transfers to other pension schemes10 RKQR 6,810 6,084 5,363 13,221 12,777 34,245

ONS andy

Andy is referring to the Office of National Statistics  update to “Investment by insurance companies, pension funds and trusts (MQ5)” -table 4.3:

The numbers are confirmed by the latest Origo stats, which show an alarming increase in transfers passing through its options service.

origo transfers

Origo Stats for their platform


So much for the Treasury’s predictions on the impact of Freedom and Choice on Defined Benefit Pension Transfers.

Treasury DB transfers

Vulnerable investors

There is , in the FCA’s cast-list , such a person as a “vulnerable investor”, defined as someone unfit to take rational decisions due to mental or physical incapacity.

I am tempted to include those active and deferred members of a DB plan as “vulnerable investors”.

The FCA recommend that vulnerable investors have special protections to ensure that they do not self-harm, when taking life-changing financial decisions. I suggest that special protection be given to those with eye-watering transfer values for whom the word “pension” no longer seems relevant.

Only a few weeks ago, the FTSE100 stood at 7700, today it is below 7000. I was at a session yesterday where we quizzed wealth managers on how they protected clients from major market downturns. The (provisional) £34.2bn that transferred into DC last year is a case in point.

Just how much financial resilience is there? What happens if the market falls below 6000? How will those drawing down units at 20% below purchase price recover from “pounds cost ravaging” AKA sequential risk? I heard no answers to those questions yesterday and I suspect that following a ten year bull run, such a scenario is far from wealth manager’s minds.

Wealth Managers show me charts with money flowing from accumulation, through transition to preservation and then inheritance, as if the point of his service was to avoid the question of income in retirement altogether. Were the generous tax reliefs on offer to these clients – supposed for inheritance tax mitigation?

It would seem that the pensions system established to supplement the state benefits, is being dismantled at a pace that quite outwits the Regulators. This weeks’ white paper earned this comment from LCP

This is a significant development in DB pensions policy, but it will be some time before many of the measures set out in the White Paper pass into law, if at all.

This week saw the Pensions Regulator and FCA issue a joint statement of intent to “work closer together”. LCP saw through that one too.

There is little real meat in this paper, with much of its content taken up in reciting what the two bodies are currently doing separately, before going on to ask what the two bodies could do jointly. 

And finally we were treated to the Pensions Regulator’s second DB landscape report. LCP managed a notable hat-rick of put downs , commenting

This report (accompanied by a blog) provides a useful overview of aspects of the DB landscape that will be of interest to policymakers, but one cannot help think that the Regulator has much more detail on the landscape that it is choosing not to make public.

Are we getting the full story on transfers?

While Government fiddles, Rome burns.

Meanwhile, real people are doing real things to limit the damage. Before I had decamped to judge the wealth managers, I had had a pint and a burger with David Neilly. Here he is a few hours later collecting an award on behalf of Chive with his wife Karen.

David Neilly

David and Karen Neilly



David, Rich and Stefan were instrumental in bringing the problems at Port Talbot to the public eye. Al Rush, Al Cunningham, David Penny, Darren Cooke and many more great IFAs are now building a restitution service to help trustees and employers manage the problems created by unscrupulous advisers. Above all, this is Al Rush’s award.

It is up to blogs like mine, and their readership, to make it absolutely clear that the current system of transfer advice is failing the ordinary working person in this country.

The tripling of pension transfers over the past year is testament to that. If – as the FCA estimate- 53% of the transfers advised on in 2017 contained questionable advice, we are looking at around £18bn of these transfers, that should not have been made.

We cannot go on ignoring this problem.

Posted in advice gap, BSPS, pensions | Tagged , , , , , , | 3 Comments

IFAs and the defined benefit promise


captive IFA

This article explores the relationship between IFAs and defined” benefit schemes, one that has historically been uneasy. It argues that the polarisation of opinion between IFAs who see pensions as “pots” of wealth, and those who regard them as a “wage for life” has never been stronger. This polarisation is present in politics, demonstrated by the differing view on “pension freedoms” at the DWP and Treasury, and present in Regulation, with polarisation between the FCA and tPR’s approach to these same issues.

This deep divide is philosophically between those who believe is that the management of financial assets should be a matter for the beneficiaries of those assets (the member) and those who think the creation of a lifelong income, a matter for collective endeavour.

And the fault lines created by these polarised positions are clear to see, wherever you look.

They are apparent from the Work and Pension Select Committee’s inquiry into Pension Freedoms, which focussed on the divisions in Port Talbot between BSPS members desperate to liberate the wealth in their pension scheme and the Trustees, who were (until recently) oblivious to the demand for “pension freedom”.

The fault lines were equally apparent in the disputes between Royal Mail and its membership (represented by the CWU) and the current dispute between USS and its members (represented by the UCU). In both cases, the employer believed philosophically that it was doing the right thing by switching from DB to DC accrual, based on evidence that ordinary people value a pot of wealth rather than a wage for life.

Contrarily, members have said no to a DC pot and held out for a wage for life. In the case of Royal Mail’s membership, this will mean an unguaranteed CDC pension and in the case of USS members, a continuation of guaranteed accrual from a DB plan.

An IFA, reading these paragraphs, has every right to be confused. Steel-workers are not normally considered as candidates for wealth management, but with average pots of c£400,000, they proved to be of great interest to a large number of IFAs. Meanwhile, the professors and lecturers who one would imagine financially capable, have gone out on strike , rather than be switched to a DC pension.

The polarisation of opinion cannot be defined on socio-economic lines, nor can it be defined in terms of education. In fact, the pension freedoms seem to be as popular on the streets of Tai Bach as in the City of London.

It now looks likely that once all transfers out of BSPS are completed (some time in April), around £3bn will have moved from “pensions to pots”. This is roughly the same amount that has been transferred out of the Lloyds Bank staff pension scheme and around 75% of the £4.2bn that Barclays have reported moving out of their pension scheme. It was not long ago that KPMG were estimating the total transfers from DB to DC in 2017 would be £6bn. What has happened?

The explosion of transfers  that has happened from mid 2016 onwards, cannot be explained by the Pension Freedoms alone, indeed , in its 2014 impact analysis, the Treasury saw no reason for the changes in the tax treatment of DC pensions as having little to no impact on DB to DC pensions.

Nor can it be considered a function of quantitative easing or the shift of DB assets from equities to gilts. While there may have been a marginal shift (major at BSPS), quantitative easing and the trend for DB pensions to “de-risk”, were established well before 2017.

What I believe has happened over the past eighteen months has had everything to do with adviser confidence, especially confidence in the IFA sector. Underpinning this confidence is the rise in world stock- markets which has seen equity-based wealth management solutions deliver fabulous returns to their customers for nearly ten years. There is a sense among many advisers I speak to , of invincibility in market forces and the power of investments in growth assets to deliver better outcomes than can be achieved from DB pensions.

The second factor that has given advisers confidence, is finding a mechanism to unpick the lock on the CETV, without creating disruption to their client’s cash-flows.  I mean by this the practice of conditional charging. By putting the bill for advice at the back end of the advisory process, IFAs can achieve a painless transfer to their wealth management solution that enables them to be paid from a tax-exempt fund without concerns over VAT. It enables clients to release their “DB wealth” without reaching for their cheque book and  it is a very elegant solution to the problems posed by the requirement of those wishing to transfer an amount above £30,000, to take financial advice.

There is nothing uncompliant about conditional charging and it is now widely used by the majority of Britain’s 2,500 transfer specialists. However, conditional charging is showing signs of stress. Ten firms have now “voluntarily” handed back their permissions to advise on DB transfers , leaving hundreds of clients orphaned from the transfer process and marooned in DB.

A recent article in the Financial Times, saw the Personal Finance Society’s Keith Richards, claim that Professional Indemnity Insurers were jacking up premiums for those remaining PTS’ and denying some cover. The practice of outsourcing pensions advice to specialist Transfer Value Analysts, has come under considerable pressure from the FCA.

All this is evidence of the deep divide between those who see a pension as a “pot of wealth” and those who regard it as a wage for life. Many advisers, such as John Mather, consider the defined benefit system, so broken, that engineering a route out of DB for clients , is the right thing to do. Meanwhile, the FCA insist that from their sampling in 2017, 53% of transfers examined, contained either questionable or wrongful advice.

The Pensions Regulator and the FCA are at last working together to produce a joint pension strategy. In a recent session of the Work and Pensions Committee, its Chair- Frank Field- suggested that advisers and trustees were living in “different countries”. The same criticism has been made of the two regulators.

It remains to be seen where this will all end up, few believe that we have seen the end to the DB transfers. The results of SJP, Old Mutual, Prudential and many other providers, suggest that pension providers are now reliant on the massive flows of assets brought to them by advisers. Many advisers now seem as addicted to conditional charging as they were to commission and the FCA and Pensions Regulator, seem powerless to prevent CETVs becoming business as usual.

As always, the analysis of the issue , post-dates it. The transfer from pensions to pots will go on, till a point where either the available assets within DB schemes have been exhausted, or a proper brake has been put on the transfer process, most likely by a Government with the will to ban conditional charging.

In the meantime. we have to hope that those in charge of this new found wealth, can deliver on their promises.

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

Bill Galvin , stop whingeing to the FT and come down here!

Bill Galvin

Bill Galvin is a very nice man

Bill Galvin would be well-advised not to snipe at social media for peddling misconceptions about the University Superannuation Scheme.

bill kill

Dennis Leech, Professor of Economics at Warwick concludes a recent article with the question

will this independent group be subject to the normal modalities of academic enquiry and discourse? It is after all the function of academia to find out the truth by open, free debate. That is what universities are for.

He is not speaking of the USS itself, but of the proposed group of experts proposed to oversee the valuations of the scheme. Personally, I find no need for such a group, like Dennis, I see the most constructive conversations about the future of the USS and the pensions of lecturers and professors in the open and free debate of social media.

Bill’s USS enjoy a privileged position in the current dispute

Just because Bill isn’t in the front line, doesn’t mean he shouldn’t be involved. I’d say he and his colleagues are failing the Frank Field Test.


The Frank Field Test

USS , like BSPS, has chosen not to use social media to engage its membership in its issues. Now Bill Galvin, its CEO has complained to the Financial Times.

“We have seen material which suggests that this valuation has been done on the basis of [all university] employers going insolvent. This is palpably untrue.”

Come off it Bill – this sounds pompous – it doesn’t sound like you at all.

And I have to ask you Bill why you think the FT is a better soapbox than twitter?

I didn’t see Jesus, when he preached, avoiding social media, he went to the nearest boat, hill or street and broadcast his views to the masses; much to the annoyance of the priests who had till then had a monopoly on teaching.

I am not likening the FT to the Pharisees, (the FT gets social media), but I think Bill would be minded to get out of their pulpit and come and talk to the people who pay his wages.

And quite some wages

The issue created by having a very big salary is akin to that of the Selfish Giant, who – finding himself in possession of a fine garden, put a big fence around it – to keep out the plebs. Bill’s behavior could be interpreted in that way.

It is doubly unfortunate that while I know Bill to be one of the most down to earth of people, the sponsors of his scheme, the Universities, are run by people who have quite lost the confidence of his members and indeed the University’s customers.

The Frank Field Test establishes whether  the management and Trustees of a pension scheme are in the same country as its membership. I suspect that Bill has been lumped in with the Vice Chancellors as an overpaid elitist, probably abusing his expense account and certainly avoiding open debate.

None of which is fair of the man.

Social media is not alternative truth!

Although it’s possible to find irresponsible comment on social media, and though much that is written is unintentionally wrong, social media has a habit of ironing out its creases in time. The threads about USS on twitter have shown some of the most intelligent debate on pensions I have ever read – not least because they are informed by the opinion of brilliant people (like Dennis Leech).

Bill can take many isolated instances of people getting wrong and use them to justify his negative views on social media, but these are exceptions – to use his language “outliers”.

Instead of criticising social media, he should be studying it – as should the Pensions Regulator, there is wisdom in the crowd and it will show itself over time. Social media cannot be pushed around as conventional media can, there are no Robert Maxwells or Rupert Murdoch’s controlling the social media agenda,

Instead there is a groundswell of informed opinion that surfaces from time – the still small voice of calm. Shakespeare wrote for the pit as well as the galleries and without the diversity of the Elizabethan theatre audience, his plays would be the less. Bill cannot confine himself to the Financial Times, he should come down off his high horse and mix it with the groundlings!

He should be feeding the 5000, not just the elite readership of the FT.

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

Transfer carnage at BSPS – the truth revealed

BSPS Missing

The full impact of transfers on the British Steel Pension Scheme has been revealed in this perfunctory tweet

I have since had it confirmed from the Trustee that it now expects the final amount taken via Cash Equivalent Transfer Values from the scheme to be “over £2.5bn”.

My estimates have been that £3bn has been requested to transfer, that it may be less than that, may be because a number of applications will be disqualified because the firm certifying the advice, has withdrawn from the market. Yesterday, the FCA confirmed that the number of firms who have voluntarily de-authorised themselves has risen to ten.

Technical note  ; the CETVs at BSPS are (as a multiple of salary) relatively low – typically 25 times pension. This is because of a relatively high discount rate resulting from the high allocation of the scheme to growth assets and the 5% clip on CETVs resulting from the insufficiency report issued by actuaries WTW.

As a proportion of total scheme assets, the amount transferred out is around 25%, as a proportion of deferred members assets – it is probably double that. Transfers taken have been from those with longest service and with most to transfer. This either suggests a degree of cherry picking among those advising, or that there is a preciously undisclosed class of BSPS employee – who might be deemed “wealthy”.

What does this mean for the 3,700 BSPS members who’ve yet to have their CETVs paid.

At least we now know that all those who got the correct papers in – will have their transfers paid – though I fear there are many who will find out too late that there was an error in their paperwork.


What does this mean for BSPS 2 (New BSPS)?

It will mean that up to  7,500 of the projected membership of BSPS2 will never join. Some of those may not have made an election under Time to Choose and some may have “chosen” PPF, but most of the transferees will have otherwise have headed for the new scheme.

Since the Trustee, by his own admission, totally underestimated the size of the transfer, it is likely to be a different BSPS2 than had been imagined, one with fewer deferred pensioners and less assets. Paradoxically, the financial resilience of BSPS2 may have been strengthened by these transfers as the “buffer” put in place as part of the Regulatory Apportionment Agreement, is not impacted by transfers out – it is only reduced by those falling into PPF. If the scheme is stronger, it is also likely to be less ambitious. The wings of CIO, Hugh Smart will be further clipped as he is now managing out a pool of pensioners with a much reduced constituency of youngsters. The capacity to invest for growth is severely diminished.

In summary, the shift of nearly 8,000 deferred away from BSPS2 will make the scheme stronger but less likely to deliver discretionary increases in future. This make for a different BSPS2 – not necessarily a worse one.

What does it mean for UK financial services?

BSPS is by no means the scheme with the biggest CETV bill. Barclays’ accounts it shed £4.2bn in 2017, Lloyds Banking Group reckon they are losing c£250m a month, British Airways talk of £75m a month.

The ONS MQ5 Data for Quarter 1 2017 onwards remain provisional and subject to revision until the incorporation of the 2017 annual survey results in December 2018.

So we will not know – till later this year  the full extent of the voluntary shift from DB pension members , from collective pensions to individual arrangements.  But there are enough schemes reporting more than 10% of relevant assets transferring to suggest that 2017 has been a game changer.

While the occupational schemes shed assets, the insurers and SIPP providers report record years. Old Mutual reported this week a 40% increase in profits with over 20% of all inflows last year from DB transfers. Similar numbers are reported from the Prudential (with exponential growth in Prufund) and St James Place. The insurers and the SIPP platforms have simply held forth their aprons.

What does this mean for Government policy?

The libertarians will argue that this is the greatest thing to happen for freedom and choice since the French Revolution. Others will be more cautious.

53% of Transfers investigated by the FCA last year were considered questionable or worse. That’s around £1.5bn of BSPS money and over £2bn of Barclays money.

The Personal Finance Society has claimed that many people who would have had the option of freedom and choice will have their dreams broken by Professional Indemnity Insurers unwilling to insure some advisers to do more of the same. This claim was reported in the FT.PFS

It is unsurprising that PI insurers are nervous about insuring a market where 53% of the cases investigated by the FCA are deemed unsafe. PI insurers have long memories!

And it was disingenuous of the PFS to suggest that the intention of the Treasury, in introducing Pension Freedoms was to increase the numbers of people transferring out of DB schemes.

Below is an excerpt from the Treasury’s impact study , published in 2014.

Treasury DB transfers

What this wholesale charge to freedom means is that the intentions of the legislation laid down in PA2015, have been reversed. Pension Transfers have soared since the introduction of the Pension Freedoms.

This is a major embarrassment to the Treasury, not least because the pension fund trustees, mentioned above, appear to have had no power at all to “help mitigate risks to DB pension schemes from an increase in demands for transfers”. It is only now that the FCA is recognising there is a problem. One of the lessons of Port Talbot is that neither Regulators, nor the Trustee were alive to what was happening under their very noses. They were – to use Frank Field’s phrase “in another country”.

The Treasury are an unwitting accomplice to this carnage

For all the fine words of its 2014 statement, the Treasury have unwittingly encouraged IFAs to milk defined benefit schemes. They have done this by condoning conditional fees which allow ordinary people “free advice” or at least advice paid for out of the transferred funds in such a way as they never have to dip into their pockets. The cost of this advice to the public purse is that it is paid for from a tax exempt pension fund and paid under the “intermediation” rules, without VAT.

The Treasury is aiding and abetting the very thing it claimed it would prevent. It’s principal enforcement agency, the FCA – seems powerless to do anything about it.

If you want to read more about this scandal, follow this thread.

Some sorry conclusions

  1. Transfer levels were at an all time high in 2017 with some schemes seeing over 10% of available assets transferring
  2. This has been a bonanza for advisers, SIPP providers and insurers.
  3. If the FCA sampling is correct, more than half of this money should not have moved
  4. The only thing that appears able to stop the flow is the refusal of PI insurers to insure advisers to continue
  5. The Treasury impact statement has proven hopeless – pension freedoms are now claimed by the FCA to be about allowing this carnage to continue
  6. The Treasury are aiding and abetting all this by permitting conditional fees to be used as a means of paying for advice.

poll bsps anon

The October poll on BSPS Facebook that led me to Port Talbot

Posted in annuity, BSPS, pensions | Tagged , , , , , , | 14 Comments

When enough isn’t enough – thoughts on #NoCapitulation

No capitulation

Is the USS really in crisis?

I was disappointed to read that the University strike isn’t over. But it isn’t and Jo Cumbo hits the nail  on the head.

By going against their Union’s recommendation, the lecturers now have to find a position which through some kind of collective process. And people who had previously no knowledge of how pensions work, are having to get up to speed with the arguments for and against.

as Rebecca goes on to say

Rebecca – read Dennis Leech’s blog

I wish I had the time, energy and wit to bring together in one short and easy to read article, a proper argument that refutes what John Ralfe is saying. If Rebecca or any other lecturer, wants to understand the “other side of the argument”, then I can point them to the excellent work of Mike Otsuka on this blog. I have written myself, but not as well.

However there is one article that has been published on my blog for some time, that has been read by many thousands of lecturers that meets Rebecca’s requirements. It was written by Dennis Leech and can be found here.


When I wrote yesterday morning that the UCU/UUK agreement could see the end of the strike, I had to change “should” to “could” , when I saw the weight of opinion behind the “no capitulation” hashtag.

I spent the day at Cheltenham (lucky me) and have just seen Dennis’ comment on my blog.

Dennis leech

Dennis is a sound judge, a lightening stick for the thinking of those around him. The UCU must now rethink its position, as must UUK. Sadly, the space afforded by the proposals put forward on Monday, is no longer there.

Meanwhile, the idealists among us , can enjoy four minutes of Bruce, getting carried away!

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

A master class in fractional scamming


It’s childsplay


Scamming has grown up; long gone the daylight robbery , fading into the distance “pension liberation”. Today’s scammer plays pass the parcel with your money, skimming off a slice of your savings – every turn. It’s called fractional scamming , it’s alive and well and the scammers are after your money.

Here’s how the FCA compare the pre and post adviser remuneration model (oops- I meant the “value chain”). Pre RDR it was called commission, post RDR it’s called “marketing fees”.

value chain

FCA – “non workplace pension review”


Fractional scamming works by sending money from one of those boxes on the bottom row to another, so that everyone gets a slice of the action.

fraction 2

So it’s all about distribution!

If you want to view the lesser-spotted overseas pensions introducer organising distribution, here’s John Ferguson

And here’s how he makes his money.  courtesy of Angie Brooks and Pension Lite  

I’ve been racking my brains…

I’ve been trying to remind myself of a UK investment structure that linked unauthorised introducers to authorised IFAS who worked with Pension Trustees to transfer money into overseas funds, but I just can’t remember the instance.

Somehow, Port Talbot, Dublin and Orpington came into the conversation. Hardly Dubai or Hong Kong…..

and then I saw this tweet and it got this horrible sense of deja vue

If I’d mate it all up- so had this guy!  Just like this Pension Scam Survivor, just like Angie Brooks.

I must have made it all up as I have a 12 Page letter from B**t Wils@n LLP (marked not for publication) telling me I had.

I’ve been racking my brains trying to remember what happened and now I realise it didn’t happen at all. And the You and Yours investigation that revealed all this is happening to the Pension Scam Survivor and the others, that was making it up too!

So was Bond Investor, whose beautifully written blog on Blackmore;  that  must be pure fantasy too!

We know that we must be liars, because all these guys’ solicitors tell us we are, and because John (Gus) Ferguson and David Vilka and Patrick McCreesh and Philip Nunn are still sunning themselves in Dubai, or Hong Kong or Spain .

And if we weren’t liars and these guys really did do the things that the BBC say they did, they surely would be under arrest – which they aren’t.


We get the financial services we deserve.

If we think it is ok that fractional scammers can carry on taking the p*** with our money, we can allow these guys to carry on – we can send them our money – we can indulge them their lavish lifestyles.

But if we think we deserve better, we ought to join with Angie Brooks and with all the good guys like Stephen Sefton, who are strong enough and admit to being a Pension Scam Survivor.

Because all the lawyers in London, cannot defend the venal behaviour that is going on today – and under our very noses.


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

Beyond the workplace – managing our pension saving legacy.

metro bank magic


The FCA are consulting on the £400bn of pension assets that are not in workplace pensions. Implicit in the consultation is a desire to help those who depend on them in retirement to maximise these savings.

The savings are of questionable value; some are invested in the wrong funds, some are subject to extortionate charges and most have no obvious means of release as a wage for life or “pension”.

Assessing the value from their current management, the cost of that management and arranging a viable default means to spend these savings – should be the primary priority of the FCA.

Fortunately, it looks as if we may be able to do all three, if not tomorrow – at least in time for some people to get a better deal. Doing nothing is not an option, we have the means to clean up the legacy ; help is at hand. Let’s look at these three issues separately and return at the end of this blog to the holistic solution which people with such savings need.


Mixed in with a lot of filth, there are some pearls. Genuinely good with profits contracts with guaranteed annuity rates, policies which carry good quality death benefits, some waivers of premium which are currently allowing accumulation to be insurance company funded.

And there are some very special self-invested personal pensions which are enabling the financially capable, or those with financially astute advisers, to manage their financial affairs within pension wrappers – with precision and acuity. John Mather and others – PACE!

There is also a lot of very good passively managed money, run within new style personal pensions, technically SIPPS, but for practical purposes, fulfilling the original intention of the stakeholder pensions. All of the above offer value, and I have no issue with these plans as a means of accumulating the capital to pay a retirement income.

But – and you knew there would be a “but”, there is one heck of a lot of filth.

  • Investments that made sense at the time but which have been taken over by changing economic circumstances (low interest rates for instance)]
  • Management that proved a flash in the pan – funds which now languish in the back office
  • Funds which were too big to succeed – the closet trackers

We all know the names of the providers – Allied Dunbar, Abbey Life, Crown Life etc.. but who remembers those top performing managers – the sexy Japanese warrant funds, the sophisticated broker managers that we gladly put our trust in? All offered value – most failed to deliver and few are accountable.


The money we have paid to providers for the investment of our savings has – in many cases been eye watering. I have recently transferred an investment of many thousand pounds made in the mid eighties, at the value of the contributions – no more. I was promised equity returns, if i had got them , my fund would have been worth four times what I contributed. For no reason other than charges, I got a quarter of what a simple investment in a tracker would have delivered.

All the arguments about tax free cash, tax free growth and tax relief on contributions pale into insignificance against the carnage created by

  • Capital/Initial units
  • Accumulation units
  • Periodic contract management charges
  • Non-allocation periods
  • Bid/offer spreads
  • Dilution levies
  • 90/10 with profits charging structures
  • Transaction costs within funds
  • Operational costs in switching (especially automated switch programs)
  • Paid up penalties
  • Exit penalties

The complex charging structures designed by private pension providers were designed to be fair. They shafted everyone.

If you tried to get out of a contract you were shafted by exit penalties

If you stayed in , you were shafted by the various initial and accumulation charges on the fund.

Thankfully, the 1% cap on exit penalties which has come in since 2016, means that those 55 or over, can at last get some relief from the incessant value destruction caused by the money we have had to pay.

However, the facts are , most 55 year olds don’t know what they are paying and don’t know there is any better.

The pension at the end of the tunnel?

The harsh truth is that there is no pension at the end of the tunnel, only an annuity or the freedom to go and spend your money as you choose.

That may sound inviting to those with little understanding of what it’s like to be alive and have no work, but it’s not much comfort if you are at the end of your working life and at the beginning of a long period when you’ll be on holiday on £8,500 a year.

When the tax-free cash runs out, there is a drawdown to come. But that draw-down is unlikely to provide a wage for life. Ordinary people who had expected a pension , are being delivered the hardest, nastiest problem in economics, dressed up as “pension freedom”.

There is no pension at the end of the tunnel.

Poor value – lost money and no light at the end of the tunnel.

That’s how legacy pensions are turning out for those who bought into Mrs Thatcher’s personal empowerment dream in the eighties and nineties. Things improved after the arrival of stakeholder pensions but even today, consumer protections are too weak and millions are being squandered daily on ridiculous self-invested strategies which look remarkably like the broker managed funds we thought we’d left behind twenty five years ago.

What we have not yet devised, is a means to look at what we have purchased and assess whether it gives us a value for money pension offering.  The means to look at value and money pensions simply doesn’t exist.

It is not possible to type in your personal pension policy number and have a machine tell you

  1. what value it has given you and what value is yet to come
  2. what you have paid for it and what you have still to pay
  3. The pension you are likely to get from your savings.

Could we build a machine to tell us the answers?

Yes we could. It would be a pension dashboard which had real purpose. A dashboard which had a diagnostic light for each legacy pension that you typed in.

Red light flashing – this pension is rubbish and you could and should get out now

Amber light flashing– this pension is rubbish but its questionable whether you should get out now

Green light flashing – this pension is alright and worth hanging on to.

Would that be advice? Yes i think it would, it would be a machine that would have had to have been kicked around in the FCA’s sandbox. The risk would be with the programmers and maintenance managers of the machine

Would that be guidance? Yes I think it would, it would be a machine that employers and other could promote without fear that they would be deemed “advisers”.

Would that be helpful? If you were able to tip in your pension legacy as easily as your old coins into the Magic Money Machine at Metro Bank

Not only does the technology exist, the Regulatory will is there as well.

We’ve had the technology to analyse funds, pension contracts and to deliver pensions from pots for some time. Until now, we did not have the Regulatory will to do anything with it.

Now, we have in the FCA and tPR, two regulators who seem to want to work together to ensure we can compare good with bad, whether it is in the workplace or not.

We finally have some kind of pension offering, emerging out of the fog created by pension freedom.

Before too long, we might have a way of comparing the retirement annuity contract I took out in 1984 with the SIPP I set up in 2014, the money in my trust based occupational scheme I joined in 1995 with the workplace pension I joined in 2012.

My hope is that ordinary people can – without having to consult with anything but a machine, be in a position to see what they have by way of value, what they are paying for it and a default option they have for this money in retirement.

They can then make easy choices based on clear information that might include employing an adviser.

If we could offer people the retirement equivalent of Metro Bank’s Magic Money Machine, then we’d have a pension dashboard worth talking about.

metro bank magic

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My call for an end to contingent fees on DB pension transfers


Calls to keep contingent pricing fall on my deaf ears.

I champion the pension rights of those with low incomes and I champion the rights of those likely to get lower pensions (women). I don’t champion the right of financial advisers to unlock CETVs for people without the cash to pay an upfront fee. This may sound paternalistic, it isn’t. Tax free-cash is provided to help people with freedom and choice and a pension is a wage for life. The tax incentives that go with pensions (whether DB or DC) are granted on the understanding that a pension is not a general source of later retirement wealth.

We have chosen to make CETV’s available to people with funded pensions but on certain terms. Those terms include the requirement that people take advice on whether the transfer is in their interests. We agree that generally a CETV is not in someone’s best interest.

I think it would be good that everyone owned their own house, but I do not think that 100% mortgages should be people’s be right. I do think that there should be stamp duty and that people should take legal advice as part of conveyancing. That’s because we know what happens when you have a frictionless house finance market.

I think it would be nice if everyone had good cars, fridges, sofas and could choose between private and public education and healthcare. But most people can’t because they don’t have the money.

Most people do not have the money to play “freedom and choice” on all their pension, that’s why the cash commutation was always limited to c25% of the notional pot.

Now some advisers consider the right to have freedom and choice on all their DB pension rights should be enshrined by giving contingent fees tax-breaks that make them the equivalent of a 110% mortgage. Forget it!

What follows is a briefing note that I sent to senior politicians in the hope that we might get a ban -at least on the tax-breaks- for contingent fees , in this year’s Finance Bill. My timing was all wrong and this note to was no avail, amendments were guillotined before the note was read.

But my campaign doesn’t end there. Expect to hear a lot more from me on this.

Need for legislation to protect members of DB schemes from harmful advice

The FCA sampling suggests 53% of those advised to transfer out have had questionable or wrongful advice. They consider that advice is event driven – as in BSPS’ Time to Choose when steel men faced a transfer guillotine. But there is evidence of mass evacuation – £.2bn left Barclays DB scheme in 2017, £2.8bn left Lloyds, the final amount leaving BSPS may exceed £3bn. Transfers are now business as usual for the 2500 authorised IFAs, it’s a nationwide feeding frenzy.

Not only is the advice to transfer questionable, so’s the destination of the money. The FCA are equally uncomfortable about the Self Invested Personal Pensions (SIPPs) and with profits funds used to manage the emerging “wealth”.

Most of the advisers who recommend transfers, benefit from the management of the transferred money through discretionary fund management agreements within the SIPPS and from adviser charges paid by insurance companies running with-profits funds.

As if these conflicts weren’t enough, IFAs have now invented a system known as “contingent fees/charging” where they get paid from the transfers. So, members only have to pay an upfront fee if they don’t take up the advice to transfer. Unsurprisingly, most IFAs recommend transfers most of the time and their customers only feel the pain of “contingent fees” when they get to retirement.

This sloppy process means that IFAs can extract 1-2 or even 3% of a transfer value as a contingent fee to remove the money from the DB pension and then charge as much again every year to manage the funds. As the average transfer value from a DB scheme is £500,000, that means some advisers are routinely taking as much as £15,000 for a single piece of advice and a regular income running to thousands of pounds for doing very little.

What is worse, unlike honest upfront fees (which are paid out of taxed income and with VAT), contingent fees can be paid from the tax-exempt transfer value and (because of VAT exemptions on “intermediation” can be paid without incurring VAT). Inadvertently, HMRC is cross-subsidising malpractice.

In summary – there are three problems

  1. Advisers are conflicted – they stand to gain from the transfer and are disincentivised to say “no” to a CETV
  2. Advisers can use contingent fees which increase the conflict as an adviser’s fees using this kind of charging are painless (and tax-advantaged)
  3. Instead of charging a fixed price for a job, an adviser can fix the contingent-fee as a percentage of fund- giving scope for absurdly high fees which often go unquestioned

I call upon all political parties to stop this transfer frenzy, by

  • Putting an end to the practice of charging contingent fees


  1. Requiring separation from the advice to transfer and ongoing advice by requiring an adviser can do one or another (but not both)
  2. Capping the fees charge for advice on transfer at £5,000
  3. Ensuring that transfer advice is liable to VAT (and not paid for from a tax-exempt pension fund)
Posted in advice gap, pensions | Tagged , , , , , , , , , | 3 Comments

Is the tide turning in the University pension dispute?

tide turning

The  lecturers at Oxford University have received a significant email. I don’t have the email but I have Mike Otsuka’s tweets of it.

louise richardson

This is how the dispute will be resolved. There is some powerful emotional intelligence at play here and I suspect that with negotiations in the hands of women like Louise Richardson, Janet Beer and Sally Hunt, we have rather more hope of a speedy resolution than were we leave it in the hands of us men!

UUK and UCU are back at ACAS today, after the hasty rearrangement yesterday. It seems that at last, some common sense is winning through.

If I’ve kept up: @UniversitiesUK took a decision reflecting a minority of its members, of which many were Oxbridge colleges, who deny they were ever formally represented, to undertake an action that is unnecessary, based on assumptions that are implausible. Right?!? #USSstrikes

— Rich Harris (@profrichharris) March 6, 2018

Let’s see if Cambridge follow suit.


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

Pensions and Pornstar Martinis

Pornstar Martini

The Pornstar Martini

Question ; what have pensions and pornstar martinis got to do with each other

Answer; after announcing they would have a day off from negotiating, the UUK pension team appear to have deferred to the bar for some of these popular beverages.

Here is the press release following a hard two hours discussing pensions with the UCU

and here is a report of a “lost tweet” from its press office

Martini gate, as it will surely be known, comes at the end of a bad day for the Universities UK pension negotiating team who now appear to have done a post-martini u-turn.

Time was when it was the boozy “beer and sandwiches” brigade of the far-left who could be relied on for inebriate rambling. Now it’s the bosses who are proving themselves drunk and disorderly.

Time was that it was the unions who were up to vote rigging, now its the bosses.


UUK are not behaving and have not behaved any differently than the picture painted by the recent Channel 4 dispatches documentary, which painted some Vice Chancellors as out of touch , extravagant and venal.

This blog has carried a number of serious articles from senior lecturers such as Dennis Leach and Mike Otsuka that coherently argue the case to continue to let lecturers accrue defined benefit pensions as part of their remuneration.

There is no intellectual weight behind the philosophical arguments of UUK and no financial weight in their claims they cannot afford to pay the expected pensions.

Instead there is growing concern, not just within the Universities, but without, that its governance – epitomised by certain Vice-Chancellors – is incompetent.

UUK – back down now.

I speak as a parent of a university student who – though he gets no current teaching, supports the strike. I also speak as a card-carrying member of the conservative party.

I have no natural inclination  to support industrial action by unions.

However, everything I have and am reading about the conduct of this pensions strike suggests that it is the unions who are behaving responsibly and the UUK who are not.

It is time for the UUK to accept that they are losing the argument and back down.



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The CMA and IDWG are looking for the right grubs under the wrong stones.

The Competition and Markets Authority has produced the first of a series of working papers (only 90 pages) looking at the buy-side of institutional intermediation (e.g. what happens between buying an asset and the return the customer gets).

“The evidence reviewed so far indicates that competitive processes are not providing customers with the necessary information to judge the value for money of investment consultants and fiduciary managers.

“The potential competition concern with this is that customers are not well-equipped to choose, and subsequently monitor the performance of, their provider and in turn to drive competition between investment consultants, and between fiduciary managers.”

For investment consultant – read “financial adviser” and for “fiduciary manager” read “discretionary fund manager” and you can  read straight across from institutional to retail.

Vertical integration – the practice where advisers morph into wealth managers, means financial advisers and investment consultants are becoming little more than the sales people who bring the money in and keep the customers quiet. (distribution and customer relationship management)

The lines between retail and institutional are further blurred by the “intermediation” going on within our great DB schemes. The news that total CETVs paid from Barclays DB scheme were £4.2bn in 2017, should be attracting the CMA’s attention. £4.2bn is a pretty meaty slab of cash, representing the assets of some of our largest DB plans.

And yet it is being taken on a journey that the FCA has analysed as follows

FCA CETV advice

Following the FCA’s methodology, only £1.5bn of that money would have found a “suitable” recommended product. £2.75bn of that money was destined to unsuitable products – or products where the suitability was unclear.

Where is the money going?poirot

We don’t need to be Hercule Poirot, to make some connections. Here is the Tideway pitch (made ironically to the Group Head of Pensions at one of the banking schemes most impacted by transfers in 2017)


Tideway Investment Partners LLP is an independently-owned financial advice and investment management business, specialising in providing defined benefit pension transfer advice and secure investment portfolios.  Up to the end of 2017, we had completed around 1,400 transfers with a large  number of them deferred members of the Lloyds Bank schemes.

We have a number of free workshops around the country throughout March 2018, covering the pros and cons of transferring out. Given that we have already successfully represented Lloyds scheme members when they transferred out, we thought we would contact you in case you were able to share details of the events with any of your deferred members or any active members approaching retirement.

Our workshops are as follows

  • 6 March 2018, Chepstow
  • 7 March, Manchester
  • 14 March, London
  • 20 March, Norwich
  • 28 March, Aberdeen

Registration details can be found on our website at www.finalsalarytransfer.com.

The events will be hosted by Tideway managing partner James Baxter, widely acknowledged as a leading UK commentator on DB transfers, and often quoted in leading national business/personal finance pages. James regularly appears in the Daily and Sunday Telegraph, along with the Times, Sunday Times and the FT.

Tideway are quite comfortable with this kind of language, as well they should be. Tideway partners (members)  presented their report and accounts for 2017 with this statement

Tideway report

The same hyperbolic results were presented to the shareholders of St James’ Place

St. James’s Place Annual results for the year ended 31 December 2017

28 Jul 2017


View the financial highlights and CEO commentary below for the year ended 31 December 2017.

St. James’s Place plc (“SJP”), the wealth management group, today issues its annual results for the year ended 31 December 2017 – read the press release.

  2017 2016 % uplift
EEV New business profits (£m) 779.8 520.2 50%
EEV Operating profits (£m)  918.5  673.6 36%
IFRS profit before shareholder tax (£m)  186.1  140.6  32%
Operating cash result (post tax £m)  315.2 226.0  39%
Underlying cash result (post tax £m)  281.2  199.5  41%
Underlying cash earnings (pence per share) 53.6 38.2  40%

The horse that bolted -is now re-stabledbolted


Despite these eye-watering depletions of our DB schemes and the equally eye-watering increases in shareholder and member returns from these vertically integrated wealth managers , nobody seems to be making any connection.

But anyone familiar with the ways of retail wealth management and institutional fiduciary management will see precisely the same business model at work.

The main difference is that the margins achievable in the retail space are even higher than those in the institutional space.

I have the same message for Dr Sier and the IDWG as I do for the CMA – follow the money.

We can no longer consider CETVs a retail issue, nor can we consider Tideway, SJP or the major platform managers (Hargreaves, Nucleus, Aviva, Transact, Co-funds etc.) as retail platforms.

The scale of transfers is now so great and the speed of movement of money so fast, that by the time the IDWG has completed its template, many of the horses will have bolted. True they may have been re-captured and put into new stables, but those stables – so long as they are “retail stables” will fall outside the scope of the IDWG and CMA’s institutional reviews.

Whatever happened to the disintermediated solution?

We have an odd understanding of wealth. My browser is flooded with adverts from wealth managers telling me that with £250,000 I am a wealthy pensioner. But £250k wouldn’t even buy me my entitlement to the state basic pension.

People who find themselves with CETV’s worth quarter of a million or more, are being told they are wealthy and channelled into wealth management solutions. Pension managers I speak to speak of tens if not hundreds of members joining the same SIPP with monies being allocated to the same DFM. A classic example of this is the use of the Vega Algorithm within Momentum and Intelligent SIPPs by steelworkers at Port Talbot.

The idea of a SIPP was that it was “self-invested”, but that’s not what the steelworkers were and are expecting.poll bsps anon

Most steelworkers I’ve spoken to are simply swapping one set of fiduciaries (trustees and their CIO Hugh Smart) for another set of fiduciaries (advisers and their CIO – ?).

The “wealth solutions” being offered to most Port Talbot steelworkers were almost certainly falling into the “unsuitable” or “unclear” categories established by the FCA. This is why Port Talbot has become the focus for thinking about a “transfer scandal”.

But Port Talbot is no more than the tip of an iceberg that’s huge underwater mass is now emerging through Barclays reporting – a £4,151,000,000  pension scheme CETV in 2017.

Barclays has a very good workplace pension scheme (run by Legal and General on fabulous terms for the members).

Lloyds Banking Group has a self-administered workplace pension scheme (with charges paid for by the Bank)

Tata and Liberty have workplace pension schemes run by Aviva and L&G respectively, both have default options which cost less than 0.30% of funds under management.

Compare this with a typical advisory charge (1%), platform charge (0.40%), DFM charge (0.5%) and underlying asset management charge (1%) and you can see how easily an intermediated “wealth” solution can cost 10 times the non-intermediated workplace solution. In a world where expected drawdowns run at 4-5% of assets, a 2.7% charge cap between the workplace and wealth solution represents a 50% cut in post retirement income. And this is before account of transaction charges.

The disintermediated solution has a stable all of its own, but no CETVs ever end up there!

A money merry-go-round where everyone wins but the consumer

We of course know why. The “Tideways” and the “SJPs” are not alone. Up and down the country, the DFMs of IFAs are filling up with monies transferred from defined benefit occupational schemes though a practice called conditional pricing.

Tideway are perhaps the most vocal advocates of conditional fees, I have even given Peter Doherty, its CEO, a platform on this blog to argue his case. The argument is that by paying your fees out of your transferred fund, you can afford the transfer in the first place. This argument is given credence by a tax system that allows intermediaries to avoid charging VAT at 20% on advisory fees taken from the transferred fund and allows those fees to be paid from a tax-privileged source (a pension fund) rather than from taxed income.

I am quite sure that everyone from accountants to solicitors envy the privilege accorded wealth managers to levy fees to “wealthy clients” without VAT and from a tax-free fund.

That we – the taxpayers – are offering this privilege to the vast majority of those transferring from BSPS, Barclays, Lloyds and many other well-run DB schemes is beyond me.

Why we are using tax-payers money to reward the advisers , shareholders and partners of Tideway, SJP and other wealth managers is beyond me.

And why we are not banning contingent pricing and with it the conflicts associated with recommending an in-house wealth management solution over non-intermediated workplace pension solutions is also beyond me.

The wrong stones

As for the CMA and IDWG, I fear they are looking for the right grubs, but under the wrong stones!grubs


Posted in advice gap, brand, BSPS, pensions | Tagged , , , , , , , , | 2 Comments

It is time to ban contingent charging on DB transfers.

no win no fee

The argument for contingent charging (in abstract)

The best case for contingent charging appears on this blog and it’s made by Pete Doherty, Managing Partner and CIO of Tideway. I published this blog to provide balance and to create debate.  This is the nub of his argument..

Now that we better understand the breakdown of fees into “commoditised” and “value-added” components, it is obvious that for DB Transfers a non-contingent fee structure would simply increase the total fee pool for advisers.

In a world where everyone pays the same fee irrespective of transferring or not, the fee charged for completing a DB Transfer would not go down. That fee is paid for detailed and complex advice around an irreversible transaction and, as described above, represents an insurance policy against future claims. With non-contingent fees the whole DB Transfer population – the scheme members – could only be worse off.

Under the logic of non-contingent charging, the fee for doing nothing must be the same as for doing something, otherwise there is an explicit subsidy and that is not allowed either. So, all that would happen with the introduction of non-contingent fees is that thousands of customers would be charged thousands of pounds for “not doing something“.

Does anyone think that equality and fairness comes from charging someone £ 10,000 to make no change to their financial circumstances? That cannot be right.

These arguments were made, at the time of the Great British Transfer Debate. At that event, Rory Percival made an alternative argument. He pointed out that in practice, contingent fees could open the sluice-gates and empty the pond. Rory has been proved right.

Last week, Barclays published the amount its pension scheme had paid out in transfers in 2017. It was a staggering £4,152,000,000. A figure of just under £3bn is reported by Lloyds. Financial institutions are reported to have been most affected by transfers, probably because they have de-risked further (with higher CETVs resulting from lower discount rates) and because their members tend to be more financially self-confident.

But the fact remains that these numbers are business as usual. The FCA may have thought that BSPS was a one-off but they are wrong. While BSPS was unusual for a blue-collar scheme, the peculiar circumstances of “Time to Choose” has merely pushed it into the territory of the de-risked schemes – typically the banks. The average CETV from BSPS- after the 5% clip for insufficiency, was paying around 25 times the prospective pension, the average CETV from the gilt-based  schemes like Lloyds and Barclays – around 40 times.

BSPS was special, only in that disrespect for the covenant and a time-bound transfer period herded behaviours into a mass emigration.

The FCA has no idea of the scale of transfers across the entire DB constituency. Barclays (I suspect) published the CETV figure to explain how their DB fund had gone down, rather than to alert the FCA. There is no statutory requirement on trustees to publish the outflows from CETVs either to the Pensions Regulator, the FCA or indeed the PRA.

KPMG have told me, they estimate the take up of CETVs across the DB piece to be c£6bn. I now know this to be a wild underestimate. I would be surprised if it was less than £60bn. The KPMG underestimate is likely to be (lack of) evidenced based. Where there is no systemic reporting,  under-reporting is the likeliest outcome.

Why have CETVs become business as usual

The principal reasons for the massive increase in transfers (CETV pay outs quadrupled from 2016 to 2017 at Barclays) can be ascribed to three things

  1. Telephone number transfer values driving consumer behaviour
  2. Advisers like Tideway seeing waking up to an opportunity
  3. The practice of charging contingent fees that made a transfer painless.

I see no reason for the speed of transfers to slow down. Employers are relieved to get liabilities off balance sheet at well below their accounting cost.

Trustees and the Pensions Regulator see the solvency of their scheme being technically adjusted in the right direction.

Advisers, product providers and asset managers share in the dispersal of institutionally managed assets into higher margin advised retail assets.

The FCA has no understanding of the true nature of the problem. As at Port Talbot, they are blind-sided by a lack of evidence and a lack of day to day communication with people on the factory floor (in this case the administrators of the DB pension schemes like Barclays).

Time for change

I am reluctantly calling for a change in the law. We have a Finance Bill coming up and I call for it to contain a section banning the use of contingent fees for those advising on transfer values.

My argument for this is simple. It is Al Cunningham’s defence.

People who transfer must consider themselves in special need of a transfer.

The FCA in its sampling of CETV transfer advice has found that 53% of cases they examined showed either questionable or wrongful advice. If we are to accept the sampling methodology (and I do), we can infer that over £2bn of Barclays transfers and £1.5bn of Lloyds Bank transfers were questionably advised (or worse).


FCA CETV advice


The FCA found no good reason for 53% of the people advised, to have taken their transfers.

By banning contingent charging , the FCA will make itself hugely unpopular. It will outrage those advisers, like Tideway (who claim to have done 1400 transfers over the period). They will be open to claims that they are closing the door on freedom and choice. They will be shouted at by the people who now have to fund transfer advice out of their own pocket. This will not be a popular move.

But the simple argument remains. If you have a special reason to transfer, you will find a way to meet fees upfront and in full.

All of the evidence I have from advisers is that by moving away from contingent fees, they see levels of transfers fall of a cliff. People see the need for a transfer disappear when they are asked to find the means to pay for the advice in advance of the advice being given.

I would add a second question.

If you cannot find a means to pay for your transfer advice, can you really afford to manage your own retirement finances?

It’s a matter of conviction

I’ve been an IFA, now I work for actuaries; I helped people transfer, I now advise trustees and advisers on transfers. I am convinced that the FCA are right and that at least half of the transfers that are made are questionably or wrongfully advised. Questionable advice amounts to wrongful advice, there has to be a special reason to transfer and in more than 50% of the cases the FCA have looked at, there is no special reason.

If you have conviction , as I do, of the value of a pension, then you will be heartbroken to see the Barclays, Lloyds and BSPS numbers. I am especially heart-broken because I know of many other instances where schemes are being denuded of future pensioners because of questionable advice delivered on a frictionless basis through contingent fees.

Pete Doherty’s arguments are based on abstract notions that have not been born out in reality. The reality is the evidence that is coming to light and is laid out in this blog.

This blog is simply an extension of the blogs I wrote after my time in Port Talbot. It extends the call to action to meet the particular challenge of the sausage and chip brigade, with the wider challenge presented by contingent fees.

I call on all who have conviction that schemes pensions remain the best way of providing people with retirement security to join me. We need a change in the law. We need the charging of contingent fees to be banned.


I have heard it argued that smart advisers and their clients would find a way to be compliant and still be complicit in the taking of contingent fees.

They reckon without the impact of legislation on Professional Indemnity Insurers. If a PI insurer was to spot such practices, they could withdraw cover or increase premiums to the extent that no sensible adviser could stay in the market.

If the Financial Ombudsman was armed with principal based legislation that allowed him to look through to the contingent fee and see deliberate avoidance of the ban, then enforcement would be through the financial restitution met by the PI insurer. My experience of PI is that material non-disclosure would invalidate claims.

Any adviser who thinks that a ban on contingent fees is unenforceable by the FCA, reckons without the power of FOS and PI.

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Barclays numbers point to transfer carnage happening today.

barclays full

I am staring with disbelief at p304 of the Barclays Report and  Accounts 2017 which contains this statement.

Of the £4,927m (2016: £1,800m) UKRF benefits paid out (in 2017), £4,151m (2016: £1,029m) related to transfers out of the fund.

The total assets of the Barclays fund at the start of the year were £31,8bn and at the end of the year £30.1bn. Contributions to the scheme were just over £1bn.

So nearly 14% of the fund was transferred in one year, four times the contributions. When you consider that a large proportion of the assets of the scheme relate to pensioners, that suggests that the level of transfers is running at over 20% of transferrable assets.

If the FCA’s sampling is as good as it usually is, that means that over £2bn of this money was subject to questionable advice and might better have stayed where it was.

A repeatable number

At Lloyds Banking Group, I’m told DB transfers ran at just below £3bn. We can only assume transfers at RBS and HSBC weren’t far behind.

KPMG’s estimate of total transfers last year stands at £6bn, a figure we now know was outrun by just 2 of the 7000 schemes not in the PPF.

What’s more, transfers out of Barclays DB scheme were up four times on 2016. This is nothing to do with Pension Freedoms which were just as tantalising in 2015 as 2017. Transfer values would have been higher in 2017 with the discount rate falling from 2.8% to 2.4%. But even so, the exponential growth in transfers out is mysterious.

Why so quiet?

One reason for Barclays keeping so quiet may be that the transfers have been very helpful to scheme funding (now at 109%). The accounts make reference

The improvement in funding position between 30 September 2016 and 30 September 2017 was largely due to payment of deficit contributions, higher than assumed asset returns, higher Government bond yields, and transfers out of the scheme.

Neither the trustees or the Pensions Regulator  are going to mind too much. The scheme is 109% solvent, even if that solvency was achieved by losing £2bn_ of “liabilities” , through questionable advice to an unknown destination

Indeed, as the transfers are calculated on a best estimate basis and the liabilities are accounted for by the Bank at mark to market, the balance sheet will have seen a marked improvement from all these people leaving the scheme. Shareholders and market commentators are hardly going to lament the freeing up of the balance sheet. That £2bn of the liabilities have been shed (to unknown sources), is no business of the employer.

Nor are the financial services organisations that received the proceeds of these transfers going to be too concerned. St James Place announced its results this week. In reporting on these statements

In his report, chief executive Andrew Croft stated:

‘In the past year, we have seen increased activity around pension transfers, driven in part by the flexibility afforded around defined contribution schemes following the introduction of pensions freedoms but also due to increased transfer values.

‘Transferring out of defined benefit schemes is not without considerable risk and complexity which requires expert bespoke advice, so we have naturally been relatively cautious in recommending such a course of action, but we expect this to be an area of heightened interest for clients and one which we will  continue to manage carefully in the years ahead.’

Note the cautious and restrained tone. Having worked in an SJP type environment, I would be surprised if the thought of £4bn+ pa free money did not excite the passing thought “fill ya boots”.

And finally there are the former members, who now have wealth beyond their wildest dreams. While the average DC pot is still below £40,000, the average DB CETV is over ten times that. Except in the Tai Bach rugby club (for a while), you aren’t going to hear too many former members shouting about the glut of transfers, they’re all too busy counting the noughts in their SIPP accounts.

Indeed , in this topsy-turvy world, everyone’s a winner. As Dave Thompson sums up in the comments on this blog

It’s all about Hyperbolic Discounting or Jam today as Rory Percival explains so eloquently. ” I want my money now so I can live for today, everyone wins, I get my money, HMRC gets their tax quicker, DB schemes reduce liabilities. Fund managers get aum, Adviser firms get funds under management much quicker than encouraging regular savings” George Osborne did us all a favour.

Reasons to be noisy 1-2-3

Many advisers are happy to boast about their caution, but somebody has been busy with Lloyds and Barclays, I hear stories of transfer mayhem in towns as far removed as Dagenham and Halifax, Port Talbot and Redcar.

I see the BSPS Facebook pages and they are filled with the delighted stories of steelworkers who are out, The last recorded number for transfers in Time to Choose was £1.1bn (early Jan), my estimate for the total transfers by the end of March isn’t shy of £3bn (even with the FCA interventions).

The KPMG £6bn number is manageable – but if the number is in reality ten times that, and it could well be, that shows an exodus from DB funds that is deeply worrying.

I think it’s worth making a lot of noise about the Barclays numbers because they are truly frightening. I am not saying that 14% of all DB assets are offski, but if they were, we would be seeing a transfer out of DB plans of well over £100bn.

Stick a pin on the donkey’s tail somewhere between £6bn and £100bn and you are looking at the depletion of defined benefit assets caused by the 2017 transfer frenzy.

That may not be a cause for concern for employers, trustees , SIPP providers and asset managers, but it should worry Government and it should worry those of us wanting to restore confidence in pensions.

It’s time that a proper audit was done on the accounts not just of Barclays, but of all the large DB occupational pensions in the private sector. If we can’t measure the extent of transfers , we can’t work out if we have a problem.  The current measure of £6bn is clearly wrong; we need a new number.

barclays pen

Those Barclays Pension Numbers in Full (p304 – Report and Accounts 2017)


Thanks to FT adviser for the re-post

Thanks to Maria Espadinha, of FT adviser for her article on this subject which you can read here. Maria has been a force for good in recent months in helping a wider audience get an understanding of these complicated and difficult issues.

Posted in pensions | 5 Comments

How do I rate my various pensions?


Following the publication of yesterday’s Guidance from the DWP on “DC pension” disclosures, this article asks “have we any framework for answering the question in the title?”.

The conclusion is “not yet”, thought the disclosure guidance takes us another step towards a common measurement system which can allow us to compare our “SIPPs,” “auto-enrolment pensions” and “company  schemes”.

That I struggle to find a consistent language to embrace three different parts of the market is part of the problem. Our defined contribution schemes operate in distinct bubbles, with little means to talk of “retirement savings” as a single entity.

Let’s try a little harder and organise our savings options into the same three buckets but this time use the titles that the Regulators are using.

Non workplace pensions (SIPPs)

As a nation we have around £400bn of retirement savings in private “non workplace” pensions. Some of us executed our private pension (Hargreaves Lansdowne) , most of us were advised (SJP or pre-RDR personal pension or SIPP platform), and a few of us are using the remains of a workplace pension which was jettisoned into our ownership when we left a former employer. It’s a messy market which the FCA are currently trying to knock into shape. For most of us, it’s pot luck as to whether our savings are working for us or for the retirement savings provider.

Workplace pensions (Auto-enrolment pensions)

This is a much more ordered market, still small compared with the mature non-workplace pension market, but growing with the advance of auto-enrolment.

Despite the high degree of Government control , this remains a diverse market containing trust and contract based schemes which flourish or fail depending on their commerciality. With the exception of NEST, which really is too big to fail, all the workplace pensions are competing against existential threats. Two of the leading workplace pensions (NOW pensions and Standard Life) will likely be under new ownership by the end of the year.

Ironically , Standard Life have gone wrong by assuming employers will buy something that looks like a SIPP (Good to Go) while NOW pensions have used a product that looks like a paternalistic occupational DC pension.

Many smaller master-trusts are currently deciding whether to continue under the more rigorous conditions created by PA16.

But general awareness among buyers (employers) and savers (employees) of the state of their workplace pensions’ fortunes is as low as ever. If the OFT were to return today, I doubt they would revise their 2014 statement.OFT

Single occupation schemes

The DC schemes set up by employers for their own staff should be the crème de la crème, the benchmark against which non-workplace and workplace pensions set themselves.

But this is very far from the case. While the best schemes are very good indeed, many are beset by problems of their own making. The richest employers are too often beguiled by bogus consultancy-driven strategies involving “white-labelled funds”, “liability driven investments”, over-engineered communications and under-engineered administration. These schemes are beset by the vanity that comes from unconstrained budgets, offered DC trustees by guilty employers aware they are selling mutton dressed as lamb.

And behind the first wave of trophy schemes with their PQM kite-marks, is a dark web of semi-derelict occupational schemes that struggle along because employers feel that as they’ve started – they should finish.

Far from being an example of excellence, the single occupational schemes are an example of a free-market gone wild. A thousand flowers bloom in this meadow. but as many weeds.

How do we compare one with another?

Writing in today’s FT, Jo Cumbo compares the Australian’s engagement with pensions and concludes that they are saving four times as much as us, partly because they know what they are saving into and have confidence in their “super”

 Australians are not shy about talking about their super. In fact, they can get positively competitive about how well their pensions pot is doing. This is largely due to the fact they have choice over where their super is invested and do not have to stay with the fund chosen by their employer, a feature of the UK system which sees billions languishing in poorly performing “dog” default funds.

There are many comparison websites that allow investors to rate their super on a range of measures from charges and investments options to insurance and death cover.

Newspapers frequently publish league tables of the best-performing super funds, with the top 10 accounts achieving over 10 per cent, net of investment fees, in 2017. This generates a culture of competitiveness between super funds in a way which is yet to be seen in the UK workplace pension market.


There is currently , no such culture in the UK

Many people who have been saving for their retirement twenty or thirty years, will have examples of all three types of pension. Quite naturally, they’ll be looking to bring all these pots together into one single pot and working out which pot to use going forward.

They may employ an adviser, who typically nowadays is a wealth manager who will advise all pots aggregate to the wealth management solution on offer from the advisory firm. There is no way for the ordinary consumer to test if this is a good idea, this is a worry.

Many people will not have an adviser and will consequently feel disempowered to aggregate. Typically these people will be unaware of where they are getting value and what money they are paying. We don’t even know the rules of engagement. For instance, very few people know that exit penalties on non-workplace pensions dramatically fall away on their 55th birthday.

The non-advised are therefore acting in the dark. There is some “lux in tenebris” from organisations such as Pensions Bee, Evestor, Nutmeg and other progressive aggregators and there are new organisations such as Hulgrave who are looking to put information into the market which can help us understand value, but there is still no “GO COMPARE” for pensions.


There is a simple way for us to assess what we have by way of “good” or “bad”. The test is called “value for money” and requires a commonly agreed measure of “value” and “money”. Till very recently, the best we had to hope for, was the “single charge” which is disclosed to us as the cost of management.

Here is another extract from that 2014 OFT report


Four years on and we are nearing a point where we have a manually completed template that will allow IGCs and Trustees to understand the total cost of the funds that their providers choose to invest our money into.

In a couple of years, we can hope to have automatic feeds from asset mangers which will prevent “cheating” and bring down the cost of gathering this information.

Meanwhile, we are struggling even to get consistent accurate reporting on value within sectors. If I want to compare NEST with Standard Life’s default, I have to wait till NEST send me their unit prices (up to a month after the price was created) and I have to apply through a price vendor (Morningstar of Financial Express) for price history on Standard Life.

There is no table showing performance data, let alone risk adjusted performance, let alone the costs incurred in getting that performance.

And that’s just the funds bit of it! The value we get from a workplace pension is the combination of the net performance of the investments and the experience we have of using the pension (both now and in the future). We are a long way for agreeing a value for money formula that can compare workplace, non-workplace and occupational pension schemes.

Leaving other forms of retirement savings (ISAs) out of this, we need to embark on creating a means for ordinary people and ordinary advisers to have access to tables that can compare the value for money of all retirement savings vehicles where we – the punters- are bearing the performance risk.

The DWP’s disclosure paper, is a step in the right direction. The work of the IDWG in creating a template is another, MIFID II and Priips help and the clearance work from the Transparency Taskforce is important too.

But we need more than all this, we do need the co-operation of all parties in a general endeavour to make saving for retirement easier and fairer for those of us doing it.

That’s one of the ways we restore confidence in pensions.pensionplaypencomingsoon


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HMRC’s pension taxation; the Scottish question.

Scottish tax

The HMRC’s position on pension taxation reached new heights of barminess last week, with its decision to let the new “19% Scottish taxpayers” receive 20% relief at source. This is Apparantly one of those problems that gets put in the too difficult box.

But while it’s fine to give away tax to troublesome Scots, some of the most vulnerable of British citizens, low-earners in net pay schemes get 0% rather than 20%!

If you don’t believe me – it’s all here in the latest HMRC pensions newsletter!

One law for the poor

Net pay

Members of pension schemes who get pension tax relief through the ‘net pay’ mechanism have their pension contributions deducted before Income Tax is applied to their pay, so only pay tax on what’s left. Pension tax relief on these contributions will continue to be given by default at members’ marginal rate of tax, including the new and newly increased Scottish rates.

One law for the rich

Relief at Source

If you are the administrator of a pension scheme using the relief at source mechanism, you will continue to claim tax relief at the rate of 20% for members who are Scottish taxpayers.

For pension scheme members who are Scottish taxpayers liable to income tax at no more than the Scottish starter rate of 19%, or who pay no tax, current tax rules will continue to apply. This means that scheme administrators will continue to claim relief at 20% in respect of these individuals, and HMRC will not recover the difference between the Scottish starter and Scottish basic rate.

And special treatment for the richer

Pension scheme members who are Scottish taxpayers liable to income tax at the Scottish intermediate rate of 21% will be entitled to claim the additional 1% relief due on some or all of their contributions above the 20% tax relief paid to their scheme administrators.

These pension scheme members will be able to claim the additional relief for 2018 to 2019 by contacting HMRC if they don’t already complete Self Assessment returns, or through their return if they do. HMRC will engage with stakeholders to help affected members claim this additional tax relief.

Pension scheme members who are Scottish taxpayers liable to Income Tax at the Scottish higher rate (41%) and Scottish top rate (46%) will be able to claim additional relief on their contributions up to their marginal rate of tax in the usual way, either in their Self Assessment tax return or if they don’t complete a tax return by contacting HMRC.

What kind of hypocrisy is this?

It is high-time HMRC was called for it’s pensions hypocrisy.

It is prepared to invent all kinds of special processes to accommodate the wealthy Scots , but is unprepared to help the poorest members of society who have – under auto-enrolment , been nudged into pension savings with the promise of a 4+3+1% contribution structure. If anyone is unaware, the employee is supposed to pay 4, the employer pays 3 and the Treasury pays 1% into the pension pot.

For hundreds of thousands of low-paid pension savers, (including a fair few Scots), the Treasury 1% simply won’t arrive.

That’s because under net pay, the tax-relief members get is in line with their marginal rate of tax – 0%. Meanwhile, the Scottish low-paid in Relief at Source schemes get more than basic rate tax relief! It’s barmy, it’s hypocritical and it’s just plain wrong.

Who runs these net pay schemes?

The vast majority of occupational pension schemes – including most master trusts (Peoples, Nest and Smart excluded) – still run net pay schemes.

They say that their systems won’t let them run under relief at source and they aren’t allowed to split schemes to run the low earners under RAS and the high earners under net pay.

So these schemes continue to offer immediate tax-relief through pay-code adjustments to their tax-paying members and nothing at all to those who are tax-exempt.

These large occupational schemes seem disinterested in this matter, as does the Pension and Lifetime Savings Association that ludicrously offers a Pension Quality Mark to net pay schemes.

I’ll continue to shout about it as the contribution problem gets worse

In April, Auto-enrolment contributions for employees treble, the following April they increase again from 3 to 5%.  Actually that 5% should be 4% as the 1% “incentive” for the low paid should ease the burden. But no such luck in sight for low earners on net pay who will have to pay 100% of the increases!

An unfair taxation practice that’s about to get 5 times bigger!

HMRC is so powerful that few people want to speak out about this unfair taxation. I’m grateful to my contacts in payroll who pick up on these things and feed me the information. It would be good for the CIPP and CIPD to follow me in on this. I will be sending them this blog.

But the people who should be doing something about this are not the payroll bodies but the HMRC.

Come on HMRC, if you can tweak the system to reward the rich, you can do the same to help the poor.

If you don’t then you will rightly be called hypocrites, arguing that we pay our tax fairly, but giving all the tax-breaks to those with the deepest pockets.



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Standard Phoenixed.

phoenix 1

There are few examples, since the demise of Equitable Life, quite so ignominious, as the end to Standard Life.

Standard Life Assurance Limited is being sold to Phoenix Life for just £3.2bn , part of which will be paid to Standard Aberdeen in shares of Phoenix Life. It can be argued that the cross share-holding will mean that Standard Aberdeen still has an alignment of interest in the success of the new venture and some residual interests in the fate of its policy holders. But in practice, it is selling off its life insurance business and with it, its responsibility for the retirement outcomes of its workplace savings business.

“Good to go”

In hindsight, calling the workplace pensions product “good to go” was prophetic, it is indeed going and to what extent employers with Standard Life workplace pensions will find these good to go, we have yet to find out.

A few years ago , Standard Life was the default provider of workplace pensions. They achieved this by aggressive pricing (the most attractive propositions – such as the GPP they offered staff at Logica – had an all in price of 0.10%). This was backed up by a well-acclaimed investment proposition – fronted by the GARS fund and the outstanding reputation of Standard Life as a consumer brand. Standard Life were IFA friendly, offering attractive commissions on new business prior to the implementation of the Retail Distribution Review.

But since RDR and the introduction of auto-enrolment, Standard Life haves been supplanted first by Legal and General, who undercut them and out-marketed them to pick up most of the attractive AE business, in 2013 and 2014, and latterly by low-cost, high-impact master trusts who have hovered up the majority of the smaller businesses entering workplace pensions from 2015.

The disastrous performance of GARS over the past few years has not helped, but what has really hurt Standard Life was its failure to come up with a compelling proposition at a reasonable price .  “Good to Go” may have been attractively named , but it was too expensive and inflexible for a market that wanted its functionality for free and saw little to admire about an investment proposition that was not delivering.

Along with NOW pensions, Standard Life is the great casualty of Auto-Enrolment. Had Standard Life Assurance, got it right (as L&G and B&CE did) , then its workplace pension would not have been “Phoenixed” and might have actually made the whole Standard Life proposition, a bit more attractive to Standard Life Aberdeen.

It’s Aberdeen with a big A and Standard with a small s

I must stop calling Standard Life Aberdeen that – undoubtedly, the total loss of the life business, including its live “workplace business” makes Aberdeen the predominate partner. Aberdeen has  stripped Standard Life of its investment and platform business assets and spat out the pips on Phoenix.

Whether selling off the rival business to Scottish Widows, will be enough to attract back the £109bn of LBG assets, I very much doubt. The word on the street is that the money is in Aberdeen’s cul-de-sac and the only way for it is “out”.

The only winner in Aberdeen Standard is Martin Gilbert, who has now a firm grip on a diminished business. It’s a case of 1+1 = 1.5% – but that’s 50% more than Gilbert had before.

Where now for Standard workplace pensioners?

So where does this leave employers and policyholders with Standard Life “Good to Go” workplace pensions?

We’ve had a few statements from Phoenix, suggesting that there will be continuity of brand under some white-labelling arrangement. Corporate Adviser has been told

Standard Life, which had in recent years been the largest workplace pensions provider in the UK, will continue to market and distribute the workplace pensions, which will retain the Standard brand name, on a white-label basis, while the back office administration and ownership of the schemes will transfer to Phoenix.

But this doesn’t sound very core to Phoenix’s business model, which is essentially the management of closed books of business. Having spent some time working in a non-core area of British and American Financial Services , I do not envy those running “Good to go”, you will find the business cases you put forward for new investment , a lot more difficult.

Policyholders should be right to be worried. They are paying a premium price for a premium service. Finding that service owned by a “Zombie-insurer” will not go down well with many.

Governance – a fish out of water?

Much will depend on Phoenix’s attitude to governance. The Standard Life Governance Committee under Rene Poisson is now looking a fish out of water. I have consistently rated Phoenix’s IGC and hope that whatever merged IGC comes out of it, it combines the best of both. If the IGC is dumbed down, the proposition will surely follow.

Standard Life also own a number of master trusts, including one that is used for workplace pensions. It will be interesting to see what changes occur on the boards of these.

And finally, the teams at Standard Life will be reunited with the teams at Elevate, who manage a number of insured investment only propositions – including that of Lloyds Banking Group’s own staff pension scheme. There are considerable savings that might be made by using the Elevate platform at the investment platform of Good to Go and the Mastertrust

But are these cost savings to benefit the shareholders of Phoenix or the policyholders and members of the Standard Life workplace propositions? Strong Independent Governance will be needed to ensure that a balance of interests is maintained.


For more information…

New Model Adviser has produced a really effective slide show on the wider implications of the phoenicisation of Standard Life. Access it via this link

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UUK – you cannot dictate the terms on which you break your promises.

“Pension promises” are difficult. Lawyers tell me that the members of the University Superannuation Scheme (USS) do not have a contractual right to it. It could be argued that cutting off the oxygen of future accrual (as UUK are threatening to do) is the prerogative of the employer. This blog argues from a more common-sensical point of view.

If you are paid to be a lecturer, you consider your wages holistically – as total reward. Taking away your deferred pay (pension) is like taking away your actual pay. I dare say you can cut my salary, but you’d be well advised to get me to agree to the cut. So when I talk about broken promises – I’m talking about a failure to keep a promise – rather than a criminal act!

And of course , we’re all talking about what goes on in the future and not what has happened in the past. The past is another country and (thankfully) accruals to date cannot be put in jeopardy. Those accruals are rights not promises.


I have recently been interested in three instances where large employers have broken promises to staff about pensions.

Tata (and other former British Steel employers) broke a promise to fund the British Steel Pension Scheme. Steelworkers accepted the closure of the scheme as a way of keeping steel plants open. One way or another, the plants survive though the pension promise has been diminished. Most members of BSPS chose BSPS2 over the PPF – quite a few (who could) opted out of either.

Royal Mail, so over-protected its DB pension scheme that it found it could not afford to fund future accruals. Over a protracted period of negotiations, both sides came to the conclusion that it was in the best interests of all for Royal Mail to offer an upgraded DC solution in place of the broken DB pension – we know this solution as CDC or the “wage in retirement plan”. Royal Mail wasn’t broke (like Tata) but it’s pension scheme could have broken it.

The Universities (known collectively as “UUk”) are not broke, and it is highly debatable that their pension scheme will break them.  The best explanation of why the promises made by Universities need not be broken is made here.

The Universities are a different case

alastair jarvis 2

Janet Beer

Despite my personal affection for my old teacher, I think Dame Janet Beer is wrong to have written the letter she did yesterday, trying to get the University’s Union – UCU, back to the negotiating table.

Re-reading the letter, I see a false assumption, an assumption that the UK Universities cannot afford to pay the DB promises they have made. The truth is that they can, but they want to do other things with the money they’d have to use to do so. It’s a case of discretionary spend.

Instead of assuming they are right, Janet Beer and others should be explaining to staff, as Royal Mail did, why it would be in everybody’s interest to accept the breaking of these pension promises. The Universities’ case is different because they are pressing on without the support of the unions or the members of their pension scheme (USS), Consequently they aren’t just facing, they’re experiencing strike action. The negotiations are not going well and UUk know it.

I will be in Cambridge this afternoon, watching a game of football. After, I’ll be spending time with students. All the indications I am getting is that Cambridge students are on the side of their teachers. They see things the way I see things – the Universities have not won the argument to close USS for future accrual (on any basis).

If and only if, UCU accept DB closure…

In its open letter to staff ,  UUK offer options for further discussion. These options do not get discussed until and unless an agreement is reached that the closure of the DB scheme is in the best interests of all – not just the employers.

While it is pleasing for me to hear that UUK acknowledge the existence of a CDC option (the one that was forged by Royal Mail and CWU), it is wrong of them to assume that they can use it to short-circuit the fundamental question about the breaking of the DB promise.

It’s heartening to hear that UUK still consider risk-sharing an option, this is- I think – code for a DB-lite solution , such as the WinRS scheme proposed by the CWU to Royal Mail (and rejected by the Royal Mail. This too could be discussed, if the case for breaking the DB promise was accepted.

Sally Hunt and the UCU are prepared to go back to the table

The UCU has said that it will go back to the negotiating table next week. They should go back to listen to the argument of UUK for why their members should accept broken promises. Some of that argument is rehearsed in Janet Beer’s letter, but simply saying you are right – does not make you right.

Sally Hunt is right on the money here

and again



No DC discussions without prior-agreement

But the UUK have not won their argument and cannot expect UCU to discuss any kind of DC solution (DC or CDC) – or indeed a dilution of the DB promise, unless both sides can accept a general way forward that justifies the breaking of the DB promise.

The people who fund the UUK are the tax-payers and the students (future tax payers and loan re-payers).

Janet Beer is on very weak ground as she has neither the support of the Unions, the students or the general tax-payer (well not me anyway!).

If the Universities want to pay their Vice Chancellors CEO wages, and build fine buildings and behave as if they were privately owned enterprises, then they will need to find a business model which the public buys into. They should stop behaving with ill discipline and poor governance.

They should come to the table next week with humility. They are asking UCU members to accept a broken promise and they need to do better at explaining the case to do that.

Part of that case, might be , that the alternative pension arrangement may not be so bad after all. But we can have no talk of CDC just yet. Professional Pensions claimed UUK were “jumping on the bandwagon”, there is of course no CDC bandwagon. CDC is no reason for UUK to break the DB promise.

The only bandwagon in town is the “let’s break our DB promise” bandwagon, which is sadly being driven around a large number of employers still accruing DB. CDC has nothing to do with this and any attempt by UUK to justify the breaking of the DB promise by offering CDC should be stoutly resisted. Resisted not just by UCU but by anyone who rationally calls themselves a “Friend of CDC”.



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Could this letter have opened the lecture- room door to a pension settlement?


This letter needs to be read carefully. CDC is carefully positioned as one of a number of options available to improve benefits to staff. It would be in practice an upgrade to the existing DC scheme in place and not a downgrade of the DB promise. That said, members moving to the CDC plan would be accepting that this would be in place of future DB accrual.

Understandably, the UCU are reluctant to give up the rights to any DB accrual which they consider affordable immediately and in the long term.

However, the stated offer of a negotiation around an improved version of DC , may be as helpful to UCU as its offer by ACAS was to CWU. If the long term outcomes of a CDC scheme can match or exceed outcomes from an equivalently funded DB plan (as Con Keating and others of us in Friends of CDC believe it can), then future membership of a CDC plan need not necessarily be disadvantaged .

But there is a big “if” there. It will take a lot to get UCU and its members to exchange certainty of outcome for certainty of contribution. That said, this open letter is a great big step in the right direction and hats off to my old teacher Janet Beer!

The open letter to USS members in full:

22 February 2018

Dear members of the Universities Superannuation Scheme,

With the prospect of further industrial action in the coming weeks, we wanted to take the opportunity to let you know what the Universities UK position is in this dispute over pensions, and also the basis on which we are asking UCU to engage in further talks. We wanted to make it clear that we have never refused to continue to try to find an affordable, mutually acceptable solution.

The challenge for the Universities Superannuation Scheme (USS)

The problem that we share as interested parties in USS is that to continue to offer current benefits, contributions would have to rise by approximately £1 billion per annum. The scheme has a £6.1 billion deficit and there has been an increase of more than a third in the cost of future pensions. Pensions law requires this increased cost to be addressed, and the Pensions Regulator and USS trustee need to agree a credible plan to address the increased deficit by this summer.

When valuing a pension scheme there are many assumptions to be made by the trustee and it is understandable that differences of view may exist. The USS trustee, informed by independent expert advice, has been guided by the laws and regulations governing private pension schemes, which include stringent requirements on how much risk is tolerable. Despite a prudent assessment by the trustee, the independent Pensions Regulator raised concerns about the level of risk in USS in September 2017.

Employers have a legal duty to ensure the pension scheme is compliant with the requirements of the regulator. We also have a moral duty to the members of the scheme, and to the employers whose joint contributions ensure the financial sustainability of the scheme, to take action.

The problem faced by USS and universities is not unique. Many trustees and employers are making the same difficult decisions across UK-funded defined benefit schemes. Only the government could guarantee the level of financial backing for a defined benefit scheme to achieve a sufficiently manageable level of risk, and USS is not a government-backed scheme. The only options to address the funding challenges are to increase contributions to the scheme substantially or change the future benefit structure.

The consequences if employer contributions increase

Employers currently pay 18% of staff salaries to USS, double the average for defined contribution schemes in the UK. In Universities UK’s consultation with employers the majority were clear that an increase in the employer contribution is simply not feasible. If an increase in employer contributions were to be imposed, funding would have to be found from elsewhere in university budgets – from teaching and research, from staffing costs and from student services. It could lead to widespread redundancies, hurting both staff and students. And there would be no guarantee that the scheme would be in a more stable place at the next valuation, leading to further cost increases, more significant reductions in future pension benefits, and more cuts.

Potential for further talks

Universities UK, as the representative of employers, has been in talks with the University and College Union (UCU) throughout 2017, and we have met more than 35 times since the start of 2017 to try to find a way forward. The benefit changes that are proposed address the current issues with the scheme and also ensure that the maximum amount of the employers’ contribution goes towards members’ benefits. It is the best solution for this valuation to ensure the sustainability of the scheme.

We are open to changing the scheme again to reintroduce defined benefits if economic and funding conditions improve. To that end we have been and continue to ask for further talks with UCU on the future of the scheme including:

  • Exploring alternative models for risk sharing, which might provide higher certainty about retirement benefits to USS members.  An example of an alternative scheme is collective defined contribution, which is currently not possible under UK legislation, although this may change in the future.
  • Exploring a well-defined framework for the future re-introduction of meaningful defined benefit if economic and funding conditions improve.
  • Exploring how deficit recovery contributions can be kept as low as possible, so that a greater proportion of employer and employee contributions supports future benefits.
  • Engaging with stakeholders on the way that any investment de-risking is to be implemented by the USS trustee, for example to ensure that any specific portfolio de-risking approaches deliver the most benefit for the associated expected reduction in target return. ​

From the end of March a two-month consultation will begin, when you, as a member of USS, will be asked for your views. We would like to appeal to you to take the opportunity to put forward any proposals you feel may not have been sufficiently considered. We have sought independent expert advice at each stage of this process, but we are open to the possibility that we have not considered every possible angle.

In the meantime, we wish to continue to discuss any credible, affordable proposal; and even at this late stage, we are confident that employers would want to consider whether such a proposal could form the basis of a way forward.

If you would like to read the detailed briefing material that sets out our views and analysis in more detail, please visit the Universities UK website.
Best wishes,​


Professor Dame Janet Beer, President, Universities UK

Alistair Jarvis, Chief Executive, Universities UK​

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Royal Mail CDC – proof of concept or the real deal?


I am always amazed at the churlishness of the pension industry towards innovation. Here’s John Lawson suggesting that the Royal Mail should be spending £400m a year to satisfy his curiosity.

Let’s be clear, you do not spend £400m a year on anything unless you are totally convinced it is the right thing to do (unless you are an insurance company “re-platforming”).

In answering the question I posed in the title, I have first to question what the insurance company means by “real life” and “mathematical theory”.

Real life

We all live in bubbles to a greater or lesser degree. But if your job is delivering letters to people at 7am in the morning in February (when I’m writing), life must seem super real. It’s cold, it’s tough and one of the things that keeps you going is that you will be getting enough money at the end of your working career , to stop pushing a cart around, or sorting or driving a van.

The Royal Mail pension scheme is a deadly serious enterprise.

“Real life” is not hypothecating on twitter.

Mathematical theory

All insurance and pension projections are based on mathematical theory. How those projections match up to outcomes is a matter of speculation whether we are talking about Royal Mail’s ability to meet the targets for their pensions or Aviva’s Statutory Money Purchase Illustrations.

Here is the mathematical theory behind the Royal Mail’s wage for life pension scheme, which will commence as soon as Government can help organise it.

I hear a lot of grumbling about pension contributions not being big enough. The Royal mail will be paying 13.6% of postal worker’s pay into this Wage in Retirement CDC scheme and postal workers will be paying a further 6%.

The £400m that Royal Mail will be spending is real life money not mathematical theory.

A disintermediated pension

It is up to the people who manage Royal Mail pensions to ensure that as much of the £400m as possible ends up in the hands of the real life postal workers for whom it is intended. So beware insurers, pension consultants, third party administrators, lawyers, accountants and actuaries – there is a chance that the management costs of this DC upgrade could be radically lower than any pension scheme ever run in this country.

That is so long as we don’t see the Wage for Life arrangement having to shell out on worthless intermediation.

So long as the Wage for Life scheme is as simple as the scheme design above, the chances are that it will run at a fraction of the cost of any workplace pension and deliver much better outcomes.

Of course the outcomes aren’t just a matter of keeping the costs down, they will – as all DC schemes will – depend on market conditions and of course on the skill of the investment managers. The Trustees of the new Royal Mail Wage for Life scheme, will have plenty of opportunity to search out the best in investment management.

Turning round the fortunes of Royal Mail

Royal Mail is poised to return to the FTSE 100, after adding £2bn to its market capitalisation in the last four months. Shareholders have been rewarded by more than a 50% increase in the value of their stock.

Royal Mail was booted out of the FTSE 100 last year as the share price plummeted on fears of a pension strike. That strike was averted by good work from Royal Mail and CWU and investors have flocked back.

In the real world, shareholders, management and staff stand to gain a great deal from sorting out pensions.

More than a proof of concept of a mathematical theory

You only get one shot at this. The “Wage for Retirement solution pioneered by Royal Mail has the chance to radically reshape the three principal DC markets in the UK

  1. Large single employers DC plans
  2. Multi-employer workplace DC plans
  3. Non workplace retirement savings plans.

Note the deliberate avoidance of the word “pension” in any of the three. Insurers like Aviva have the privilege of managing many of the plans in all three sectors but – along with other providers, do not offer a wage for life integrated into any of these plans.

In the real life of postal workers, the loss of such pensions from the closure of the Royal Mail DB plan, has meant that around 100,000 of the 142,000 postal workers have lost the right to a wage for life. The proposals give them back that right.

John Lawson, and others who point to the upcoming Royal Mail wage for life scheme had better get the message. This pension plan is very real and poses an existential threat to their meagre ambition for the rest of us.


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

A good day for pensions, a good day for the DC upgrade.

Royal Mail FT

We will know we have a solution when we don’t need guns.

Overnight I heard the President of the United States deliver his solution to the gun crisis in American schools. To prevent more mass shootings, Donald Trump suggested that American teachers carried (and were trained to use) a gun.

I am sure I am in the majority of British people when I call this an appalling solution that demonstrates a societal breakdown in America. We in Britain aspire to a society where no-one needs to carry a gun, where arguments are settled by words and where we de-escalate violence. Extending the problems of the street into the classroom, simply desensitises beautiful young people.

Guns are not the solution, we will know we have the solution when we don’t need guns.

What planet are these guys on?

In making the following statement, I risk alienating some people who might say I should not be making capital out of the heart breaking loss that parents and friends of those who died in that Florida school.

I think that Trump’s remark was born out of a fundamentally mistaken position , just as I think this statement is made out of a fundamentally mistaken position.

This is in fact excellent journalism, Alex is articulating the very thing that most of his readers (the Pension Experts)  will be thinking. Most people regard “CDC” as an unnecessary complication which would best be left in the alphabet soup.

Alex has now published an article in Pensions Expert, which quotes at length the views of Simon Harrington, senior public policy adviser at the Personal Investment Management & Financial Advice Association.

Unlike Hargreaves Lansdown’s Nathan Long, who made some excellent points about people for whom CDC would not be suitable (most of HL’s clients), Harrington was not at the hearing. This is very clear as the meeting articulated a clear vision of CDC as a CD upgrade – initially for the Royal Mail but in time for others. Here he is moaning to Alex as if we were back in 2015.

There is an absence of clarity about what CDC is as legislated for, for the UK, and how it compares with other international examples, and then specifically what the benefits of CDC are as compared with the current system that we have”

I’m pleased that Alex is articulating the “industry position”. It allows me to take a step back, as I did with Trump’s remark and ask “what planet are these guys on?”.

CDC needs international comparators like teachers need guns.

Misreading the mood of the country

My reply to Alex, wasn’t considered but looking at it now, I think it properly explains why most people, including Alex are misreading the situation.

But just as Trump’s comments were logical in the context of a belief that everyone should be allowed to carry a gun, so Alex’s comments are logical in the context of the pension freedoms. It is only one step from saying “no one should ever have to buy an annuity again” to saying “no one should ever have a pension again”.

What was happening to the Royal Mail postal workers, was that they were being offered a pot not a pension. The same thing is happening to teachers. Teachers are striking today for the right to continue to accrue pensions within the USS. As the FT’s excellent opinion piece today puts it.

The changes the UUK is proposing are similar to those that have been carried out by businesses across the UK. These would see the scrapping of defined-benefit pensions which offer certainty of income in retirement. In their place UUK would introduce defined-contribution pensions

Except the “striking dons” won’t get pensions, they will just get pots of money.

Just as Trump is blind-sided by his fundamental belief in American gun laws, so we are blindsided to the obvious fact that people so don’t want pots and so do want pensions, that they are prepared to go on strike about it.

We will know we have a solution when we don’t need “pension experts” to manage our pots!

No news is not fake news.

What was so wondrous about yesterday’s meeting of the Work and Pensions Select Committee, was that it was so un-newsworthy. No reporters sat with me in the gallery, not even Alex (though he had tweeted he would be!). There is nothing so unreportable as consensus.

With Trumpian recklessness , Alex called the proceedings a “jolly”. They were anything but.

Jon Milledge of Royal Mail and Ray Ellis of CWU spoke movingly about how they had found an agreement which met the needs of the 142,000 postal workers. Frank Field and a team of cross-party MPs, wished them well in “selling” their solution to the DWP. Field described the consensus between unions and employers over pensions as “huge”. We are witnessing something huge, and everyone in the room knew it.

I will put this to anyone reading this piece

  • Can there be anything more pressing than finding a way of paying people what we have promised them ( a pension) from their defined contribution pots?
  • Can we really suppose that the rag tail and bobtail of advisory solutions proposed by the Retirement Outcomes review represents a lasting solution to the hardest, nastiest problem in finance?
  • Can any reader point me to an equivalent “good news story” to the Royal Mail pension settlement?

Yesterday, FTadviser reported the DWP as saying

“We are engaging with Royal Mail to better understand their pension proposals. However any changes to legislation would be in the interests of savers and the wider pensions industry.”

To my mind, that is one of the best statements I could read. If the Royal Mail can provide a wage for life for the postal workers, then the DWP can help millions of us, trapped in the current bind of annuities and drawdown, a default pension solution for our pots.

Myopia can be cured

I was prompted to write this blog by the blindness of Donald Trump to the implications of his solution. I realised that I had a similar feeling about Alex’s blindness to the importance of the Royal Mail solution. Both are cases of  myopia resulting from fundamental misunderstandings.

Fortunately, children are marching on Washington to put the case for less rather than more guns in schools. And (on a much less violent matter) , we are marching on with our polite but determined request to have a wage for life from our DC savings.

Alex, you should have been in the room, if you had been – you’d have seen it was no jolly. There is an earnest endeavour among all working towards this DC upgrade.

save our pensions 2

Striking for pensions – not pots

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

Why are university staff going on strike?

stuart croft

Stuart Croft  – VC Warwick


My son has started sending me the announcements he’s been getting from his University about impending strike. He’s at one of two Universities who have been leading the charge amongst employers calling for an end to DB accrual in the Universities Superannuation Scheme(USS). I’ve had to explain that the reason his teachers won’t be teaching him (something he’s paying for) is because of this dispute.

This morning, the Prime Minister will announce a review of the way that students meet the cost of their education, she’ll be doing at a time when students will be accruing expensive debt and getting very little for it. The timing isn’t great.

A few months ago, I wrote a blog called “Postmen want to strike – is it any wonder“. I made it clear that I supported the Postmen who wanted a “wage in retirement” and were rejecting offers of a cash sum at retirement. Not all postmen voted for a strike but 89% did – showing that pension freedoms (for them) came second to the keeping of a decades old promise.

I wish I could be as certain of my support for the members of the University Superannuation Scheme. If the Royal Mail and CWU had not reached a pension settlement, I would be. In some ways the financial case for keeping USS open for future accrual is stronger than Royal Mail’s. The Universities (UUK) present a strong covenant (whatever rubbish tPR has said about universities failing). The Universities can afford the future cash-flow and balance sheet implications (especially if they kept to a growth strategy on their investments).

But it now seems that (led by Oxford and Cambridge) the Universities themselves have dug in their heels.

For all this, I cannot write “lecturers want to strike, who can blame them” and this blog from the Vice-Chancellor of Warwick University is why.

I have no answer to the question “why are university staff going on strike?”

We are now only days away from a period of industrial unrest which I strongly believe could have been avoided and, with goodwill on all sides, could still be avoided.

I have been very public with my criticism of the pension valuation and the subsequent decision by UUK to advocate what is in effect closure of the defined benefit element of the USS scheme.

I do not believe that either party to the USS negotiation have exploited the full range of options which could have generated a meaningful pension for University staff without jeopardising the financial future of the sector.

I am therefore calling for an early return to negotiations, with a more open and imaginative approach from both parties. A return to active negotiations with a real willingness by all sides to explore every option would of course enable deferral of industrial action until those avenues have been fully explored.

In short, I question the need for the change in the valuation assumptions last autumn which gave rise to the scale of this challenge. Second, I would ask that consideration is given to options which would protect the less well paid in the sector and future entrants, perhaps by restricting DB to those in the national pay framework and placing the higher paid into a DC only scheme.

Thirdly, I believe it that instead of focusing on removing everyone’s choice on DB USS should look to give individuals the choice to opt out of DB where their circumstances make this less attractive e.g. some overseas staff.

Finally, I would suggest it is time for government to take as close an interest in pension provision as it does in other aspects of reward in this sector. This could be through legislation which enables risk sharing DC schemes or by underwriting pensions for everyone currently in USS in a way that is more reflective of government support for unfunded public sector schemes such as TPS.

I recognise that there is a deadline being demanded by regulators. But it is vital that we find a way of resolving an issue which will be costly, both financially and in terms of reputation, for Universities, the sector and – most importantly – its students and staff.





Posted in pensions, Royal Mail, USS | Tagged , , , , , , | 5 Comments

HMRC and FCA complicit in the democratisation of villainy.

If the FCA want to get to grips with the problem of contingent (conditional) charging, they had better have a look at the taxation of advice and make changes in the Finance Act 2018 to the way we tax advice.

First the facts, as verified by those financial advisers practicing in the transfer market.

Case one

Someone consults an IFA on whether to transfer. IFA says that independent of the size of transfer, a fee of £2500 +VAT will be payable for the research, advice and recommendation on what to do.

Case two

That someone consults an IFA, who says he will do the same research, analysis and transfer and will only charge for it, if a transfer is made. The same fee is payable but this time there is no VAT to pay and the fee can be paid out of the transferred monies.

In case one, the actual amount that will have to be paid is £3000 (VAT adding £500) and the amount that will need to be earned (the client pays a marginal rate of tax of 40%) is £5000.

Put simply, it costs this person twice as much to pay a non-contingent charge and the difference (£2,500 v £5,000) is entirely down to the HMRC subsidising conditional charging.

“Intermediation good – advice – not so good”

I asked top IFA, Dennis Hall why contingent charging gets the tax-breaks while the adviser who charges for advice alone, lands his client with a whopping tax-bill

Actually , it costs twice as much as Dennis and I , hadn’t considered the income tax situation.

Just what “intermediation” has got going for it is unclear. But the impact of this taxation anomaly becomes even greater , if you consider that an adviser who charges conditionally, can also levy the cost of implementing the advice in a tax advantaged way.As David Penney puts it in his tweet.

Treading on thin ice

There is a problem here; even if HMRC were to separate out the recommendation to transfer fee from the implementation fee and stop the lumping of the two together as an implementation fee (non vat-able and payable from a tax privileged fund), the smart IFA would simply knock his transfer fee down to £1 and load the cost of the implementation.

Paul Lewis had a laugh at me when I tried to sum up the problem in 140 characters.


But I forgive him as he put his finger on the nub of the problem


Such a brutal analysis misses the subtlety of my pompous little phrase but gets to the heart of the matter. Right now it is massively expensive to pay a non-contingent fee, so expensive that only those with deep pockets can do so.

If HMRC’s (and by extension) the FCA, wants to make transfers special, they can ban conditional charging and continue to  levy tax and VAT on the non-contingent fees. That would make transfers a rich-man’s game,  (it wouldn’t however put an end to the endemic issues with VAT and vertical integration).

Putting an end to Contingent Charging would reduce transfer activity.

The conversation on contingent charging that started when Martin Bamford appeared on Moneybox and ended when we all went to bed. It involved about 20 advisers, Paul Lewis and me. There was one tweet from Martin Dodd which should be picked up on by the FCA and any financial journalist worth his/her salt.

This is the grist of the matter.

By allowing contingent charging to be deemed “intermediation” , the FCA and Treasury are putting the cost of transfer advice within the range of everyone. Advisers love it, they are simply taxing people’s futures with minimal pain today. As the perceived benefit of the pot over the pension is so enormous, no one is asking any questions.

But as we discovered in yesterday’s blog, the FCA knows that 53% of the advice given to those transferring is questionable, so it really ought to be doing something about the frictionless process created by their own tax rules (the FCA and HMRC both come within the compass of one Government department – HM Treasury).

“Intermediation” is the democratisation of villainy

The FCA’s wider problem with vertical integration (as articulated in the asset management market study) is also made worse by “intermediation” as it makes the non- charging of VAT , a benefit of any advice linked to the product being recommended.wealth product

Wealth managers, as the picture to the right suggests, now consider themselves “manufacturers” and can integrate their advice into the product, exploiting the same “intermediation” loophole as those affecting transfers.

Indeed the majority of firms holding themselves out to be transfer specialists – are wealth managers at the same time.

But of course they are more than wealth managers, they are altruists, for they are – through contingent charging – offering the most cash-strapped access to their pension pot!

I have (again) pompously referred to this as the democratisation of  villainy.

Why this stinks!

The current use of tax-privileged pension pots to pay for everything is ripping off the tax-payer and making IFAs  rich. It is enabling transfers that are questionable or downright wrong and it is storing up problems for tomorrow.

But tax-privileged intermediation underpins the entire shooting match of vertically integrated financial services, extending way beyond transfers and wealth management into institutional fiduciary management.

Where you stop is anybody’s guess; but stop it must. We need to stop proliferation of VAT and tax abuse so that reputable advisers like Martin Dodd and reputable clients, who play by the rules, are not further disadvantaged.

I will shut up now, aware that I have opened a particularly smelly can of worms which most of my readers will recoil from, because they are in part complicit to these bad practices.

Posted in accountants, advice gap, dc pensions, pensions | Tagged , , , , , , , , | 12 Comments

Workplace pensions – who gives a flying feck what’s going on?

Share action report.PNG

Share Action is watching.


Data or opinion? What’s the best measure of value?

Most investors when looking for evidence and would prefer to trust data.

Opinion is now measured by “the crowd”, the wisdom of a great number of people is turned into data. The opinions of experts counts for something but successful enterprises are driven by bigger data.

It worries me that there remains in my world of pensions, an oligarchy of experts who’s opinion counts for more than big data. I refer to the “usual suspects who’s names occur on the majority of IGC committees, master trust boards and the governors of our pension institutions.

The saddest statement from the chair of an IGC or Trustee board is “in my opinion , we offer value for money”.  I expect to hear this statement repeated again in again throughout the upcoming IGC reporting season.

The opinion of those who govern our pensions is only as good as the data that it’s based on

Share Action has produced a review of the 2017 annual reports produced by the independent governance committees (IGCs) for contract-based pension schemes (which they began last year after the FCA said it was indefinitely delaying its own review). They’ve focused on the transparency of the IGCs’ reports, to see if an external observer could understand what value scheme members are getting from the different providers.

While they’ve seen emerging good practice in the reports, they found that many of them were too vague and unsubstantiated to allow an external observer to understand the value being offered by providers. For example, more than a third did not state what members were being charged and nearly half gave no data on investment performance. To me, this doesn’t meet the FCA’s policy intent, which was to increase transparency and encourage comparison between IGCs.

Clear and comparable reporting is needed from IGCs to demonstrate transparency and build accountability. It is important for IGCs to assure scheme members that this is not just another case of industry assessing industry, and that this governance gap is truly being filled.

Who watches the watchers?

The Share Action Report produces a ranking table of IGC reports that correlates pretty well with the rankings I produce in April (see bottom of article)


Some of the low scores are easily explained

share action scores



What Share Action (and I)  are asking for.

Share Action have made some recommendations for the IGCs on how they can report more effectively. They have also recommended that the FCA should set a specific definition of value for money and issue clear, comprehensive guidance on how to assess it. The widely varied standards of assessment and reporting demonstrated by IGCs indicate that a more standardised approach is required.

In case anyone thinks that master trusts and single occupational schemes  hold out a gold standard, let’s be clear – they do not. If anything they are less accountable, they do not report in one go and the majority of their reports are only available to members. Fortunately , the Pensions Regulator does monitor what is going on and this week issues fines to a number of miscreant trustees whose reports were considered inadequate.

You can read what the Pensions Regulator is doing to enforce better standards of reporting here. I look forward to the DWP’s conclusions following its work on value for money disclosures which is due out later this year.

But more can and should be done by the pensions industry to independently monitor value for money and provide ordinary people with help about their pensions.

To this end, the IDWG are producing definitive templates which collectively can capture the data we need to understand what we are paying for funds.

To this end, a disparate group is working to collate further published data on the costs for members of participating in occupational pensions (including master trusts) and group personal pensions.

To this end I hope can generally working to create definitive performance data that can compare one form of workplace pension with another by way of absolute and risk adjusted performing.

And from these data sets, I hope IGCs  will be able to provide value for money ratings that can be used to rank all workplace pensions against each other in league table. Those offering most value at the top, and those offering least , at the bottom.



My ratings of the IGC reports in the past two reporting rounds. Note these are based on my personal opinion and not data! I will be looking to incorporate the Share Action transparency ratings as well as other ratings (for instance the Pension Bee Robin Hood Index) into my assessment of engagement, effectiveness and transparency (in VFM) in 2018

IGC2017 framed




Posted in Henry Tapper blog, IGC, pensions | Tagged , , , , , , , | 1 Comment

Time for a DC upgrade?

upgrade underway

I was wading through yet another long and technical explanation of CDC  when I got my Eureka moment!

I don’t want a CDC plan, I want a DC upgrade!

I’m not dissing legal eagle Sandeep Maudgil (who’s soon to appear before the Work and Pensions Select Committee to opine on what CDC is).  Sandeep works for Slaughter and May (who can charge more in an hour than most of us work in a week). Sandeep is a brilliant lawyer who can explain CDC in the context of the Netherlands, Canada and UK DB legislation. The trouble is, the only people reading his article are people like me and the other friends of CDC!

CDC has become a playground for academic and legal experts intent on displaying their technical proficiency. For years it has been discussed by actuaries as a way of de-risking Defined Benefits.

Sandeep’s article (ironically in that most pragmatic of papers – FT Financial Adviser) is summed up in three “key points”

  • CDC schemes might be an alternative to defined benefit schemes
  • In a CDC scheme, the actuary is asked what rate of pensions members can reasonably expect to receive
  • CDC schemes are widely used in the Netherlands, Denmark and certain parts of Canada.


We are told

“the impetus behind collective defined contribution is the idea that the UKs’s current legal framework for occupational pensions is too binary”


The article has its moments, where I can get excited but again and again it shows it is being written from the perspective of someone immersed in defined benefit culture. It sees CDC’s challenge as

getting people in the UK accustomed to a new form of pension arrangement where pension amounts are only targets rather than being guaranteed entitlements, and where pensions might reduce once in payment.


Most people in the UK do not have an occupational pension that gives them these guaranteed entitlements. Most people have a combination of workplace and non-workplace DC pensions that guarantee them nothing but the freedom to go and buy a financial product like a drawdown plan or an annuity!

I’ll say it again – I want a DC upgrade!

It’s time that ordinary people wrested control of the CDC arguments from the actuaries and lawyers and academics and applied them to their own personal circumstances.

I want a DC plan that pays me a wage for life. I don’t care about binary occupational plan options, I don’t mind that CDC pensions aren’t guaranteed, I just want a simple way of converting my DC pot to a DC pension.

I don’t want this kind of rubbish “non workplace pension”!

value chain

I don’t want a workplace pension that isn’t a pension at all!

Every night I have to watch the DWP tell me on the TV to “get to know my workplace pension” and every night I ask – “what workplace pension?”. My workplace pension pays me a pot not a pension.

I don’t want a workplace savings pot – I want a workplace pension !

workplace pension 5

what pension is that then?

I’ll say it again – I want a DC upgrade!

I want freedom to do what I want with my pension , but I don’t want the freedom of a “pot”! I want in retirement , what I had in work, the payment of regular amounts into my bank account so I can budget with a degree of certainty. I want a wage for life.

What Dutch actuaries, or Canadian lawyers or Danish and German regulators are getting up to , is of absolutely no interest to me. I don’t want to know thanks very much.

I want a DC upgrade so that I know that when I come to draw my pension , there’s a pension there to draw – and I don’t want ever to have to buy an annuity!

I’ll say it again – I want a DC upgrade!

So when I read that 142,000 postal workers are going to have a CDC plan, I try to work out what that means and how I can explain CDC to a postal worker (more specifically my postman).

It’s so simple – it’s a workplace pension that instead of paying out as a pot – pays out as a wage for life. It’s an upgraded workplace pension suitable for people who aren’t pension experts.

  • Does it stop people who want to be pension experts transferring their money into a SIPP? NO

  • Does it stop people who want to give their pot to a financial adviser to manage? NO

  • Does it stop people like JR who want certainty exchanging the CDC pension for a guaranteed annuity? NO


What the Royal Mail and the CWU have agreed upon, is a solution to 142,000 workers joint problem, they did not want a pot but a pension.

The Royal Mail could not afford to guarantee the pension, but they could afford a generous contribution into the pension plan so that the potential pensions look good.

The members were prepared to take their chances on the markets and have accepted the defined contribution and are prepared to collectively underwrite the risks of the “hardest nastiest problem in finance”.

Somewhere in the background are actuaries, lawyers , regulators and the odd academic, making this happen. But this is not, and should not be about those clever folk, it should be about people like you and me and our money!

CDC is a DC upgrade and the best thing to happen to workplace pensions since auto-enrolment! I commend it to the House!

upgrade underway

I want a DC upgrade please!

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

Bamboozled by vultures! – The Work and Pensions report on Port Talbot

time to choose

Though it reveals little new, Frank Field’s report into what happened  in the British Steel Pension Scheme is nothing if not a good read.

But we shouldn’t allow headlines about sausage ‘n’ chips suppers and factory-gate skulduggery to get in the way of the report’s conclusions and recommendations.

This was a serious inquiry that has thrown up some important messages.

  • Even as good a pension as the British Steel needs a sponsor; without the support of TATA, this scheme’s natural home was the PPF which is where it went.
  • Giving people a choice of lifeboats was for a substantial minority of steelworkers for themselves, they’d have swum for themselves – pretty well no matter what.
  • The job of protecting such people from the worst consequences of an emotional and irrational decision was simply not done; either by the Trustees or advisers.
  • This was out of a misjudgement by the Trustees and out of opportunism amongst a small band of entrepreneurial advisers (who I bet now wished they hadn’t got involved).

My part in all this is rather over-represented in the report, as I have the gift of the gab and am quotable. But I am pleased that I and Al Rush and Rich, Stefan and David, were able to highlight the systemic problems with transfer advice in the UK today

  1. That where demand is strong (there were over 15,000 CETV quotations in circulation out of a transferrable population of 43,000) , then advice tends to be commoditised. Stories of advisers doing 7 transfers in a day abound.
  2. That the new kind of SIPP (see diagram below) has allowed some advisers to subvert the RDR and get paid via the back door. There is nothing illegal about these SIPP structures, but they do the same financial vandalism as scams.value chain
  3. That where demand is so strong, a feeding frenzy will emerge and that Port Talbot was entirely predictable (indeed I predicted it in August to a group of BSPS Trustees and their advisers).

Having been an IFA in the 1980s and 1990s, I totally understand both the good and bad advisers I have been in contact with. The Pension Freedoms are a side issue in this. What created the feeding frenzy ,was not the capacity to spend the money when they liked (only 4% of members in an early poll wanted to control their money themselves), it was the telephone numbers , the financial and emotional response to Tata’s covenant and the failure on everybody’s part to explain why transfer values are so high.

poll bsps anon

One person I spoke to explained that they thought the transfer value for their £30,000 pa prospective pension would be £30,000. It turned out to be over £700,000. Can you blame that person being amazed?

What added fuel to the fire was a perception that TATA and the Trustees were acting in unison to prevent transfers. While Time To Choose talked of BSPS2 and PPF, the steelworkers talked of lifeboat v transfer. The Trustees and their members weren’t having the same conversation.

I’m now finding myself talking to the Trustees and managers of other large pension schemes and it turns out (surprise surprise) that they have their own Port Talbots. Indeed some of the advisory firms “volunteering” not to advise steelworkers are also causing “de-authorisation issues” for other schemes.

Port Talbot has changed the landscape;

  • 9 firms have removed themselves from the transfer market
  • 1 firm (Active Wealth) has gone into liquidation
  • The FCA’s sampling suggests that in 53% of cases where transfer advice given the advice was either iffy or downright dodgy
  • As a result, all transfer advisers can expect the “inspector to call” in 2018
  • and the Pensions Regulator and FCA have agreed to establish a joint pensions strategy.

I hope that we will see in 2018, a diminishment- if not the end- of conditional pricing, the practice of only charging a client if they don’t go ahead with the transfer recommendation

I hope we will see an investigation into advised SIPPs as part of the platform review


I hope that the FCA will weed out the IFAs who have the qualifications but not the integrity, needed to help people in this most difficult area of financial advice

And I think that those, like me who advise trustees, will recognise we hold a part of the blame. We are supposed to be able to look at the future and predict things with help of data from the past. I could tell, as a former adviser, where things were heading , but it looks like the better qualified advisers talking with the trustees – couldn’t. They shouldn’t be able to walk away from the consequences of Port Talbot (even if they don’t know where Port Talbot is).


taibach al

If you want to hear me spout some of this on Radio 4’s today program, the link’s here (minute 1.17)



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

Are you feeling DC sick?

DC sick

We’ve all been there!

Joy for DB is pain for DC!

ppf good

DB looking good (according to PPF)

equities one month

FTSE 100 – one month – feeling a little DC sick?


I am sure I am painting too simple a picture and that I’ll be whacked over the head by my learned colleagues, but the general jubilation breaking out over UK pension scheme solvency levels, is coming at a time when the average DC investor is suffering a “market correction” wiping as much as 10% off their market savings.

I believe this is called a barbell, what is good for Peter is bad for Paul and vice versa.

It’s a bit like Boris Johnson wanting everyone to enjoy Brexit, even if for the remoaners , it’s a pain in the bum. I don’t need people whooping it up in the land of the perpetual gilt (on the road to buy out) , when I’m trying to get on with business as usual!

Business as usual for me is the incredibly boring world of FABI, where funding levels do not jump up and down because Mark Carney breaks wind over monetary or fiscal policy. FABI is based on real world economics, what people make and how companies prosper, rather than the seemingly arbitrary decision of the Bank of England or the Fed.

As a DC investor, I am into patient capital, I am 56, I don’t want to start drawing down till my appetite for earning diminishes (and it’s showing no sign of diminishing). Consequently, what happens to interest rates is of no consequence to my pension.  I’m looked after by my former employer (thanks very much Zurich Financial Services) – I’m very happy for them if they are a bit more solvent but I was even more happy when they carried me through periods of insolvency.

So I’m alright Jack – but what about the rest of us!

I do appreciate David Robbins tweet .

Higher yields produce lowest aggregate s179 deficit in nearly four years. But headline £51bn shortfall = £174bn of deficits minus £123bn of surpluses. £174bn arguably more relevant for potential PPF claims. https://t.co/5Ng59YgWC4

— David Robbins (@David_J_Robbins) February 13, 2018

If David is worried about the impact of those schemes in deficit going into the PPF, then he should remember that those in DC have just taken a PPF style haircut (10% off) in one month!

And if he’s worried about the financial resilience of the PPF, he should remind himself (I’m sure he does) that the biggest winner from the recent uptick in gilt yields, will be the PPF itself, which is inexorably heading for self-sufficiency at a heady rate.

As we in the Friends of CDC maintain, the PPF looks like a very ugly CDC scheme right now, ugly in that it is full of ugly assets , but friendly as it is going to pay out pensions to millions of people in the most efficient of ways.

DB has a strong chin!

The DB world, and especially the PPF, can look at that  £123bn shortfall with the calm eye of a champion boxer;

“give me your best shot”,

knowing it’s got fitness, a strong chin and resilience!

Because of strong DB schemes (like the one I’m in – praise be!) and because of the PPF, we have a lot of people in this country who have certainty of a supplement to their state pension. They are the lucky people with a DB promise. I am one and I thank goodness I am.

But DC does not know how to cover up!

As said before , I’m not worried that I’ve lost 10% of the paper value of my DC in a week, there are ten years plus of work in me yet!

But there are many I know, including those I’ve met through working with BSPS members, who do not have any way to cover up. If you are in an equity based DC scheme, especially in drawdown, you are hurting. If you are about to drawdown for whatever reason and are in equities, you are in an uncovered position right now.

I am sure most people reading this blog, are able to live with that, but it’s the people who don’t spend time reading pension blogs (eg 99.99% of the population) who I am worried about.

We need to think about them – just as the CWU have been thinking about the 142,000 postal workers. For while the Royal Mail DB scheme , is safely tied up in the harbour (close to 100% gilt funded – immunised from stormy weather), those in DC are taking a right pummelling from the financial storms.

Former DB members of Royal Mail are being offered a CDC alternative, one that pays a wage for life , not a “pension pot”. They can rightly look forward to a pension – albeit a pension that is to a degree – market related.

Those who have and are transferring out of DB schemes have no such prospect (yet). those who are being shoved into DC schemes (as those in USS and BT are about to be) have no such comfort.

Feeling DC sick?

So while I am happy that DB is looking more secure, while I am comfortable that the PPF is heading for self-sufficiency, I am not happy or comfortable for most people in DC. Most people in DC are feeling DC sick right now, having been tossed around by the market for the past couple of weeks.

If you are DC sick and want some relief – come and join the Friends of CDC!


target pensions

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

Aegon stung into action by the Bee!


The repression of nearly 900 Aegon customer’s is coming to an end

Let your people go!

It looks like Aegon has backed down and agreed to treat its customers wishing to transfer to PensionBee, fairly.

This report, based on what appears to be a press release from Aegon, suggests that Aegon will release the 874 policyholders who they’ve trapped in their departure lounge for up to 214 days.

pension bee tracker

By any standard , Aegon’s behaviour has been reckless.

    • Those stuck in the lounge have been forced to pay high charges for funds they no-longer want to be in. Financial loss will be quantifiable, Aegon are running severe risks of litigation – especially if a class-action is invoked from those who can prove loss.
    • Nearly 41,000 people have watched PensionBee’s customer video explaining to potential customers how to leave Aegon. The video has been well-liked , even by Aegon’s senior management in the Netherlands
  • Aegon’s UK management have messed with Aegon’s corporate brand, holding it up to ridicule on pages such as mine and in the financial press. They risk much wider coverage , should a national get hold of the story.
  • Aegon’s behaviour should be of interest to the FCA; they have not treated customers fairly and at a time when we are trying to get better pension engagement with ordinary people, Aegon have contravened just about every unwritten and written rule in the book
  • Aegon have shown up the timidity and lack of independence of their IGC which has done nothing to bring it to heel.
  • Finally Aegon has shown itself thoroughly incompetent in its conduct of due diligence. If it cannot see a good’un like PensionBee, how could it spot a bad’un.

During the course of the 8 months that it has turned off the tap to PensionBee transfers, PensionBee has received a substantial equity injection from State Street. Did it not think to refer to that due diligence and ask itself why one of the world’s largest fund managers was backing the management of the organisation who’s integrity it was questioning.

In a report by Money Marketing, Aegon  confirmed it will resume electronic transfers to PensionBee, providing it gets “personal assurances” from the directors of the company about key aspects of transfer process.

 “We are seeking assurance from PensionBee that they always capture clear authority from clients to carry out the transfer, and that they provide appropriate warnings and information to customers to ensure they understand any features within their current policy which will not be replicated within the PensionBee pension.”

This ranks as one of the weakest climb downs in the history of financial services – “personal assurances”? Knowing the management of Pensions Bee I have personal assurance a plenty of their good intentions. I can also see that the customers who’ve been able to escape the departure lounge are extremely happy in the Pension BeeHive.

pension bee trust pilot

I have never seen a trust pilot score this high (Pension Plowman)

So what is going on?

Why should Aegon hold itself up to general ridicule, risk the wrath of the FCA, the pension press and most importantly its own stakeholders – it’s shareholders and customers?

I don’t know. I don’t know why the Aegon IGC have not intervened as they could, I don’t understand why BlackRock, which recently sold its DC platform business to Aegon (and which manages the greatest part of Pension Bee’s money) didn’t intervene.

I don’t understand why the FCA hasn’t commented.

I don’t understand why the start-up, is being bullied in this way and why Aegon cannot see how embarrassing it is to their staff, who are being tarred with the corporate brush.

None of this makes any sense at all.

In one sense, I don’t care much, so long as the 874 people in the departure lounge catch their flight in the next couple of days and buzz off to happier pastures.

Corporate dis-Grace.




But I don’t think we can just let this matter drop. It is time to hold Adrian Grace and his management team to account for the distress they have caused PesnionBee’s customers and PensionBee (which is also out of pocket over this).


If we think it is ok for Aegon to trap customers in the pension departure lounge, we presumably think it’s ok for others – including NEST – who frankly haven’t got a much better record, nor the various third party administrators running our single employer DC pension plans.

While they debate standards for the passing of data to the Pensions Dashboard, many administrators still haven’t got to first base when it comes to passing DC transfer values to third parties.

Aegon is actually in the Origo transfer network and so is PensionBee; there was no excuse for Aegon not to have treated PensionBee as it does the other members of the network and exchange monies with them as pension partners.

But most of the occupational DC pensions are not subscribing to the Origo pension service. NEST tell us that they do subscribe but only have a process to take money in – not pay money out!!!

In short, if we allow Aegon off the hook, then we allow a great part of the pension industry to assume that pots can follow members at the pace they – the fiduciaries dictate.

This is as ludicrous as the attitude of Aegon. Driving up administration standards for occupational pensions is as important as changing the customer care of some insurers.

Support PASA in improving transfer standards.PASA

Fortunately, the rights of ordinary members of occupational pensions to first class administration are championed by an independent body for which I have great respect.

Margaret Snowden’s PASA organisation, which (among other things) campaigns for the rights of deferred DC members is holding a session of its conference in London on 13th February (next Tuesday afternoon).

margaret snowden

Margaret Snowden

Margaret (Princess that she is) has released a press release which tells us

“With GDPR, IORP II and Pensions Dashboard on the horizon, data management must be top priority for trustees and it is important that deferred members are not forgotten in this process.

Although active members may present the potential challenges for years to come, in actual fact, it is .. deferred members who pose the greatest number of current challenges for schemes.

Deferreds account for a huge proportion of overall membership and liability, so not giving them proper attention can lead to any number of problems.  These might include transfer requests and concerns about delays, as well as poor data quality hampering de-risking activities for schemes thinking about the ‘end-game’

.“Our conference has been set-up to provide people with practical advice on how to better manage data and improve transfer processes, whilst looking at how new kinds of technology might improve the way deferred members interact with administrators and create a more positive process for all”

I think they’re talking mainly about DB transfers , but DC transfer processes are just as important.

Sadly I can’t make it , but I hope that some people reading this article will, and will ask

“why so many third party pension administrators do not use the Origo clearance system”.

If you want to find out more about the good work PASA does, here is the link to PASA. 

If you want to register for the Conference, here is the registration link. I thoroughly recommend the event.



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All quiet on the charges front

all quiet

I wasn’t at yesterday’s meeting of The Institutional Working Group but I know a few who were and the feedback I’m getting is good

  1. A sensible methodology which can be understood
  2. The platform for a common way for pension funds to find out how much they are paying for asset management
  3. General agreement among all stakeholders in the room

This is quite an achievement and the recently maligned Chris Sier and the FCA, should be congratulated. CONGRATULATIONS.

What appears to have been said

In the best traditions of British transparency, this is a compilation of whatsapp messages I got from people in the room. If I’ve got the wrong end of the stick, hit me with the other end and I will edit this article. For those of us who have wanted cost transparency for years, the meeting is of great importance. Perhaps the FCA could consider some kind of live-streaming – as the Work and Pensions Select Committee do -so that people like me can get it right first time!

The template that is the first practical output of the Working Group is to follow. It will be a draft of the reporting template. It was not on display yesterday and the meeting was told it would be distributed in the next few days. The IWGs intention is to release a stable template by the middle of the year

TISA asked a question was asked from the floor on whether the template would be consistent with MIFID- an assurance was given it would be.

Alan Miller asked as to how the regulators will deal with those who do not complete the template properly. I have no record of a response.

And it seems from the information that I have, that there was a strong commitment to adopt the template from the LGPS.

The Investment Association , while speaking well of the template , stopped short of a commitment to adopt it.  They spoke of “next steps”.

The Investment Association proposed that the focus of the group shift to retail investors so that its output passed “the Daily Mail test” (whatever that is).

Where this gets us

This look like a major step forward- Unison have suggested we use the word “historic”.

The consensus seems to be that the IWG ahs found a balance between the ability of asset managers to supply data and a satisfaction of user’s need to know what they are really paying.

The IWGs has been across all asset classes and the cost templates will be designed with professional usage in mind. The output from the data collection is focussed on getting better consumer outcomes. Those buying on our behalf will have better buying power and this will ultimately bring costs down.

For me the most important agreement of the IWG is the focus on providing buyers with a single number. Though there may be many cost templates, a reference template will provide a common lexicon meaning that when costs are consolidate into the single number, disclosure will be consistent.

This means that we will be able to compare the cost of apples and pears, while recognising they have different value.

In the words of my correspondent the methodology put in place by Chris Sier and his colleagues is “super-solid”. Clearly that contention will be tested over the coming days.

But for now, all is quiet on the charges front. For those who have followed this debate over the last five years, that’s quite a step forward!

all quiet two

Jawing not waring

Posted in pensions | 3 Comments

Trial by twitter’s fine by me!

An IFA withdraws its transfer service complaining it’s the victim of “trial by twitter”.

Accountability is something that falls hard on adviser’s shoulders. Because we are in the business of longer term investment, the outcomes of our advice will typically be judged when we have long departed from the scene.

So the system of summary justice meted out by twitter to “the Pension Review Service” AKA County Capital Wealth Management has come as a shock.

It shouldn’t have.

Learn from feedback, don’t fight it.

Yesterday I was at SDWorx’s conference where its UK CEO told the audience it Net Approval Scores with its customers weren’t all they could be, he even went so far as to say he couldn’t do much right now about them – Doug Sawers was right on both counts! You can’t censor what your customers and prospects say about you, you can only influence what others say about you over time.


Now Pensions

NOW Pensions were flagged as failing their customers from the early days of their association with staffcare. Instead of doing what they are doing now – building a proprietary system to manage interfaces with payroll, they chose to outsource (to Staffcare).

This blog has repeatedly warned NOW not to do this, is suffered a trial by social media (I wasn’t the only one) and it is finally investing £4m in putting in a proper system. If NOW had licensed, it would have been a lot easier. Now’s trustees would not be being fined by the Pensions Regulator and customers would not be jumping up and down with frustration. NOW should have listened to social media and now it is paying the price.


If you, as a corporate, fall victim to a social media storm, as Aegon currently is, it is almost certainly your own fault and you will have to pay the price for so long as you stay in the hole.

Trial by twitter/youtube/blog is fine. It is the way to be held accountable in a way that you will not be held accountable by Regulators. The FCA will catch up with Aegon and require it to treat Pension Bee’s customers fairly, NOW will put their house in order (by April or presumably close its doors till it does).

Pension Transfer Review Service

As for the Pension Transfer Reviewers of County Durham, they have been weighed in the balance and found wanting. They have “volunteered” to cease dealing in transfers and now they are sulking off complaining that they have been hard done by.

Let’s remember that the biggest victims of social media in the Port Talbot affair are not “the Pension Review Service” but the FCA, who were given a good kicking by Frank Field in the Work and Pensions Select Committee.

Learn like SDWorx , BSPS and the FCA

I was there when the kicking happened and I don’t see the FCA whingeing about trial by social media. I hear plenty of people complaining that W&P is a kangaroo court and they all have one thing in common – they are terrified by the possibility of following the FCA.

The summary justice meted out by judge Frank Field, is an extension of social media. I had lunch with Allan Johnston , Chair of Trustees of BSPS yesterday, we talked of Stephen and Rich and David’s Facebook Pages, I pointed out that these guys were his Member Nominated Trustees for Time to Choose and he agreed. The Facebook pages remain critical of BSPS Trustees and their advisers and they are right to do so.

I now know that every criticism has been read by Allan Johnston and is ingrained on his soul!

What Allan has done, which clearly the management of the Pension Review Service has not done, is listened. BSPS will be dead in 7 weeks and the New BSPS will be born. Hopefully, the new BPSP will be more responsive to its members and better understand its member’s needs – I think it will.

Hopefully NOW pensions will be NOW Pensions II after April 2018 and maybe even Aegon will see sense!

Social media is not going away, people (including me) will continue to be trialled by Twitter and we will continually to be successful. I run (as Gregg McClmont calls it) the bully pulpit. This blog has earned its stripes over 10 years. If it didn’t have integrity it would have been shut down (see Aon’s unsuccessful attempt to “turn off the tap”). It would have been shut down by the firms who send my bosses at First Actuarial whingeing letters (this blog is nothing to do with them- see top right above) and it would have been shut down by the libel courts (which I am constantly threatened with).

There is nothing wrong with the immediate pillory that is social media. Sticks and stones can break your bones but words can never hurt you – unless that is , you are extremely vulnerable to the criticism you are receiving.

sticks and stones

And likening the bullying meted out for corporate shortcomings to the bullying we see in the class-room is as dumb as school-bullying.

We are in the business of providing good long-term outcomes. If you aren’t in the business of taking short-term criticism on social media, you shouldn’t be in business.

I was more impressed by Doug Sawyer’s attitude than I can say on this blog!

As for the Pensions Review service, it should grow up , take the criticism on board and move on,




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

Catch a falling knife?

ftseglobalFor the first time since we had pension freedoms , we have a market that appears out of control. As I write, the London Stock Exchange is preparing to open, with the FTSE lagging the S&P by 2.5%. We are bound to see further falls this morning, as we have overnight in Asia.

What does that mean?

For many people – people who have recently acquired “wealth” , through the transfer of cash from DB plans into equity based wealth management, it means a paper loss that will run in to tens of thousands of pounds. People could lose as much in a week as they earn in a year.

Sadly some people will attempt to catch the falling knife and bail out. They will be exposed to the worst kind of market timing, the price they get for units in the funds they are invested in will be manipulated so that everybody involved in the transaction will be protected , except the beneficial owner of the units.

It’s a simple message, when you jump out of the plane , pull the parachute cord, don’t try to get back on board.

Wise words from a Financial Advisor

Yesterday morning, my friend Al Rush posted on a group of steelworker’s Facebook  page , this message.al message

Shocks like this are never nice, but…

..but you don’t need to worry, unless that is, you are due to be drawing down a slice of your funds today or in the next couple of days, when you have no idea how much damage that drawdown will do to your “wealth portfolio”.

For you, the worry is “sequential risk”, which is a wealth manager’s phrase for “the knock on effect”.

Those in drawdown, have been cushioned for the past three years, by one of the most benign markets I have ever seen. Markets haven’t looked like dumping, as they are doing today, and people have got used to the slow accretion of paper wealth, as they skim off a tidy income.

It is precisely at this moment that I should and will advise people that they should not be in the market , unless they are prepared to take this risk and that if people are about to rush to their IFA/Wealth Manager/Stockbroker to cash in their chips. They should get back in their chairs and do absolutely nothing.

Catching a falling knife is a dangerous business, it is best to leave well alone. The reason to invest in equities is for the long-term protection it gives against inflation. Ironically, the reason that the market is dumping right now, is because of the fear of short-term inflation.

Ironically, the very thing that makes equities sore today, will make them strong tomorrow.


sore today



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

The FCA can excel; the “non-workplace pension” paper’s a model of its kind

Pensions or potsHenry Tapper and Pension PlayPen response to FCA’s paper DP18/1

Effective competition in non-workplace pensions

This is the response of Henry Tapper and the Pension PlayPen. It is not a response on behalf of any other organisation that Henry Tapper is connected with.

I urge anyone who has interest enough in reading my response to respond themselves. The paper can be accessed using this link


Do you agree with our high-level description of the market? Have we omitted any significant elements or dynamics?


value chain 2

It’s a good analysis. If it has a weakness, it is in comparisons with workplace pensions, in publishing the PLSA analysis of who pays for what, you give too rosy a view of subsidies for workplace savers. The 144 schemes in the survey are self-selecting; the reality for most of the 1m employers participating in workplace pensions is that they have no resource to subsidise anything but the AE compliance. Workplace pensions have their own governance issues, not least that small employers share the buy-side weakness of individual purchasers. The critical difference is the higher levels of protection afforded workplace pension savers who benefit from IGCs and the strengthened fiduciary obligations on master trusts.

The comparison of the £400bn in non-workplace pensions with the much smaller amount in contract based workplace pensions is again a little misleading. The majority of workplace pension saving is in to master trusts. It would be useful for the FCA to consider what master trusts are doing that is attractive to small employers and examine whether there are implications for non-workplace pensions. Are the collective structures that master trusts offer, more helpful to small savers than the individual contracts with insurers? If so – why? These questions might usefully be included in any Market Study arising out of the paper.

Demand Side Weakness

Do you have any comments, observations or evidence about engagement levels among non-workplace pensions customers?

Comments on engagement are typically skewed by personal experience. I and the people I associate with are quite comfortable managing our own money and happily disintermediate advisers so that we can get the best deals for our savings. The Self Invested Personal Pension was designed for people like me.

But for most people analysed in the FCA’s FAMR study, the provision of financial support in retirement remains the “hardest, nastiest problem in finance”. I have been involved for the past four months in moderating Facebook pages for British Steel Workers. I have met quite a few and spoken, mailed and messaged many more. I was struck by a poll conducted early in the Time to Choose process which was designed to find member preferences. Like the PLSA’s poll – it is self selecting (only around 8,000 of the 120,000 BSPS members actively used these pages).poll bsps

What interests me in this poll is the high percentage of steel workers prepared to put trust in an IFA and the low numbers wanting to self-manage the pot created from a CETV.

From my conversations, I was impressed by the confidence that steelworkers had in IFAs and depressed when I found how often that trust was abused.

The BSPS Time to Choose consultation, as with the engagement of postal workers at Royal Mail and teachers at Universities shows that people get the importance of “pensions”. But this should not be mistaken for engagement with the dynamics of managing retirement savings, let alone dealing with the business of paying a “wage for life”.

Do you have any comments, observations or evidence about the factors that influence consumers to switch between or transfer into non-workplace pensions?

One of the most interesting aspects during the BSPS Time to Choose was the reluctance on all sides, to consider transferring into the Tata Steel and Liberty GPP workplace saving products. Both GPPs had the features IFAs were promoting with SIPPS (including adviser charging) , both had AMCs well below 0.3% and both had the kind of defaults that could have managed steelworkers pensions.

On investigation, I found that the workplace pension providers (Aviva and Legal & General) were reluctant to put forward their products (as was Tata and Liberty – lest they were seen to endorse transfers). Perversely, the opportunity to use good workplace pensions to manage out transfers was seldom presented and virtually never taken up.

I heard from a number of steelworkers, disgruntled with their employers, that while they were prepared to participate in workplace pensions to pick up contributions, they were uncomfortable with Tata having anything to do with their transfers. This may have had something to do with confidentiality (many steelworkers fear for their jobs) but probably more to do with a fear that Tata might sabotage their savings. When it was announced that Tata were to provide the administration to the Prudential (instead of Capita), a number of posts appeared on Facebook pages from steelworkers who’d transferred to Prudential’s personal pension, claiming they were out of the frying pan into the fire.

My observation is that many people transfer to get a clean break. This is born out by conversations with providers of streamlined SIPPs such as Evestor and PensionBee, whose customers cite a wish not to be a deferred member of a former employer’s workplace scheme (often out of disgruntlement).

Non- workplace pensions play an important part in helping people to “own” their pensions, many people do not think they have full ownership when in an employer or former employer’s workplace pension.

Do you have any comments on the impact of regulated advice on consumers’ ability to understand and assess their pension throughout the product lifecycle?

The use of the phrase “their pension” in this question is interesting. If people understood what they were saving into or transferring into, they might well think it would be providing them with a pension. Of course it is not. It might provide with a flexi-access drawdown or might be swapped for an annuity, but the personal pension is not in itself providing a pension (nor are most workplace pensions for that matter – even master trusts).

When even the name of the product is misleading, it is not surprising that most people don’t really understand what they are saving for or how the “product lifecycle” really works. While a lucky few savers have an adviser for life, most people will have a series of advisers as advisers move jobs, get promoted or retire. While they may have an understanding of what they are doing at outset , too often the strategies selected for non-workplace pensions end up as “set and go”, rather than the dynamically advised lifecycle strategies promised at outset.

I am more confident in the guided pathways of the lifestyle approaches in workplace pension defaults than the promises (however well made) of advisers. My concern is more for the mass market of people who transfer large amounts from DB pensions, than for High Net Worth SIPP owners who – like me – are au fait with the risks.

Do you have any comments about whether certain funds are seen by consumers as default arrangements and whether these should be subject to additional standards and protections?

The most common perception of a default is with the with-profit fund that pays a bonus that appears very much like a guarantee. Of course it is not a guaranteed bonus but that’s how many savers described what they were promised from Prufund and equivalents.

Steelworkers told me they liked these funds because they were “guaranteed” by a household name. There was a suspicion that some were complicit in going along with this talk knowing full well they had rights of restitution if they were let down.

There is a moral hazard at play here (it will be the same with CDC) and I fear that many advisers do too little to downplay the misconceptions. The sales targets on advisers , and the need to sell in bulk, can all too easily lead to dumping smaller or less-savvy savers into default arrangements so that more valuable and more demanding customers can be given full attention.

However, most of the streamlined SIPPs I have looked at, use defaults sensibly and promote them responsibly. They should not be tarred with the same brush.

Do you believe that demand-side weaknesses are present in the market for non-workplace pensions? Do they apply across the market or are they specific to particular consumer groups, products or sales channels?

I have partially addressed these questions in previous answers. The abolition of commission has undoubtedly changed most salespeople into advisers and has improved the quality of the “sales-side”. Where “selling” persists, it is less overt.tideway lbg

Above is an advert sent to a Pensions Manager of a large DB scheme, showing how a sales organisation can advertise itself to fiduciaries as an employee benefit. An actuarial practice – of which I am a Director – has seen examples of firms actively promoting transfer advisers to staff as an employee benefit, in practice it is also a helpful way of “de-risking the balance sheet”. I worry that what looks like a sheep, could well be a wolf.

In the case of Tideway, I have seen statements in the press and in advertisements that strengthen those concerns. Tideway and most other firms operate a conditional pricing structure where advisers are remunerated when a transfer is completed and typically invested in Tideway managed investments.

It seems to me that there are demand-side weaknesses that such firms are preying on. Pension Managers and Trustees are susceptible to advertisments of this type and employers are only too pleased to see pension liabilities transferred at a discount to book value.

Many trustees are now offering CETVs on benefit statements and at retirement. This excites demand for what look like telephone number cash benefits. It is only too easy to see how this can create the kind of feeding frenzy we saw in Port Talbot. I have meetings with three large pension schemes (with assets in excess of £12bn) on this issue in the next two weeks..

In direct answer to this question, the principal concern has to be around vulnerable customers with large amounts of investable cash. The DB transfer issues presents exactly that scenario.

There is a serious issue here which needs to be addressed by the Pensions Regulator and the FCA jointly.


Do you have any comments or evidence relating to our discussion of SHPs?

If there is market failure, it is not with stakeholder pensions. They failed to sell in great enough numbers to be a central focus of this study and those that were sold, were generally sold fairly. I was at Eagle Star/Zurich at the time when SHP was launched and saw some evidence of abuse (though not from Eagle Star/Zurich).

The issues are about the practice of hiding charges in the asset price – depressing performance while declaring an ostensibly low AMC. This is an issue being looked at by the FCA’s IWG and is one for IGCs who should consider now workplace and workplace SHPs as a single item.

SHPs provided a guarantee on pricing which in itself had a price. Whether the price paid for the stakeholder guarantee is worth paying is worth consideration. In my opinion, consumers are getting little from stakeholder pensions that couldn’t be provided more cheaply by the better SIPPs and personal pensions. There is an argument for disbanding SHP but -when do much more pressing issues abound, it is a weak argument

Can you provide any relevant comments or evidence relating to charges on pre-2001 policies?

No. I will leave this to the IGCs and GAAs, who I hope will be contributing to this discussion.

How might we and industry improve non-workplace customers’ awareness of the charges they may or will incur and the impact of those charges on their pension savings?

The most effective awareness campaigns make the impact of poor choices graphic (think the HIV/Aids campaign and advertising on cigarette packets. We can do more to show how the impact of costs on a pension saving plan, can reduce the outcomes. There is a difference for instance in the standard of holidays/cars and other consumer durables that arises from price and the ability to meet it”. I would like to see cost disclosure promoted by regulators in a more outcomes focussed way!

The OFT agreed with insurers that IGCs could provide people with value for money assessments. This has been extended to cover trust based DC schemes. But we have yet to see any proper system for measuring value for money. Instead we get IGCs and Trustee Chairs trotting out the statement “in my opinion we are providing value for money” as if this might help.

The only way such a statement can be meaningful is if it answers the policyholder or member’s question “relative to what?”.

Since there is no coherent system of measuring value for money or independent means to benchmark it, members are entirely let down. We need an independent and public utility (as there are in Australia) to compare workplace and non-workplace pensions for value for money and such a utility needs to use accurate performance data, accurate risk measures (standard deviation) and accurate costs (including hidden charges).

If we were able to see the true costs of some of the non-workplace solutions made available to vulnerable investors, if those costs could be displayed against those of alternatives and if the impact of those costs could be displayed in relation to holidays /cars and other tangible outcomes, then the kind of awareness of charges (and value) that we see in more mature DC environments, could be quickly created in the UK.

Do you have any comments on how industry might better support consumer choice (including monitoring and identifying when it might be appropriate to switch to a more competitive product and / or provider)?

The system of benchmarking (using a public utility) is the initiative that I would recommend. It should be available on every pension dashboard. The workplace pension providers should co-operate in facilitating data and IGCs and Trustees should supervise this.

Allowing people to see if they are getting value for money and explaining its importance is an important step along the way.

Once we have an awareness of the importance of getting value for money and an idea on where it is to be found, then we need a free and easy way to move money from one part of the system to another. I note the comments in the discussion paper on this. I am sure that at the top end of the market, re-registration systems are important, but for the mass market, this means transferring money from one provider to another using unit encashment.

The only research I know of as to how effective the market is , is provided by Pension Bee’s Robin Hood Index. Currently it shows that the majority of workplace pension providers are using the Origo system and that the market is functioning if not perfectly – at least a lot better than it has done. However it is clear that some workplace providers – most notably NEST, are not releasing money in a reasonable timeframe and hiding behind phrases like “due diligence” to hang on to pots. There appears to be one insurer- Aegon -which is making life as hard for transferring policyholders as possible.

The work of Pensions Bee in publishing a league table of the good and the bad, is really helpful, especially as they are using proprietary experience which is evidence based.

The Robin Hood Index should be taken up and promoted by the Pensions Regulator and the FCA as precisely the way to get us to universal good practice sooner.

Can you provide any evidence or examples of where competition is not working well on non-workplace pension charges (applicable across the market or specific to particular products)?

I would like to include with this proposal, evidence of a market failure that is causing misery to many people involved. At the time of writing I have been presented with a twelve page legal letter threatening me with a defamation writ if I publish this information.

Since I don’t want to go to court, I have only one alternative, which is to withhold the evidence that I have.

It is a shame that those people who try to expose bad practice, I cite Gina Miller, Chris Sier as examples, are pilloried for doing so. The resources of those who manage our money are substantial and those who monitor them meagre.

There is a great asymmetry between the information available to those who manage our assets and we who own them. This asymmetry is not healthy, it can lead to bad management, poor outcomes and – in extreme cases – outright fraud. The answer is transparency of disclosure, benchmarking of value for money and the creation of a proper awareness of the impact of charges – by all.

The vast majority of the evidence I have of anti- competitive practices and high charges relates to SIPPs where mutton is dressed as lamb and the victims are those with a large amount of (ex DB) money and a low level of financial literacy – in some cases any kind of literacy.

Summary and next steps

We would like to understand whether and how providers’ oversight arrangements differ between workplace and non- workplace pensions.

This really is a matter for you to judge rather than me to comment. I publish each year a summary of the IGC Chair Statements together with a ranking of each statement in terms of clarity, effectiveness and depth.

I would like to do the same for master trusts and non-workplace providers but it is too much for one person to do.

I would make the general observation that best practice is often found in odd places. Who would have thought that Virgin Money would have such a good IGC while other household names repeatedly trot out bland banalities and dress up marketing information as value for money metrics.

The master trust chair statements are almost impossible to find and are published at odd times of the year – presumably with the intention of getting read by the least possible number of people!

There are exceptions – but they prove the rule that workplace pension oversight arrangements are currently operated in a bubble, and that the only people who get involved in them – are the people who are paid to do so.

There are, I am sure, good things going on behind the scenes, but it will not be until these workplace pensions start publishing real information on the value for money of their core products, that they will be working properly.

I see no reason why IGCs should not have equal oversight of non-workplace pensions as they do of workplace. I note with approval how my non-workplace pension transfer values improved when I reached 55 and they no longer contained transfer penalties. I thank the IGC of Zurich for making this happen for me.

The work they have done so far could be extended, as has been indicated in this response. But by far the most important function of IGCs and Trust boards is to protect their policyholders and members from poor value for money.

In the context of the potential harms in this market, are there any other interventions that you think we should consider? Please explain what the impact might be and why such remedies would be appropriate.

I have referred in this response to the difficulty I have in publicising bad practice. I , and others , find it hard to whistle blow using Project Bloom, not least because we get no feedback from Action Fraud and the people we are trying to protect get help too late.

If we go public we can be criticised for “tipping off” and are sent legal threats from those we criticise. We are vulnerable to being censored by our employers or (for IFAs) – networks. In extreme cases we can be stopped from working.

It seems to me that the system of public censure and self-regulation that we have in this country is based on free- speech.

I would like to see the FCA and other regulators supporting whistle-blowing (though censuring slander and libel). At the moment, it is too hard to speak out and for that reason, many bad practices are allowed to persist. The Port Talbot experience is only one example.

I welcome the FCA’s recent interventions in the market, especially around transfers from DB plans and will work with them wherever I can to ensure better advice and better outcomes for people in DB schemes (and out of them).

Do you have any other comments on the matters discussed in this Discussion Paper?

I have stated publicly (henrytapper.com) that I support the aims of this paper and congratulate the FCA for its simple and effective format. It addresses the main issues, has a good market summary and I enjoyed reading it and responding to its questions.

I hope that others will respond to it and that it provokes action within the FCA and other regulators.

I would be happy to discuss any of the matters contained in this response with the FCA and others.

Henry Tapper ; for the Pension PlayPen – Feb 4th 2018

Posted in advice gap, BSPS, dc pensions, drawdown, Henry Tapper blog, pensions, PLSA, Retail Distribution Review, Retirement | Tagged , , , , , , , | 1 Comment

£400bn reasons for better practice. The very odd world of “not- workplace-pensions”.

£400,000,000,000 is a lot of money. It’s the amount that sits in “not workplace pensions”.

“Not workplace” is what we call that great hinterland of individual pension pots that are labelled stakeholder pensions, personal pensions or self invested personal pensions.

Now the FCA are turning their sites on these forgotten policies. Discussion Paper DP18/1 “Effective completion in non- workplace pensions” aims to shine a light on what’s going on with our private savings. This is what the OECD is called the third pillar, and it’s a very odd pillar indeed!

The paper starts with a review of where this money sits , or at least what the “value chain looks like.

value chain

Anyone familiar with my recent blogs will recognise the bottom row. Far from creating value, the RDR has  spread opportunities for fee charging. Ordinary people are finding themselves signing up to discretionary fund management agreements without proper understanding of who is managing their money and how much it is costing them.

Where the individual personal pension was a licence to take commission, the new SIPP is a licence to take fees, while commission was charged against contributions, fees are charged to the fund.

Meanwhile, the paper points us to the world of workplace, an idealised world of large schemes where the employer picks up the majority of the fees.

value chain 2

Not that black and white

To suppose that workplace is a nirvana of subsidised services while non-workplace a barren wasteland is entirely wrong.  Figure 4 (above) is taken from a survey of 144 large DC schemes run by members of the PLSA. These schemes are as gold-plated as DC plans get and are generally aspiring to PLSA’s Pension Quality Mark. But the generality of workplace pension arrangements are paid for almost entirely by the members, the employer picking up the cost of auto-enrolment compliance.

Meanwhile , a new breed of streamlined SIPPS such as those run by Pension Bee, Evestor and the forward thinking insurers such as Royal London, members are being offered the kind of pension most workplace pension providers can only marvel at.

This new breed of SIPP is setting new standards in terms of customer service, embracing our new world of digital interfaces, offering instant access through our phones to services that still take the workplace pensions days to provide.


It is the best and worst of worlds

So just as the shift from personal pensions to SIPPs has given the opportunity for fee gouging, it has spawned a new kind of competition. The PensionBee Robin Hood index is an example. Not only does it shine a light on bad practice, but it enables progressive SIPP providers to put pressure on workplace pension providers such as NEST and Aegon, who are conspicuously failing customers, especially when customers try taking money away.

It is not just Pension Bee that has suffered from the bullying culture of the “pensions industry, regular readers of this blog will find that some of the blogs on what I consider SIPP malpractice are missing, they can draw their own conclusions.

But the old world of legal threats and deliberately obstructive transfer practices is not one that sits well where social media shines a light. The transparency agenda is made possible because organisations like Pensions Bee are no longer dependent on Aegon and NEST. RDR has its successes and the new streamlined SIPPs are as a much a pointer to the future as the activities of some advisers in Port Talbot are a pointer to the past.

£400bn is a lot of money.

It is high time that the FCA got to grips with “not workplace pensions”. They represent the best and worst of what is going on today.

Reading  Discussion Paper DP18/1 “Effective completion in non- workplace pensions”, makes me want to respond to it,  It is a sensible document that is in the interest of FAMRs population. The FCA are reaching out to the trustees of occupational pensions and it’s important that those trustees reach out to them.

£400bn is about 40% of the value of the funded part of Defined Benefit pensions, it is a huge amount of this nation’s wealth. Just what will happen to this money is open to conjecture, though it has received pension tax-relief, it is unlikely to be paid as a pension.

Some of this money should properly be considered wealth, the majority of it is pension saving from ordinary people who are neither wealthy or desirous of freedoms.

This discussion paper is nicely time to coincide with the Work and Pension Select Committee’s investigation into the Pension Freedoms and subsequent inquiry into CDC. Let’s hope that these various discussions can be brought together for the common good!






Posted in pensions | 1 Comment

How certain are my client’s state benefits?

death and taxes

The old adage “there’s nothing certain except death and taxes”, sadly did not include pensions, not even the state pension. Behavioural science suggests that the further we look into the future , the more we crave the security of certainty. But life (and death) aren’t like that and anyone who has ever conducted a cash flow forecast knows they are putting their finger in the air.

While we can philosophise  about the “ineluctable modality of later life”, that won’t get us very far. People crave certainty and relative to other sources of retirement income, the state pension comes up with it. If you go to https://www.gov.uk/check-state-pension and input your Unique Tax Payer Reference , you will see something like this.state pension ht

This is my amount, I can expect a pension from my 67th birthday but this is not guaranteed. As the WASPI women have found out, the date at which state pensions are payable is a moveable feast and it moves with the Government’s estimate of life expectancy for all of us (us= Uk population).

The WASPI women expected to retire earlier than men and they’re finding out that that advantage has been taken away from them. This is because of UK and European law which requires state pensions to be equalised. During the last 30 years , the law has changed. Generally the law has changed for the betterment of women, but in this case it has worked for the worse. Our retirement finances are subject to the vagaries of the law and this is one reason we must keep our fingers crossed.

Can I be sure that the Government won’t push back my retirement age (as it already has)? Well no! But the closer I get to my State Retirement Age, the less likely is it that I’ll have to wait longer. There is still a corridor of uncertainty but that corridor is getting narrower! The WASPI women claim that they heard about their having to wait longer too late and that the Government hid this information from them. They have some grounds to be aggrieved, part of the contract Government has with all its citizens is to keep them informed.

Nowadays we have to keep ourselves informed -or if you are a pensions adviser – help your clients inform themselves. Things are liable to change and it’s not just the “when”, it’s the “how much”. At the moment, that £159.55 is good only for this year.

The rate of basic State pension is increased from April each year by at least the level of growth in average earnings. The current Government’s policy is that the basic State Pension will increase each year by the highest of:

  • growth in average earnings
  • prices increases
  • 2.5 per cent


For instance, in tax year 2016/2017 the basic State Pension rose by 2.5%. But in April 2018 it is likely that price increases will be in excess of 2.5% and earnings growth even higher. This is known as the triple-lock; you are guaranteed (for as long as the triple lock survives) an increase in your state pension entitlement of the best of the three numbers bulleted!

It would be good if we knew what inflation was going to be and it would be good if we were to know the triple lock would last for ever. The truth is we don’t know either of these things. We can only guess.

So far I’ve been talking about what I know about myself, the forecast in this article is my forecast. If I scroll down on my forecast I find out more interesting information about me. I discover that the amount I can expect is dependent on my contributing more national insurance.

state pension ht 2

To get my final £14.20 per week, I need to work for another four years. That’s because I spent some of my life not contributing enough national insurance. I don’t owe money, I was contracted out of the state pension and so currently only have 31 out of the 35 complete years I need to get my full entitlement.

state pension Ht 3

It looks like the 11 years when I didn’t contribute enough, gave me two full years credits, so I have the equivalent of 31 years national insurance contributions.

This is really helpful to my retirement planning. It tells me that I have every chance of getting to my full state pension , despite being contracted out of the second state pension (what used to be called SERPS) for a number of years.  This certainty I have in numbers.

Talking people through their entitlement to the State Pension is an incredibly important and rewarding part of our job. People who I do it for, are really grateful, especially when I explain the small print and put their expectation in the context of others. If you advise others, then make sure your clients have their HMRC User ID and password to hand (and an internet connection handy) when you do!

You’ve never had it so good  – the politics of the state pension.

The idea of the triple-lock would have been unthinkable for much of the past fifty years. Wage and price inflation have been far too high for far too many of these years for such a promise to be affordable. The triple lock was introduced in 2010 by the coalition Government. It is proving very popular, especially by those in retirement (who are good at voting).

In its quinquennial review of the national insurance finances in 2014, the Government Actuary made it clear that the triple lock was not affordable for ever, the triple lock was -to GAD- a way of getting the State Pension back up to a level where it provided everyone with a minimum safety net in retirement. We may feel that £8,325 pa is too little to live on, but it is a lot more than could have been expected – even in 2010.

The Government Actuary points out in his review that “private sector provision” and in particular its increase due to “the impact of auto-enrolment” and the “pension freedoms

“could open up consideration of phasing options starting in 2020 for securing greater sustainability of State Pensions and the National Insurance Fund”.

This is a coded way of saying that provided we are saving more, the Government could turn off the triple lock by the end of the decade.

We may look back at this decade as the “good old days”, at least for state pension. The clear message for your clients is that none of us expect the state pension to increase into the next decade as fast as it is at the moment and that the nice surprises we get when we revisit the state pension portal, are unlikely to last. There is some certainty in that.


What else can you expect from the state?

Most people who can afford to pay for financial advice , will be dependent on the system of further state benefits in retirement , known as Universal Credit. However, the level of those benefits and how and to whom they come payable, is important, especially when – like me – you talk with people in the workforce who are on low incomes.

The certainty that these benefits being available is unfortunately low. The universal credit system is not properly understood because it is complex and often unfair. The acknowledged expert on these matters is Gareth Morgan (the Ferret). If you would like to bone-up, as I do, you can visit the Ferret website – http://www.ferret.co.uk.

To be fair to Government, Universal Credit is new and has yet to bed down, we can be reasonably certain that the current unfairness will reduce over time. Never the less, the reality for most people on very low wages is that – unless they are very careful – they could reduce their entitlements to benefits under Universal Credit, by being seen to draw income from private pensions.

It is worth reminding wealthier clients who are concerned about the uncertainties of their retirement planning, that the uncertainties for those who do not have their wealth are much greater. The increased dependency that poorer people have on state pensions and benefits in retirement are much higher than those of us with money.

There is one final point which is important, but often ignored , with regards the payment of income in retirement. Money arising from pensions , whether state or private, is not subject to national insurance and is therefore more valuable in the hand than “earned income”. This , combined with the increased age-allowance and certain un- means tested universal benefits (bus passes, TV licence reductions etc.) mean that life in older age is financially less taxing.

Are their risks from perceived inter-generational inequalities?

But, as with the benefits themselves, the taxation of benefits is not written in stone. Economists such as Paul Johnson are keen to point out the increasing inter-generational transfer from the young to the old which is sociologically and politically unsustainable. While there is good reason for Governments to reward the old , these do not include bribing them for their votes. The baby booming generation , who form the majority of financial adviser’s clients, should be aware that they cannot have it their own way – forever!

The certainty of the current benign conditions pertaining to state pensions and benefits – needs to be viewed in the light of these large “macro” considerations. in the final analysis, the nation has to ask of itself – “can we afford all of this?”. Unless we see a substantial increase in productivity (GMP) , I think we can be certain that the answer to that question is “no”.

death and taxes 2

Posted in accountants, actuaries, advice gap, pensions | Tagged , , , , , | 3 Comments

If I was Theresa May….

may 8

I can understand Theresa May’s frustrations, I am a member of her party and have witnessed her “annus calamitous” up close and personal.

I am a fan of May’s, an endangered species, but I prefer her to alternative models


As a businessman, I am concerned about her threatened interventions on behalf of pension schemes. I suspect that Carolyn Fairbairn and the CBI share such concerns, ultimately companies must be self-determined, they cannot be run by their pension trustees.

Much as I would like, as someone dedicated to restoring confidence in pensions, to put pensions first, I don’t think that putting the sponsor second, is the way forward. If  integrated risk management means anything, it means both sponsor and trustee – if not in harmony – in touch.  We risk breaking that touch point if Government intervenes. We do not want the relationship between management and trustee to become mechanistic.

But I do want to see the Prime Minister exercising her authority so that ordinary people feel more confident about the pensions they are in,

A crack of light?

So while I am against Government intervening further in the delicate touch points between employer and trustee (the Pensions Regulator is quite involved enough), I do hope that Theresa May can find a way to exert her authority in other ways.Light shines on

It was not until a recent meeting I was involved with, where a group of us was discussing the need for legislative change to take forward CDC, that such an opportunity presented itself.

Royal Mail has now announced to the  London Stock Exchange that it intends to set up a CDC scheme which will pay its 140,000 staff a wage for life. The news has been greeted with some  enthusiasm by the market rm shares


The Pensions Industry’s reaction has been less enthusiastic and  is properly summed up by Tom McPhail in Pensions Age.

The plans to launch a CDC scheme will be watched with keen interest by the pensions industry, which has very mixed feelings about the viability of such schemes.”

A rather more partisan statement comes from John Ralfe, commenting in the Times.

John Ralfe CDC

There are substantial headwinds to come and the confidence the market is expressing through Royal Mail’s share price may underestimate the challenges to come.

To make Royal Mail’s plan “viable” will need energy and commitment from Royal Mail and its staff”s union (CWU). It will also need that energy and commitment from within DWP.

Friends of CDC

Putting on another hat, I am a Friend of CDC and one of our aims is to help CDC to happen.

It strikes me that Theresa May would be well advised to make CDC happen too!

  • It doesn’t need involve her with World War III with the CBI
  • It can help improve industrial relations between Royal Mail and its staff
  • It could pave the way for similar settlements in future
  • It does look good on her CV
  • It takes our mind off Brexit
  • Sorting all this out is achievable within the present context.

That last point is debatable. I have now seen sufficient evidence from sufficient actuaries and lawyers , to support this view, but I admit that I am not the expert. I take others word for it – on trust.

Fortunately, I am not the only Friend of CDC, there are others, who are trustworthy and articulate and energetic and who are acting pro-bono as they want to restore confidence in pensions too.

In the gloom the gold gathers the light about it.

It  would be very helpful for Britain if we made 2018 something rather better than 2017 and I do not subscribe to the view that this would  best be achieved by kicking the current Government out.

I still believe that Theresa May is our best bet for a way out of the current complexities. Unfortunately she presides over a party which is denuded of pension expertise and is therefore floundering on the pensions front.

So I rather hope that somewhere in the serried ranks of civil servants and politicians, there is a person who can whisper in the Prime Minister’s ear that CDC might well be her best bet.


lux in tenebris 2

Lux in tenebris

Posted in CDC, pensions, Royal Mail | Tagged , , , , | 3 Comments

A finger of fudge is not enough!


That was then



The fudge that is “guidance” is top of the list of Ros Altmann’s priorities. She’s even written a letter to the Pensions Minister.

I wish that she could turn her mind to the 140,000 postal workers who don’t want guidance or advice, but want a wage for life from their retirement savings.

Not enough

Yesterday morning, 60 people attended a meeting of the Friends of CDC, so many that our room was full to busting. We had insurers from Germany, civil servants from Whitehall, pension managers from the City and the odd front bench MP, thinking about the hardest, nastiest problem in finance – how to provide an income for yourself for the rest of your life.

We didn’t discuss guidance.

Give me freedom from these freedoms!

For the workers at the Royal Mail, the prospect of having to confront the hardest nastiest prospect in finance with the help of guidance or advice was not appealing. They had been promised a pension – a wage for life- and they had been prepared to strike for it.

Our meeting was looking at the tough choices that need to be made to satisfy them.

It is becoming clear to me that though “many flowers bloomed” in Steve Webb’s garden of “Defined Ambition”, only one crop can grow in the austere Brexit-dominated legislative landscape of the next three years.

I am not talking about abolishing freedoms, nor of reinstating annuities. I am talking about allowing a group of workers a third choice.

The talking at yesterday’s meeting was tough. There is no miracle cure that will solve all ailments , what can be produced  in reasonable time , may be no more than a crude remedy. Many of the problems that ordinary people have with their DC pots, may have to wait. A universal solution (as ambitious politicians have found universal credit) causes as many problems as it solves. Reform of our pension system is not going to be wholesale- it may have to be local – it may have to trial solutions.

I do however believe that the postal workers need more than the “finger of fudge”, that Baroness Altmann is chasing disappearing rainbows and that what Terry Pullinger and his union want for his workers is a practical means of turning pots into pensions.

No amount of guidance can do that. Many people having been offered freedoms, are saying no thanks. DC pots are not enough, people want freedom from the bondage of uncertainty inflicted on them by the “hardest, nastiest problem in finance”.

Not guidance, not advice but a “wage for life”.

So this blog calls , and will continue to call on Government to address the needs of the many and put aside special pleading. This blog calls on Government to help the postal workers to a resolution of their differences with their employer, by granting them- and their employer  – a mutually agreed means for the workers to get a wage for life in retirement.

No guidance – no advice – no dashboard needed – a wage for life for a lifetime’s saving.

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

BSPS – a big win – but at what cost?

BSPS Missing.PNG

Despite the success, many members of BSPS will be “missing” from the new scheme


It now seems quite certain that the New British Steel Pension Scheme will happen and that it will be populated by the majority of members of the current British Steel Pension Scheme. In announcing the results of “Time to Choose” Allan Johnston, Chair of BSPS Trustees had this to say.

I am pleased that so many Scheme members took the time to choose the outcome that was best for them based on their personal circumstances. The New BSPS offers benefits that for most members are the same or better than the PPF and around 83,000 members have chosen to switch to the New Scheme.

The PPF provides a valuable safeguard for members of occupational pension schemes and around 39,000 scheme members will remain in the current scheme when it starts its formal PPF assessment period at the end of March unless they take a transfer.  Their benefits will be aligned to PPF compensation levels.

Work is now under way to allocate the members and scheme assets between the new BSPS and the old scheme. Central to this work is the requirement to ensure that, from 29 March 2018, pensioner members receive their appropriate pension payment depending on which arrangement they will be moving into. 

Further information will be provided to all members ahead of the split taking place on 28 March 2018.

It is the mark of a good Chair to always be right in public, but to be furious in private! If I were Allan Johnston, I would be just that.

By a strange coincidence, I met my investment hero, Hugh Smart for the first time last night. For all his suave charm, he made it clear that the last two years have been the toughest of his working life. Hugh was in 2016 (when SSgA stopped doing the numbers)  the undefeated CIO of the world, his investment record impeccable.

That Britain, a proud industrial nation with a booming motor industry, came so close to abandoning its capacity to produce steel is remarkable, that Britain’s #1 pension scheme in terms of its cost controls and investment track record, should have come so close to entering the PPF even more so.

If you want to understand the implications of the deal done by the Trustees, here is an excellent Q&A that was published last night in the Teeside Gazette. It is also worth looking at the wonderful gallery of images from the Teeside works over the years

Allan Johnston’s achievement, was made possible by Hugh Smart’s asset management, but it is fundamentally the Chair who has carried the weight of the past two years. Well done to the Trustees of BSPS for keeping afloat in the stormiest of waters.

But there are lessons to be learned

The problem that a strong chair has, is that there’s no one in the Court to criticise him. Even if the Emperor had had no clothes, he’d have been admired. I’m seeing Allan next week, a meeting I’m looking forward to for a number of reasons, not least because I am not in his Court and will be able to read to him this comment on the “Trustee’s best effort” (received in response to the announcement above)

Sending out 16/30 page packs of difficult to read documents and reminder letters to everyone even if you had already voted.

Not providing a panel of regulated advice to tell you the best option because they were so frightened of losing their impartiality.

Wording an option “I want to move with the current scheme…”

Not allowing email submissions or opting on-line.

The failings of Time to Choose were visited upon the members, but the same member who wrote this criticism could also post on the BSPS Facebook page

Applications do take time to process and most remain in the statutory payment period of 6 months after the original CETV guarantee date (eg september for dec 11 extended to jan 26 submission). It is very frustrating and we hope the message Rich got will at least take away some of the panic.The pensions office are not trying to prevent you getting your transfer but no one has handled this size of RAA before and in parallel with the transfers they are getting all the data ready for the PPF/BSPS2 split which is another mammoth task.

I am not apologising for the Trustees but just trying to put some truth to what is happening.

Institutional winners and individual losers

Just as the transfer of 83,000 members is a triumph, so the loss of 39,000 members to the PPF will include some minor financial tragedies.  I have been told that the trustees got well over 100,000 responses but there were lots of duplicates and changes of mind so the final figures  in this statement are on the conservative side.

Just under 97,000 members completed and returned option forms, of which 86% were from members choosing to switch to the New BSPS and 14% were from members choosing to move into the Pension Protection Fund.

But 25,000 people never returned a form. And counted among those who elected to join BSPS there are those who have made elections to transfer and are awaiting their money.

Citywire report today that many of these transfer requests may not be met from BSPS. How much of this is hearsay and how much fact is open to question. What isn’t open to question is the worry that the waiting is causing.

Here are two postings on the Facebook pages which demonstrate the stress that Time to Choose has put these steelworkers through

A lot of us only chose bsps2 so we could utilise the extra time needed to meet the artificial deadline forced on us, given the farcical response, and response times, of the cetv requests…..

and poignantly

Another day hoping and praying that Mr Postman will drop a letter through my door and it will say that ‘Mr …. , your pension has been transferred’ Alas no 😦 Its only been 145 days or 20.7143 weeks since my FA sent my forms off

This is not to mention those steel workers who find themselves – having transferred- in arrangements manifestly unsuited to their circumstances

In the final analysis , this is a war that should never have been fought

The battle to wrest a scheme back from the PPF was a battle that should never have been fought. The Trustees have won that battle at such cost that they may have lost the war.

This is why – were I Allan Johnston, I would be openly proud and privately furious. It was never the intention of those who set up BSPS and ran it so well for many decades, to have members posting comments like this.

As it is now over three months since they were authorized to send them can someone please tell me where I stand in regards to claiming as they have cost me possibly tens of thousands. Am shaking with rage as I type this.😠😠😠😠😠😠😠

and finally this

Well thats it, waiting game is over.
Transfer not accepted.

These are bodies lying on the battlefield. We can sit and read this , but we have no idea of the pain that these comments attempt to express , and for what?

We cannot continue to fight these kind of wars and leave the people we are trying to help in such a state.

I am sure I will read many analysis’ of the BSPS numbers , but my thoughts are with those members who have had their working and social lives disrupted as they have been.

Let’s hope that it can be done  better – the next time a scheme goes into an RAA.

BSPS hartlepool

The way it was

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

PensionBee stands up to the bullies at Aegon.


“Think three months is too long to wait for your pension? So does Aegon CEO, Adrian Grace – especially when it’s his pension.” – Professional Adviser 03/15

Let my people go

This story begins with an interview between Adrian Grace, CEO of Aegon and Professional Adviser. Grace tells Laura Miller

“The old world doesn’t work anymore. We believe that by agitating the market, there will be more business for advisers and so more business for us compared to those that will sit on their hands.”

and cites a personal example. Grace had been waiting three months to transfer his pension benefits from one provider to another. Grace concludeschange

At Aegon – nothing much has changed

Fast forward to the autumn of 2017. Pension Bee is publishing the Robin Hood index which identifies which providers are good at taking your money and which are bad at giving it back. All the major insurers are using the Origo platform and all conforming to its 12 day transfer standard. All that is except Aegon, Adrian Grace’s insurer is still taking 38 days (on average) to complete a transfer.

This is not good enough for Pension Bee’s CEO , Romi Savova, who pursues Grace and the Aegon IGC (Chair- Sacker’s Ian Pittaway) for improvements in service. None are forthcoming. By last week Romi has had enough

An open letter to Adrian Grace, CEO of Aegon UK

Dear Mr. Grace:

I am writing to you about our ongoing concerns for people transferring out of Aegon policies. These now impact c.600 customers. I am requesting the immediate resumption of electronic pension transfers between our firms.

I have opted for an “open letter”, as Aegon will not meaningfully engage with us despite direct letters to you, your Independent Governance Committee and various other Aegon employees. I point out that our Chairman, Mr. Mark Wood, has repeatedly offered to meet you in Edinburgh to discuss this matter but has been rebuffed – indeed on one occasion, a planned meeting was cancelled without notice.

Aegon’s arduous transfer approach for our mutual customers is out of line with that of its peers, who enable customers to switch their pensions quickly and safely to their chosen provider. Our experience in completing over 10,000 transfers is that best-in-class providers, including Aviva, Legal and General, Prudential, Scottish Widows and Standard Life, typically transfer electronically in 12 days or less.

In contrast, since 8 June 2017, customers wishing to transfer out of Aegon to PensionBee have faced barriers to switching, including multiple discharge forms, telephone calls and repetitive requests for information that has already been provided. There are various other steps that impede the customer’s right to switch pension provider easily (please see here). The average transfer out of Aegon for completed transfers now takes c.54 days – although the true scale of detriment remains unknown, since many people have been unable to overcome the barriers placed in front of them by Aegon in their attempts to switch or have simply given up.

This is all extremely puzzling as prior to 8 June 2017, Aegon readily used electronic means to transfer the policies of over 300 customers to the PensionBee Personal Pension.

I note that your communication to our mutual customers refers to due diligence and the importance of preventing transfers to pension scams. I wholeheartedly agree that this is an important aspect of any transfer decision, but Aegon has not clarified to us any specific due diligence concerns that it has regarding PensionBee. More importantly, I am concerned that bombarding customers with impersonalised pension scam warnings will lead to such letters being considered as red tape. The consequence may be that some people ignore genuine red flags when transferring to an actual pension scam.

Although I have already sent you this information several times, I will include it here again for completeness:

  • PensionBee, established in 2014, is authorised and regulated by the Financial Conduct Authority as a pension provider and we have our own wrapper
  • The PensionBee Personal Pension is an HMRC-registered personal pension and no unauthorised transfers or withdrawals are permitted from the scheme
  • All underlying investments are provided by BlackRock (Aegon’s primary asset manager), Legal and General Investment Management and State Street Global Advisors, who is our largest external shareholder

As you will know given my letter to the Financial Conduct Authority, I do not believe Aegon’s approach to transfers-out is Treating Customers Fairly. It doesn’t help the millions of people who have been auto-enrolled consolidate several small pension pots. As I’m sure you know, TCF’s Outcome 6 requires that “Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.”

As a result of unfair treatment, some customers who have completed transfers have begun or are considering taking Aegon to the Ombudsman for compensation. Our records indicate at least 56 customers have already complained to you (although our understanding is that many more have come to you directly) and that you have compensated some of them due to admitted errors in your processes.

I thought it would be helpful for you to hear some of the complaints in the customers’ own words, as I appreciate resolving this situation may not be on the top of your very long to-do list.

Customer 1

“Whilst I appreciate your role in minimising pension fraud and advising me to make considered decisions, I now find your actions to be deliberately resistant and are designed to fatigue me in moving – something I will be highlighting to the FCA and FOS.

I have moved 2 other pensions from Scottish Widows and Legal & General to Pension Bee and this process was completed within 30 days. This current process is taking more than 3 months.

You write and continue to advise me to avoid pension scams. I have researched the company I am moving it to and will again confirm the below

  • They are regulated by the FCA – whilst capital is at risk- it provides the same level protection as you do.
  • The two funds are with State Street and Blackrock – with billions under management
  • I understand the fees may be more- and am happy to pay the small (0.1%) increase due to the better online dashboard
  • They have a strong trust pilot score from existing users

Had I requested to move my funds to a small start-up in China or an investment vehicle that provided inflated returns, you would be right to challenge. Pension Bee have not provided any short term unrealistic claims and have been able to show what funds might be available at 66 years old.

Furthermore, their website has helped me identify shortfalls in my current saving plan for the yearly amount I wish to live on in retirement.

Your actions on the other hand are now boarding on bullying/scare-mongering and domineering in threatening not to release my funds.

I have completed numerous questionnaires, provided proof of identify and I am asking one final time for this transfer to be completed.”

Customer 2

“You will be amused to note that Aegon seem to think that PensionBee is a fraudulent scheme, despite having already transferred two of my schemes to it already.”

Customer 3

“I’ve received your letter dated 12 July enclosing a 4-page “due diligence” form, which you appear to be requiring me to complete (together with providing supporting documents) as a condition of complying with my instruction to transfer the pension fund to another FCA approved pension scheme. I’m an experienced lawyer who used to advise on pensions law and I fail to see what purpose is served by this form. I’d be grateful if you could refer me to relevant clause(s) in the Trust Deed or Scheme Rules which entitles you to refuse to execute my instructions unless I complete such a form.”

Customer 4

“What more due diligence checks are required?? I have completed all these forms already and advised your adviser I am happy for the transfer to proceed?

In terms of seeking financial advice this is not required below £25,000 and since my funds are just over £400 I will NOT be doing this.”

“What do I have to do to get my money??? This is ridiculous!!”

Customer 5

“I have responded to Aegon recently as they sent me many complicated forms which I did not understand. I wrote them back advising they need to allow PensionBee access to my funds. Please contact Aegon to confirm and advise when this has been done please as I would not like to have to complete the confusing forms they sent me.”

Customer 6

“Aegon are being real pains in the neck about my other pension transfer. I had to fill in a long form, have had two calls (asking the same questions), emails telling me if I don’t reply they’ll cancel the transfer (I replied) and now they are asking my to fill in a Discharge Indemnity Form with clauses like the ones pasted below.

They say if I don’t fill it in, they will cancel the transfer. It seems to be one thing (excuse) after the other. In your experience, is the latter normal? And, legally, do I have to fill in the indemnity form?”

Customer 7

“Yes, please proceed with this transfer! I have instructed you to do so on several occasions. I have completed an exhaustive questionnaire and also taken a call and been through all the responses again!

I cannot make myself clearer, I want you to proceed with this transfer as soon as possible. I believe now Aegon is being obstructive in delaying to do so. You can see that my receiving scheme (PensionBee) is bona fide and there is no reason now not to proceed.

I have carried out all my background checks, and am fully informed of all the facts. I have worked extensively in the financial services, investment and retirement planning sectors. Please remember also that this is my money, not yours, and I will decide what to do with it.”

Customer 8

“I have just been on the phone for what must be the 9th time now regarding my transfer of both pensions away from Aegon. I was actually speaking to a rather helpful colleague of yours [redacted] who send over yet more forms can you believe.

However over the last 4 months, I have been treated appallingly and you have left me no choice but to complain through the proper process for my unnecessary time spent trying to transfer both my pensions to my Pension Bee portfolio.

The word “Disgusted “ doesn’t even come close to the way I feel about Aegon, having had the displeasure of dealing with your company. Back in September 2017, Aegon received an instruction from Pension Bee along with 2 other pensions of mine (Aviva and Scottish Widows) both of which were transferred within 6 weeks without any hitches all online. Not even a single phone call was required on my behalf.

Aegon, on the other hand… Well, where do I begin?

I have filled out identical sets of forms twice , even 3 times in one instance, emailed several times, rang the customer service centre. Altogether I have spent an estimated 10 – 12 hours of my life trying to transfer my pensions.

I charge £30 per hour for my time so you leave me no option but to send you an invoice for my loss of earnings due to gross incompetence.

I am not sure why you choose not to employ electronic means for your pension transfer protocol. It beggars belief that in 2018, you will not embrace change and act like Luddites. All that is achieved is the alienation of your customer. I for one can honestly say that I nor my friends and family would ever recommend Aegon.

As a goodwill gesture, I expect Aegon to recompense me for my loss of earnings, through full payment of the attached invoice. I believe this is the very least you can do. If you choose not to offer me an equivalent form of recompense then I will have to follow legal proceedings for my loss of earnings.

If you cannot solve my complaint within the next 4 days, Please provide me with the contact details for the Financial Ombudsman to escalate the complaint.”

End of sample customer feedback

It is difficult to understand why Aegon treats its customers differently to other providers, who are all transferring electronically to the same FCA-regulated PensionBee pension plan. I look forward to your response or better still, the resumption of electronic transfers between our companies.

Yours sincerely,Romi Savova

Romi Savova

Chief Executive Officer

PensionBee Limited

Three questions

  1. What makes Adrian Grace think he can get away with this kind of behaviour?
  2. Why has Aegon’s IGC – under the Chair of Ian Pittaway, not got involved.
  3. What are the FCA going to do about Romi’s complaint of corporate bullying?


Are we being served?

I suspect that not even “young Mr Grace“, could claim that Aegon have “all done very well”.


Posted in advice gap, FCA, IGC, pensions | Tagged , , , , | Leave a comment

No shortage of “pension engagement” at Royal Mail.

Pension people want positive engagement, but when they get it, they ignore it or deride it.

On Friday, the CWU announced that an agreement had been reached between CWU and Royal Mail which will now be put to the membership. The agreement means three things.

  1. We will not have a postal strike
  2. The postal workers will have a pension that gives them a “pension not a pot”
  3. A more general settlement between CWU and Royal Mail will follow.

If you don’t believe me, here’s Terry Pullinger spelling it out to members.

Terry Pullinger four Pillars Agreement from The CWU on Vimeo.

5,000 people have watched that video in the last 24 hours, the FT has reported on it in the starkest terms

But the story has hardly made the front page. I guess that 140,000 people agreeing a radically new pension settlement which pleases both them and their employer, isn’t considered the “right kind of engagement”.

USS – more “wrongful engagement”.

I guess the papers will continue to report the bad news stories. The story of how Carillion over-promised and over-delivered to shareholders , under-priced contracts and failed to manage its covenant with its pension scheme. This is being reported as a pensions failure, when clearly it is a corporate failure.

I suppose that the impending strike by university staff will similarly be reported as a pension failure, despite the clear evidence to the contrary. The magnitude of the challenge facing the university staff and its union is that the preferred solution, a DC plan that “democratises” (dumps) risk on teachers , will not provide a pension but a pot. We are about to see another strike where staff are engaging with and choosing “pensions” and rejecting “pots”. Presumably – another example of the wrong kind of engagement.

At the risk of sounding cynical, but the “right” kind of engagement, seems to be about the management of “pots” and not with a pension at all. The nearest I hear to calls for pension engagement – from those on the sell side of the argument – is when the argument comes round to the purchasing of annuities.

As far as I can see “industry” calls for engagement are no better than the hawker’s cry

Who will buy!

Everywhere you look, people are engaging with pensions. The WASPI women are engaging with their entitlement to the state pension, politicians argue about the sustainability of the triple lock, Gareth Morgan and others campaign for better integration of universal credit and pensions so that those on low incomes get a better deal (than the crud they get at the moment).

All are examples of engagement with pensions as “a wage for life” and all are ignored by the financial services industry or mocked as the wrong kind of engagement.

The reason why the SIPP providers and the insurers are so vehemently against “wage for life” solutions, is that they see them as a threat to their business plans. Their business plans are built around individuals engaging (or more exactly financial advisers engaging) using highly problematic drawdown problems or very expensive individual annuities.

You can’t get much more engaged than going on strike about something!

I cannot think that all those postal workers and all those university teachers would have considered withdrawing their labour unless they felt strongly, that they were fully engaged.

In case anyone is under the impression that the Royal Mail strike is about more money into worker’s retirement pots, it is not. The contribution into the proposed CDC pension matches the contribution into the DC pension, Royal Mail aren’t taking on more risk -either in terms of contributions or balance sheet. They have simply agreed to a more equitable means of “democratising” risk. The risk will be better shared by members using the mutual assurance that CDC can provide.

So the engagement is not about screwing the employer, it’s about getting the right kind of pension.

I have no evidence of how the UCU will argue their case with their member’s employers , but I suspect the argument will be along the same lines.

That people are prepared to go out on strike to keep accruing “pensions” , rather than getting “pots”, tells me that pensions are engaging an awful lot of people.

The solution is not to abolish pensions!

I have given up on arguments that say the word “pension” is at fault. Financial services people want people to stop using the word. This is hardly surprising, they are no longer selling pensions , they’re selling “pot management” (aka “wealth solutions”). Initially , you may be flattered that your CETV is worthy of a “wealth solution” – but I fear wealth management is not a long-term solution for those in medium and low incomes, even if their CETV is worth £368,000 (on average)

carillion scam 2

While nobody wants to see an end to pension freedom, it’s clear that most people do not want to see an end to pensions. Most people do not see final salary pensions as “pots” and that includes the FCA.

The solution is to promote what we used to call a scheme pension and what we can generically call a wage for life.

Let’s remember that when the full implications of the Royal Mail/CWU agreement.starts sinking in.

target pensions


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

Let’s stop pretending guidance is enough.


News that the Government has thrown out proposals for compulsory guidance to protect us from ourselves comes as no surprise to me , though it has clearly angered Ros Altmann.

Writing on her blog, the former Pensions Minister writes of  the  “Government trying to weaken consumer protection for pensions”. This is doubly odd; Ros is a Tory Peer – accusing her own side of having it in for soon to be pensioners is bizarre; but even more bizarre is her belief in self-help through “guidance”.

Those most at risk of being ripped-off in retirement are those in need of advice not guidance. If we are to learn anything from Port Talbot, it is that ordinary people are not in the least interested in managing their own pensions, they want to hand the hardest, nastiest problem in finance to somebody else. That person is typically a pension trustee (the vast majority of those with the choice, voted for BSPS2). Where the trustees were rejected, people put their trust in the financial advisory system, a system that unfortunately let a number of steel workers down.

I’ve published this mini-poll on this blog before, but here it is again. It was taken on October 23rd towards the start of the steelworkers time to choose on the steelworker’s own Facebook page.poll bsps

The poll was conducted by a moderator of the site and he framed the question; please note – 82.6% of those who voted , voted to have their money managed by an IFA.


Why guidance is not enough.

In her article , Ros Altmann has a touching faith in ordinary people’s capacity to make sound financial decisions with the help of guidance.

“Automatic guidance can help pension customers make the most of their pension savings”.

“Customers need help to understand complex pension choices”

“Free, unbiased, expert guidance is available but many don’t get it”

“Auto-enrolment into free guidance will improve take-up and protect many more customers”

“Government is now trying to remove the automatic guidance clause”

“A shame pension providers have not supported this much-needed change”

“It is in the interests of the industry, as well as consumers, that people have proper help”

These are the headlines and substance of Ros’ argument and I couldn’t agree less. Guidance is a great thing for those who are prepared to pick up the phone and listen, people who have a confidence in the complex system of financial products  that underpins pension freedoms and people who are taking their retirement planning into their own hands.

For most right-wing commentators, this should be all of us. From the mid eighties onwards, there has been a concerted effort to create sufficient financial resilience among ordinary working people , so that Government can “democratise risk“, dismantle collective pension structures and leave us to be master of our own financial destinies.

Whichever right-wing think tank we point at , the answer is always the same, give people the tools and they will finish the job. Pensions Wise was the realisation of their vision and Pensions Wise has failed.

Why do we need “consumer protections”?

The reason the Government needs to protect consumers is because it has given everyone the right to harm themselves. In giving property rights to those in DB schemes back in the 1980s, David Willetts was roundly applauded by the people who wanted to manage their own wealth (his own). But the first round of pension freedoms led to pensions mis-selling and the costly restitution of people advised to transfer – into the DB plans from which they had been “liberated”.

In giving pension freedoms to all, George Osborne simply compounded the earlier mistake. In order to cover his tracks, he instigated Pensions Wise which has been helpful to those who are prepared to listen and trust , but no good at all to the vast majority of people who want someone else to look after their money.

Guidance is “sausage and chips” to the scammers.

sausage and chipsThroughout last year, TPAS were having to take down adverts from scammers purporting to be TPAS, to be supported by Ros Altmann, to be doing the Government’s work. In ever more audacious statements, lead generators claimed to be offering us the guidance we needed. It’s “sausage and chips” stuff.sausage and chips 2

Scammers are clever, they understand that people don’t want guidance, they want to be told what to do. So for every sausage and chips supper , there is a Darren Reynolds, ready to take the after-dinner order.

vega certAnd once someone has put their trust in the financial adviser, the money is gone. It could be going to a fund that offers a “guaranteed 6.5%” (Prufund) or be “Ultra Conservative” (Vega Algorithms) , it could have been invested in Cape Verde or Dubai or in St Lucia (Friendly Pensions). People were prepared to hear the narrative the adviser gave them, because they had decided to trust in the advice.

(By the way – I am not saying Prufund guarantees 6.5% pa – it doesn’t, but that’s what steelworkers I spoke to thought they were buying into).

Financial Advice is a minority sport

I’ve likened advice to a minority sport for a reason; like fox-hunting , it is great for the few who can afford it , but is meaningless to most people, who can neither afford it or enjoy its benefits. My friend Al Rush won’t have most ordinary people as clients, not because he’s a snob, but because they don’t need financial advice.

What most people need in retirement is a well organised wage for life from the State and from their workplace pensions. They also need cash to manage life’s emergencies and a sinking fund for occasional pleasures such as holidays, gifts and so on.

If people do need guidance, it is to understand how the State Pension works, how it interacts with Universal Credit and how their workplace pension supplements the income from the Government. When asked, and the CWU did ask, people choose to have a “wage for life” rather than to manage their own pot. The 89% “wage for life” vote from the Royal Mail workers was a vote against a DC pot or a cash balance paid to them from a DB plan. It was a vote for what ordinary people have always wanted, a “wage for life”.

This is no different from BSPS , where the vast majority of those who voted, chose a wage for life in BSPS2 or the PPF and those who voted for freedom, actually chose to have their “pot managed by an IFA”.

If you don’t trust your trustees , then your financial adviser is your alternative , but what makes you special enough to need an IFA? (as Al Cunningham would ask)

People choose to be “free of freedom”

As I have said in my CDC submission to the Work and Pensions Select Committee. Most people want to be free to choose, but will choose the security of a managed solution. If we want those solutions to default to Self Invested Personal Pensions, which is frankly what the financial services industry would generally prefer, then we can persist with the current approach which will have people transferring out of DB into a range of “advised” solutions, people coming out of workplace pensions into a range of “advised solutions” and those advised solutions being of varying quality.

But I don’t think there is any evidence that that is what ordinary people want.

What people want is to have value for money pensions which pay them a wage for life. That’s what the people I spoke to in Port Talbot thought they were getting, it’s what the people who Angie Brooks advises thought they were getting and it is what millions of people saving into NEST and other workplace pensions think they will get.

People save for retirement and want an easy life when they get their, they want to be free of choice, not to have freedom of choice, they want advice not guidance and they want products that give them predictable outcomes – they can trust.

Put guidance to one side

What Ros Altmann and her friends in the House of Lords want is a kind of automatic guidance that will be a complete waste of time. An enforced Pension Wise which will become a chore for people looking to get on with it.

What I want is a system which provides everyone with a default option for their money – an option which we can code-name CDC – but which will be better understood as a “wage for life”. It is in fact a “target pension” , rather than a guaranteed pension and it can be bought at retirement instead of an annuity and exchanged back for cash , in case of emergency.

It’s a wage for life that is not underpinned by a sponsor or insurance guarantee but relies on the old-fashioned principles of trust and mutual assurance. There is nothing about this “wage for life” approach that needs advice or guidance, though people are free to go to the new Government Advice Body for more information or indeed pay for an opinion from a financial advisor.

Let’s put guidance to one side for the moment and focus on the main event. Let’s give people what they actually want, not what we think they need.




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

The democratisation of risk?


Feeding in a time of plenty

I can’t say I’d heard this phrase before Bruce Porteous of Aberdeen introduced it into conversation at yesterday’s Westminster Business Forum.

The only reference I can find to it on the web is a sneering jibe at “Cowboys in Superland” back in 2002.

The stock market boom was fueled by retirement fund money, now it’s crashed and retirees are angry.

Capitalism may have to be reined in again to protect ordinary people’s savings

It’s been a long time since we’ve seen a real fall in people’s savings.


The FTSE 100 since the introduction of auto-enrolment

So now is a good time to herald the risk transfer from collective to individual using the glowing term “democratisation”.  I asked Bruce and the panel he was on – what they meant by the phrase

“democratisation of risk”

but that was too hard a question to answer with  a coffee break approaching.

The hardest nastiest problem in finance

Asking ordinary people to provide themselves a wage for life (aka pension) from a retirement pot may be what Bruce was referring to. It’s certainly what the acerbic Aussie was referring to.

David Harris (a genial Aussie)  has commented on the phrase since this blog was published 

Mentioned in Ireland 2014 against a backdrop of likely pension reforms. Also highlighted in the debates around the privatisation of US social security between 1997-2000. Also linked with the sharp decline in DB in Australia. Reality is risk moving onto DC member as employer /plan sponsor reluctant to have it on balance sheet- global markets/competitive

If “democratisation of risk” means dumping on the individual the anarchy of market forces, then the phrase “the abnegation of risk management” seems more appropriate.

Pot or Pension?

Later in the morning, the Westminster Business Forum heard from Terry Pullinger of the CWU about how 89% of his members voted against a “pot” and for a “pension” (a wage for life). They turned down a pot from a Zurich managed DC scheme and they turned down a pot from a self-administered cash balance plan and they voted for a scheme that paid a pension.

Terry’s overwhelming good humour turned a dry affair into a morning of good natured debate. If you want to see what I mean , you only have to watch one of his videos – like this one, where he announces the mediated settlement the CWU and Royal Mail have come to.

In my opinion, the scheme they voted for, a collective defined contribution scheme, really would democratise their risk.

Because – instead of leaving each individual postal worker , in the employ of Royal Mail, to take the market risks and the risks of their living too long, the union and employer are embarking on an experiment in mutuality where the risk to the employer will be confined to paying a defined contribution and the market and longevity risks will be pooled between the members of the scheme – both pre and post retirement.

This does not eliminate the hardest, nastiest problem in finance, but it makes it a lot easier to manage.

When the crash comes

So far, we have only seen rising markets , since the democratisation of pension saving (aka auto-enrolment). No-one has had cause to worry that the pots they have built up have gone from full to half-empty. But this will happen.

When that happens, some of the drawdown strategies in place, will fail. They are not sufficiently robust to survive the sequential risks of a sustained downturn in markets.

When the pot falls before retirement, pounds cost averaging can recover the situation, but if it falls in retirement – where pots have negative cash-flow, there is no such salvation. Paying a pension over time is not called the “hardest, nastiest problem in finance” for nothing.

So when the crash comes, and it will come several times in the savings careers of the younger auto-enrollers, there will be great gnashing of teeth, and John Ralfe will be telling us so – for not buying annuities and those who talked about the “democratisation of risk”, will have retreated to their city offices.

I thought of Terry Pullinger a bit like Noah, there he was with his big staff and his big boat beckoning everyone aboard his Ark. Meanwhile, the rest of us were basking in the glorious sunshine of a sustained heat-wave.

Flood? – My arse!

Of course we know what happened next!

At the end of the morning, as we broke to go home, I asked Terry’s panel – the Chair and the audience another question

Is there anybody in the room that doesn’t wish Royal Mail and CWU the successful realisation of their plan?

As with my question about the democratisation of risk, I got no reply.

Posted in CDC, pensions, Trades Union Congress, trustee | Tagged , , , , , | 1 Comment

“Focused, faster and more frequent” – tPR unmasks “Friendly” Pensions.

friendly 3

When the Pensions Regulator launched its corporate plan in April of last year, I wasn’t the only person to be a little sceptical. “Intervening more frequently and acting quicker?” – the proof is in the pudding and the pudding had gone cold. That was then – this is now.

Actions are speaking louder than words

Last week this blog asked the Pensions Regulator’s CEO- Lesley Titcomb to intervene quickly to take down factory-gate adverts that were frightening people towards taking a cash sum from their Carillion pension – minutes after the announcement that the sponsor was bust. Within a couple of minutes, I had a personal response and by lunchtime the adverts had been taken down. I am impressed.

Friendly and the “not so Friendly” Pensions

For the past couple of years, I have been following the sad case of Friendly Pensions Limited.

The name may be familiar if you were involved in workplace pension selection in 2013 and 2014. A master trust of the same name pioneered many of the techniques which are best practice today. Unfortunately, it was inextricably embroiled with another (not so) “Friendly Pensions”.

Despite an attempt to re launch as “GenLife”, the proper Friendly Pensions never recovered and was taken over by Smart Pensions, who look after its employers and members to this day (and for many years to come). That story had a happy ending, but the story of the Spanish Friendly pensions continues.

As far back as October 2015, the ambulance chasers were out for the victims of this Friendly scam. But the matter was properly in the hands of the Pensions Regulator, which is why this blog has been silent.

Yesterday, in a break from the past. The Pensions Regulator published the full story of the Spanish Friendly Pensions – together with case studies of how people were sucked into it. I re-publish the Pensions Regulator’s press-release.

Anyone who has dealt with tPR in the past, read this – and think again. Anyone tempted by ads like the one at the top of this blog – resist.

If you are in any doubt about what you are doing , speak to the Pensions Advisory Service , by following that link or by calling 0300 123 1047.

Pension scammers ordered to repay £13.7m they took from victims

Ref: PN18-02
Tuesday 23 January 2018

Four people who ran a series of scam pension schemes have been ordered to pay back £13.7 million they took from their victims.

David Austin, Susan Dalton, Alan Barratt and Julian Hanson squandered the money after 245 members of the public were persuaded via cold-calling and similar techniques to transfer their pension savings into one of 11 scam schemes operated by Friendly Pensions Limited (FPL).

Victims were told that if they transferred their pension pots to the schemes they would receive a tax-free payment commonly described as a “commission rebate” from investments made by the pension scheme – a form of pension scam.

Today (23 January) the High Court ruled that Austin, Dalton, Barratt and Hanson should repay millions of pounds they took from the schemes over a two-year period.

The Pensions Regulator (TPR) had asked the High Court to order the defendants to repay the funds they dishonestly misused or misappropriated from the pension schemes – the first time such an order has been obtained.

Austin laundered funds from the schemes into his bank account and the accounts of family members in the UK, Switzerland and Andorra through a number of businesses that he had set up in the UK, Cyprus and the Caribbean, including FPL. TPR showed the High Court evidence of how members of Austin’s family had lived a life of luxury using the money – including showing off their spending on expensive goods, ski holidays and trips to Dubai and the Mediterranean on social media sites.

Dalriada, the independent trustee appointed by TPR to take over the running of the schemes, will now be able to seek the confiscation of the scammers’ assets for the benefit of their victims.

Nicola Parish, TPR’s Executive Director of Frontline Regulation, said: “The defendants siphoned off millions of pounds from the schemes on what they falsely claimed were fees and commissions.

“While Austin was the mastermind, they all took part in stripping the schemes almost bare. This left hardly anything behind from the savings their victims had set aside over decades of work to pay for their retirements.

“The High Court’s ruling means that Dalriada can now go after the assets and investments of those involved to try to recover at least some of the money that these corrupt people took. This case sends a clear message that we will take tough action against pension scammers.”

In his judgment, Judge Mark Pelling ruled that Austin had been the “mastermind” behind the scam and that all four of the defendants had acted dishonestly.

He ruled that Mr Austin and Mr Barratt were jointly and severally liable to pay £7,713,317.71 plus interest, that Mr Austin and Ms Dalton were jointly and severally liable for £5,900,947 plus interest and that Mr Austin and Mr Hanson were jointly and severally liable to pay £122,937.37 plus interest. The judge also ordered that they pay the costs of TPR and Dalriada on an indemnity basis.


How the scam worked

  • Between November 2012 and September 2014, 245 victims were cold-called or lured by a series of scam websites and persuaded to transfer their pension funds into one of 11 scam schemes. The victims were told their pensions would be reinvested and they would be paid an upfront cash lump sum for making the transfer. They were also lied to that their funds would be put into assets, bonds and HMRC-compliant investments to meet the target return of 5% growth a year.
  • False documents were used to trick staff at the ceding schemes – the schemes where the victims had their pensions – into believing that the pension holders worked for companies linked to the scam schemes. This meant the staff were persuaded to allow £13.7 million of funds to be transferred to the scam schemes.
  • David Austin installed Alan Barratt, Susan Dalton and Julian Hanson as the trustees for the scam schemes and they were then paid to act on his instructions, allowing the scheme monies to be used at Austin’s will. Mr Barratt and Mr Dalton also acted as salesmen for Mr Austin’s Spain-based business, Select Pension Investments, persuading victims to transfer their pension pots into the schemes. A small proportion of the funds – between 10% and 25% of the amounts transferred – were given back to the victims as their “rebate”, although many victims were assured that this payment was coming from the investment provider not out of their pension pots. More than £1 million was paid to “introducers” or “agents” who used cold-calling to encourage pension members to transfer over their funds.
  • More than £10.3 million was transferred to businesses owned or controlled by Mr Austin, including the current accounts of Friendly Pensions Limited and Friendly Investments Company Ltd. Mr Austin, a former bankrupt who had no experience of running an investment company, even used the bank accounts of his dead father-in-law and his elderly mother-in-law to move around hundreds of thousands of pounds. Mr Barratt was paid £382,208, Ms Dalton more than £168,000 and Mr Hanson £7,000. Mr Hanson’s scheme had become active only weeks before the scam was stopped. The High Court found that on the available evidence, Mr Austin and his family had derived at least £1.355 million of benefit from the scam.
  • Just £3.2 million of the funds was invested. Among the investments were £2 million in an off-plan hotel development in St Lucia called Freedom Bay and an unregulated commercial property bond. £120,000 went to a company registered to Mr Austin’s daughter, Camilla Austin, to fund her father’s legal costs in a separate case.
  • A whistleblower contacted TPR about the scam in November 2014. TPR then appointed Dalriada as an Independent Trustee to take over the running of the schemes from Mr Barratt, Ms Dalton and Mr Hanson, to prevent further funds from being taken out of the schemes by the scammers.


Case studies

Names have been changed to protect the victims’ identities.

Case study 1: The refusal of one man’s pension provider to agree to a transfer saved him from losing more than £50,000 to the scam

Donald, 57, was cold-called by Susan Dalton in February 2013 and told that if he transferred his pensions from two companies to her scheme he would get a guaranteed return of at least 5% a year, plus a 10% cash lump sum upfront.

But while one of his pension providers agreed to the transfer of his £17,000 pot, the other refused to transfer his £58,000 pot. Instead, ReAssure rejected a series of letters from companies linked to the scammers, saying it was not satisfied that the receiving scheme was a valid one. Eventually, the scammers gave up trying to persuade ReAssure to make the transfer.

When he reached 55 in 2015, Donald contacted Susan Dalton to ask to draw down 25% of his pension. But she claimed he had never transferred his pension and then ignored his calls and emails – prompting Donald to call Action Fraud.

Donald, from Hull, said: “If ReAssure had allowed my pension to be transferred it would have been a disaster. I would have lost everything. I have had a very lucky escape.

“My wife and I were council tenants so Susan Dalton should have realised that we did not have lots of money and that our pensions were an important source of income to us. She totally misled me into transferring my pension and paid no regard for my financial well-being.

“She told me what I wanted to hear and I believed it. Looking back now, everything was basically a lie or a betrayal. I was naive. I was conned by a professional con merchant.”

Case study 2: A man who had given up work to care for his seriously ill partner and their three children had almost £50,000 taken from his pension pot by the scammers

Colin, from South Wales, had become the full-time carer for his partner when he was approached via text message.

He was offered up to 10% of his pension as a cash lump sum which the agent promised would not come out of Colin’s fund. Instead he was told his pot would be invested in the construction of holiday complexes in St Lucia with good returns. He was tempted by the opportunity to spend some money on his children, redecorate their home and potentially go on holiday with the lump sum.

After hearing about pension scams in 2014, Colin tried to approach the scammers but could not get in touch with them. Dalriada, the Independent Trustee appointed by TPR, later broke the news to him that he had fallen victim to a scam.

Colin, 48, said: “I should have known that it was too good to be true. I should have sought advice and asked more questions, but I didn’t.

“I had contributed towards my £50,000 pension pot, for which I had worked really hard, and now that has been taken from me.

“The loss of my pension will have a massive impact on my life. When my children finish school I will be around retirement age. There will be no money to draw down when I turn 55 and no pension savings for later life.

“I was greedy. I feel stupid for throwing away my financial future for £4,200.”

Case study 3: A couple lost both of their pensions after falling into the clutches of Alan Barratt

John and Samantha, from Hereford, were persuaded in 2013 that if they transferred their funds to Barratt’s pension scheme they would get better returns on their investments.

Their pension provider warned them that they believed the transfer could be pension liberation fraud, but Barratt convinced them to carry on, saying they would get a lump sum as commission for transferring their funds.

The couple then transferred a total of more than £78,000 – receiving £11,800 as their “commission”. But while they had been assured the funds would be invested in low-risk investments, they were sent details of a truffle trees firm in the West Country.

The couple were so concerned they contacted police. HMRC later contacted the couple to tell them the “commission” had come out of their pension – and handed them a tax bill of thousands of pounds.

John, 46, said: “As a result of my dealings with Alan Barratt my final salary pension is in a scheme that I don’t understand the status of but which I have been told is a scam.

“As far as I know, the majority of my pension fund is invested in truffle trees but I doubt whether that is legitimate. My partner appears to have lost her pension too.

“I deeply regret ever listening to Mr Barratt.”

Editor’s notes

  1. Section 16 of the Pensions Act 2004 allows TPR to apply to the High Court for a restitution order, requiring those who have been involved in the misuse and misappropriation of pension scheme assets (whether dishonestly or otherwise) to compensate the schemes for the losses suffered.
  2. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).
  3. friendly 3
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“Trust is a fragile thing” – it’s based on sharing.

PerspectiveAlistair Queen of Aviva is a great representative of his company. He curated this graphic to twitter yesterday – and it was well liked.

Alistair’s comment was made in the context of frustration from Jon Stapleton, a journalist who has done as much as many to keep trust in pensions.

How do we square the drain pensions were to the stricken Carillion, with the alternative truth that Carillion have let down (some of) their pensioners. I mention “some of” as it now appears that some of the Carillion Group’s pension schemes may be solvent enough to stay out of the PPF – should a new sponsor be found.

Jonathan Stapleton is right on the money here;

And Jonathan’s bang on the money here.

Carillion’s behaviour has been judged “egregious”, but it paid out almost as much to its pension scheme as it did to its shareholders. The truth is there was not enough coming in to meet the expectations of both sets of stakeholders. This is how business failures happen.


Which is why perspective is needed.

That the UK DB model is broken – at least for the corporate sector, is not in doubt. For every Unilever (who yesterday announced it was ploughing another £600m into its pension to halve its deficit) , there is a Carillion. There is not enough profit being generated to meet the reasonable expectations of shareholders and accrue future guaranteed pensions.

That is why Joanne Segars and Andrew Warwick-Thompson (and other pension stalwarts) have run to the higher ground of local government pensions. Up there, conversations like those between Stephen, Alistair and Jonathan, aren’t necessary. The tax-payer – particularly the council tax-payer, has a limitless capacity to meet pension obligations. Indeed many of us are paying more into other people’s pensions , than we are into our own.

It is easy to get a perspective on the pension problem if it isn’t your problem.

It’s not so easy to trust pensions -if you’re losing some of yours!

Trust is a fragile thing, and every Carillion makes trust a little harder to restore.

Some of us, the Friends of CDC, are arguing for a new type of pension sponsorship, where risk- if taken by an employer, is taken on a DC basis and risk, when taken by members – is shared collectively.

This is an even more fragile concept, you would hope that a minister for pensions would be receptive to it. Sadly yesterday brought news of a leaked letter from Guy Opperman (the Pensions Minister) which suggests he is not in problem- solving mode (yet).


Hopefully, the Minister’s position is as wrong as the headline;- the Government put Defined Ambition on Ice in the summer of 2015, it has been in the fridge ever since.

The report in FT Adviser, is based on a leaked letter to former Shadow Minister, Jack Cunningham. Apparantly our pension system

“needs time and space to adjust to other reforms underway,”

and  it appears that

risk sharing is an area that the government will “revisit once there has been an opportunity for that to happen”.

If I were to put a little perspective on these comments, it would be this.

If Government was to wait to see the consequences of its actions;-

  • we would still have Darren Reynolds selling 5Alpha to unsuspecting steelworkers.
  • We would have a plethora of dodgy master trusts bottom feeding in the auto-enrolment shark-pool.
  • We would have the vast majority (not the tiny minority) of companies pre-packing their DB plans into the PPF.

The reason we have a stable pension system in this country is that Regulators are getting it right most of the time, and when they’re not they have people like me tweaking their tails.

The Minister for Pensions and Financial Inclusion (to give him his chosen title), does not know about CDC and he’s not showing any great inclination to learn about it (trust us, we’re trying).

However, those who are at the FCA and the Pensions Regulator and at the DWP and even at the Treasury, do want to know about CDC, as they see it as a way of solving problems, not creating them.

Trust is a fragile thing – it’s based on sharing

Over the next few weeks, I and my colleagues will be trying to convince our Pensions Minister that he is wrong in assuming that

“significant legislation” for CDC schemes to come to life would need to be introduced, and the existing rules would need to be changed.

We would vigorously contest this statement to Alex Cunningham

 “We continue to believe that significant legislation would be needed to enable and regulate this type of pension.

And we seek to change this position, which has prevailed for the past three years and is blocking progress towards restoring confidence in pensions.

“Whilst we continue to be interested in collective pensions, the governments view is that because the breath of its scope, the legislative framework set out in the 2015 Act is not the most effective way of introducing the provisions needed to provide for the collective schemes currently being called for.”

If Guy Opperman wants to hear why we think he is wrong and how CDC could be offered to the 140,000 postal workers who want it, he should come and talk with us. We have made the offer and we keep it open.

Even politicians can get some perspective by listening to others! We have answers and we want to share them, does our Pensions Minister want to share time to hear them?

Thanks to Maria Espadinha of FT Adviser for her timely and helpful edits

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Self-sufficiency for pensions.

Pensions or pots

Pensions or pots?


Whether you are in charge of the PPF , one of the 13 Carillion defined benefit schemes, or any one of the thousand or so “distressed” pension schemes that might no have a sponsor able to bale it out;-the term “self-sufficiency” should be intoned several times before going to bed. It will bring sweet dreams.

Immunising a pension scheme against the need for further contributions from an employer is now the holy grail for the Chair of the Trustees. It is of course impossible for any scheme to accurately predict the death of its final pensioner and funding for that event has to rely on either insurance (buy-out) or the use of an employer as a quasi insurer.

Defined benefit pension schemes weren’t designed with built in obsolescence.

Many schemes today have developed investment strategies that not only immunise themselves against all known risks, leaving only the risks we cannot imagine as “vulnerabilities”. It is an interesting philosophical question as to whether these risks are worth further investigation. I’ll leave that at an academic level, the sky could fall on our heads, but it’s a risk too far for me.

Which begs the question, what more can a scheme do?

The answer is increase it’s operational efficiency, so that the drag on the scheme’s investment strategy from the business of paying pensions , is minimised. This was the conclusion I came to last week. There is only so much you can do to set your investment strategy, the business of managing the needs of members gives much wider scope for progress.

Central to the argument is the question of “benefit”. A defined benefit scheme only “benefits” someone, if it fulfils a need. If there is limited need for a “wage for life” , then a member should consider exchanging “pension for pot” and create a capital reservoir to meet future financial needs on an “ad hoc” basis.

There is a strong body of opinion that thinks that people would be better off with capital rather than a regular income; it is what underpins tolerance of workplace pensions, which have – as yet- no confirmed “income for life” option, relying – as most DB schemes do – on the annuity market for “self sufficiency”.

It is highly ironic that the current Conservative Government – and in particular its leader , are calling for employers to sponsor defined benefit schemes to a point where they are insured against being a threat to the PPF, while encouraging people to save into DC pensions where the promise is “that no-one need ever buy an annuity again”.

As schemes consider how they can best operate to make themselves self-sufficient, I think it reasonable that they help their members determine for themselves whether they have special need of capital or would be better with a “wage for life” pension.

This has been the themes of recent blogs. I favour DB schemes running their own pension wise sessions for more mature members, something like John Cridland’s mid-life MOT to determine “pension or pot”

Towards personal self-sufficiency

Just as pension schemes should be seeking to be self-sufficient of employers, ordinary people should be seeking to be self-sufficient of work. Since work means pension contributions – in this age or workplace pensions, we could restate that as saying that we should be establishing our own personal “recovery plans” that ensure that our targeted benefits in later life are fully funded.

To a very large extent, this is what a CDC plan is trying to do. It is trying to take away the hardest nastiest problem in finance, the creation of financial self-sufficiency in later years, from individuals.  Instead CDC looks to share this problem among a wider group.

Pension or pot?

Reluctantly, the private sector his putting the guaranteed defined benefit pension scheme behind it and moving on. Putting the existing promise on a self-sufficient basis is the limit of a modern trustee’s ambition. Managing the strategy involves sound investment management and an operational strategy designed to maximise the efficiency of pensions , by paying them only to those who want and need them. Those who are special and need pots rather than pensions, should be free to leave and with blessings upon them.

But those who stay, who always assumed a company pension scheme provided a company pension (whether now called workplace or not), then an equivalent choice should also exist. Currently the choice is between an annuity and a capital reservoir (from which we can draw down). Neither is particularly satisfactory.

If Theresa May is calling for greater security for members of DB plans, she should also be thinking of security for those who are not in such plans. I will resist cheap shots about MP’s pensions (or of the gap in security between those in the private and public sector).

Pensions as well as pots!

What I am calling for , and all Friends of CDC are calling for, is that the Government are even-handed and put in place a basis by which those saving for their future, and those with existing DC pots , can have reasonable expectations of a target pension.

The cliff-edge – from which you fall when ceasing to accrue DB, needs to become a gentler slope. CDC is a way – not just for the 140,000 Royal Mail workers, but for the millions of new savers plus the rest of us historic DC savers, to think of our “pots as pensions” – if we want to.

Self-sufficiency is an aspiration for all. We should define our ambition and set the bar a little higher than we currently do. When I hear the Prime Minister talking about the future , as well as the past, I will be more minded to commend this Government’s private pension policy.


I want the Prime Minister on the left and not the one on the right

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Pensions aren’t on the brink of anything!

carillion brink

I’m sorry to disappoint the headline writers at the BBC, but pensions are not about to change very much, are not in crisis and aren’t really worth the headlines they are getting.

Those were the stunning findings of a group of pension experts holed up in windy Worcester on a stormy January evening.

Here are the four great non-stories your headline-writers will not print (but we discussed last night).

  1. Defined benefit schemes are finally getting their shit together and recognising that integrated risk management means managing your pension with a mind to the risk to the sponsor, to scheme assets and to scheme liabilities.
  2. Defined contribution schemes are waking up to their being savings plans not pension plans.
  3. Ordinary people are taking their money away from workplace pension schemes, because they can.
  4. There is no obvious way to convert a self-owned pension pot into a pension.

This does not add up to a crisis, it is just a stage on a circular journey which hopefully will take us back to where we started in 1950 or whenever. Because, despite all the tra-la-la, for the ordinary person, nothing has changed or is likely to change anytime soon.

We learn, we work, we stop working and put our feet up. Pensions are our way of putting our feet up, or at least doing what we want to do , rather than what our bosses or customers want us to do.

In place of a wage from employment , we expect a wage from investments. This is incredibly boring as it isn’t contentious and it tells us that in basic human needs, the world hasn’t changed any since the second world war (or as long as most of us can remember).

Crisis what crisis?


rubbish record-rubbish story

There is no story at Carillion, at least no story that spells that pensions are on the brink.

It was not pensions that brought Carillion down. Carillion brought its pension scheme down (as the FT reports).

Mr Rubenstein said that if banks and governments had thrown Carillion a financial lifeline last week there might have been an opportunity for Carillion to restructure its pension debt.

“What brought down Carillion in my view was they simply ran out of funding,”

This is not a pensions crisis, it is a local problem – in the grand scheme of things we will be able to put our current troubles in a wider historical context and be amazed at current hysteria.

In the 80s and 90s, defined benefit pensions were worried about being in surplus and in the last twenty years, they are worrying about being in deficit.

Over the last five years, the way we are building up pensions has changed, fewer people are building up pensions at a fast rate and more people are building them up at a slower rate. The overall picture is one of more people saving for a pension but with shallower resources.

If there is a potential crisis, it’s that – as yet- we haven’t got a way to turn these savings into the retirement income that people think they’re getting – “workplace pension”, the clue’s in the title.

We have abandoned the idea of guaranteeing people a wage for life by forcing them to buy an annuity, but we haven’t given them a better alternative. Or at least Government’s call for innovation have fallen on deaf ears. At the moment we are in the hands of the wealth management industry who are showing conspicuously little interest in finding a solution to the hardest, nastiest problem in finance.

Instead of looking to solve these problems, we take each corporate failure , as indicating pensions are on the brink. This is the BBC headline which prompted this article. Some 28,000 pensions at Carillion are on the brink of going into the PPF and of being paid out at a marginally lower rate than had they been paid by the now defunct employer. This is unfortunate but it is not a crisis.

The PLSA warn that up to 3m of those lucky enough to have a defined benefit pension , could find themselves with someone else paying the pension at a slightly lower rate. This is taken to mean the wholesale dismantlement of the system of workplace pensions we built up since the second world war.

I am very glad that Mr John Ralfe has stood up and said something sensible about this. As he has said a lot of silly things recently, I am going to quote him – with approval- for this.

The PLSA said there was a “real possibility” of a collapse for more high-profile pension schemes, and that one solution could be the pooling of resources into “super-funds”, which would then have bigger investment opportunities.

Pensions consultant John Ralfe has described the super-fund plan as “outrageous”.

He said there was “no crisis in defined benefit pensions, so there is no need for crisis measures”.

His confidence is based on the existence of the pensions “lifeboat” – the Pension Protection Fund (PPF).

I’m sorry to sign off with yet another “non-story” but when John Ralfe is right, he is very right indeed!

FAKE NEWS is just that

Our pension system is changing, but our need for pensions is not.  By faraway the most significant thing to happen in the past twelve months – and this is not fake news – is that 87% of Royal Mail workers agreed they would rather go out on strike than be left without a wage for life when they got to retirement.

For the vast majority of ordinary British people, the best bit of pension news – is no news at all;

just get the bloody things paid and leave me to read about something else over my corn flakes.

Consequently, the needs of ordinary people for boring predictability, and the needs of the press for “disruption” are fundamentally at odds.

The continued reporting of fake news about pensions being on the brink, not least by the PLSA, is driving a substantial proportion of the 11m people in this country with defined benefits, to swap pensions for wealth in what is likely to be (for most) a very unsatisfactory long-term deal.

Earlier this week, somebody – I’m pretty sure it was the Pensions Regulator got Google to drop an advert that pumped out FAKE NEWS on Carillion’s pension situation, on current options and (if you clicked through) on the loss of pension rights.

Romi scam

It is absolutely the responsibility of those of us who get pensions, to put our foot down and stop this kind or rubbish being pumped out. Whether it be sensationalist reporting on the BBC (to be fair to David Peachey, his article belies the headline) or in the Daily Mail (this FAKE NEWS has caused a lot of heartache) or indeed in Google, people are being bombarded with stories which are ill-researched and sensationalist.

carillion scam

Work is boring, pensions are boring – there’s a synergy there.

Sorry guys, this blog is not giving in to the “quel horreur!” school of comic-strip journalism that sees pensions tinkering on the brink of an undefined abyss.

Pensions are rebuilding – they are more inclusive but shallower. We save for a pension but have no good way to exchange our pensions for a wage for life, these are the facts of life in 2018. Let’s get on with making pensions better rather than throwing rocks at them

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“Of margins and men”. Were the City and Carillion ever friends?

City and Carillion

Of all that is being said about the collapse of Carillon, the comment that remains with me is something said by Robin Ellison, in his capacity as   in an interview with IPE.

The FCA is looking at asset management companies’ margins, suggesting that the average figure of 35% is too high. For Ellison, those margin levels seem “about right” for a service industry. Other industries – such as construction, where the figure is closer to 5% – are content with lower levels.

When we have growled about executive pay, distribution of dividends and the cost of historic pension legislation, the bottom line remains. There was insufficient money coming in, to afford the payments going out. At the beginning of this week, Carillon has only £29m cash in the bank, it was not trading as a going concern. It went  bust.

So just who was content with a 5% margin on construction contracts? I suppose those awarded the contracts – Government- and in the short term- the tax-payer. Collectively we drove the price of the services we were asking of Carillion below a level that Carillion could withstand and it went bust. The logic of this argument is that Government and the tax-payer need to take a long hard look at the way we run large construction contracts (and finance them).

So who wins from low margins?

So  don’t agree that Carillion and their competitors were happy with the 5% margins they were keeping. The article is dated March 2017, before the first of the Carillon profit warnings. I suspect that at the point this interview was given, Robin was content with the employer’s covenant too.

But in July 2017, the wheels fell off. The cordial relationship between Carillion and the City was over for ever. What followed after was simply the aftershocks of the July profit warning.

Carillion share

The bad news in July surprised everyone


Received wisdom says that you cannot run a business for ever on wafer-thin margins , sooner or later – you will hit a problem – as Carillion did, and there will be insufficient reserves to meet the ongoing liabilities (including the liabilities of its various defined benefit pension plans (and their deficit recovery plans).

Who defends the indefensible? A fool or a joker!

I suspect that Robin knew that, just as he knows that the 35% margins for asset managers (and service industry margins in general) are unsustainable. Robin Ellison’s career has been established on his having the Chutzpah to defend the indefensible, (while doing the right thing despite what he says).

Nobody negotiates with a fund manager , knowing that they’re charging seven times the margin that you’re getting from your customers, without questioning those margins and I simply don’t believe that Robin was prepared to subsidise the lifestyles of those in the City at the expense of the Carillion shareholders.

Robin Ellison was not in a corner, I suspect that he was in wind-up mode.

A failure in market economics

Of course Robin is of the City and of the service sector and he has enjoyed the margins to which he has referred. He is a very extreme cases of someone who puts his money where his mouth is and attacks regulation at every opportunity. His great friend, Con Keating , when asked last week by the FCA  for his views suggested that “the only good regulator is a dead regulator”. I am sure that Robin would have agreed – Con too can see the funny side.

But to have a de-regulated system, whether we are referring thinking of an enterprise or its pension scheme, we need to have strong internal controls. In most British companies, these controls exist, at Carillion, they appear to have broken down, Carillion is the exception that proves the rule – it is not the rule itself. Carillion is a market failure, not a regulatory failure.

Which is why we have the PPF. Ordinary people should not be solely dependent on the covenant of an employer for the payment of pension promises, there should be a pooling of risk, which is what the PPF does – the PPF takes the risk that an employers cannot take and it manages it off with the help of stronger companies (that pay a levy). I have no doubt that the PPF will absorb whatever part of Carillion’s schemes – it gets landed with, it is a success. Robin has the comfort of offering us his “laissez-faire” views from his tight-rope , while others tighten the safety net below him.

Again, I suspect that wry smile on Robin’s face – an endearing feature of his Chutzpah, is his delight in having someone else’s cake and eating it.

 Robin is not wrong, he’s naughtily right!

Robin EllisonRe-reading Robin’s interview to IPE , I can see why he is one of the few Trustee Chair’s who I would have dinner with. He repeatedly points out the fallacies of conventional de-risking, the need to take long-term views and the positives of direct investment into infrastructure (what a few months later is being called “patient capital”). Were I to afford to eat in Robin’s restaurants, I would buy him supper and listen to him speak all night,

Robin’s provocative comments throughout the IPE article, make for great reading. I am sure he enjoyed the interview as Carlo Moreolo enjoyed writing it up.

It remains a cameo that could variously be described as “pride before a fall” or of “mischievous prescience”. I prefer the latter.

However the fun has now stopped, the PPF have arrived, the schemes will go – quickly I suspect, into the PPF (there are already 5,900 of the 28,000 members in the lifeboat).

We now have the extra moral hazard for those who want to keep schemes out of the PPF, that members become vulnerable to lastminute.scam. Much as I would like to see Tarmac and McAlpine and other great schemes soldier on, I fear that we live in a wicked world, and the mischief that Robin Ellison can manage, will be visited on his members without Robin’s integrity and humanity.

In defence of Chutzpah.

We have much to learn from Carillion and – as it touches pensions – I look forward to more from Robin Ellison. His wit, Chutzpah and integrity will continue to be needed in the months ahead.

With a little humour, good will and understanding, the City and Carillion could have been friends. Sadly, these things seem to have been missing. What happened in July last year, suggests that the two were never really on speaking terms. Robin could have changed that.

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Who need’s a factory gate when there’s google


Update***** Update****Update***** Update*****Update*****Update

The ad below appeared this morning as the top Google Ad on the search “Carillion pensions”.  I asked the FCA and tPR to ask for it to be taken down shortly after and it has been taken down at lunchtime.

We are quick to denounce regulators for being slow to act, but we are slow to praise them when they act effectively. Thanks regulators, especially tPR who have responded at the highest level.

carillion scamThere are thousands of deferred pensioners in Carillion’s 13 DB plans who are waking up feeling vulnerable and scared. If they google “Carillion Pensions” , the first thing that google will offer them is the ad above. I won’t do it the honour of making the link live, but were you to press it, you would land on this.

carillion scam 2

Scroll down and you will find this;

Carillion scam 3

To which we could add, transfer now , before your scheme goes into the PPF.

This might seem dodgy to the trained eye , but it looks pretty plausible if you are a Carillion employee who has just lost your job and suspect you might lose your pension.

Even more plausible if you read the small print about Financial-Advisor.co.uk

Carillion scam 4

.I’ve no idea which advisers are paying for Financial-Advisor.co.uk ‘s leads, but clearly one of them is prepared to help out with some clever compliance stuff so they can’t be seen to be soliciting transfer business.

As with Celtic Wealth/Active Wealth in Port Talbot, the tactic is for the factory gating to be conducted by professional lead generators – except there’s no factory gate like there was at Port Talbot – so the generation happens on Google.

Has Google no shame?

There is nothing illegal about what Financial-Advisor.co.uk is doing. There is nothing illegal about Google selling them the top-priced ad space. This is capitalism with a capital “I” for irresponsible. Google are not responsible for the outcomes of this ad, nor are those paying for the advice and by the time that the punter has filled out all the data collection stuff, we are three or four layers away from the direct approach.

No one will be accountable at Google, nor at the lead generators and meanwhile the vulnerable members will have been caught up in an urgent rush to get forms in before the guillotine comes down and their scheme goes into the PPF assessment period.

The intervening period is the perfect shark pool for those with the agility to profit from the pressures of the imminent departure of the scheme , the lure of capital and the horror of immediate redundancy.

Forget cold-calling , this kind of advertising is far more insidious and relevant to the FCA. I’m asking Megan Butler and Lesley Titcomb to ask  Eileen Naughton, newly appointed CEO at Google UK  to stop running these ads.

So go on – click that add!

Every time someone who knows, clicks the add in real time (google Carillion Pensions) it costs the lead generators money. I suggest that you spend a couple of seconds this morning, making the day of these parasites a little bit less profitable. If anyone wants to go a little further and find out what IFA sits behind all this, go for it.

If we have another Port Talbot at any of the Carillion Pension Schemes, it may be the end of transfers for a while. But I don’t want to see transfers banned and I don’t want to see Carillion deferred pensioners ripped off.

So get to it and see these stinkers off!


The Pension Advisory Service (TPAS) has set up a dedicated helpline for Carillion pension scheme members 020 7630 2715


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

Don’t panic about Carillion’s pensions.


The fate of Carillion as a company is in the balance. Up to 20,000 jobs are at risk.

Carillion 2

Bond and equity holders are likely to lose substantial sums. Carillion driven projects are likely to suffer and 28,000 members of Carillion pension schemes will suffer loss.

Carillion’s 13 pension schemes which include such household names as Tarmac, Mowlem and Alfred McAlpine, will probably into the Government lifeboat , the Pension Protection Fund.


Pensioners may get a slightly lower rate of pension increases, those awaiting their pensions will see their pensions cut by 10% (more if they have big pensions). None of this is good, this is not a good time to be connected with Carillion in any way.

There is a group of former public sector workers who may lose out slightly more, as Prospect are pointing out (via the FT).

It is clear however , that members of the pension schemes are protected.


But  it would appear that the situation is complicated by not all of the individual companies being in administration – It would appear that 8 out of the 14 companies in the Carillion Group are not in administration , which explains this statement from tPR


The list of companies in administration is

Carillion Plc

Carillion Construction Ltd

Carillion Services Ltd

Planned Maintenance Engineering Ltd

Carillion Integrated Services Ltd

Carillion Services 2006 Ltd

For a pension scheme to go into the PPF , a section 120 notice has to have been issued following the  insolvency . It is possible that some of the businesses may survive and with them their pensions.

keep calmNone of this is sufficient for people to be alarmed, let alone panic. Even if a pension scheme goes into the PPF, you have strong protections.

The PPF is strong and will be able to absorb the deficit of £580m, even if this deficit is measured another way, it is not big enough to increase levies on other pension schemes (which have been falling fast in recent years as the PPF moves towards being “levy-free” or “self-sufficient”).

We must get used to seeing companies fail. Not all companies that fail pass their pensions into the PPF , BHS remains outside as do others. The British Steel Pension Scheme avoided the PPF. The PPF has capacity and is – if anything -underused.

As this blog has said many times, the PPF is a national treasure. It is invested – not in funds – but by its own investment managers, it is self-administered, it treats its members well and it is a model of good governance. It is one of government’s success stories.

While it is not a good time to be retiring from Carillon, its pension schemes are not badly run. The deficit is not so “huge” as to make the scheme the cause of the company’s financial woes. Indeed the scheme, would, in the normal course of events, have followed a recovery plan to solvency. It may not now be allowed to, but Carillion members should not be blaming its trustees for that.

Carillion’s woes as a company are to do with its debt and to do with business decisions that went wrong. These things happened , not because of some financial credit crunch or global recession – we are beyond these things – but because of a combination of poor decision making and bad luck.

The attrition rate of large companies operating in the Western World is low, not many go bust – Carillion may still not go bust. But some companies will go bust. For every Amazon there is a BHS.

I worked for a time with Alfred McAlpine and got to know a good many of the people who were in its pension scheme. They were good people who built roads, I remember being taught about roads –  I remember the pride with which they talked about environmental considerations. We do not stop needing the skills of these people. They will find new work. The shareholders and bond holders of Carillion will absorb their losses as these holdings are part of diversified portfolios. Few people should have their financial futures dependent on the price of Carillion equities and debt.

It seems to me, the major concern expressed today , is that Carillion has been awarded Government contracts, while in its current financial pickle. This may be a political worry for those who awarded them and may account for the weekend meetings in the Cabinet Office. But this is hardly the cause for panic.

The reality is that Carillion’s current problems are local and manageable. The deferred pensioners and pensioners will get less , but not markedly less (full details here) . The PPF will do what it is designed for. Investment portfolios will absorb losses on Carillion debt and equity and Carillion workers will find new work.

This is business as usual and not the end of the world, even if that is what it feels like, if you work for Carillion this morning. My thoughts are with those who work for Carillion and I hope that any who read this , will take heart that they are not the first – nor will they be the last – who face this situation.

The Pension Advisory Service (TPAS) has set up a dedicated helpline for Carillion pension scheme members 020 7630 2715

philip green carillion

Carillion’s Chair – Phillip Green (no relation)


Posted in pensions, Pensions Regulator, Retirement | Tagged , , , , , | 8 Comments

“Probing” IFAs is not enough; we need simpler more transparent transfers.


Allegations of “mis-selling” against IFAs are premature and unsubstantiated.

My eye was caught last night by a linked in post by Andrew Warwick-Thompson, formerly of the Pensions Regulator.

Here we go again. The personal pensions miss-selling scandal all over again. Per the FCA over 50% (so far) of the advice given to Port Talbot workers was not appropriate. When will we learn that for the majority of consumers a transfer out of a DB pension is not in their best interests?

A sentiment that all right-minded pension professionals could agree on. There are similarities between now and the introduction of transfer values in 1987. But the difference are bigger than the similarities. We have to deal with the present problem in a different way than we did in the mid-90s and we need to use prevention as the best cure.

Andrew’s comment linked to an FT article UK’s FCA to probe thousands of pension advisers after Port Talbot crisis” 

The article quotes the FCA’s (Megan Butler’s) letter to Frank Field (Dec 21st)

 In 2018, we will be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture

I replied

To be fair to the IFAs , the FCA surveyed 88 transfers and none of them had anything to do with BSPS. It’s a small sample to condemn advisers with.

It’s good that the FCA are going to continue their investigation into transfer advice, 88 cases is not a large enough sample when Origo reported that over half a million transfers occurred in 2017 alone.

Nor is it good enough to imply that the problem is all about IFAs. I take issue with the FCA’s headline; “probe” is the wrong word, “consult” would be fairer.

In this article, I suggest that the FCA need to look beyond IFAs and consider

  1. How they get (and how whistle-blowers give) intelligence
  2. How whistle-blowers can be better encouraged and supported
  3. The role of trustees and their administrators in providing intelligence
  4. The role of SIPP managers – especially their accountability for the destination of investments
  5. The application of the fit and proper rules to those managing SIPP investments.

It’s a long list – too long – there are far too many parts, too many regulators and a lack of co-ordination around a central purpose. The reason I am writing this blog is that I can find no other account of what has happened at Port Talbot that could enable the Pension Regulator , the FCA, trustees, IFAs , SIPP managers, fund administrators and fund managers to see the problem in one view. It may also be helpful to the Work and Pensions Select Committee as they prepare their report on what has happened at Port Talbot.

The difficulties good IFAs and the FCA have had putting matters right.

The activities of Active Wealth Management came to light because Al Rush and went to Port Talbot at the invitation of the moderators of the BSPS Facebook Groups. It was Stefan Zait and Rich Caddy who drew out attention to problems at Port Talbot, it was the steel workers themselves who put us on to Celtic and Active Wealth management and it was Al and I who brought our intelligence to the FCA.

When giving evidence at the Work and Pensions Select Committee, Megan was asked by Frank Field  ”

Chair: So you went into the plants at dinnertime and talked to the men there?

She replied that she was about to go to Port Talbot – which she did, the next day.

Frank Field asked if she’d been in touch with me and pressed on the mattermegan butler

Actually both Al Rush and I approached the FCA. Al is a Pension Transfer Specialist, I am not – I haven’t been an adviser since 2005 and actually took holiday to go to Port Talbot.

Megan has been charming , courteous and I have congratulated her every step of the way. I am totally behind the work she is about to do with the FCA and I hope that it brings about lasting change that stops the haemorrhaging of monies from good occupational schemes into SIPPs and then to who knows where.

Al and I only lit the blue touch paper and sprung the FCA into action. But had we not done this, Active Wealth Management, with whom the FCA had been dealing since August 2016, would undoubtedly have continued shipping money through SIPPs to Gallium , Vega and 5Alpha.

But Al did not stop there, he went on to set up Chive which has done great things to put wrongs right and provide the counselling to steelworkers that they needed. He has worked with TPAS and has built up a network of like-minded IFAs who have given freely of their time. This has been recognised in New Model Adviser. Looking through the 33 comments on this post, I see praise and support for Al and Chive’s IFAs. But I also see professional jealousy.


Chive did come to the rescue at Port Talbot and they guided the FCA to where the problem was. I actually agree with Megan Butler that she could not reasonably have been expected to have been in “the plants at dinnertime”. She relied on evidence which got passed from steelworkers, though the Facebook pages and IFAs. That is how it works.

The offensive post from Kuchu, quite misses the point. IFAs care about their reputation and the reputation of advice. So does the FCA. But the primary driver in all this is the fate of the money that has left BSPS. We now know that Darren Reynolds himself, helped £40m out of BSPS and into 5Alpha. Chive (and I) continue to lobby for the return of that money to the SIPPs through which it passed (without penalty).

For people like us to act as we do, means we have to take considerable risks. We risk upsetting everyone and getting considerable abuse. Al Rush is one of the bravest people I have ever worked with, he spent much of his life dodging bullets in the service of his country – he has faced worse than Kucho and his whispering friends.

We need to stick up for our whistle-blowers as we need to stand up for our troops.

DB Administration and its shortcomings

I work with other large occupational schemes, some much larger than BSPS. I see they have the same problems as BSPS in preventing the departure of money from their DB sections or identifying where the money goes.

One scheme I am particularly involved with shares the same administrators as BSPS so I can see exactly the problems that Derek Mulholland has. The only direct contact the scheme has in the process is in transferring money to the SIPP. It is the administrator who verifies the IFA has certified the transfer.

The management information that trustees need to identify where there are clusters of transfers around specific advisers (as happened with BSPS), is not available to them in a timely fashion. It takes too long to gather and – when it arrives – it is inconclusive. Trustees can only see half the story. Here is the list of SIPP providers and the amounts they put into Strand Capital (the failed predecessor to 5Alpha).

Gallium SW3

With a couple of exceptions all the introducers are well known SIPPs. A trustee asked to send money to James Hay or Curtis Banks or Intelligent Money could not have known that it might have been lost to Strand. BSPS were sending money to Momentum , Intelligent Money and Fidelity (at Darren Reynolds’ request). They could not have known it would go to Strand’s phoenix – 5 Alpha.

They could and should have seen an unhealthy concentration of transfer activity through Active Wealth Management, but my experience suggests that the MI systems would not have been able to pick up these patterns in short time. Certainly there are lessons for administrators in this.

The screen that divides trustees and the FCA

But there is also a lesson for SIPP providers. I have spoken to SIPP providers who were approached by Strand’s sales team and by Vega Algorithms and said “no”. As one SIPP provider told me “there was no way we were going to have our money going to Strand”.

There is also a lesson for the FCA, who knew of the connections between Strand (which is in special administration) and Vegas and 5Alpha – from the Witness Statement of Joe Egerton (dated 15.05.17) detailing the links between the three organisations.

The SIPP providers are effectively a screen dividing trustees and the FCA. Trustees can see the SIPP providers (and the advisers using them- eventually). The FCA can see the asset managers to whom money is directed – but not the origination of the money.


A more open transparent system is needed.

This article started by looking at the lack of understanding of a former pension regulator; it looked at the problems facing the FCA in getting intelligence on Port Talbot, the issues facing project Chive and the distrust many people have with the motives of whistle blowers.

The article goes on to look at the difficulties trustees have finding out what is going on, the problems administrators have providing timely MI, the inability trustees have to see the probity of the investments made by SIPPs (under instruction from advisers)

Finally it looks at the problems the FCA have tracing the origination of monies arriving at fund managers like Strand and 5Alpha because of the lack of transparency created by the SIPP screen and the opaque structures of certain investment structures.

My conclusion is that the FCA need to look at the problems with transfers holistically. They cannot simply look at advisors, they need to talk with SIPP managers and the fund administrators and managers behind them. They need to get the other side of the SIPP screen and talk to trustees and their administrators. We need better intelligence and that means enabling trustees and administrators to bring intelligence to the FCA’s attention in a timely way.

Above all , we need to make whistle blowing an activity to be encouraged. To my mind the comment of “Kucho” is akin to racism or homophobia , a kind of hate crime that should not be tolerated.

Project Bloom – which brings together the enforcement activities of the FCA, tPR, the police and Action Fraud, is a closed book to those who pass information to it. Again and again, those who report to Action Fraud, get no feedback, no thanks and no support. They watch the train crash and are barred from making public comment lest they be accused of “tipping off”.

The system seems set up to allow the regulators to operate a closed shop. While I support Megan Butler , it was right that Frank Field called her to account and it is right that I and others continue to demand action on 5Alpha and its infrastructure.

I hope that this blog, and others like it will bring about lasting change and not just dump the problem on IFAs – who I consider are being made unfair scapegoats for a much wider failing.





Posted in Blogging, BSPS, Change, FCA, pensions | Tagged , , , , , , , , , | 3 Comments

For all the noise-news from BSPS is good!

Yesterday saw a number of documents published and statements made, confirming  findings in Port Talbot but leaving many questions unanswered.

But for all the noise, news published at the end of this blog is good- very good – it should make us  breathe a sigh of relief and earns BSPS Trustees, my congratulations.

port talbot 4

Port Talbot and the Tai Bach Rugby Club (in red)

We’re learning that what we suspected was true

At first sight, the letters and statements appearing on the Work and Pension Select Committees’ website, are useful in confirming what amateurs had already discovered

We learn that Celtic Wealth Management had a large number of introducers within the Port Talbot Steel Works and that it earned £700 a lead for work passed to Active Wealth Management.

We learn that Active Wealth Management advised on around £40m of BSPS Transfers, that the average CETV advised on was £400k and the largest twice that. Anything between 90 and 100% of transfers were arranged on a contingent basis and the upfront advisory fee charged by Active was £1500.

We learn that there is an 8th firm that has closed its doors to transfers as a result of the FCA’s review.

In a further statement from the FCA published yesterday (but not own the BSPS website) it is reported that the FCA are looking to extend its activities to probe all transfers and that 45 further firms will be subject to investigation.

What is clear from Frank Field’s statements on the W&P website is that he is far from satisfied , either by the letters from Celtic and Active Wealth or by the responses of the FCA.

The responses raise a series of further questions about the FCA’s actions in regard to the BSPS, which the Committee will be pressing them further on:

FCA intervention in British Steel Pension Scheme

The timeline of FCA intervention in the BSPS saga, including specifically in relation to Active Wealth.

Although it is apparent Active Wealth  was already on their radar, the FCA first contacted the firm about the BSPS specifically in November 2017 – two months after BBC investigators presented it with evidence they had uncovered on Active Wealth and Celtic Wealth.

The FCA had requested case files and outlines of business processes from Active Wealth between August 2016 and February 2017, leading to a visit by the FCA in July 2017. As a result, Active Wealth’s director Darren Reynolds agreed not to recommend any “non-standard assets” to clients. It is unclear whether this means that Active Wealth had been recommending “non-standard assets” to pension transfer clients before July 2017.

The FCA finally required Active Wealth to cease advising on new pension business 14 months after it first started digging, and just weeks before the original deadline for BSPS members to make a decision on their pension.

Active Wealth’s reductions for early retirement

The description by Active Wealth of the Scheme’s reductions for early retirement as “taking a penalty” and “suffering a penalty” raises the question of whether they were using this pejorative characterisation of what is actually simply an actuarial calculation in their advice to clients.

Size of transfers and fees

Questions remain over the actual size of transfers handled and fees received for them. The highest transfer value that Active Wealth handled in respect of BSPS clients was £790,404 and the average was £398,347  – representing upwards of £40 million transferred out of BSPS on their advice alone.

Active Wealth state they advised over 300 clients on BSPS transfers, “around a third” of whom acted on that advice to transfer out. Their director Darren Reynolds failed to answer the specific question of how many in total of those 300 plus individual pension savers were advised to transfer out of the “gold-plated” scheme.

The highest and average fees paid to them so far described as £1,500 and £1,443 respectively. The fees seem very small relative to the huge transfer values and it is unclear how many BSPS clients signed up to an ongoing adviser charge or what that might cost them ultimately in total.

Field concludes

“I have already described the FCA’s action on BSPS as grossly inadequate, and these responses do nothing to increase my estimation.

The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate. From their intervention in this affair it seems clear that the FCA’s actions still effectively protect these businesses’ ability to make money out of pension funds, rather than protecting pension savers. They must take care they are not sleepwalking into yet another huge misselling scandal.”

What we aren’t learning

Nothing above is new, the dribble of firms voluntarily resigning their capacity to transfer extends, the tone of the FCA’s (unpublished) statement , is considerably more robust, but such developments are to be expected.

We still have no idea why Darren Reynolds and Active Wealth Management chose to invest money into 5Alpha, via Vega Algorithms’ DFM, why he was charging so much below the market rate for transfers and nothing at all for ongoing advice. We don’t know why the redemption values offered to Vega/5Alpha investors are so much lower than the amounts invested. We don’t know which classes of 5Alpha shares were purchased (or why) and we have no idea whether the marketing fees that 5Alpha can pay, were paid.

5Alpha , confusingly – has been removed from the Newscape website. Fortunately , I have a copy of the “supplement” prospectus, from which this extract is taken

If investors want an update on the progress of its plan since inception, they can use Bloomberg (5Alpha is represented by the orange line and is compared to the global equity index (red) and FTSE 100 (blue).



On the face of it, Darren Reynolds undercut the advisory market while investing members in funds that were to put it mildly – obscure. The fund has already built up a formidable history of under-performance. Ultra Conservative maybe – but hardly living up to its billing.newscape bloomberg

If we can accept that AWM and Celtic did not take these distribution fees, we must assume they have not been paid. Hopefully this will be reflected in the full return of monies invested through Vega (by Gallium).

Reynolds’ letter goes at length to reassure the Committee that he uses the most sophisticated risk management techniques, which…

 involves looking at the strategy and track record of the fund manager and the funds under consideration, and to analyse a range of metrics, including common measures of volatility, such as standard deviation, and of risk-adjusted returns, such as the Sharpe ratio. We also consider Sortino which is a variation of the Sharpe ratio which distinguishes downside volatility from overall volatility. It uses an investment’s standard deviation of negative returns, often referred to as downside deviation or semivariance

yet the fund into which Vega’s DFM invests – 5Alpha was seeded from Strand Capital, a fund that is currently in special administration. The performance of Strand and 5Alphas is right at the bottom of its sectors and the costs that are incurred in the management of the Vega DFM , the fund and sub funds it invests in , not to mention the fees charged by Gallium , the SIPP providers and Vega itself, make an investment into 5Alpha a total nonsense.

What possible reason had AWM (and others) for investing client monies in Vega?

We now know that Active Wealth Management has been under the FCA’s surveillance from August 2016, we know that Strand Capital has been in special administration since May 2017. It really is time that we started to make sense of why AWM were investing as they were, why most SIPPs refused to have anything to do with Strand, Vega , Newscape of 5Alpha and why AWM were not charging the market rate for what they did.

Put another way, if AWM were paying Celtic Wealth Management £700 per case, and only charging the client £1500, how could Darren Reynolds afford to do business?

Would it not have made more sense for AWM to have simply used the TATA Steel workplace pension , at a fraction of the cost , with a guided pathway and at no regulatory risk ?

Finally some good news

The first cut of numbers suggest that a very high proportion of the BSPS members who made a choice have chosen to move to BSPS2. Some will have deliberately chosen PPF (for better early retirement and tax free cash). Some will not have chosen as they had already transferred. For some the impact of choice would have been so marginal, making a decision was not critical.

And of course some members will have voted more than once – a problem with the lag in communication resulting from using paper.

These numbers are an early indication and the Trustees will be making announcements once a proper audit has been conducted.

But of this,  the Trustees of BSPS have a right to be proud. They have conducted themselves with integrity throughout and look as if they will be rewarded with the confidence of the general membership.

I stated in a recent article that the trustees had lost the confidence of members and these figures who that I was wrong – or only partially right!  What I saw in Port Talbot was not representative of the total membership, the disaffection with BSPS – was not a disaffection with the Trustees, but broadly with TATA.

I am very happy that such a high proportion of BSPS members have taken good decisions and congratulate the trustees and management of BSPS for what is looking like a result.

Nonetheless, there are lessons to be learned from the Facebook pages of the members and Frank Field’s comment that the trustees were  in “another country” (I had previously remembered “a different world”) is justified – at least in terms of what happened in Port Talbot.

Lest the Trustees become complacent, they should consider that many who have yet to complete their transfer, have elected to join the new BSPS, in case the CETV is never actioned.

From what I am reading on the pages, there is still considerable anxiety that pipeline transfer applications will not be submitted by the administrative deadline of February 16th and that many CETVs will not be paid by the RAA cut-out date of March 29th.

Until the very end of the Regulatory Apportionment Arrangement, the Trustees will not know for sure how much of the BSPS fund has transferred away.

Until we have answers to the questions that remain outstanding over AWM, many who have transferred will remain in darkness.

Until we have a rethink of the way that ordinary people are presented with decisions over their pension rights, that enables them to make informed decisions into products with predictable outcomes, we will have more Port Talbots.

Latest estimates are that there are only 3,000 advisers in the UK – qualified to give transfer advice. Mercer estimate that since April 2015 over 200,000 people have elected to transfer.  We can only speculate over the number of CETVs which weren’t taken up.

This suggest that on average, a Pension Transfer Specialist has advised 65 clients to transfer. If we are to believe the FCA’s own research , that only 47% of transfers were suitably advised, then we must see Port Talbot as the  visible tip of a very large iceberg.

Good news for the steelworkers – but the fundamental problem remains



Posted in BSPS, corporate governance, dc pensions, pensions | 2 Comments

Tough choices for our Pension Minister

Guy opperman tweet

Despite the reshuffle, our Pension Minister, Guy Opperman is staying our Pension Minister.

As pension celebs go, Opperman has been – so far – decidedly B-list; there is only so much time a Pensions Minister gets to acquaint himself with his job and – as recent tenure has shown- that time can run out. The list of ex-pension ministers who never quite got round to doing anything is growing longer.

So far, the only firm commitment Opperman has given is to the Pensions Dashboard. He intends for it to be, not the series of data standards envisaged originally, but a utility run and managed by the DWP. This is, as I have said on this blog several times – a vanity project – destined to fail. It is also a blocker to the very real challenges that exist within pensions which are not glamorous , but are pressing.

At some point in the next 12 months, Lloyds Banking Group’s Trustees will be taken to court by its (unrecognised) union to determine what will be the position for occupational schemes with regards GMP equalisation.  The legacy of 40 years tinkering with the interaction between state and occupational pensions is unlikely to go away any time soon.

This year we will also see Pension Wise disappear and re-emerge with a new name, under new leadership bringing together TPAS and MAS. This reshuffle looks like absorbing considerable energy , though one wonders to what great effect.

And while all the deckchairs are being moved, there is a very real considerations for the Pensions Minister , one that demand more than a briefing from his civil servants.

The decision of 140,000 postal workers to defer a Christmas strike on the expectation of reaching a settlement of  their differences with Royal Mail has yet to prompt comment from Guy Opperman.

This is surprising. The current truce could be broken as soon as it becomes clear that Royal Mail cannot implement a CDC scheme because there is inadequate regulation for them to do so.

In my opinion, if DWP fail to act on the reasonable expectation of postal workers that they can have a DC scheme that allows their current pension contributions to accrue them a CDC pension, then blood will be on its hands. There is a very real expectation that the secondary legislation promised in 2015 but never written, will be completed with some urgency.

A tough choice for Guy Opperman

While the Pensions Dashboard is glamorous and even sexy, turning pension savings into pensions is not. As Hargreaves Lansdown’s submission shows, creating collective rather than individual DC schemes will ignite the wrath of the insurance and SIPP industry, who have their snouts buried in the swill of pension freedoms.

But the needs of the unadvised “silent majority” of whom the postal workers form a significant part, have not been met by the Financial Advice Retirement Review and the innovation sought by the Retirement Outcomes review is nowhere to be seen. Instead we have increased concern, crystallised by the issues facing BSPS members in their Time to Choose, that there is simply no obvious exit route from what is considered the burning building.

CDC is not designed to de-risk accrued Defined Benefit liabilities, but it does represent a better mass-market alternative than a self invested personal pension – for those who cannot stomach staying in their employer’s scheme a moment longer. Not only is CDC an alternative for future accrual, it could be a pragmatic alternative for a very large amount of money , currently in the wrong kind of SIPPs with the wrong kind of management. I speak with feeling as I have seen these products close up and the stench is still in my nostrils.

In creating a way for DC schemes to pay scheme pensions, the Minister can enable the great new master trusts that are taking the money from auto-enrolment, to provide the guided pathways into retirement, they have been asking for. CDC is the obvious retirement solution for the workplace retirement saver,

It is touch for an inexperienced Pensions Minister to take choices , especially when it means forsaking a project that only last month he was congratulating himself on. But I think it is time to say this loud and clear. The DWP must prioritise the present needs of the Postal Workers and help create a scheme fit for those who are currently stuck in products entirely unfit for purpose.

In doing so , they should not forsake the pensions dashboard, but return to the original conception – laid out by the Treasury last year – of limited intervention and maximum facilitation of market driven innovation.

In place of diverting the DWP’s limited resources into trying to build a digital annuity, the DPW should grasp the nettle and complete the work needed for CDC schemes to operate. There is resource at hand from the private sector to make that happen (if needed).

Let’s see the Pensions Minister stand up and be counted as a friend to the postal workers and those whose pension rights languish in inappropriate products.

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

In defence of small pension schemes

I went to bed worrying about this statement and woke up with it still rattling round my brain.

 “A lot of employers are fed up with their pensions and want to see the back of them, they want to see their pension fund going to a good home.”

The remark’s from Ed Truell- he of Disruptive Capital and several ventures into pensions , typically via his venture capital vehicles. It was published in an FT piece entitled “UK’s first pension consolidation fund targets £500bn in assets” (the title says it all).

Who is standing up for small pension schemes?

It seems that everyone has it in for the trustees and advisers of small pension schemes. The DWP White Paper (which I haven’t yet read) Apparantly says that the Government will take steps to encourage consolidation. The PLSA have come out violently in favour of “superfunds” and Ed Truell and Alan Rubenstein’s new venture will no doubt compete with the insurers and the PPF, for what’s left of Frank Field’s “great economic miracle”- our 5600 DB pension schemes.

I work with one of the few consultancies interested in advising these small schemes and I declare an interest. My firm’s future is tied up with making sure these schemes are appropriately funded, governed and administered. No doubt, when our scheme actuaries enter into strategic discussions with trustees and our employer consultants talk with their sponsors, we will be putting this new superfund forward as an option.

But I wonder how many of our clients will respond well to being described as “fed up with their pensions” and how many really want to “see the back of them”.

A tradition of care

There is a tradition of care in many small manufacturing companies, many charities, NGOs , many schools, many research institutions  and service organisations of looking after staff. This is rather glibly referred to as “paternalism” – which implies the notion of “noblesse oblige”.

When you live the life of Alan and Ed, the rather less lofty ambitions of organisations like those that are our clients are easily dismissed. To run a business, or a charity or an NGO with the view of perpetuating a “good thing” is an ambition in itself and many of our clients see it as their social purpose to perpetuate a tradition of paying people in today’s wages and in deferred pay – that is explicitly referred to as a “pension”.

Some of our clients, I would like to think most of our clients, are keen to continue this tradition and are not that interested in getting someone else to pay these pensions for them. Far from being sick of pensions, many of our clients are whole-heartedly behind their pension scheme and they use firms such as ours to ensure those schemes remain affordable, well governed and well administered.

A proper function of any organisation is to look after its staff.

Here is Alan Rubenstein voicing his view of what our client’s want.

“We know that many businesses are constrained by their pension liabilities and need to find a more affordable way to fulfil their promises to pension scheme members,”

He’s right, times move on, many of the managers of our clients are no longer in the pension scheme and they consider the interests of pensioners and deferred members pretty low down the stakeholder pecking order.

It is easy to demote the rights of people who are no longer working in an organisation, or no longer of strategic importance to its executive.

But they have in law certain rights that mean the promises made to them must be kept and should a company not meet the funding obligations to these people, the Pensions Regulator has the right to demand the organisation put its pension scheme into the PPF and enter administration.

This is not a pleasant process as it means people can lose their jobs and part of their pension (quite a large part if you are well pensioned). Nonetheless, the Pension Protection Fund does provide a safety net and many small schemes cherish its security.

I did not hear Alan Rubenstein insinuating that small schemes were running inefficiently when he was at the PPF and I have yet to see any concrete evidence that employers could fulfil their pension obligations more efficiently through a superfund.

Many of our clients already participate in superfunds and find their participation in last man standing DB master trusts , extremely problematic. They are locked in by section 75 and have little control of their pension bills, they have no participation in the super trust and take the pain without credit from their staff.  Many current superfunds are making our clients miserable too!

Superfunds are unlikely to wave a magic wand that will ease the pain. Taking the patient out of a loved environment, a cottage hospital and putting the patient in some general hospital – may sound more efficient to the accountants, but it may not make the patient any better.

The proper function of any organisation is to look after its staff.

We should not assume that big is better – any more than assume that “small is beautiful”. Trustees should consider each scheme on its merits.

Someone has to stand up for small schemes

Putting aside all the arguments about grandfathering scheme liabilities, small schemes play a valuable part in the economic life of the country. Many are well run and many, given the right economic tail-winds, will return to solvency.

Pandering to the lowest common denominator with language like Ed Truell’s is likely to put the backs up many Trustees who are doing their level best to pay the pensions they promise – under their own steam.

Many employers see no conflict between meeting their pension obligations and managing their businesses as usual. They may not operate as venture capitalists would like to them, but they operate as they want to.

Infact, many or our clients see venture capitalists, investment bankers and fund managers as the people who have put them and their pension schemes in the state they are in today.

First Actuarial stand up for these good people, we do not object to more options being laid before our clients, but we object to the insinuation that they are sick of their pensions; our clients are just not like that.


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Dr Geoffrey Tapper – “Balm for both body and soul – and from a politician to boot”


My father – a trustworthy man

This morning saw the funeral of my father at Salisbury Crematorium. Here is my tribute

It isn’t hard to write about my Dad, he was a very public man , talked a lot and was much talked about. He gave his life to public service, an ethos he inherited from his father Bill.

This devotion to public service was