COVID-19 – our chances IF we survive.

Posted on May 27, 2020 by henry tapper

Introduction

Given the complexity of the question, and the different facets, we are breaking our commentary on this question into three bulletins:

What is the likely mortality of the ‘survivor pool’ in the short term?
What are appropriate ways to consider setting mortality assumptions at the ‘post-pandemic’ stage?
What are the long-term mortality implications of the pandemic?

In this bulletin we look at the mortality of the ‘survivor pool’ in the short term. The objective is to consider what the mortality of the population will be after the initial pandemic, not allowing for any ‘nth wave’ returns of the coronavirus.

What will affect the mortality of survivors?

The overall mortality of the survivor pool will be different from the equivalent pre-pandemic mortality to the extent that the COVID-19 fatalities exhibited different mortality (pre-pandemic) from those who survived.

What do we know about the COVID-19 fatalities that may have affected their ‘pre-pandemic’ mortality? Clearly they were primarily the old, and primarily male: however, demographers and actuaries (amongst others) will take account of age and sex in considering mortality, and hence these aspects are not relevant to the question here.

To estimate the mortality of the ‘survivor pool’, we can work through the following thought process:

What aspects of COVID-19 lead to disproportionate deaths for some types of people?
What would be the likely mortality (pre-pandemic) of these people?
Thus, what would be the likely mortality (pre-pandemic) of all those dying from COVID-19?
If we remove those people from the overall population, what is the remaining average mortality?

What aspects of COVID-19 make deaths arise disproportionately?

So far, we know that the following factors are particularly relevant (where we provide also some indication of typical mortality impacts, expressed as ‘odds ratio’ multipliers – so e.g. the figure of 1.5 for obesity means an obese person would have 150% the mortality of a non-obese person, all other things assumed equal – that can be combined, so eg an obese diabetic would have mortality of approximately x 1.5 x 2.0 = x 3 normal mortality):

Factor	Comment
Obesity	An important factor. The effect of obesity is of the order of 1.5.
Diabetes	Very important. The effect is of the order of 2.0.
Other chronic conditions	For common conditions (eg history of heart disease, cancer), of the order of 1.25
SE Class (IMD quintile)	Top quintile 0.8 of middle (ie average) quintile, lowest quintile 1.4 of middle
Ethnicity	BAME 1.5-2.0

Note that the figures in the above table are approximate and indicative only. We have commented specifically on risk factors in [link to bulletin], and since then further papers have emerged (many of which we have noted in our Friday Reports).

What would be the likely mortality (pre-pandemic) of the people in those groups?

We know from existing research that people in the above groups have normal (ie all-cause mortality absent the coronavirus) mortality somewhat different from the average. Using the same way of presenting this effect as we did in the above table, the factors as they would apply to people in the 60-80 year old age group are, very approximately:

Factor	Mortality effect (all-cause)
Obesity	1.2
Diabetes	1.3
Other chronic conditions	2.0
SE Class (by IMD)	1.5 (ratio bottom to top IMD quintile)

What would be the pre-pandemic mortality of those who die from COVID-19?

We can use the known (disproportionate) nature of COVID-19 to estimate how the deaths break down, for instance as follows (considering here just diabetes and obesity for simplicity). We can then calculate the expected pre-pandemic mortality of these subgroups, and hence the overall average ‘pre-pandemic’ mortality of the whole group of COVID-19 fatalities.

Splitting just by diabetes and obesity, this table shows the proportion of COVID-19 deaths we might expect (from the first table above on COVID-19 mortality risk factors in conjunction with population prevalence).

Group	Population prevalence	Proportion of COVID-19 deaths	All-cause mortality multiplier
Normal	65%	48%	1
Obese, non-diabetic	20%	22%	1.3
Obese, diabetic	10%	22%	1.6
Diabetic, normal BMI	5%	7%	1.2
Total	100%	100%
All-cause mortality	1.10	1.20

This table also shows the all-cause mortality multiplier, weighted by population prevalence, and also weighted by proportions of COVID-19 deaths.

We can therefore calculate that the expected ‘pre-pandemic’ mortality of the group who died from COVID-19 is 1.2 / 1.1 = 109% of the same number of people randomly selected from the population.

With the COVID-19 deaths no longer in the overall population, what is the survivor mortality?

Suppose 1% of the population die from COVID-19. Although this is a high (hopefully unrealistically high) figure for the whole UK population, it is a reasonable figure (perhaps even an under-estimate) for older age groups.

Having estimated the mortality of the group of all those who died from COVID-19, we can estimate the relative mortality of the survivor pool:

Group	Proportion	Relative mortality
COVID-19 deaths	1%	109% of normal
COVID-19 survivors	99%	99.9% of normal
Combined population	100%	100% of normal by definition

The 99.9% above is ‘solved for’ by finding the value that, combined with the 109% of normal mortality for the COVID-19 deaths group, takes us back to 100% for the combined group. Thus the mortality of the survivor pool is (in this example) around 0.1% below normal (pre-pandemic) mortality.

The effect is light in this example largely because we have assumed a small proportion of deaths from COVID-19 in the ‘base’ group. For high age (and male) segments of the population, we expect higher proportions to die from COVID-19 and hence a greater eventual differential between pre- and post-pandemic mortality.

The figure is also lighter than the ‘real’ figure will be because, in the above, we have looked at only two categories (obesity and diabetes). Introducing more categories (e.g., other common medical conditions, or socio-economic splits) accentuates the effect (if, for each extra category, we have both an increased risk of death from COVID-19 and increased ‘all-cause’ mortality, which is generally the case).

Further work by the author testing the effect of this extra granularity increases the all-cause pre-pandemic mortality ratio of COVID-19 deaths to normal population from 109% to of the order of 130%.

Conclusion and further work

COVID-19 mortality is associated with various risk factors (such as obesity and diabetes) that are themselves associated with higher ‘normal’ (all-cause) mortality. If we consider this aspect only, ignoring for now other aspects (noted below), then the overall mortality of the post-pandemic ‘survivor pool’ will be lighter than overall population mortality pre-pandemic (allowing for age and sex effects).

The example calculation above, which illustrates the underlying dynamics, shows that the effect is likely to be low other than in subgroups of the population with a high proportion of COVID-19 deaths.

The other aspects to be borne in mind in estimating the likely mortality of post-pandemic survivors are:

How are future mortality improvements likely to differ because of the pandemic? (For instance, what effect might the associated economic shock have on healthcare expenditure or personal health-related expenditure that may affect mortality?)
What is the effect on human physiology of surviving a ‘severe symptoms’ (hospitalisation necessary) infection of COVID-19? (For instance, the Spanish flu was associated with long-term features that had a material morbidity / mortality effect.)

In the next two bulletins on this subject, we consider the points above, and we also consider how, once we are ‘post-pandemic’, we could conduct an experience analysis in a way that allows appropriately for the largely ‘one-off’ nature of the pandemic.

Matthew Edwards
27 May 2020

Posted in actuaries, advice gap, consultant, coronavirus, pensions | Tagged Covid-19, Matthew Edwards, mortality, Pandemic | Leave a comment

The still small voice of calm

Posted on May 27, 2020 by henry tapper

The Famous Five

Yesterday was busy for me and I didn’t have a chance to see the comments on my blog-either on twitter or on the blog during work-time. The blog called on us to move on and let Cummings be.

Yesterday evening I did see some of things that were said on twitter and was upset by some violent language from people I like.

“But by and large our suffering has been minimal ” Feck off, Henry, and then feck off some more and write about something you know about instead of this odious drivel.

I don’t need to defend my comment, most of the people I know have not had to face the choices that Dominic Cummings made – I certainly haven’t. Our church – whose congregation is mainly BAME- has seen deaths.

But the consequences of COVID-19 for most of the people I know have been financial , emotional but not existential.

There was also some bad tempered comment on yesterday’s blog itself, chiefly an argument between two regular contributors. I don’t want to moderate genuinely held views but let’s be kinder to each other.

The still small voice of calm

Although the majority of comment was calling for Cumming’s resignation, there are two comments from George Kirrin which are here.

The media’s Cummings story no longer stands up for me, Henry.

He didn’t go to Durham for a second time on 14 April, as reported on the front pages of both the Sunday Mirror and the Observer. He didn’t have any physical contact with Durham-based family members. The police didn’t talk to the Cummings family about the Covid lockdown guidelines but about security (presumably if/when the media posse arrived there, as they now have done). Durham police issued their own press release at 4:01pm yesterday, just when Cummings was supposed to be about to start his rose garden press conference.

Cummings didn’t carry on doing things that nearly everyone else had stopped doing — he missed the funeral of his uncle who died from Covid-19 in London on 5 April. He didn’t leave his London home for leisure reasons — he left because he was receiving threats as a result of media demonisation. He was ill, his wife was ill, and at one point his child was taken to hospital in an ambulance in Durham.

His family has had a really rough time and parts of the media have told lie after lie about him. The real scandal is not Cummings’s behaviour — it is the collapse of ethics and objectivity in leading parts of the British media.

Cummings is, however, guilty of what many of us have done when overworking – driving when impaired, putting work before family and personal health, and maybe putting work colleagues at risk of catching whatever it is we’ve got or we’ve had.

I have put the final paragraph in bold because it gives an insight into Cummings’ behaviour that rings true with me and which I haven’t seen or heard elsewhere in the debate.

As illuminating is George’s second comment

Jenny Harries and her “exceptional circumstances” on 24 March, and it’s here:

http://www.bbc.co.uk/iplayer/episode/m000h32w

The question (about a hypothetical 2-y-o child is asked at 62 minutes in) and her exact quote is at 65 minutes, part of an answer that begins at 64’50” ….

Those who argue that Cummings’ use of “exceptional circumstances” is exploiting a loophole must listen to what Jenny Harries says in these four minutes.

There was some speculation before Dominic Cummings’ conference that Dominic Cummings’ child is autistic.

Seems the next stage in the Cummings defence is to invoke the 4 year old son being autistic. Don’t know what the truth is but it’s not good, invoking autism (which affects thousands and thousands of kids in the UK) for this behaviour.

— Pete Wharmby (@commaficionado) May 24, 2020

As far as I know , other than the child being taken to hospital, Dominic Cummings’ has made no mention of “special circumstances” for his child. The restraint employed in not responding to comments such as Pete Wharmby’s is admirable. The circumstances Mrs Cummings and their son find themselves in is tough.

Thanks to George for providing the still small voice of calm.

We are being kinder

Until this matter, I had thought there was national unity based on a common front against the pandemic. Unfortunately this unity has been broken. We have the Conservative back-benchers yet again rebelling , a junior minister resigning and we continue to see the normal questioning of Government on its COVID response being interrupted by questions about when Cummings will resign. On social media this has degenerated into #sackthemall .

Although we are allowed to have our judgement on the performance of the Government (and the bare numbers of deaths , hospitalisations and (lack of) testing do not speak well of it), we must be kinder. There is no B- team ready to step up and replace the cabinet, the PM and the Spads.

The A team was elected only 6 months ago and are less than 10% into its term. When we have an election, we have to accept the result and support the Government in its endeavours. This is particularly true at this time.

One of my most left-wing of friends sent me these two direct messages on twitter last night

we can aspire to more than one thing – a decent PM AND a policy of more fairness and better public services post the mad rush to finance running the world.

and separately

Ideally the Tory party needs to boot out Johnson. I don’t suppose it will happen, but the smart guys and gals – and I do believe there are some – need to manage him and sort themselves out.

We want to be kinder ; let’s hope we will turn a corner by better protecting the most vulnerable in our society. To do that we will have to spend a lot more of the nation’s wealth on welfare and a lot less time throwing stones.

This will mean a radically different reaction to this crisis than “austerity”. It will mean that those of us who have the means to be kind, must be kind.

We are already be kinder, let’s not let this Cummings’ episode stop that.

George Kirrin – aye!

Posted in advice gap, age wage, coronavirus, pensions | Tagged COVID-10, Dominic Cummings, kindness, welfare | 14 Comments

Michelle’s right, the last thing we need is Cummings to go…

Posted on May 26, 2020 by henry tapper

Enter a caption

On a day when very little of what was said carried much authenticity, I heard a lady from Newcastle University say something that seemed real to me.

Speaking on the BBC evening news following the interrogation of Dominic Cummings in the Rose Garden, she explained that most working class people she knew didn’t find a rich elite British male doing what he liked the slightest surprising – or even interesting, their thoughts were elsewhere. She explained they were concerned with how they would make ends meet over the next few months,

To suppose that we are all in it together is absurd, as she went on to say 99% of people in the north east don’t have the choices Dominic Cummings had – to them he was quite simply -irrelevent

Cummings matters to the liberal elite – because he represents us.

Listen to the people who are howling against Cummings and what you are hearing are people who have also had his choices and chosen not to take them. The stench of entitlement is overwhelming as we hear of the sacrifices we made to the general good.

But by and large our suffering has been minimal , by and large we are raging against the opportunity that we turned down and Cummings grasped, the loophole we missed. And in likening ourselves to Cummings, we elevate ourselves to his level of public service. Cummings wasn’t broadcasting from Downing Street’s Rose Garden for nothing, he is doing more than what we do – he is running the country.

This spelt out to me my unquiet, explained in my two blogs , making your own rules and Boris’ Bismarck.

No matter how much better blaming Cummings makes us feel, sacking him is not going to help people pay the rent.

As Michelle Cracknell put it on Linked in

“Love him or hate him, the last thing all of us need is for Dominic Cummings to go. We need to focus on the things that matter (testing, PPE, moving out of lockdown) rather than what DC did or did not do”.

Michelle was agreeing with this statement

Cummings is a vital cog in the strategy to defeat Covid. Not some clown driving across the country to buy a puppy.

How this reflects on us?

Dominic Cummings has still not been tested for Coronavirus, he does not appear to have been treated as part of “Government” at all. He was juggling his job and duty to Johnson and the country against personal fear for his health and the health of his wife, child and wider family and he was seen running accross Downing Street in what looked like panic to the press.

Cummings running to help his wife

We now know that Cummings was not running away in fright, he was running to his wife who had symptoms of COVID-19. The images we have of Cummings are of a man isolated and pursued by cameras, he is also a husband and father.

Yesterday we saw a man give a press conference who was nervous. Never once did he play to the camera or the press. He did not impress as a politician would have impressed. He didn’t impress at all.

Frankly it does not matter much how many times he stopped to fill up for petrol, how long he was outside at Barnard Castle or whether he dialled 999 or 111. The Guardian and the Sunday Mirror can go on with their forensic investigation , un-turn rocks and keep this story alive for another week, but this isn’t going to help us move out of lockdown or pay the rent.

We watched Cummings hoping for drama, we got the opposite. I was left asking why I was watching and feeling decidedly queasy. In wanting drama I realised I was complicit with the press. Their prurience was my prurience. I wanted to wash my hands.

Damaged goods?

Far from being damaged goods, Cummings is now centre-stage and a full-on anti-hero for anyone chippy enough to challenge liberal sentimentality. And having listened to the endless tales of self-sacrifice by those in lock-down I am now immune to that sentimentality.

What is becoming damaged goods is the line of press lined up to throw stones at Cummings. To them I add those who compare their tale of hardship to that of Cummings. Whatever we are going through is our cross to bear, we cannot tie Cummings to it.

It is not unusual for members of the elite to become working class icons. Churchill did it, Farage did it (a little bit) and Cummings has got all the makings of doing it himself. Nervous as he was yesterday, he managed to last 90 minutes without losing control and unimpressive as his delivery was, he came accross as considered and deeply serious.

Cummings has no Checkers or Sandringham , he did have his family home and it appears that became so attractive he recklessly drove himself and his family there, against all Government advice. Like the Newcastle University professor , I don’t find this in the slightest bit surprising, I don’t find it news. He did what he could with the hand he held and his bets paid off.

From George Osborne’s newspaper

No apologies – no regrets

The press are angry that Cummings stays “elite”, They want him to apologise and show regret. Based on achieved outcomes Cummings has nothing to regret, he is back safe and so his family. As for apologies, he refuses to apologise for taking responsibility as he does.

And for so long as the media continue to lay into Cummings, the more he will divide the nation. He clearly isn’t going to stand down and the best that we can do is climb down from our high horses. He is Johnson’s Bismarck, he makes the rules and I am glad that he stood firm yesterday. I do not want another resignation , another failed Government and yet more disruption .

It is our job to repair not damage goods. Like Michelle says.

Posted in coronavirus, pensions | 16 Comments

DWP furloughs Gran’s pension data

Posted on May 25, 2020 by henry tapper

I’m pleased to hear that Steve Webb’s campaign to encourage us to get our (or our mother’s fair share of the state pension has already been a success.

LCP report that over 20,000 people have already used its calculator and that the flow of interest shows no sign of abating. Those who use the calculator land on the link to the LCP report I mentioned in yesterday’s blog (for which I got a number of requests). For those who want to understand the issues Steve Webb is raising – here is the link. (you don’t have to pretend to be your Mum here!)

Freedom of information has been critical to my sanity over the past nine weeks. Without the COVID-19 actuaries teaching me how to read ONS and other reports, I would have felt myself a pawn in the chess game of the Downing Street briefings.

DWP FOI and the absence of briefing

But even Steve Webb, till recently a DWP Minister, cannot get the information he needs to help Mums and Grandmas and elderly spinsters to their proper state pension.

I understand that after his first Freedom Of Information request in February (FOI) , he tabled a follow up to get more details (so he wouldn’t have to make so many guesstimates for his report); it went in on Feb 28.

At the end of Mar (the normal deadline) The DWP said that because of Coronavirus they would be delayed in replying; but another two months later they still haven’t replied; it feels like they’ve furloughed FOI.

Repeat offenders?

The DWP has form on this. The WASPI women are seething with indignation that they haven’t been informed and now we have one of their former ministers in the same boat!

The matter is at its most stark for the over 80 year old women. To remind you of the entitlement;-

Once you reach 80 you are entitled to a state pension of £80.45 a week if your existing state pension is less than that or you do not get one at all. To qualify you must be

aged 80 or more

live in the UK or the EU when you reached 80 or when you claim

have lived in England, Scotland, or Wales for at least ten years out of the last twenty.

It is not means-tested and does not depend on your National Insurance record. The full rules are here.

If you are over 80 but get less state pension than £80.45 or none at all then claim it now. It can be backdated up to a year. (details from Paul Lewis)

The one major exception is that people living outside the UK in a country where the state pension is frozen – (it does not rise with inflation) – may well be getting less than £80.45 a week and not be entitled to any top up.

The over 80s pension (known by the DWP as Category D) is the closest thing we have in the UK to a citizens or basic income; there is no NI test, just a residence test.

I find it really hard to believe that the large numbers of over 80 year old women Steve Webb found getting less than the flat £80.45 all failed the residence test

Shocking

When you get to 80 , the rules become simpler and that’s to make sure no-one gets left behind.

It is shocking that there is still – in this simple environment – doubt over the payment of the full £80.45 to resident pensioners. That doubt could be put aside by the DWP publishing the information requested.

If there are underpayments, then quick restitution should follow.

COVID-19 is not a good reason to defer the publication of this information. Infact it is all the more reason to make sure that the basic entitlement to older women (less than £4,500 p.a) is paid in full.

So come on DWP- do the work – you’re not in furlough.

You have not been granted leave of absence by your customers nor has Steve Webb furloughed his inquiry.

You can claim your extra pension either online at the Pension Service or call free 0800 169 0154.

Posted in pensions, steve webb | Leave a comment

Making our own rules; (Cummings II)

Posted on May 25, 2020 by henry tapper

Ruling but not leading

The Cummings and lack of goings of the past 48 hours are dividing Britain between the absolutists, the pragmatists and the people who just hate Dominic Cummings.

I suspect the number of people who know Cummings well enough to hate him is very small and comprises those people whose journalistic and political careers are thwarted by him.

The numbers who see him as an archetype of “arrogance”, “hypocrisy” etc, is much larger and these are people are fuelled by a sense of injustice that we are not all in this together , that they have done their bit and that they are being laughed at. Many of these people have genuinely suffered self-deprivation or illness and some have lost loved ones to Coronavirus.

Finally , there are the pragmatists, who seem to include most of the Conservative parliamentary party, all of the Cabinet , the Prime Minister and a very large part of the country who are more interested in just getting on with, siding with productivity within safe limits over the strict obedience to absolute standards.

Wherever you sit, your position is relative to others and the ruling you are making on Cummings results from personal prejudice. There is no absolute position since the people who made the rules, are now interpreting them differently to how we understood them and implying that there are things we cannot know about Dominic Cummings’ behaviour , because that is in the public good.

In the public good

Churchill once redefined the word “lie” as a “terminological inexactitude” so as to imply a member of the house wasn’t telling the truth. In doing so he poked fun at the system but kept his integrity.

This is probably the best response from most of us to Cummings’ road trip. No one needs to like him for it, no one needs to like Cummings – one of the most attractive things about the man is his complete disregard for most people’s opinion (see yesterday’s blog)

Our Government believes it needs Cummings and is therefore protecting him. The Government has worked out that it can take some collateral damage in this. This is not necessarily political , more based on Cummings’ genuine leadership. He appears to be the Bismarck to Johnson’s Kaiser and Johnson still appears to be working at half power (he had a genuine brush with death).

My view, as expressed yesterday, is that if you take Cummings out of 10 Downing Street, you are left with an underpowered PM and not a lot of depth in the rest of the team. We should not underestimate the reliance on Cummings at this point.

So it is probably in the public good that we put the road-trip away in a cupboard and accept that some must act at this time and we must accept that they can act differently in the public good. Which is the only way I can mentally accept the behaviour of Dominic Cummings.

It is of course the same leap of faith that allows me not to throw my laptop at the TV when I see the briefings on those who “tragically” have died, knowing that the briefings have consistently been telling us half the picture, to keep us in order.

My mother’s comment remains relevant, for her it is more important to trust authority than to believe in its absolute probity. Just as Machiavelli knew how to control the people, so the people accepted the principles of the Prince, to maintain social order. This complicity looks likely to prevail, for all the ranting in the papers, on social media and in radio and TV phone-ins.

There is little genuine comfort in being absolutely right

Without going into the doctrine of original sin, it’s worth finishing with a thought about moral absolutes. “Let he who is without sin, cast the first stone” is probably the most pragmatic phrase to come out of the Bible and it certainly applies here.

Anyone who claims absolute moral authority in their behaviour, bullshits me.

There is also a sense of humour failure just around the corner.

And unless you are very different than me, it feels very uncomfortable sitting on a high horse. It’s a long way down and you never know if the horse mightn’t just buck

It is great fun, in the fury of the moment, convincing yourself you are right. But as I know, when I re-read my blogs, I have often been either wrong or hypocritical or both.

So reluctantly, as I see Cummings as a bell-end much of the time, I am prepared to move on and accept that for the public good, the man needs to be excused if not exonerated.

We live in a very imperfect world and sadly , kicking Cummings out will not make it more perfect.

leading but not ruling

Posted in coronavirus, pensions | Tagged Bismarck, Boris Johnson, Covid-19, Cummings, Kaiser Wilhelm, Road trip | 3 Comments

A whole new can of “defaults”

Posted on May 24, 2020 by henry tapper

worms

The Pension Regulator’s found a new can of worms to open. This time it relates to a very local problem but creates some difficulties for those running and governing DC pensions. As the vast majority of money going into DC pensions is our money- coming from our salaries, this is important.

The issue

Currently it is very hard to put a value on a property and to value units in a property fund. In order not to liquidate properties at a false price, most property funds are currently in lockdown or “gated” as fund managers call it.

Trustees are nervous about allowing savers who’ve chosen property funds to pile more money into a fund that has uncertain value so they are beginning to divert money that would have gone to property into alternative assets that behave like property funds but are more liquid so don’t go into lock-down.

The Pension Regulator has this to say about replacing a property fund with an “alternative” fund.

Some trustees, having taken investment advice, are redirecting scheme contributions into alternative funds until the gated funds re-open. This could result in the alternative funds becoming default arrangements and therefore subject to legal requirements such as the charge cap (if the scheme is used for automatic enrolment) and the requirement to have a statement of investment principles for that default arrangement.

You may need to take legal advice to assess whether this is the case for your scheme. According to the DC code of practice, the position will depend on how the members who selected their investment made their choice. Were they aware and did they agree to their contributions being used in this way?

We believe that the only circumstances where a default arrangement would not be created are if either:

members were made aware before they selected the original fund that contributions could be diverted to another fund in certain situations

you contacted the members before diverting contributions and obtained their consent: please note that you should consider taking advice on the implications for your scheme before doing this

If you have discovered that you have unintentionally created a default arrangement by diverting funds you should immediately take steps to ensure this arrangement meets the legal requirements. These requirements include falling within the charge cap if the scheme is used for automatic enrolment and having a statement of investment principles that meets the requirements for a default arrangement.

Fund substitutions – can of worms

There are some real problems here. Firstly, most workplace pensions sit on fund platforms which rely on fund substitutions when things go wrong.

There are exceptions. We saw with Woodford that SJP did not need to substitute the fund , they just substituted Woodford as manager and got new managers to sort out Woodford’s mess. But most people exposed to Woodford were directly invested in a Woodford fund and had to divert future monies to alternatives.

What tPR is saying is not just to do with property funds, it’s to do with any fund substitution and it’s saying to trustees that changing fund (not fund manager) is tantamount to making the new fund the “default”.

Trustees can get round this by telling members who self-select they have the powers to substitute or by giving the members who’ve made a selection the job of choosing for themselves. But both options are likely to be difficult. Trustees do not want to be seen to be accountable for substitutions, especially if when the old fund comes out of lockdown, it shows it was resilient and a better bet than the replacement. But nor do trustees want to have new defaults to report on (with all the hassle of policing charges and writing SIPPs). This is the can of worms.

So what is tPR worried about?

TPR says it is worried about members who specified how they wanted their contributions invested, finding that the trustees hi-jacked their choice (in breach of their DC Code of Practice)

But I suspect there is a wider issue of value for members, at play here. What tPR are doing is de-railing the process of fund substitutions by demanding each time this happens a “mini-default” is set up. Ultimately this would lead to any self-invested option that was replaced coming under the same rules as the scheme default.

This looks to me like the work of the DWP, who are keen to limit the capacity of workplace pensions to offer semi-governed fund options on platforms, with little responsibility for the outcomes of those funds.

So if you want to offer a Woodford style fund to workplace savers, you will forward have to tell members you are accountable for how it does and tell them you have the right to change it if things go wrong, or you will have to treat the substituted fund as a mini-default. Either way – your duty of care to the funds you offer under self-select has changed.

Broader issues for fund platforms.

Most money that goes through workplace pensions defaults to a single fund or option. However, the fund platforms used for self invested personal pensions are the other way round with advisers avoiding default solutions and promoting choice.

The issues of gated property funds, of Woodford and of all the unregulated UCIS funds that have given so much trouble are much more prevalent in this self-invested world.

In the past few days, the High Court has finally rules for Carey Pensions , saying that the management of the SIPP could not be held accountable for the value destruction caused by using funds selected on its platform by investors (usually under advice).

So while tPR is tightening the duty of care for trustees of workplace schemes, the FCA is seeing its capacity to enforce governmental requirements on non-workplace pensions reduce.

Differing approaches to self-investment

So to sum up- tPR are hinting at a regime where trustees take more responsibility for the outcomes of self-selection within workplace pensions (and occupational schemes in general) while the FCA are finding that contract-based providers are “off the hook”.

The FCA came in for some criticism earlier in the year (from me and the FT) for not requiring IGCs the same reporting standards on self-select as on default funds.

I am more worried (post the Carey judgement) that contract-based pensions – especially those beyond the inspection of IGCs and GAAs will be under-regulated and that it will be FSCS and IFA policies that will be required to pay compensation.

But I am comforted that DWP/tPR are taking a tough position on the governance of self-selected funds – requiring trustees to be clearer about their duties and ensuring that where things go wrong, trustees are subject to the “default rules” and/or clear disclosures that they will be accountable for fund substitution when members take choices.

Conclusions for investors

If you are looking to manage your own fund portfolio then increasingly you will be able to do this within a master trust or within a contract based plan.

Not all master trusts offer self-invested options but expect many to move into this space as they try to increase their average account balances.

It looks as if the default legislation that covers workplace pensions is being used by DWP/tPR to protect members from illiquidity and high charges.

But there are other questions that arise, especially the statutory rights of members to 100% of their money on transfer and at normal retirement age. These rights appear to apply equally to single employer and multi-employer schemes.

So long as these statutory obligations remain (and I think they are exclusive to trust based schemes) then trustees are going to be very nervous of having any illiquid funds or illiquidity within its default. There is only one place to go for that liquidity and that is the sponsor. Which opens up another can of worms.

Posted in advice gap, age wage, pensions | Tagged default, pensions, Savers, SIPPS, workplace Pensions | Leave a comment

Cummings; Boris’ Bismarck

Posted on May 24, 2020 by henry tapper

In conducting his lockdown tour of London and the North East , Dominic Cummings has confirmed himself the central figure of British politics. He is the Bismarck to Johnson’s Kaiser and the most effective British political operator of the past 10 years.

Cummings’ refusal to admit to having done anything wrong and his sneering at the left-wing press have endeared him to at least 52% of the country,

Cummings has become the focus for the frustration of many but his defiance is absolute

#Policing #coronavirus #lockdown ‘made much harder by #DominicCummings‘ actions’

Read More: https://t.co/rCbfWnQX0J #coronavirusuk #covid19UK #Lockdown #DominicCummngs #COVID pic.twitter.com/RFr2HiZIpT

— Oigetit Health (@Oigetit_Health) May 24, 2020

I have three observations to make

We all love a baddie
We want the baddie on our side
Cummings is the person we don’t dare to be

We all love a baddie

Cummings has all the attributes of a political baddie. He’s unelected, arrogant and secretive. He has absolutely no interest in pleasing anyone and he’s quite ruthless.

He is not a pantomime villain, a Dick Dastardly, he is a very real baddie

We want the baddie on our side

If you had to pick your political football team, you’d want Cummings in charge of the defence. For everything that his behaviour tells us about the abuse of power, we want Cummings in charge – even if he picks up a few cards along the way

Cummings is the person we don’t dare to be

Forget all the minutia, Cummings is the husband and Dad, as well as the Bismarck to Boris’ Kaiser.If he survives (and I think he will), he will be the most notorious adviser in Downing Street for decades.

Though he focusses all our discontent, he thrives on the opprobrium heaped upon him. And his stature is the greater for him driving a reasonably sized family car into which he piles his family and all that goes with them.

He is what we want to be and that is hugely frustrating.

Is Dominic Cummings running Britain?

The answer quite clearly is yes. Have we the power to sack him – we will see, but I suspect the answer is “no”. Will he diminish those around him- undoubtedly he will, Johnson already looks a second order Kaiser beside this Bismarck.

Does it matter if he does?

It’s worth noting, that Britain is not only in the grip of the pandemic, but it is in the midst of a political change. Both are likely to be momentous and both are being managed by Cummings.

We have to look at the alternatives to the Cummings way, the problems we had moving forward under May and Cameron, the ineptitude of most of the current Cabinet and utter irrelevance of the opposition (though this may change).

Cummings is where he is for a good reason. He is filling a vacuum. If we find a way of ridding ourselves of him, we will have to find an alternative. Where is that alternative?

I am encouraged in this view by this blog by Simon Carne. He argues that whatever we think of Cummings’ behaviour, the press are not the judge and the jury.

Posted in age wage, pensions | Tagged Cummings | 13 Comments

Is your Mum getting her proper state pension? – Steve Webb’s making sure!

Posted on May 23, 2020 by henry tapper

Apologies to readers whose Mums are no longer around and to younger readers whose Mums are still to retire. but the majority of people who read this blog are millennials and boomers whose Mums are drawing the state pension along with Dad or on their own – as widows. This blog is for pensioner Mums and for adult children who care about their finances.

The problem

The DWP have a very complicated set of rules about the payment of state pension to women and a computer system that relies on human intervention. The intervention is usually prompted by claims from pensioners , many of which are not filed – as most citizens don’t understand the rules. The DWP, like all administrators, is also prone to human error. The usual toxic cocktail – lack of financial capability – inadequate automation and over-reliance on manual administration. The WASPI cocktail (II).

Sir Steve Webb highlighted that many older women are being short-changed of their pensions as a result. Initially this was taken up by the Daily Mail’s This is Money website.

Now LCP, Steve Webb’s firm, have issued a report on what’s happened and the Times is running the story as a £135m state pension error

The real problem is that most of the problem relates to elderly women who aren’t best placed to sort this out for themselves and are reliant on children who struggle to find out the facts on their behalf.

So to date, restitution, where restitution has been due, has been confined to cases where children have applied obsessive zeal on their mother’s behalf. Witness this case study that will be no doubt be attracting the attention of furloughed PPI claims specialists

Widow, 96, with dementia gets £117k after she’s paid wrong state pension for 20 YEARS

Rosemary Chattell’s son was fobbed off THREE times by DWP staff
He made a fourth call about her low pension, thinking ‘I will give it one more try’
DWP then paid arrears of £107,850 and no interest – but stumped up a further £9,500 when This is Money intervened
Rosemary might now face a massive income tax bill on the belated payment
Ex-Minister Steve Webb says: ‘This is one of the most shocking cases I have ever come across’

So what is Steve Webb doing about it?

Credit to the man, Steve is dong a lot. Firstly he’s explaining how the problem came about…

The problem affects a set of women covered by the ‘old’ state pension system – that is, those who reached state pension age before 6^th April 2016. Under the old system, married women could claim an enhanced rate of state pension when their husband reached 65 in cases where they had only a small state pension entitlement in their own right. Parallel rules applied to widows and divorced women. At current rates, the pension that a married woman can claim based on her husband’s record of NI contributions stands at £80.45 per week, provided that their husband was receiving a full basic state pension. This is 60% of the full basic state pension rate of £134.25.

Since March 2008, married women on low pensions should have been awarded this 60% rate automatically when their husband turned 65 but before that date they needed to claim the uplift. Data obtained in a Freedom of Information request submitted earlier this year by Steve Webb to the Department for Work and Pensions suggest that many tens of thousands of married women who would be eligible for this rate are not receiving it. In the majority of cases it seems likely that this is because they not actively claimed the uplift, but in some cases it will reflect the failure of DWP computers to automatically award the uplift. Where women needed to make a claim and do so only belatedly they can only backdate their claim for 12 months – any uplift for years before this is lost.

In addition to gaps for married women, LCP have found other groups who may be missing out. These include:

Thousands of widows who appear to be on very low state pensions, well short of the expected rate for a widow claiming on her late husband’s record;
Thousands of divorced women who should, in principle, be benefiting from the ability to ‘substitute’ the NI record of their ex-husband for the period up to the end of their marriage;
Thousands of women aged 80 or over who should in principle be entitled to an £80.45 pension on a *non-contributory* basis provided that they satisfy a simple residency test;

Without access to DWP administrative data, it is difficult to put precise figures on the numbers missing out, but by combining the FOI data with data from the DWP’s online ‘stat xplore’ tool and data from the DWP’s Family Resources Survey, LCP estimates that tens of thousands of women are being paid less in state pension than they are entitled to.

Based on typical amounts repaid when women contact the DWP, the amounts underpaid could be up to £100m in total, not including ongoing increases in regular pension payments. (which the Times are estimating make up the balance of their quoted £135m)

Secondly he’s lobbying for change

Steve Webb is now calling on the government to investigate this issue as a matter of urgency, and to automatically uplift the pensions of those who are entitled. He is also calling for a review of the 2008 rule change which means those who became entitled to a higher pension before that date can only now backdate a claim for 12 months.

We should be giving Steve Webb credit, gratitude and support!

Credit due!

So what can you do?

If you want to understand this problem properly, you need to read LCP’s guide

At the time of blogging, this document hasn’t been posted to the web (no pun-intended), when it is, the link will be here and for now you can request a PDF from henry@agewage.com because it is the weekend and the LCP press office isn’t open.

If you don’t want to “gen-up” but want to check-up, your next port of call is LCP’s web-page for Grannies

This contains links to the DWP’s Pension Service , and the Government’s Money Advice Service

You can claim your extra pension either online at the Pension Service or call free 0800 169 0154.

To see if you qualify use this calculator provided by Steve Webb at Lane Clark & Peacock. Note- this is not an exhaustive tool. If you want to exhaust yourself – read on!

What should Grandma have got?

If you want to know what your Mum/Grandma’s entitlement are you can read the brilliant Paul Lewis’ factsheet here.

Tens of thousands of married women aged at least 67 could get up to £4000 a year extra state pension. They aren’t being paid a top up to their pension from their husband’s National Insurance. If they get less than £80.45 a week they should claim now https://t.co/JaneR6q0E3

— Paul Lewis (@paullewismoney) May 23, 2020

And for the hard of clicking, here is what Paul is saying.

SUMMARY

Tens of thousands of married women in their seventies or older are being paid too little state pension. Some could be owed £4000 a year.

You are almost certainly entitled to extra state pension if

your husband was born before 17 March 1943

AND

you get less than £80.45 a week state pension

Some slightly younger women – aged at lest 67 – and some women with younger husbands may also be due extra money.

The women affected get the old state pension, not the new one which began for those who reached state pension age from 6 April 2016.

These married women are normally entitled to a top up to bring their basic pension up £80.45 a week. However, many did not claim it or it was not paid due to an error by the Department for Work and Pensions. See ‘Married women’ below.
Some divorced or widowed women may also be entitled to a bigger state pension. See ‘Widowed or divorced’ below.

Anyone aged 80 or more – men and women, married or not – should normally get a state pension of at least £80.45 a week. See ‘over 80’ below

DETAILS

Married women

Nowadays most married women have their own state pension paid for with their own National Insurance contributions. But millions of older women do not. Women born before April 1950 needed 39 years of contributions to get a full pension. If they had fewer than that their pension was reduced and women with fewer than 10 years contributions got no state pension of their own.

Many married women did not earn enough at work to pay National Insurance contributions or, if they did, they chose to pay the reduced married woman’s contribution – known in the past as the ‘married woman’s stamp’. It did not count towards a state pension. The result is that millions of older married women are only entitled to a reduced state pension of their own, or none at all.

To help them there is a special rule that when a husband reaches state pension age his wife can get a pension based on his National Insurance Contributions. That married woman’s pension is 60% of the basic pension – and currently comes to £80.45 a week.

If a married woman has a basic state pension of less than £80.45 a week or none at all it is topped up to that amount when her husband reaches state pension age. That applies even if he – but not she – gets the new state pension (men born from 6 April 1951 get the new state pension).

Nowadays that top up to £80.45 a week should be paid automatically when her husband reaches state pension age. However, before 17 March 2008 a married woman who already had a pension when her husband reached pension age had to apply for the upgrade.

Research done by former Pensions Minister Steve Webb indicates that there could be more than 100,000 women whose husbands were born before 17 March 1943 who get a state pension of less than £80.45 a week but who did not apply for the top-up. Those women were born before 17 March 1948 and are now aged 72 or more.

They can apply for the higher pension now. It will top up their state pension to £80.45 a week and the top up will be backdated for a year. A woman with no state pension will get £4183 plus £80.45 a week for life.

There may also be some younger women born between 17 March 1948 and 5 April 1953 and some women with younger husbands – born 17 March 1943 or later – whose pension should have been upgraded automatically but was not. Steve Webb’s figures show that error did happen in many cases. They can apply for this pension now and, because the mistake was made by the Department for Work and Pensions, it will be backdated to the date it should have been paid. That can be up to 12 years.

Any married woman who has a basic state pension of less than £80.45 a week should claim the extra. She will probably be successful.

Widowed or divorced

A widow can use her late husband’s record to get a state pension if that would be more than was due on hers. In most cases her reduced pension can be boosted to 100% of the basic state pension – currently £134.25 a week. She can also inherit some or all of his SERPS.

A woman who is divorced can use her ex-husband’s National Insurance record instead of her own up to the date of the divorce. If she has had more than one husband then it is only the record of the most recent one she can use to boost her state pension. This should be done when she claims her state pension. But it may not have been so it is worth checking.

Women who are widowed or divorced and get less than the full 100% basic state pension of £134.25 should ask the DWP to check they are getting all they are entitled to. If it was worked out wrongly in the past it could be backdated to the date of that error.

Call the Pension Service free on 0800 169 0154.

Over 80

Once you reach 80 you are entitled to a state pension of £80.45 a week if your existing state pension is less than that or you do not get one at all. To qualify you must be

aged 80 or more
live in the UK or the EU when you reached 80 or when you claim
have lived in England, Scotland, or Wales for at least ten years out of the last twenty.

It is not means-tested and does not depend on your National Insurance record. The full rules are here.

If you are over 80 but get less state pension than £80.45 or none at all then claim it now. It can be backdated up to a year.

You can claim your extra pension either online at the Pension Service or call free 0800 169 0154.

Exceptions

Not every married woman with an old state pension of less than £80.45 will be due extra pension. Some husbands themselves had less than a full state pension – they needed 44 years of National Insurance contributions then to get a full one. If he gets less than the full basic state pension – currently £134.25 a week – then his wife will also get a lower married woman’s pension. However, it is his basic state pension that counts (called Category A), so ignore all extras like additional pension – what we used to call SERPS – graduated retirement benefit, or extra pension for not claiming it at 65.

If he was originally given less than a full basic state pension then his wife’s pension on his contributions will be 60% of that and will be less than £80.45 a week. But she may still be getting too little and should claim.

People living outside the UK in a country where the state pension is frozen – it does not rise with inflation – may well be getting less than £80.45 a week and not be entitled to any top up.

End point

Is this a conspiracy against Grannies? – no. This is what happens when you have a complicated system, poor computers and a problem too big for a Government department.

Is this solvable? It looks like it, though as Ros Altmann points out , the solution looks like it’s in a queue that stretches from Caxton House , round the houses or parliament and back again (all socially distanced).

Is this affordable? – yes. The sums quoted in this article are chicken-feed relative to the State Pension budget.

Why it’s important to get this problem and associated state pension problems sorted, is that our state pension has to be relied upon as the platform for all our retirement. Steve Webb knows this more than anyone and it’s good that he’s spending his and his consultancy’s resources on what is (for them) pro bono.

Posted in actuaries, advice gap, age wage, pensions, steve webb | Tagged DWP, Grannies, LCP, state pension, Steve Webb | Leave a comment

Increasing pension scam awareness

Posted on May 22, 2020 by henry tapper

As AgeWage prepares for its journey into the FCA Sandbox, we are becoming more aware of the vulnerability of ordinary people to pension scams. We are really worried about the impact of unemployment, especially on those who are over 55 and within reach of their pension freedoms.

Now news reaches us of PensionBee, the UK’s leading online pension provider, who’ve released The Pension Scams Awareness Report, an 11-page document highlighting the varying levels of pension scams awareness among the general public, amidst a rapid increase in online fraud and scams.

The report, which surveyed 500 UK adults in April 2020, found that up to two thirds of respondents failed to identify some of the most commonly used scams. The two scams least likely to be identified are ‘early pension access’ and ‘free pension advice’, which are among the most prolific and costly scams for savers.

According to the report, less than half of those surveyed know that you can access your pension from age 55, highlighting an overall lack of awareness in how long a pension is designed to last.

” News” that pensions can be cashed in at 55 , is a tempting prospect for someone facing immediate hardship. Panic about the impact of the epidemic on people’s prospects of retiring could result in savers running out of money in later life. Worse, it could make them vulnerable to scammers seeking to capitalise on their confusion leading them to believe that accessing a pension at 55 is a perk that only they can provide.

A fifth of respondents do not expect scammers to target them by phone or email despite a huge increase in scams of this nature in recent months., People staying at home as a result of social distancing and lockdown restrictions are easy targets for cold calls. Cold calls are a hallmark of scammers, and have been so prolific in recent years that a ban on pension cold calling has been in effect since January 2019.

The findings are of particular concern as the number of scams has peaked since the start of the coronavirus pandemic, with Foreign Secretary Dominic Raab issuing a stark warning in early May, highlighting that cyber criminals are targeting individuals and organisations in the UK using Covid-19 related scams and phishing emails.

Sam-awareness is particularly dismal amongst older people who have a trust of “in person” approaches.

The UK’s National Cyber Security Centre (NCSC) and the US Cybersecurity and Infrastructure Security Agency (CISA) have also published warnings to consumers in recent weeks.

While consumers are encouraged to remain vigilant, innovators in the pensions industry are also working together to educate savers on how best to protect themselves. One new initiative is Scam Man & Robbin’, a pension scams awareness game created by four of the UK’s leading digital pension platforms: PensionBee, AgeWage, Smart Pension and Nutmeg. To win, players must correctly identify six of the most common pension scams and are given advice on how to spot a scam along the way.

This is what Pension Bee’s – Queen Bee – Romi Savova has to say

It is concerning that so many savers are unaware of the common tactics employed by scammers. Any one of us could fall victim to a scam and the coronavirus pandemic has only heightened that risk.

People should be extra vigilant and refuse to share any sensitive information about their pension, or indeed anything else, with people they do not know. It is clear that the pensions industry must do more to educate savers and take a stand against scammers.

The Scam Man & Robbin’ game is a great start, but we must continue to work together to find new and innovative ways to play the scammers at their own game!”

Posted in pensions | Tagged AgeWage, Blog, cold-call, Pension Bee, pensions, Phishing, robbin, Scam, Scam Man | 1 Comment

Shoot the message – not the messenger.

Posted on May 22, 2020 by henry tapper

If you can’t tell your savers what’s going on – let me!

Watching Martin Lewis’ money show last night I found myself aghast! Someone was trying to weigh up whether it was better to get 0.1% pa tax-free from an HSBC ISA or get 0.4% pa from another HSBC account and run the risk of paying tax on it.

Who’s framed this choice? HSBC I’ll be bound!

Lewis turned on the question with grim relish “clearly you are a new viewer” – (sub-text or a total loser)

“you are asking me whether to take money from a spit-worthy account to another spit-worthy account ” the answer is you should use neither. You should be taking the money away from HSBC and getting a proper rate elsewhere (and by the way I very much doubt you are earning enough interest on your savings to need an ISA anyway)”.

I paraphrase from memory but you can see the episode (f you can bear the ads) here. (8 minutes thirty).

The point is not that the question came in on some digital account but that the answer was clear and real. This is Martin Lewis at his absolute best getting viewers off their sofas and onto their devices , searching best rates and making their money go further.

Compare Martin’s with our pension messaging

Yesterday I had a go at Professional Pensions for publishing three articles in as many days all saying that pension schemes can use data-analytics to push messaging out to members in a more targeted, more personalised and more effective way.

My grouse was that the power of data analytics is awesome and just because you can identify the members of your pension scheme who you think need “education” or “nudging”, doesn’t mean that you are giving people the information they want.

I get “targeted” by hundreds of messages each day, all driven by my social media profile and all trying to sell me things I don’t want. It’s boring and time consuming junking mails and I do precisely the same with the pension messages. They are not telling me what I need and want to know. They are not interesting.

As my Mum tells me “If you haven’t got anything interesting to say, keep your mouth shut”.

Our messages are mostly junk

Just because you own a data-set, doesn’t mean that you have the right to bore.

The data you hold on your customers holds some very interesting information

The actual return your savers have achieved (known as the internal rate of return)
The amount of risk taken to get that return
The value your savers have got for the money they’ve given you
The value you’ve given them for the risk you’ve taken

This data is held within the contribution history of each of your savers and unlocked by comparing the contribution history to today’s outcome, the pot size – technically the NAV.

If you own the data set, or even if you have a right to an anonymised version of it, you can unlock the answers to the questions people are really wanting answering

What have I got?
What will it get me?
What has cost me?
Have I done well?
Did you do a good job?

By “you” I mean the people who had hold of people’s pension savings. If you are not telling people the answers to these questions , you really aren’t telling them what they need and want to know.

You are keeping your savers in the dark and all the messaging about saving more, or being financially resilient are you being boring. People should have the right to turn you off , but most people can’t – so they just send your messages to junk.

This is a shame, your data holds the information people want to know but you either don’t know how to, or don’t want to tell your captive audience what they want and need to know.

Do you want to be like Martin Lewis?

If you want to be trusted, you need to be fearless and tell people how it is. i would love to say that I agree with this post on Linked in! But I don’t….

I don’t agree with the post or the blog that Rhys has written because it perpetuates a long-standing myth that so long as everyone else is doing it, it’s ok.

“If I can see the benefit to me – a more relevant message, richer information, a smoother process, a more enjoyable read and best of all, a more prosperous life after work – then it’s all good”.

Actually being fed the placebos of the pension industry that everything is going to be good is what people dislike about our communications.

Right now people’s pension pots are between on average about 20% lower than they were in February. Many of us will have to stop paying into a workplace pension because we will be made unemployed. Many of my age will not get a job again, we may never see pension values like they saw in February again. These are uncomfortable messages but they are the ones people need to hear and act on.

Many people are very frightened about their pensions and they need someone like Martin Lewis who is not going to feed them the “which shade of HSBC” bullshit but point out that to get the best from their savings . People are going to have to find out what is going on and make informed choices.

If you want to be like Martin Lewis and properly communicate with your members/policyholders/savers, you’re going to have to stop agreeing bland placebos with each other and start telling people how its is.

Shoot the message not the messenger

Data is awesome and data analytics tells us everything we need to know about our customers.

Data analytics should not be used just to feed the same old stories to our customers as we’ve been churning out for the 40 years I’ve been doing this job.

People are bored with hearing the same messages telling them to save more , longer and with their current provider.

People would like to know their choices and those choices have to be “open market”, As I keep saying, so long as you suppress choices, the less people will trust you.

Telling people how it is – good or bad – using the data you hold for your savers – is the RIGHT THING TO DO.

If you can’t tell you people what their data says – I will.

Fabricated numbers but you get the point.

Posted in advice gap, age wage, Martin Lewis, Payroll, pensions | Tagged henry tapper, Martin Lewis, Message, Messenger, Quietroom, Rhys Williams | 2 Comments

“Your pension data could be taken down and used against you”

Posted on May 21, 2020 by henry tapper

Latest casualty

The last two weeks has seen Professional Pensions going data barmy with not one, not two but three stories extolling the use of personal data to manage pension scheme risks.

The first is a gentle and sympathetic article by Michelle Cracknell that won her the PMI student essay competition. I congratulate Michelle for the award and for qualifying as a student.

The second is the scarily title “Introducing the Maslow-style hierarchy of data-enabled communication” by Karen Quinn and Rhys Williams which calls on schemes to “reap the rewards of personalisation” by “targeting people based on their behaviour”. As these headings suggest, this is not a gentle article.

The third article is an interview with the BA’s Fraser Smart which takes the use of data to another level

“The most important priority of all the things we’re working on this year is about member experience,” Smart explains. “We’re trying to introduce a mobile application for members to increase their access to us. Every single member – whether they are a pensioner, deferred, or active member – will be able to see information about the schemes, about the benefits they have, when the next increase is, and who to contact if they’ve got any queries. Essentially, we want to give them a sense of trust that the right information is there.”

Shortly before the publication of this article, BA announced 12,000 job cuts, which made the article’s next paragraph a little sinister

For deferred members, the aim is to also provide indicative transfer values instantly available to look at, speeding up the process for those members who wish to take advantage of the facility.

The language of Trust

Michelle Cracknell’s argument is that “life moments”, the birthdays, marriages and moments of moving house and jobs are “teachable moments” and that schemes, who know about these life moments can use what they know to teach what they know.

This of course assumes that schemes are trusted and their teachings credible, if this isn’t the case then this messaging can become creepy and invasive. I remember NEST’s Tim Jones telling me he’d taken all his personal information off his linked-in profile to avoid being congratulated on life moments by “people like Henry Tapper.”

Which is why we need to be very careful about using words like “targeting” .”reaping” and loaded phrases like “take advantage”. Taking advantage of a DB transfer at a “life moment” like redundancy, does indeed require a “teaching moment”. I wonder how many of the 12,000 soon to be redundant members of the BA pension scheme will find advisers willing to teach them how to use this advantageous data.

The protection of GDPR

The General Data Protection Regulation means that we have to give our consent for our data to be used to help us. We generally have to opt-in to messaging from social media or our pension schemes. Tim Jones won’t have any of it while I – a born sharer, spend half an hour a day weeding my inboxes of unsolicited offers of help. We all have different tolerances for “privacy”.

But I wonder about the pedagogic aspects of all three articles. For Fraser, Rhys , Karen and Michelle there are “teachings” to be “targeted”. There’s no doubt people want to be taught, look at the popularity of the Martin Lewis Money Show. But people choose their content, whether on TV, youtube or through their choice of apps.

Getting people to listen to you

Smart communication is of course personalised. Rhys and Karen cite Swiss Re’s research which suggested car insurance renewal letter “open rates”, improved from 33 to 81% by putting the insured’s registration number on the outside of the envelope.

But getting people to open a personalised message only to get a depersonalised call to action like “increase your monthly contribution” or “use our drawdown service” is not so smart. You might get people listening to you , but to keep them listening to you, you are going to have to tell them something that doesn’t come accross as “junk”.

Repeating the dose

Michelle argues that great information is repeat information. There can be few better examples than the work of TPAS which hammered out the same messages for years and did so with grace and good will. Michelle is now a non-exec at Pension Bee who are doing much the same thing with their messaging.

The “Nirvana for BA pension members” envisioned by Fraser Smart, is a two way communication with members that does what Fraser did to a “ditch-digger” who once walked into his office looking for an explanation of his pension.

The person that walked in was kind of fearful about the future. The person that walked out was confident about their future.

Rhys and Karen’s pyramid involves getting data right, organising it and using it to deliver insights.

In all three articles, there is an essential similarity of view, that communication is a conversation, not something delivered from on high.

This is quite the opposite of the pedagogic communications that have failed trustees in recent years. In a classic example – the top down approach of the BSPS trustees, failed to get to the steel-men, while the Facebook pages put out by expert BSPS pensioners worked brilliantly. Eventually BSPS discovered that using the medium chosen by their members was more effective than teaching through a website no-one visited.

The Facebook pages are still there and still used on a daily basis. The reason everyone remembers TPAS is because Michelle got TPAS onto everyone’s social media feeds. Quietroom and ITM get read not just because of Professional Pensions but because they use their own sites effectively.

Using Social Media is (for many) an activity of daily living, visiting a pensions website isn’t.

Using our data against us

The dialectic of this argument has swung between my admiration of Karen, Michelle , Fraser and Rhys and my concern that what starts out as engaging is seen to be boring (Michelle), scheming (Karen and Rhys) and downright dangerous (Fraser).

And before you accuse me of being a pedagogue myself, let me explain that there are simple rules that can be followed that stop us feeling we are being bored into submission, that we’re caught up in Maslow’s spider-web or that we are part of a grand de-risking program designed to keep BA and its pension scheme out of the PPF.

These are the rules of GDPR and they can be summed up in its bill of rights

the right to be informed,
the right of access,
the right to rectification,
the right to erasure,
the right to restrict processing,
the right to data portability,
the right to object
and rights around automated decision making and profiling.

Keeping these rights to the front of mind, makes it clear that unless you keep the communications “clear, vivid and real” people will use GDPR to turn you off. Unless you stick by the rules on automated decision making and profiling members (and regulators) will object and if you overstep the mark and move from “nudge to tell” you put yourself on the hook for the outcome of your advice,

Our pension data is precious, powerful and awesomely dangerous! “Tread softly , because you tread on our dreams“.

Rhys, Fraser, Karen and Michelle

Posted in dc pensions, de-risking, digital, pensions | Tagged BA, digital, Fraser Smart, Karen Quinn, Michelle Cracknell, pensions, Quietroom | Leave a comment

And it was all going so well…

Posted on May 20, 2020 by henry tapper

Like a cobra poking it’s head out of the Fakir’s basket, like Nessy sticking its neck out of the Loch, the black mortality line is a stark reminder for those who think they’ve got away with it, that Covid-19 is not being stood down.

It is worrying when you discover that scenes in North Devon remind the police of an August Bank Holiday.

The Continuous Mortality Investigation (CMI) has published its analysis of today’s ONS release.

Key points:
– death rates are 1.4 times the same week last year
– they estimate that there have been around 61,000 excess deaths in the UK this year pic.twitter.com/YNEwbuoAGX

— COVID-19 Actuaries Response Group (@COVID19actuary) May 19, 2020

In case you are under any illusion, the virus is still wiping out small towns of us every week

The CMI’s Mortality Monitor is publicly available.

Link https://t.co/MSFqPlvqgK pic.twitter.com/hUBz7HNJrh

— COVID-19 Actuaries Response Group (@COVID19actuary) May 19, 2020

And while North Devon and the South West in general have seen little of the infection, it will not have benefited from the immunisation seen in more built up areas.

It now seems it was a cocky sense of invulnerability that led to Britain having the second highest death count in the world and if we continue to ignore the very grave threat to life and health of this pandemic, then areas like the South West will likely feel the brunt of a second wave.

It is really painful to hear that many of the cars found in North Devon car parks come from outside the South West.

Because things are getting better – does not mean things are going well. It was all going well on the graph in January, February and March, but we now know that was when things went wrong.

Not going well at all

Posted in coronavirus, Fred Goodwin, pensions | Leave a comment

#Carehomedynamo – caring for veterans

Posted on May 20, 2020 by henry tapper

The author with his mother

Lockdown has been great for bringing people with different day jobs together with common interests. In this case it’s care homes. And the person to make contact is David Prowse, who is clearly one of those gentlemen the armed forces nurture – who live to serve.

David’s a full time carer for his mother and this is only one of the amazing things he’s done in his life. He wanted me to know about the plight of armed forces veterans in care homes and I’m very proud that he thought my blog a good place to get his point across. Perhaps we can do more. Those of us in the Playpen know a few pensioners between us and may even be able to help give Op DYNAMO a steer. Volunteers, anyone?

#Carehomedynamo

The challenge

The ‘Emergency funding for Frontline Armed Forces Charities working with Armed Forces communities’ is a £6m opportunity. Can we use it for once in a generation support to a significant part of the Defence community and help address the #carehomecrisis?

The problem

The Royal British Legion Household Survey 2014 estimated 290,000 to 390,000 Armed Forces family members were living in care homes, meaning our ex-Service family makes up about half the UK care home population.

We don’t know all the needs in those 18,000 homes, but we can be pretty sure they want love and to know we’re there for them.

My suggestion

– a reverse Op DYNAMO (800 vessels assembled in six days to rescue 338,226 troops over nine days from Dunkirk) to:

Find – the veteran

Fix – their needs

Strike – up a long-term relationship

The military charities could divide the country between them, sharing out care homes and finding out their needs.

Typically, 10,000 care home residents die every month, that rate has doubled (ONS Eng & Wales 15 May 20); let’s mobilise DYNAMO now for our greatest generation.

If you agree – share.

If you can help – get in touch

If you know somebody that could help – ask them to get in touch.

The major military charities could collaborate and pool resources, divide the country between you, sharing out care homes , find out how many veterans each home has and what their needs are.

Colour of uniform doesn’t matter here, that can be sorted out later between the charities and I’m sure a funding quotient can be agreed through @Cobseo. Face-to-face is not required, charity coordinators can work from home and the risk is low.

Please use hashtag ##carehomedynamo on LinkedIn/Twitter.

#carehomeDYNAMO #mentalhealthawarenessweek #militarycharities #veterans #Cobseo #COVID19

David Prowse OBE can be reached on Linked in

Posted in coronavirus, pensions | Leave a comment

ESG? – don’t take anyone’s word for it!

Posted on May 20, 2020 by henry tapper

A grass roots organisation demanding more from our pension investment

We employ asset managers for a reason

The reason we employ asset managers is that they are better at investing our money than we are ourselves. They can do the job more time and cost effeciently , execute our wishes more accurately and provide better financial outcomes in terms of income and capital returns than we can ourselves.

Nevertheless, in employing someone to invest for us, we are moving one stop away from the coalface and have to accept someone else’s word for it.

When the brief is just about maximising returns then the conversation with the asset manager is quite easy, finding out if the strategies worked is simple enough, there are metrics in place to benchmark performance and means to compare the impact on the pure return of the local costs and charges incurred by the manager.

But when the brief is to invest according to values, then matters get a lot more personal. The rating given by one analyst to Tesla might be based on the way the company treats people, another analyst might weight Tesla according to the impact its products have on the environment

The electric carmaker is rated in the bottom 10 per cent of all companies by one rating agency (JUST Capital) but receives an “A” grade from another (MSCI). It is easy to see how investors looking at this might be left scratching their heads.

We employ asset managers to make sense of the noise.

While some asset managers make sense of the noise – most don’t

Share Action, which has campaigned for a decade for asset managers to engage with basic human rights discover that most still only pay lip service to how workers in the third world are treated.

It is clear , reading Share Action’s report that not all asset managers are the same and that the best, which include UK managers LGIM and Aviva are followed by a long and toxic tail.

Share Action – Point of no return (part II)

When it comes to picking who should manage our assets , we need an independent assessment because in the race to virtue – not everyone obeys the rules!

The race to virtue..

Annoyingly, we start out with a broad concept like “responsible investment” or “FTSE for good” , narrow down to Environmental, Social and Governance and soon find ourselves involved in heated debate about “green washing”.

There is sufficient “fake news” about ESG, that intermediaries are now employed to separate “noise” from “action” and we start judging ESG managers by their capacity not to be gulled by the management of the companies they invest in.

Everyone now knows that if you can convince investors that you have embedded ESG into your working practice you are more investable than your rival who hasn’t and we find ourselves caught up in the corporate “race to virtue”.

Leads to more regulation?

So within a few years of our first hearing about ESG, we can read Steven Maijoor, chair of the European Securities and Markets Authority (ESMA) in the FT

Companies that certify information on (ESG) criteria need “strong registration and supervision to prevent greenwashing. Personally, I believe that, where ESG ratings are used for investment purposes, [accrediting] rating agencies should be regulated and supervised appropriately by public sector authorities.

The FT rightly points out that the standardisation of analysis does not always lead to good analysis (witness the analysis of CDIs that allowed the housing finance crisis in 2008 to blow up the financial system).

It is possible to imagine an infinite regress of audit , marking each analyst , regulator and regulatory supervisor. But what happens here is a thickening of the layer of intermediation between the investor and the owned asset.

Value driven ESG needs bottom-up engagement.

To counter this thickening of intermediation we need some anti-coagulant. We actually need the people who own the shares to vote the shares, disrupt organisations issuing dirty green bonds and generally be heard. Whether this is through the public disruption of extinction rebellion or the activities of voting agencies, the voices of individual investors can be heard.

And if software can be developed that allows people to see the investments chosen by others and make their own mind up on the ESG of those investments, we can get a different kind of rating, one based on individual conviction which – collectively – can influence from the bottom up.

So the investors at Pension Bee started asking Legal & General questions about why there were fossil fuel holdings in its Future World Fund into which they were investing. Legal & General became answerable to Pension Bee as a proxy for these savers and I am quite sure that L&G now factor in the views of this group of investors – organised as they are by a pension manager which takes the governance of the funds on its platform seriously.

As organisation like PIRC, Minerva and Share Action have shown, a relatively few activist shareholders can influence corporate behaviour as much as ESMA.

And technology means companies find it harder to avoid scrutiny

Technology is driving greater transparency, The FT cite the impact of satellites tracking gas flares in the US to establish under-counting of wasted emissions by US oil companies. Data analytics can highlight inconsistencies in financial reporting and social media can build up a picture of actual behaviour based on first hand accounts.

It is increasingly hard for investable companies to get people to take their word for it. Which is what gives us hope that value-based investing is worth it.

Left to its own devices, the asset management industry could quickly absorb ESG into its business as usual with all the regulatory thickening necessary to meet Steven Mijoor’s predilections. But that would not a responsible investment industry, responding to the values of investors.

MMMM could organise this bottom up revolution

For investor’s to impose their values on the investment process, they will have to become more active, just as the investors in Future World, organised by Pension Bee, became more active. We need “share action” from individual investors through ESG’s Trustees, the investment committees of platforms, employer governance committees and ultimately we need this driven by individual investors. We need more apps like Tickr , software like Tumelo and more people using them.

We need Richard Curtis’ “Make My Money Matter‘ campaign to kick in and for young partnering companies to make their way forward.

These are the partners to Make My Money Matter and I hope to see this list of excellence grow.

My Money Matter Partners

I look forward to reporting more on developments in this space!

Posted in advice gap, age wage, brand, ESG, pensions | Tagged ESG, Make My Money Matter, Pension Bee, share action, Tumelo | Leave a comment

IFS says low-earners should quit saving for retirement.

Posted on May 19, 2020 by henry tapper

See notes at the bottom for how IFS came up with these numbers.

The Institute for Fiscal Studies has called into question the wisdom of many poor earners paying into workplace pensions under auto-enrolment.

It is not clear why the small number of people who would probably be better off not sticking with the default, and instead opting out of pension saving (at least temporarily), do not do so.

The IFS put forward various hypothesis’ – poor earners don’t know about the opt out, don’t know how to opt-out or can’t be bothered for the extra pay-roll cash it would bring.

The average gross earnings among the least financially secure group in 2018–19 were £357 per week, so ceasing pension contributions at 5% of their gross qualifying earnings (equivalent on average to over 3% of total earnings) would on average raise take-home pay by around £12 per week.

The numbers get worse for savers in net-pay schemes

That £12 per week figure is problematic. If the IFS’ poor-earners were in NEST it would be £12 but the Low Income Tax Group reckon it would be around £1.20 a week more if the low-earner saved with NOW or one of the other occupational pension schemes that don’t get low earners automatic tax relief (relief at source).

The IFS’ study should point out that for low-earners, the economic argument for opting out of a net-pay pension is up to 25% stronger than for opting out of a relief at source scheme.

Actually the real poverty tax is that those contributing to a net- pay scheme when earning below the minimum tax threshold could be paying a quarter more than those paying into a relief at source scheme, and they have absolutely no idea this is going on.

The graph has it

As you can see from the graph participation rates in auto-enrolment have increased even since the increases in contribution as the introductory taper wound out.

This is because of the steady inclusion of small employers at the end of the staging cycle and the consistency of opt-out which haven’t increased as contributions have been hiked. When Marks & Spencers first introduced AE – it required an employee contribution rate of 5% and this was thought to exclude many low-earners who would have opted out. The opt-out didn’t happen and M&S got an embarrassingly high bill for casual staff who they thought they’d not need to pension .

I think the same mistake may have been made in the Treasury. How else can we explain their failure to act on the “net-pay anomaly” when they had the chance (eg pre pandemic)?

What the IFS are pointing to as Auto-Enrolment , not as a policy success but as a policy failure (and its argument is reinforced by the net pay anomaly). This is the headline from a second IFS paper “who leaves their pension early after being auto-enrolled”

Pension participation amongst the least financially secure 3% of the eligible workforce is still 90%, up from just 22% before automatic enrolment

It is likely that there are significant numbers in this group who would be better off leaving their pension, at least temporarily, to have higher disposable income. Practically all of these employees have less than £1,500 in liquid savings, and could potentially benefit from a ‘rainy day’ fund.

So what is the counter-argument – why include the poor?

I am not going to fight fire with fire, on economic grounds Paul Johnson and the IFS are right, the lowest earners are probably better off putting better food on the table and avoiding debt than becoming sufficient in retirement. They are probably paying a poverty tax and being gulled into providing for themselves when they could rely on others in later years. I wrote back in 2017 that auto-enrolment could easily become a stealth-tax on the financially vulnerable and this worry has re-emerged

Frank Field would undoubtedly point to the dignity of those who labour and want to pay their way – at whatever price. There has always been an aversion for means-tested benefits and Field’s lifelong campaign to ensure that everyone was rid of them has a legacy in auto-enrolment.

But I don’t think you can establish a policy on the romantic notion of the dignity of labour. There has to be a bigger picture which allows those who are enrolling millions of poor earners to feel they do so for good.

I have been staring at this screen for a considerable amount of time, trying to come up with that argument and I cannot. Someone will need to explain to me the long-term benefit of millions of excess-pots being managed into retirement income by people with no access to affordable advice .

For me to be able to put up a reasonable argument for the exclusion of the poor from auto-enrolment , I am going to have to argue that there is a pension product for the poor which relieves poverty in retirement by increasing retirement income. I do not see one.

Who do the IFS say shouldn’t be in workplace pensions?

The IFS have constructed an index of the types of people saving into workplace pensions. At the top of the index are the people for whom AE is excess savings and at the bottom those for whom AE is a tax driving them further into poverty.

1st:most ‘financially secure’: meet the ‘financial security’ condition and have none of the ‘financial difficulties’ (22% of the 2018–19 AE sample);
2nd: do not meet ‘financial security’ condition, but have none of the ‘financial difficulties’ (38% of the 2018–19 AE sample);
3rd: have one ‘financial difficulty’ (29% of the 2018–19 AE sample);
4th: have two ‘financial difficulties’ (9% of the 2018–19 AE sample);
least ‘financially secure’: have at least three ‘financial difficulties’ (3% of the 2018–19 AE sample).

You will notice that figure of 3% they quoted earlier.

Hit and hope?

So far auto-enrolment has worked on the principle of “hit and hope”. Hit millions with a pension tax which they don’t have to pay and hope that something turns up in the future which solves the societal problems of people living longer and dying expensively.

So far the one initiative that is working is the triple lock , paid for by pushing back the state retirement age.

But nothing has been done to address the question “how do people spend the money they have saved”. We are hoping that something will come up – some vaccine. But whereas a health vaccine makes the front pages, a means of improving people’s pensions from their retirement savings most definitely hasn’t.

Mel Charles, the new AE Director at tPR, should not let the Government rest on its laurels. The pressure on family incomes from the impact of pandemic should increase opt-outs, not just because people need rainy day savings but because auto-enrolment saving is not saving for a pension , but saving for a different rainy day.

To really bed down auto-enrolment and make pension savings more than hit and hope, we need strategy to turn pension pots into retirement plans. We may have one , for the mass affluent, but for the people in the bottom tiers of the IFS’ “financial security index, I am on the IFS’s side .

Unless we can get people saving for a decent retirement income when they want their money back, auto-enrolment will have failed. People need to be able to swap cash for proper pensions and those proper pensions – for low earners at least – need to be collective.

The argument for enrolling low-earners must be made by demonstrating the future benefit and we are ill-equipped to do that right now.

Posted in actuaries, advice gap, age wage, pensions | Tagged AE, CDC, pension, workplace pension | 1 Comment

Protecting the public from financial fraud.

Posted on May 18, 2020 by henry tapper

Protecting the victims of financial crime

I am returning to the difficult question of financial fraud and its impact. We should not underestimate the emotional impact of fraud. This simple testimony makes this point better than I can.

My message to @JohnGlenUK, @MelJStride and Christopher Woolard:
“Do not underestimate the emotional impact of fraud.” pic.twitter.com/EWm28R8qlS

— Maria (@LCFinvestor) April 29, 2020

Whatever the vehicle which is used to relieve people of their money, the impact is the same.

The symptoms in those defrauded include a diminishment of self-confidence that leaves the defrauded unable to stand their corner. They are often made vulnerable and the duty of those fighting crime is threefold

To identify frauds at an early stage and limit their contagion
To apprehend and limit the perpetrators of crimes, ensuring they do not re-offend
To protect the financial interests of the defrauded by seeking to recover the proceeds of financial crime

And if these actions sound familiar it is because the spread of financial fraud has aspects in common with a virus. Thankfully , we do not treat the victims of CV-19 as we do the victims of financial fraud.

Where regulation is failing

The capacity of financial regulators to deal with scandals such as the creation , promotion and sale of LCF min-bonds has been called into question, not least by the testimony of Maria.

There were all the usual warning signs – opaque structures – the use of overseas investment platforms – the involvement of intermediaries – the payment of commissions and promises which were plausible.

In many frauds, including LCF, the fundamental deception was masked by the involvement of legitimate organisations who may have been wholly or partially operating within the law.

Which is why regulation must start with the question “was the customer treated fairly” and – assuming they weren’t , assume implied guilt on all parties involved. It is not good enough to assume that those who have been ripped off are guilty of not properly protecting themselves.

Regulation is still focussing on issues of procedure and the scope of the regulatory perimetre which allow those with criminal intent to carry without prosecution. There is ample evidence of repeat offending and the patterns of criminality are well known.

There is an opportunity for the UK regulators to get tough, as happens in other countries (especially the US but also Spain). We need action on the three points I’ve highlighted.

To identify frauds at an early stage and limit their contagion
To apprehend and limit the perpetrators of crimes, ensuring they do not re-offend
To protect the financial interests of the defrauded by seeking to recover the proceeds of financial crime

Justice cannot be furloughed

Sadly, the trial of suspected financial fraudsters in Spain – associated with Continental Wealth Management has been put on hold and will be resumed when social distancing resumes.

In London, over the last two weeks, the complexities of GMP equalisation have been discussed in the High Court and a judgement is expected shortly.

Financial crime continues and – as financial vulnerability increases, we are likely to see more criminality.

If fraudsters could get away with it in normal times, what can stop them in lockdown.

The UK authorities , collectively known as “Action Fraud”, have to be seen to be active and this must go beyond issuing warnings for the public to be alert. We need to see evidence of my three requirements. The authorities need

To identify frauds at an early stage and limit their contagion
To apprehend and limit the perpetrators of crimes, ensuring they do not re-offend
To protect the financial interests of the defrauded by seeking to recover the proceeds of financial crime

And this needs to be visible and reported. We cannot have justice furloughed.

Protecting whistleblowers

Sadly whistle-blowing on financial fraud is likely to lead to claims of “no smoke without fire” where the whistleblower finds him or herself implicated in the fraud by the fraudsters.

I know of instances where those campaigning on behalf of victims of fraud have been suppressed by lawyers, the media and sometimes the regulators themselves. The rules surrounding tipping-off can be used by scammers to turn regulators against informers. I have a file of solicitors letters demanding blogs be taken down. The laws of defamation are also used to provide fraudsters with a smokescreen.

So long as the authorities regard whistle-blowers as disruptive, they are likely to be distrusted. We need to encourage whistle-blowing, not distrust whistle-blowers.

This is about more than staying alert.

I am very keen to promote alertness to the red-flags that surround fraudsters. But it is not enough for the UK authorities to simply publicise the need to be vigilant.

We need to see positive action from the participants of Action Fraud to prevent those known to be scamming to continue operating in financial services.

Those who are authorised who deal with known scammers need to be investigated and where necessarily censured.

The payment of unreasonable commissions to introducers needs to be investigated and stopped.

The regulators in the channel islands, the Isle of Man, Malta ,Gibraltar, Switzerland, Germany, Eastern Europe and Spain need to work together.

Public warnings need to be published, victims encouraged to come forward and whistle-blowers protected.

The scourge of scamming is a financial pandemic which can best be contained by the sharing of data on its activity.

There is no vaccination , no mass immunisation, the only measure that we can employ to protect the public is suppression.

With financial fraud – suppression is possible

I started this blog with a tweet from Maria, I do not know Maria – know nothing of our circumstances, I only know of this tweet. If you listen to her for 90 seconds you will understand the damage that scammers do- to self-esteem.

Social media – used properly – can raise awareness , and Maria is doing just that. But social media can also broadcast scams. Where scamming is detected it needs to be explained and publicly pilloried, as Martin and Paul Lewis do.

But it also needs to be reported to Action Fraud and Action Fraud need to acknowledge and report back to those who make reports. Where the general public, journalists and those paid to combat financial fraud, work together, there is a chance to suppress fraud.

I hope that the severity of the threat facing us from COVID-19 will embolden those at the FCA and elsewhere to take action against those who they have information on and make life uncomfortable in whatever way they can. That particularly means working with others.

Suppression of financial fraud is possible , but it means authorities working better with the public for the common good.

Good for Scottish Widows for continuing to promote this tweet

Coronavirus is providing another opportunity for pension related fraud. Download our summary to help your clients identify the warning signs of a scam. https://t.co/xs4h16orvu pic.twitter.com/YpMkvydhAk

— SWidowsAdviser (@SWidowsAdviser) April 24, 2020

Posted in pensions | Leave a comment

Do you work in the bullshit economy?

Posted on May 17, 2020 by henry tapper

Bullshit jobs

Stefan Stern has kindly shared an opinion piece he’s written in the Guardian, which I like very much. You can read it for free here (thanks to the Guardian’s enlightened sharing policy)

Five years ago, Stella and I moved back into the centre of London so we could walk to work and avoid tubes and trains. Ironically, affluent people like us don’t have to worry about going to work. Stella’s employer has told her it doesn’t intend her to go to her office this year.

But Stefan’s point is that the choices available to Stella and me, aren’t available to most London Commuters , for whom cycling and walking aren’t practical. I did actually commute to the City from Windsor by bike for a few yers and good luck to you if you are as fit as I was then – I certainly couldn’t do it now. I applaud the City of London’s move to ban cars from large parts of the City so that pedestrians and cyclists can find it easier to get safely to their offices (existing pavements and cycle lanes aren’t wide enough to cope).

For all that employers aren’t going to risk their high-paid workers to exposure to COVID-19 on public transport – which is why home-working for the “haves’ will continue and why the “have nots” will face the trauma of the tube

It’s not just bosses who won’t do it.

But people who are not furloughed and need to pay their bills will travel into London tomorrow on a crowded bus or tube or rail-carriage and they will be putting at risk more than R<1. They’ll be risking themselves and their fellow passengers.

Do we work in the bullshit economy?

Another Guardian writer, Larry Elliott, is less gentle than Stefan Stern, Back in 2007 he lambasted new labour’s knowledge economy and re-christened it the “bullshit economy”

The essence of successful bullshit is that the really top-notch exponents not only manage to convince others but also manage to delude themselves. Some explanation has to be provided for Britain’s increasingly lopsided economy, dominated as it is by those not-so-heavenly twins, the City of London and the housing market.

These comments were not just Pre Covid but pre financial crisis. They are echoed by Stefan

Work is a practical matter that involves completing tasks and meeting needs. That is one of the lessons of the past few weeks. We have taken too many people in the workforce for granted for too long, while our leaders have loftily declared economic triumph.

It is not good enough for those of us who in our ‘heavenly” houses and top City and Westminster jobs to order people off Furlough and into the offices. It is up to us to make work safe and that means finding new ways to work- even if work is in our kitchen.

For those who have to travel, we must make it as safe as it can be, as Stefan concludes

General Omar Bradley, commander of US forces at the D-Day landings, said: “Amateurs talk about strategy. Professionals talk about logistics.” The logistics of getting safely to and from work should be what concerns us all now.

For those of us who get paid to carry umbrellas so that bosses don’t get wet – we should be asking can we find ways to get things done.

For those of us who employ the umbrella-holders, can we really call ourselves leaders?

We need to think again about what defines “essential work” and ask ourselves if we are doing it. If we cannot answer that question, we may well be in the mire – in the bullshit economy..

Posted in Occupy London, Politics | Tagged bullshit, Economy, Guardian, Sports, Stefan Stern, Work | Leave a comment

Will Covid unite us and make us kinder?

Posted on May 17, 2020 by henry tapper

This little survey by the Office of National Statistics has gone unreported. But it’s worth thinking about.

United?

There were two Questions:

How united or divided do you think Britain was before the coronavirus (COVID-19) outbreak?;

How united or divided do you think Britain will be after we have recovered from the coronavirus (COVID-19) outbreak?;

Answers

Thoughts

Lockdown is having a dramatic impact on the way we think about ourselves in society. Messages like “we’re all in it together” and phrases like “blitz spirit” circulate. For the moment ideological and religious differences are suppressed. How much of this is hysterical and how much genuine. Will Covid-19 make us more united and in what ways will this manifest itself when the “new normal” arrives.

Younger adults saw the largest change in their feelings of unity. For adults aged between 16 and 69 years, 19% believed Britain was united before the coronavirus, compared with 56% thinking this would be the case afterwards. For adults aged 70 or over, the change was from 28% to 59%. This suggests that lockdown has a much higher impact on the emotional response of the young than the old and that older people have a much higher sense of unity to start with.

Equal?

How equal or unequal do you think Britain was before the coronavirus (COVID-19) outbreak?

How equal or unequal do you think Britain will be after we have recovered from the coronavirus (COVID-19) outbreak?

Answers

Thoughts

Lockdown is having some impact on how equal we feel society is. It would be interesting to see attitudes to this question among different socio-economic and religious groups. There are many of my church friends who would answer “we are all equal in the eyes of God”, many ideologues would answer similarly, but most of us define equality in terms of wealth and there doesn’t seem to be much anticipation of a levelling of wealth.

Kind?

Questions

How kind or unkind do you think Britain was before the coronavirus (COVID-19) outbreak?;

How kind or unkind do you think Britain will be after we have recovered from the coronavirus (COVID-19) outbreak?

Answers

Thoughts

Kind is associated with benevolence and words like “indulgent, considerate, or helpful”; and “humane”.

For those aged 70 years or over the change was from 51% to 72%, suggesting that tolerance was and will be higher among the older in society.

We thought ourselves kind before lockdown but lockdown makes us more so. That over two thirds of us think we will be kind rather than unkind after what we’ve been through is touching. But as with thoughts on “unity”, we have to be cautious, it is easy for social confidence in our benevolence to recede when the outcomes of the pandemic become apparent. Will people continue to be kind when economic lockdown replaces social lockdown? Can we afford to be kind when we have little financial security?

Pension Conclusions.

These questions are new to the Coronavirus and the Social Impacts on Great Britain survey and were asked in the week 24th April – 3rd May. I hope that the survey will be run again to see how consistent responses are.

It is of course too early to draw conclusions but the questions that these responses throw up are interesting in themselves, especially if you work in an area where words like “unity, equality and kindness” have not been used much lately.

Pensions and unity

Pensions have always been collaborative and involved pooling. Even until 2015, the point of saving for a pension was assumed to purchase an income for life (an annuity). Pension Freedoms not only challenge that assumption, they actively promote the breakdown of pooling “From this day forward , no-one will have to buy an annuity”. But did the announcement of pension freedoms mark the high-water-mark of pension neo-liberalism? Will a post-Covid world be more interested in collective solutions where security in numbers beats aspirations to out-perform?

Pensions and equality

The current pension savings system works well for the affluent who get the majority of the tax-perks, can best benefit from pension freedoms and have easy access to advice.

Poorer people are dependent on state benefits and don’t pick up on many of them (pension credits in particular). They get a small share of the tax incentives and tend to use pension saving as a cash reservoir rather than an income for life. The self-employed – who are now mainly poor, are increasingly missing out on pensions.

The survey suggests that people will expect greater equality going forward though the results were less dramatic. It will be interesting to see if Government policy towards pension equality changes, especially with regards the treatment of pensioners who need to go into care homes

One thing that COVID-19 is breaking down , is myths around f inter-generational transfers from young to old. That the virus has so over-impacted the BAME and those in lower socio-economic groups will highlight underlying inequalities in society

The inequality of suffering from the virus is bound to ask questions about the burden of taxation and create pressure on wealth transference towards a more equal society. But it looks like we are sceptical that this will take us very far. My view is that COVID will break the camels back and we will see a juster pension taxation system going forward . We will see more money being directed towards later life care and less into wealth creation.

Pensions and kindness

There has already been a movement towards ‘financial well-being’ as a workplace benefit. The impact of COVID in the workplace is going to immediate. If we go back to work, it will be a workplace where soft-values of security and wellness are to the fore.

Savings rates are likely to increase despite higher taxes and lower bonuses and we are already seeing evidence of that. People will want to be kinder on others but also on themselves as binging is replaced by a more responsible and conservative approach to money.

Linked to kindness, we can expect to see more giving to others and a greater sense of welfare as a concept that needs promoting. I suspect that this “kindness culture” will allow Government to implement changes in the taxation system that will create greater unity and equality. We will be kind enough to tolerate these changes and this may be, in economic terms, the big shift in society from before to after.

These points are of course not exclusive to the UK!

COVID-19-how-you-can-make-a-difference-infographic-1600x900-final

Acts of kindness promoted in the USA

Posted in coronavirus, pensions | Tagged Covid-19, kindness, ONS, pensions | 3 Comments

C19 Actuaries weekly report – 16 May

Posted on May 16, 2020 by henry tapper

Matt Fletcher and Nicola Oliver

Every week, more is written on COVID-19 than any individual could possibly read. Collectively, the COVID19 Actuaries Response Group read more about the outbreak than most, so we’ve decided each Friday to provide you with a curated list of the key papers and articles that we’ve looked at recently.

Modelling – reports

Estimating infection numbers in European countries

A key variable in determining the timing and extent of easing lockdown and other restrictions is the proportion of the population that have already been exposed to the virus SARS-CoV-2 – if a large proportion have been exposed then re-opening with relatively light social distancing measures in place might be feasible without leading to a devastating second and subsequent wave of infection. If the proportion is small, then stricter measures may be required for a longer period.

There have been several recent studies aiming to determine the prevalence of infection – where some studies we have previously reported on have relied principally on estimates based on modelling of other variables (principally infections and deaths), data relating directly to infection is starting to become available in various countries:

Estimating the burden of SARS-CoV-2 in France (H. Salje et al, Science)

This is a brief but wide-ranging report, looking at various aspects of the outbreak in France. The researchers estimate that, by 11 May 2020 (when interventions were scheduled to be eased), between 1.8 and 4.7 million people will have been infected, or between 2.8% and 7.2% of the population. This suggests that in France, population immunity is likely to be insufficient to avoid a second wave if all control measures are released.

This conclusion is based on modelling of hospitalisations and deaths, but notes that a prevalence of the virus of around 3% has been estimated among blood donors in Hauts-de-France, which is consistent with their findings.

Coronavirus: the first seroprevalence data estimates that 5% of the population has been infected (report (Spanish) & article (English))

The Carlos III public health institute collected blood samples from almost 70,000 participants, to determine the proportion of people in Spain that had developed antibodies following infection. Results suggest that around 5% of the Spanish population have been exposed to SARS-CoV-2, with prevalence highest in areas closest to Madrid, typically over 10%.

A phased approach to unlocking during the COVID-19 pandemic – lessons from trend analysis (Heald et al)

This is a report which has received some recent media attention, focusing on experience in England – the analysis set out information about COVID-19 cases in each of 149 Upper Tier Local Authorities and estimates that the reproduction rate R has fallen on average from 2.8 to 0.8, sufficient to suppress infection from the disease. They also estimate that 29% of the UK population has already been infected; however, they do note that this finding relies on a linear extrapolation of current trends, an assumption which may not hold. In addition, a significant proportion of deaths are not mapped to a Local Authority which may distort the trend within a given local authority.

It’s worth noting that there is a substantive seroprevalence study underway in the UK, with initial results expected in June – this should give a direct indication of population-level exposure without needing to extrapolate from alternative data sources.

The studies in France and Spain in particular show that, as expected, prevalence is higher than the official counts of positive tests – for example in Spain, over 200,000 cases have been recorded, where a 5% prevalence would indicate over 2,000,000 cases. But the figures are not indicative of a level of ‘herd immunity’ to SARS-CoV-2 being reached.

Clinical and Medical News

How Scientists Plan to Develop a Coronavirus Vaccine

We have covered the potential for vaccine development and examined the pharmaceutical pipelines previously. The process of exactly how a vaccine will eventually make it to market is outlined here: This includes a step-by-step overview from sequencing of the virus, through to testing, approval and manufacturing. This confirms that the process is far from simple and nothing is guaranteed to succeed.

Antibody Tests

An antibody test developed by Roche that has demonstrated excellent specificity and sensitivity following evaluation at the government’s Porton Down facility has gained approval from Public Health England . At this stage, there is no official announcement on whether these tests will be adopted by the NHS. The test already has approval from medical regulators in the EU and the United States.

The role of vitamin D?

The protective role of vitamin D in COVID-19 is unclear. In an insightful commentary piece, Dr JoAnn Manson, professor of medicine at Harvard Medical School and Brigham and Women’s Hospital discusses the potential benefits of vitamin D . It is known that vitamin D has an immune-modulating effect and can lower inflammation. Emerging evidence from COVID-19 patients suggests that vitamin D deficiency may be implicated in more severe disease.

A randomized clinical trial of vitamin D supplementation is planned in moderate to high doses, to see whether it has a role in the risk of developing COVID-19 infections and in reducing the severity of disease, hence improving clinical outcomes.

Heart Health

Interesting analysis of data derived from Fitbit users around the world suggests that, when comparing the baseline data from January to that of February, March, and April, the average resting heart rate declined . Three key trends were identified: step counts declined, but active minutes increased; sleep duration increased; and, bedtime variability decreased. This is all good news for cardiovascular health.

Air Pollution Reduction and Mortality Benefit

The stringent traffic restrictions and self-quarantine measures adopted by China have resulted in a reduction in transportation emissions. Emissions from residential heating and industry remained steady or slightly declined. . This analysis suggest that interventions to contain the COVID-19 outbreak led to improvements in air quality that brought health benefits in non-COVID-19 deaths. Whilst emissions are likely to increase again once restrictions are eased, perhaps there is now increasing appetite to maintain some transport restrictions considering the impact on health outcomes.

Kawasaki Disease

Kawasaki disease is a condition that mainly affects children and causes inflammation in blood vessels throughout the body. Early treatment results in rapid recovery for most; delayed treatment is associated with increased risk of prolonged disease with cardiac involvement. Clinicians are starting to report increasing cases of Kawasaki disease, probably associated with SARS-CoV-2. Analysis of paediatric patients in Bergamo reports a worrying 30-fold increased incidence of Kawasaki-like disease.

Research Research! Part Two

Last week we reported on a key repository for COVID-19 research in which studies published in pre-print or without peer review are assessed for their strengths and weaknesses .

This editorial in the BMJ highlights how poor quality research is damaging to an effective response . The authors note that many of the registered clinical trials are likely to be too small and too poorly designed to be of any use, that access to preprints has led to irresponsible dissemination as flawed studies are picked up by the media and that there is a plethora of duplication.

Data

ONS data

The Office for National Statistics continue to produce timely data on both COVID-19 and all-cause deaths. On 15 May, they published two new datasets:

Deaths involving COVID-19, England & Wales: deaths occurring in April 2020 (data & report)

This dataset sets out how many people have died from COVID-19, where deaths occurred up to 30 April 2020 and were registered up to 5 May. Information is provided about the characteristics of those who died (including pre-existing conditions), comparisons of COVID19 to other causes of death, along with other relevant information about the registration of deaths.

It shows that of the 33,841 deaths involving COVID-19 occurring between 1 March and 30 April, 95% had COVID-19 assigned as the underlying cause of death; for context, this is equivalent to the third highest cause of death for the whole of 2018. For April 2020, COVID-19 was the most frequent underlying cause of death for deaths occurring in April 2020.

Dementia and Alzheimer disease was the most common pre-existing condition found among deaths involving COVID-19, involved in around 20% of COVID-19 deaths.

Deaths involving COVID-19 in the care sector, England and Wales: deaths occurring up to 1 May 2020 and registered up to 9 May 2020 (provisional) (data & report)

This dataset sets out information on the number of deaths between 2 March and 1 May 2020 among care home residents, both from COVID-19 and other causes, and splitting out where these deaths occurred. In total, there were 45,899 deaths of care home residents; of these, 12,526 involved COVID-19 (27% of all deaths of care home residents). Of these 12,526 deaths, 72% (9,039 deaths) occurred within a care home and 27% (3,444 deaths) in a hospital. This means that, of all deaths in hospital from 2 March 2020 involving COVID-19, 15% were deaths of care home residents.

Health Data Research UK repository

Health Data Research UK is a group looking to bring together UK health data for research and innovation. Their COVID-19 response website can be found here. HDR UK have also set up a repository containing resources for COVID-19 research – this pulls together a wide array of links to datasets and research relating to COVID-19 from the UK and elsewhere.

Et finalement …

Not sure if it’s a boy or a girl

One thorny issue that those on the continent are grappling with is whether the disease is masculine or feminine.

In France, many started off using the masculine ‘le covid’, but it seems that L’Académie Française, the esteemed guardians of the French language who are largely concerned with ensuring that the language is not infected by Anglicisms, have decided that it should in fact be ‘la covid’. On the academy’s website under the heading ‘Dire, ne pas dire’, (‘say, don’t say’), they announce:

‘On devrait donc dire la covid 19, puisque le noyau est un équivalent du nom français féminin maladie.’

‘We should therefore say (la) covid 19, since the nucleus is an equivalent of the French feminine name illness.’

In Italy, the situation is more complex – according to virologist Fabrizio Pregliasco, the disease Covid19 is feminine (la covid) , but the virus SARS-CoV-2 is masculine (il SARS)

And in Spain, the debate continues …

We’ll keep you informed as data from other countries comes in – do let us know if you have the relevant information!

16 May 2020

Posted in coronavirus, pensions | Tagged Coronavirus, Covid-19, COVID-19 Actuaries, ONS, SARS CoV-2 | 1 Comment

Living and working in the City of London

Posted on May 15, 2020 by henry tapper

Places featured in this blog

I live in Blackfriars in one of the areas of the City which were historically beyond the control of the City Fathers (what we’d call the Corporation of London today). Where I live in Blackfriars there was a priory. The land was owned by the Church and when the priory was dissolved in 1538, the land remained in the ownership of the Church – and not subject to City laws.

That is why we live next to Playhouse Yard and the Apothecaries Hall which was once the site of the City’s only theatre. This is where Twelfth Night had its premiere. Shakespeare is thought to have been a Catholic, he is said to have attended St Anne’s Church next to PlayHouse yard. It was a catholic church long after Mary’s reign, Malvolio wouldn’t have liked Blackfriars much.

St Annes is now subsumed into the Church of St Andrew’s by the Wardrobe. St Andrews claims to have the chalice from which Will would have drunk – we drank from it recently.

Shakespeare bought a property next door to where I live (now the Cockpit pub). He used it to house his players, the area was and remains a site of many ale-houses.

Indeed my next-door pub (the same Cockpit) could have been accessed from the Church of St Andrew by the Wardrobe (outside the Blackfriars Gate ) via a tunnel. It is thought that puritans who fancied a bit of the other, made their way into Blackfriars via the tunnel. I have seen the start of the tunnel and where it emerges but have not crawled it. Like much of the history of London, it has been embellished in the telling.

Views of the Cockpit

John, the publican at the Cockpit. proudly told me the pub was once called the Third Castle;- being the third pub you came to as you walked away from Barnard Castle on the river, the river is 300 yards away.

The City has not been like this since 1667.

Following the Great fire of 1666, the area where I lived burned down and new buildings emerged (including the Third Castle pub and the Church of St Andrew by the Wardrobe).The Wardrobe was a changing room for the monarch who used it to get in and out of City garb. It too burnt down and is now serviced accommodation for City visitors.

The old church of St Anne which existed within Blackfriars church ground was not rebuilt. Its churchyard remains one of the City Gardens and it’s where Stella and I have sat on a gravestone with a glass of Prosecco and toasted the NHS and 75 years of peace .

Normally our little area of the City, a hive of paved streets is noisy with tour groups but these have gone for now. There is little noise in the City once the construction workers have shut down for the day (mid afternoon). Busses still make their way up Ludgate Hill and past St Pauls and ambulances speed to and from St Bartholomew’s hospital, but there are no planes or helicopters above and few trains below.

It feels like 1667 when the Citizens of the City decamped north to the mallow fields and south to Southwark. When I last looked at the ONS map, the City of London with 8900 residents, had only 16 hospital admissions for COVID-19 and but 3 deaths.

The City of London Covid Death rate is conspicuously lower than neighbouring areas

Like 1667, most of our residents are outside the City Walls . They have gone to their second homes in the shires.

The Barbican flats are empty, I see them from WeWork. There are a few joggers on its walkways but the great cultural centre is furloughed. Only in the City of London owned estates of Golden Square and Old Street are there still queues for the shops. In Blackfriars there is no-one, most of the flats around me are serviced either for short term business rents or by Air B&B. Even the “lonely harlots” who use AirBnB lets – have no custom – and have gone home.

The Grange Hotel at St Pauls is now a hostel for the homeless. The homeless of St Pauls continue to lie in doorways during the day but make their way to hotel splendour as the night draws in. This is a City being reconstructed where only derelicts and a few people such as Stella and I, choose to remain.

Reconstruction

The great plan for 1667 would have seen the City’s street structure overhauled and a grid plan replace it. This never quite happened and the City remains a hive of small backstreets, ally’s with one or two through fares and a massively busy circumference road from which the City is serviced.

The City Fathers (now the Corporation) are now looking to reconstruct these streets so that they become what they were, mainly pedestrianised with motor cars prohibited from large parts

You will no longer be able to drive your car up Ludgate Hill past St Pauls, there will be no more cars crossing the Bank interchange and you won’t be able to make yourself East to Aldgate, north past Moorgate or down to Tower Gate by car.

It is not yet clear whether the ban will include taxis and hire cars. Busses are not mentioned. Right now the vast majority of cars in the City are limos ferrying in the traders and senior execs of the financial and professional institutions. It will be interesting to see whether these execs have to make the final mile of their journeys by bus, bike or Shanks’ pony.

The City of London is keen that when the 90% of the 550,000 non-residents return (current estimates from Land Securities is that office space is at 10% capacity), the City will be ready.

For this reason , large parts of the City are currently being reconstructed. The interchange at the east end of Cheapside is being dug up, the whole of Cheapside is dug up, much of the rest of the Blue Roads (see map above) look to be going the same way with wider pavements and bigger cycle lanes replacing the two-way traffic systems of today.

No going back?

When you go back to the City, it will be a different place. On many of the Square Mile’s streets, pavements are too narrow to maintain safe social distancing, even if only a small proportion of the City’s workforce initially returns to work. In some streets, the Corporation thinks it is likely that existing arrangements will be a danger to the public.

So the emergency measures will be drastic, I wonder if they will be permanent.

The corporation’s plans point out that Covid-19 could mean a longer-term effect on traffic levels. During the 2008 recession, traffic in the Square Mile fell 16.5 per cent between 7am and 7pm — but there was no subsequent rebound in volumes as the economy recovered.

My suspicion is that the City of London will become not just less congested, but less populous. Many people will never go back to the City. For those who do it will be quieter, less polluted and less friendly to pandemics. As a resident, I see obvious benefits , but if I was part of the eco-system of shops, bars and hotels that support the pre COVID City of London, I would be concerned. If I was Land Securities or WeWork or any of the Office landlords or sub-landlords I would be very concerned.

As in so much else, I see the pandemic as fundamentally changing lifestyles and with them our geography . The geography of London has always been changing and so has its population. More people have died from the pandemic in London than in any other region of the UK and COVID alertness is high here.

London is ahead of the curve both going in and coming out of this first (we hope only) surge of the pandemic. I am pleased to see that it is making radical preparations for the future, recognising that the City of London will not be the same again.

Further up and faster down

Posted in London, pensions | Tagged Barbican, Bicycles, City of London, Corporation of City of London, Covid-19, Deaths, London | 4 Comments

Is the UK institutionally ageist?

Posted on May 14, 2020 by henry tapper

This week we hear that numbers in England and Wales dying in care homes is exceeding those in hospital. In March Government told these homes the risk of death in homes was “most unlikely”. How did it come to this?

It seems only when Government can show that COVID-19 has done its worst, are we allowed to know its impact on our most senior citizens. The figures suggest the impact of the virus in care homes is finally reducing. Is this supposed to give us comfort?

The grim reality of the last seven weeks for those in residential care homes is becoming clear. The numbers told us it was happening and so did the presence of morticians parked outside care homes.

Academics at the London School of Economics found that data on deaths in care homes directly attributed to the virus published by the Office for National Statistics significantly underestimated the impact of the pandemic on care home residents and accounted for only about four out of 10 of the excess deaths in care settings recorded in recent weeks in England and Wales.

ONS statisticians said on Tuesday that 8,314 people had died from confirmed or suspected Covid-19 in English care homes up to 8 May. They are based on reports filed directly from care home operators to the regulator, the Care Quality Commission. Care Inspectorate Wales has said Covid was confirmed or suspected in a further 504 cases in homes up to the 8 May in Wales.

Graph showing how care home deaths (though falling) are moving ahead of hospital deaths

But academics at the care policy and evaluation centre at the LSE found that when excess deaths of other care residents and the deaths of care home residents from Covid-19 in hospitals are taken into account, the toll that can be directly and indirectly linked to the virus pandemic is likely to be more than double the current official count.

Why the ONS numbers don’t tell the story

Adelina Comas-Herrera and Jose-Luis Fernandez who wrote the LSE report tell us that

“Data on deaths in care homes directly attributed to Covid-19 underestimate the impact of the pandemic on care home residents, as they do not take account of indirect mortality effects of the pandemic and/or because of problems with the identification of the disease as the cause of death,”

“Data on registered Covid-19 deaths in care homes in England and Wales only accounts for an estimated 41.6% of all excess deaths in care homes. Not all care home residents die in care homes … Calculating total excess mortality in care homes since 28 December and adjusting this by the assumption that 15% of care home residents die in hospital, suggests that by 1 May there had been in excess of 22,000 deaths of care home residents during the Covid-19 pandemic – 54% of all excess mortality – in England and Wales.”

These numbers are truly shocking. Over a month ago ,I published work via the COVID-19 Actuaries that predicted that care homes would account for half as much again as hospital deaths.

This week we have found that COVID-19 deaths in care homes in the UK are running not at half but at more than hospital deaths and these deaths aren’t just “excess”;- many appear to have been avoidable.

Additional fatalities may have been caused by care home residents who did not seek or receive medical care for other health conditions for fear of contracting Covid-19 or over-burdening the NHS as well a lack of access to normal care.

Care homes have been running at 10% to 20% staff absence rates and many homes have been trying to isolate residents in their rooms to reduce infection spread, but this can also make their normal care more difficult and residents’ needs less visible.

The academics, who have been tracking virus death tolls in care homes globally since the start of the pandemic, cited concerns raised internationally about deaths being linked to the consequences of residents being isolated in their rooms, without adequate eating, drinking or medical support, and not to the virus itself.

Fundamental failings from being under-prepared

We have known for some time that the staff-absence rates in care homes result from staff having to self-isolate because they suspect (but do not know) they are infected.

Because we couldn’t test, many self-isolated unnecessarily leading to problems from under-staffing. The lack of tests at the early stage is now showing in reported excess deaths and these will finally be admitted as COVID-19 related deaths.

And then there is the human costs on carers, many of whom have to work in more than one care home (mostly because of poor pay and high demand). There is strong anecdotal evidence that movements in and out of residential care homes by carers is spreading the infection. This spreading happens because many carers are infected and this is because of inadequate protection – down to PPE.

Yesterday two workers came to move furniture out of an adjacent office to mine in WeWork Moorgate. They came in full body suits, had masks, gloves and total head protection. This was for the protection of these workers and had been provided by a thoughtful and financially strong employer. To get to that office they had to pass dozens of workers outside the building with no PPE on whatsoever.

The presence of these removal specialists- would have graced an ICU unit. All they were moving were files, computers and books. Watching them through the glass panels of our offices, I thought that this is how it must feel for carers in residential homes, when they watch NHS staff working in intensive care.

Taken together, the lack of testing , the lack of PPE and the lack of publicity around nursing homes has led to the situation we have today and the Government telling us that numbers dying in Care Homes is now falling, is no comfort at all to those residents and carers who are no longer with us.

Most awful of all, many elderly patients have been taken off NHS wards into residential care – taking COVID-19 into the care system with them. Recent research from the Alzheimers Society suggests a third of our residential care homes have received people cleared out from the NHS to make way for COVID-19 cases.

If the stated aim of Government was to keep people safe and avoid deaths, then the situation in nursing homes shows them to have failed. By focussing throughout the early days of lockdown on hospital deaths, the Government not only missed the bigger problem, they helped make it worse,

What this tells us about our society.

There is a body of prejudice in this country against investing money in those in later age. You hear that prejudice in comments about people in nursing homes being at death’s door. Sadly there are some who don’t see these deaths as more than natural selection.

This is not “natural selection” it is geriatric genocide. It is the opposite of immunisation, it is cold and heartless cleansing of a part of society that has no economic function.

If we accept the argument that those in residential care homes would have died anyway, then we are on a slippery slope that can extend to other less economically viable sections of society.

Ros Altmann, Stuart McDonald and Debora Price have all written on these pages on the iniquity of considering deaths in care homes as of a lesser order to hospital deaths. I will add my voice to theirs.

What has happened and is happening in Care Homes is a national disgrace. That more people are dying in Care Homes than in hospitals is a terrible indictment of our handling of this pandemic. That the LSE estimate that over 22,000 people have already died in English and Welsh residential care is a terrible indictment of our handling of the pandemic. And the terrible conditions go on. This from the Guardian’s reporting of the LSE research

Asked to comment on the estimates, a spokesperson for the ONS said: “ONS is undertaking further analysis on all deaths of care home residents which will be published in the coming days.”

The figures came as the Alzheimer’s Society said care homes have been “left to fend for themselves” amid continuing shortage of personal protective equipment and testing for residents and difficulties isolating infected residents.

It said that of more than 100 homes surveyed last week, 43% were still not confident of their PPE supply, with one home resorting to taping bags around carers’ arms, feet and hair. Fifty-eight percent of homes said they were unable to isolate residents and a third said they have taken in Covid-19 positive patients discharged from hospital.

It is good that the Government announced yesterday another £600m in funding against the infection in care homes but Keir Starmer is right to remind Boris Johnson (as he did in parliament yesterday- May 12th) that in early March the Government were telling nursing homes it was “most unlikely” they would see deaths.

The neglect of residential care homes (and of carers whether in care homes or isolated at home) tells us that we as a society have much to learn. We care too little about our senior citizens and we need to move to a national care service, as the Labour Party has been calling for. And we need a Beveridge to make it happen.

Posted in actuaries, advice gap, age wage, later life, pensions, Ros Altmann | Tagged Care Homes, Covid-19, Debora Price, LSE, Nursing, ONS, Ros Altmann, Stuart McDonald | 4 Comments

Tackling COVID-19 through electronic health records

Posted on May 13, 2020 by henry tapper

Dan Ryan

As we in England change our mantra from “Stay at Home” to the more nuanced “Stay Alert” and the possibility of increasing numbers of socially distanced contacts, it is vital to understand the range of data sources that the UK government is using to understand the spread and impact of this crippling disease. And indeed, what data is being shared with us now and what will be shared in the future.

Our changing diet of data, thanks to Public Health England

Back at the beginning of April, there were only three metrics from Public Health England (PHE):

Numbers of tests (all of the PCR swab variety).
Numbers of confirmed cases of COVID-19.
Numbers of deaths (but in those days limited to those happening in hospitals).

Since then, the breadth of modalities of data has spread to cover many different activities in hospitals, care homes and the community.

In particular, since 23 April, PHE has been publishing a COVID-19 epidemiology surveillance summary report each Thursday at 2pm. Each report is a veritable smorgasbord or treasure trove of information, that highlights the wealth of different data sources that PHE can call upon, using new and existing channels.

The series of reports aim to provide a picture of COVID-19 in the wider community that is intended to help plan the national response to the pandemic and assist regional stakeholders in local planning.

Here is a snapshot of the different key sections in the most recent 20-page report from 7 May, providing data from week 17 (April 20-26):

Confirmed cases – setting out total number of tests and those confirmed with SARS-CoV-2 in England up to 29 April, broken down by age, sex, date of sample, ethnicity and region
Community surveillance – reports on 1,006 new acute respiratory outbreaks from PHE’s Health Protection Teams and groups in the devolved countries and on internet-based surveillance systems covering both Google search queries and a national survey of 4,425 on trends in influenza-like-illness (ILI) using the FluSurvey template.
Primary care surveillance – numbers of GP visits (covering 55% of England), numbers of unscheduled visits and calls during out of hours (covering 70% of England), and the sentinel swabbing scheme at 200 GP practices which shows that 20-30% of those presenting with influenza-like-illness (ILI) are testing positive for SARS-CoV-2.
Secondary care surveillance – attendances at Emergency Departments and admissions to hospital, including data from CHESS (Covid-19 Hospitalisation in England Surveillance System) that tests all those admitted with ILI, lower respiratory tract infections (LRTI) or pneumonia for SARS-CoV-2.
Virological surveillance – data collated in Respiratory Datamart from the various PHE laboratories that have been monitoring circulating viruses since the last influenza pandemic in 2009.
Mortality surveillance – cumulative numbers of deaths by date of occurrence split by age, sex and ethnic grouping. As this report only summarises data up to 27 April, it predates the inclusion of deaths in nursing homes from the Care Quality Commission. It remains to be seen how this will be presented in future weeks. And finally, reference to excess mortality analysis provided by the ONS each Tuesday.

All of this is helpfully summarised in a multi-part infographic together with a fuller explanation of the underlying sources and motivation:

Figure 1 – Infographic from PHE Surveillance Report for 7 May 2020

An impressive feat of data collation that provides vital insights. And yet. And yet. It is much like the “curate’s egg”: tantalising in parts. It probably meets its core objective which is to provide those inside and outside the health system with reassurance that the situation is being monitored.

It leaves those wanting to develop forward-looking models and scenarios to continue their search. But it gives them the vital sign that such data does exist. All the activity information on GP and out-of-hours calls and visits are but a single slice of the patient electronic health records that collectively are one of the most valuable assets of the nation for research. Closely and correctly guarded, the various custodians of this mosaic of health datasets have supported approved researchers for years from leading research institutions around the world in improving our understanding of health, disease and treatment through tightly governed and ethically approved research projects.

Custodians of our individual health data

One of these custodians, the Clinical Research Practice Datalink (CPRD), has long collected de-identified patient data from GP practices across the UK to provide a longitudinal picture of UK population health^[1]. This dataset alone includes records from 14 million registered patients. Over the last 6 weeks, CPRD has approved 9 different cohort studies from leading research institutions such as University College London, King’s College London and the London School of Hygiene and Tropical Medicine to investigate the many different aspects of our battle with COVID-19. Impressive, but might we not have expected more given the quality and quantity of such data?

Figure 2 – Approved research studies by CPRD focusing on COVID-19

Source: Clinical Research Practice Datalink

The CPRD and other similar electronic health record datasets contain rich data built up from patient consultations in primary and secondary care, whether directly or through the referral process. Rich data covering diagnoses, laboratory tests, immunisation records, risk factors such as smoking and blood pressure, medications, outpatient and inpatient stays. Linkages with other key datasets dramatically extend the granularity and list of clinical outcomes that can be investigated, such as:

Small area level data from ONS on deprivation measures
Hospital episode statistics from NHS Digital
Cancer registration, treatment and quality of life data from PHE

Many will be familiar with the attempts in the past to synthesize all these many different healthcare datasets into a single entity, increasing both the power and depth of health insights that could be drawn. Now is not the time to debate or rehash that history. Instead, I would rather highlight how the threat of COVID-19 has led to the rapid development of a new dataset that illustrates how electronic health records can help researchers in identifying new insights and strategies for how we tackle COVID-19 more effectively in the future.

Rapid innovation in unleashing the power of electronic health records

Last week on May 7, we were introduced to the OpenSafely platform that used NHS electronic health records to look for patterns in hospitalised patients who die from COVID-19. This platform has been built in a remarkable 5 weeks, bringing together 24 million patient primary care records into a virtual data centre.

OpenSafely represents a multi-disciplinary collaboration between the DataLab at the University of Oxford, the EHR group at London School of Hygiene and Tropical Medicine, electronic health record software companies such as TPP and wider groups such as ICNARC, working on behalf of NHS England and NHSX, the group in the NHS driving forward the digital transformation of health and social care. The full background can be found at the OpenSafely website. This collaboration released its first analytical report at the launch, providing multi-variate analysis on which patients are most at risk of death in hospital from COVID-19^[2].

Figure 3 – Multi-variate analysis of mortality risk, including ethnicity and deprivationOpenSafely is taking a deliberately open approach to both its collaborations with leading research institutions and its analytical approaches. Approved researchers will be able to carry out large scale cohort analyses within the TPP data centre. Further active areas of research would include the following:

Identify those treatments that increase and decrease both the risk and severity of COVID19.
Identify those individuals at highest risk of hospital admission, ventilation or death to inform advice and planning at all levels.
Use local clinical data to predict local spread and health service need.
Provide early warnings on disrupted clinical services such as cancer referrals and emergency interventions for heart attacks and stroke to better monitor and measure the likely indirect impact of COVID-19 on population health.

All of which serves to highlight the power of well-maintained electronic health records to answer questions that are simply not possible with snapshots of activity data and limited morbidity and mortality data. Rapid innovation and iteration is enabling research that previously was either impossible or would have taken years to orchestrate.

Our data scientists and researchers have never been more crucial as we chart a course through the maelstrom that is COVID-19, and accessible electronic health records are an invaluable resource in that battle.

Dan Ryan
13 May 2020

__________________________________________________________________________________

REFERENCES

1. Wolf, A., et al., Data resource profile: Clinical Practice Research Datalink (CPRD) Aurum. Int J Epidemiol, 2019. 48(6): p. 1740-1740g.

2. Williamson, E., et al., OpenSAFELY: factors associated with COVID-19-related hospital death in the linked electronic health records of 17 million adult NHS patients. medRxiv, 2020: p. 2020.05.06.20092999.

Posted in pensions | 1 Comment

“The way we were” – DWP AE Evaluation

Posted on May 13, 2020 by henry tapper

In normal times, the publication of a major Government review of auto-enrolment would be newsworthy. Apart from a series of mentions by Jo Cumbo, I have seen no publicity for it – from the DWP or their press office or even from the reliably upbeat Guy Opperman. It appears to have been overtaken by events – but it is a significant piece of work, which is a useful benchmark for future studies . I hope it does not mark the high-water mark for pension provision in the UK, but I fear we will look back at it with a sense of nostalgia as “the way we were”.

A COVID-19 free publication

The publication of its Automatic Enrolment Evaluation Report contains data till the end of 2019, but no mention of events this year that are likely to have a major impact on the long-term savings habits of many.

The forecast is, by its nature, uncertain and does not account for future economic factors, threshold changes or the effect of the National Living Wage, to give a few examples. It also does not account for cases where employers may come into existence or cease to exist as a result of changes to financial or legal status.

I must say , this publication shows remarkable integrity in not mentioning the threat of a pandemic. This is either heroic or blindly obstinate but either way it makes the report an interesting read

The majority of the report is not new being a re-appraisal of ONS ASHE, HMRC RTI and NatCen’s British Social Attitudes survey . There is not much re-evaluation to be done, but collating this work into a single publication and organising it effectively is valuable in itself

The report’s executive summary represents a snapshot of auto-enrolment functioning as it should in the months leading up to pandemic. It stops short of being self-congratulatory and is largely an objective view of what has happened till the end of last year.

“AE Employer duties” now part of employment DNA

The report suggests that awareness of employer duties is now part of employment DNA

In instantaneous newborns, prior experience of automatic enrolment implementation was even more common. The person responsible for setting it up had usually been employed at a previous workplace when automatic enrolment was introduced

The fear of large scale un-compliance amongst smaller firms and of unbearable administrative burden has receded. One’s mind goes back to initial reports by the IOD in 2013 . While auto-enrolment may have led to the suppression of wage growth , it should be remembered it was introduced in a period of wage lockdown as a result of the program of austerity introduced by George Osborne and maintained throughout the staging period.

NEST has been an outstanding success in terms of coverage

News of why NEST has been such a success is less encouraging

It was common for newborn employers to spend only a little time researching providers and to consider only one provider seriously. While some employers explained they had considered two or three providers, these were the exception. Employers’ limited research into available providers was typically due to a cautious attitude to compliance, and willingness to follow what they saw as an authoritative recommendation.

The typical decision-making process followed by newborn employers was to choose Nest in the first instance, unless they were prompted to do otherwise by some external factor. Where employers considered an alternative provider to Nest, this was usually triggered by a recommendation from a third party. Research with small and micro employers in 2017 indicated similar approaches. Most of these employers governed their selection of a pension scheme around the schemes ease of set up and use as well as its reliability, often choosing the “safest option” which was seen to be Nest.

For many employers the phrase “NEST is auto-enrolment” would go unchallenged. The DWP has done little to promote choice amongst small employers, the majority of active decision making has been amongst the pre-2014 stagers. But even for larger employers setting up a workplace pension , the provider procurement process was sketchy

Some of these employers used advisers to review other providers, however if the employer took responsibility for reviewing this themselves, the majority tended to describe only looking at new master trusts (e.g. Nest, Now Pensions, The Peoples Pension).

Most small employers sought help in choosing their workplace pension

The DWP survey with small and micro employers in 2017 found that 90 per cent of these employers had sought advice or guidance on choosing their new workplace pension scheme.

Most commonly, they approached an accountant or financial services firm (49 per cent), TPR (28 per cent), pension providers (27 per cent), payroll providers (22 per cent), Independent Financial Advisers (IFAs) (18 per cent) or pensions advisers (12 per cent).

Nest was the most popular pension provider amongst small and micro employers (chosen by 58 per cent), followed by The People’s Pension (11 per cent) and a range of other providers (each chosen by three per cent of employers or fewer).

By the clumsy categorisation , I suspect that most decisions were taken out of convenience rather than any conviction about “value for members”

It would have been good to have some more up to date numbers from NEST and some insights from this Government funded body as to their experience of employer decision making.

The “new” EPP survey

Where there is up to date data is in the DWP’s Employers’ Pension Provision (EPP) survey, which is shared in this report though yet to be published.

The main findings of this new research are that in the private sector less than 2/3 of employers are enrolling workers – a figure skewed by the large number of sole proprietor businesses within the 1-4 employee band (which didn’t have to stage).

This has led to a significant proportion of people missing out on workplace pensions. Less than 2/3 of employees in micro schemes get enrolled. It would be interesting to know whether these people are self-providing or falling through the cracks

Opt-outs

The new findings of the EPP report are basically “no news”

New analysis within this report

the proportion of workplace pension savers who made an active decision to stop saving (including opt-out and cessation) shows a slight increase from the 2018/19 financial year to the first quarter of the 2019/20 financial year (0.72 to 0.76 per cent), following the second increase of the automatic enrolment minimum contribution rates. Despite this slight increase, the overall rate remains low

from April 2018 onwards, the period in which the increases to minimum contribution rates took place, the largest increases in rates of stopping saving (due to active decisions) were observed among those aged 22 to 29 and 30 to 39 (0.23 percentage points and 0.15 percentage points respectively). These increases are modest but notable relative to other age groups where the changes observed are negligible

between April 2014 and June 2019, the average active decision stopping saving rate was slightly higher for males (0.76 per cent) than for females (0.59 per cent)

So what of tomorrow?

We heard yesterday (May 12th) that the furlough was to be extended to October 2020 with employers required to pick up 40 rather than 20% of furloughed pay. This is likely to put more strain on employer’s and furloughed employee’s cashflows and we await to see what this does to a) employment rates and b)voluntary contribution and opt-out rates.

If people keep on saving and employers keep on spending on workplace pensions then we really do have a robust and resilient savings system.

COVID-19 will be the latest and greatest test of auto-enrolment so far.

Posted in age wage, DWP, pensions, Pensions Regulator, Retirement | Tagged AE, auto enrolment, DWP, pensions, TPR, workplace Pensions | Leave a comment

Would CDC have helped your pension?

Posted on May 12, 2020 by henry tapper

This is a blog by three bright consultants from Willis Towers Watson. I’ve been rude about WTW over the years but (as the picture shows) , there’s some sunshine after the rain. Thanks to my old buddy Anne “Freemers” Swift and to Simon and Henry for this affirmative statement of CDC’s worth in times of trouble.

How would recent market falls have affected members approaching retirement in a CDC scheme?

Collective Defined Contribution (CDC) is expected to be a new way to provide pensions in the UK from 2021, once the Pension Schemes Bill 2019/20 has achieved Royal Assent and the associated legislation is in place.

One of the aims of CDC is to smooth out the volatility in at-retirement pension levels seen in individual DC. This is done by sharing risk collectively between members and gradually varying benefit levels in reaction to market movements.

This way, benefits can be paid as relatively stable pensions, giving members greater certainty with which to plan for retirement relative to individual DC particularly during times of market volatility, but still be funded by contribution levels which are fixed in advance.

The first quarter of 2020, which saw the global equity market suffer a severe fall of around 20% in reaction to the Coronavirus pandemic, demonstrates this attractive feature of CDC as we explore in this blog post.

How would a CDC scheme have coped with the market falls?

As an example we’ve looked at the effect on CDC pensions under the design published by Royal Mail. We’ve looked at someone close to retirement who, in this scenario, would be able to retire as planned with no reduction to their retirement income.

Why is this case? Well, the Royal Mail CDC scheme design determines benefits as annual pension amounts based on career average pay, where the pension increase levels – both before and after retirement – vary each year in reaction to changes in the funding health of the scheme. Contribution rates are fixed in advance.

When the scheme is opened, there is a certain amount of ‘headroom’ in the contributions, designed to fund for future pension increases; it is only if the funding health suffers very materially that the headroom could run out and pensions would be reduced.

Based on Royal Mail’s scheme design, the initial headroom is over half of the contributions and is expected to provide for average long-term increases of 1% pa above CPI. It would therefore take a far more significant fall in markets for a member’s pension to fall; in the vast majority of scenarios, it would only be the level of future pension increases that would be at risk.

Under this design the Q1 market shock therefore has no effect on current pension levels for the CDC members – whether this is a current pensioner, or someone due to retire in the next few years. Instead it affects the next pension increase, and future pension increase expectations.

Based on the Royal Mail’s intended diversified return-seeking asset portfolio, we estimate that the collective assets would have fallen by around 7%. This reduces the ‘headroom’ funding for future increases but is nowhere near severe enough to remove it. In isolation this asset fall would have reduced future CDC pension increase levels by around 0.25% a year.

So, for a CDC member about to retire, there would have been little effect on their initial retirement income, but potentially a modest reduction in long-term future pension increases depending on how markets develop. As intended, Q1 market falls would have been smoothed out and the member could retire as planned without the need to face a difficult retirement decision.

How does this compare to individuals in DC plans?

The effect on each individual DC member depends on the timing of their retirement, their investment strategy, and how they plan to take their retirement savings.

For members many years from retirement, while the market movements might be disconcerting and had a significant impact on their pension pot, we expect the majority to make no changes to their retirement arrangements and wait and see how things develop until they are closer to retirement.

For a member due to retire in the near future with a typical drawdown investment strategy, we expect their pension pot to have fallen by c. 10% over the quarter. While this member could still choose to retire as planned without locking in this loss, as their pension pot will largely remain invested, the market falls will have introduced significant uncertainty for the member. This may require a rethink of retirement plans, for example changing their planned pace of drawdown or deferring retirement.

A member looking to buy an annuity will however typically invest in assets with less exposure to equity markets and have some bond holdings once they are close to retirement, so overall their pot will typically have remained broadly flat. However, prices for level annuities have become around 8% more expensive over the quarter due to falling bond yields.

This member is therefore left with a conundrum – go ahead and retire now on a pension which is around 8% less due to unlucky timing or, if he or she has the option through alternative income, defer retirement in the hope that markets and annuity prices eventually combine to provide a higher income.

In both cases, the market fall has therefore led to uncertainty and difficult judgements for the individual DC member near retirement. The CDC member on the other hand has been able retire on the income they expected, with a modest potential reduction in future pension increases.

Footnotes

1. DC analysis

We have assumed the drawdown member held 80% of assets in a diversified growth fund, which returned -12% over the quarter. For the annuity member, diversified growth fund holdings would typically be much lower, and government bond holdings would have typically achieved 6% returns over the quarter which would counteract the growth falls.We have based the 8% movement in assumed annuity conversion rates on market pricing for a single life level annuity for a member aged 65.

2. CDC analysis

CDC schemes would usually be relatively large, and would typically have the scale to invest in a well-diversified return-seeking portfolio which could include private markets, credit and infrastructure. CDC schemes will be subject to the charge cap and, based on our modelling, asset splits and expense approaches are available which allow such diversification at costs within the charge cap. Based on the intended asset strategy we estimate falls in return-seeking asset values over the quarter of around 7% – this is less than half of the global equity market falls due to this diversification.Under the Royal Mail CDC design, pension increases are determined as follows:

Each year there is an actuarial valuation on a best estimate basis.
The purpose of the valuation is to determine the long-term pension increase rate which results in a 100% funding level, ie the pension increase rate which the assets are assessed as being able to fund over the long term.
That long-term pension increase rate is then applied in the current year.
This increase will be applied both to pensions in payment and to the accumulated pensions of active and deferred members.

As set out in the blog, we have determined that the asset fall over the quarter would have in isolation reduced future CDC pension increase levels by around 0.25% a year. The total change in this year’s CDC pension increase would also depend on any changes in future asset return expectations or demographics.The 0.25% pa reduction in pension increase levels would be a planned long-term reduction to increases, subject to revision each year. For example, the following pension increase would then take account of any market recovery or further falls over the next year. Over the long term, pension levels will be higher or lower than expected depending on how markets develop and valuation assumptions change.

3. How does DB compare?

Defined Benefit schemes are another matter entirely. A member enjoys the security provided by the employer and the PPF, but the employer faces the ‘double effect’ of the crisis on both its business and its pension scheme (unless the scheme is both fully funded and fully hedged). Trustees must grapple with whether a weakened employer covenant can cope with an increased deficit, and contribution level negotiations can be difficult to conclude. Funding rules mean that, over the long term, calls on the business for pension funding are ‘lumpy’, and often come at a bad time. That all comes as a consequence of the employer providing a long-term guarantee of pension levels.

Contacts

Simon (the) Eagle

GB Head of CDC Consulting

Email | +44 1737 274670

Anne (Freemers) Swift

Senior Director, Investments

Henry Parker

Associate Director, Investments

Posted in pensions | Leave a comment

Eu-clidding us? Mathematical BS from BJ

Posted on May 12, 2020 by henry tapper

Boris Johnson is a classicist, but he’s not a mathematician. When Boris’ spin doctors decided to formulate the Covid-19 risk rate – this is what they came up with.

To the delight of genuine mathematicians who were able to display their posting skills to make this grandiose claim all the more ridiculous.

I felt a great disturbance in the Force, as if millions of mathematicians cried out in terror and were suddenly silenced pic.twitter.com/w8N0a6u5RR

— Kat Arney (@Kat_Arney) May 10, 2020

You don’t have to be a genius to work out where this formula goes wrong

From that excruciatingly incompetent performance it’s clear for all to see that the PM doesn’t know his “R” from his elbow.

— Raibeartmac (@Raibeartmac1) May 11, 2020

Once again Boris Johnson had brought Britain together in gleeful mirth

So our alert level is currently between 219,000.5 and 219,000.9?

— Simoncito juanito (@conchwillow) May 11, 2020

and even the curmudgeons had to admit

Credit where it’s due, it’s in keeping with the overall themes of opacity, imprecision and general confoundedness displayed by Johnson since the glory days of Brexit.

“Euclidding us?”

Euclid was a Greek scholar , alive in the third century BC and considered one of the founders of maths. Apart from having a punnable name, little is known about Euclid.

Because the lack of biographical information is unusual for the period (extensive biographies being available for most significant Greek mathematicians several centuries before and after Euclid), some researchers have proposed that Euclid was not a historical personage, and that his works were written by a team of mathematicians who took the name Euclid from Euclid of Megara (à la Bourbaki)

Although Euclid of Megara was opposed to arguments by analogy, I will make the analogy between this version of Euclid and our version of Boris Johnson. Boris Johnson is delivering stuff and nonsense with Churchillian grandeur as if he was Euclid. But unlike Churchill, who put forward content he’d thought through. Boris Johnson is spouting the nonsense of his researchers/advisers.

Eu’s Clidding who?- Euclid of Megara left and the Euclid of Alexandra right

Some may think that Boris Johnson is not a historical personage either, and that his work is done for him by Sage and those advising him in #10. Right now he’s sounding a lot more like the “imperfect Socratic” Euclid of Megara.

Is Boris fake news?

I’d like to think that the NHS, who’s logo gives spurious legitimacy to this ridiculous formula, will have given #10 the appropriate bollocking. In the meantime there are serious mathematicians who do want to know the link between the Covid Rating, R and the number of infections

He means to define a surjective function which takes the current value of R and the current number of people infected, and maps it onto the set {1,2,3,4,5}.

— Edward Russell (@EdwardMRussell) May 11, 2020

This is very much the point, and Edward Russell drives it home

In all seriousness, the government should publish the function, so that those of us who are a bit less constrained by the mathematics of his silly diagram can actually see what’s going on.

— Edward Russell (@EdwardMRussell) May 11, 2020

Boris is no Euclid – but he’s better than this.

As my Mum keeps telling me, “it’s no use having a go at our leader if it just makes people like me frightened”. She thought he was good on Sunday night and so did most of the media.

Boris Johnson is no chump but his advisers seem to want to make him look one.

What comes out of Boris Johnson’s mouth, or from his tweets, needs to inspire confidence and not be damned wrong.

We have a lot of people like Kat Arney, Mike Harrison and Edward Russell who can do the maths, and even mathematicians like me lie awake in the wee-small hours reading Covid-19 Actuary Response Group papers so we know.

Knowing is reassuring , science helps us know things and the abuse of science undermines out learnings , mocking the very science it seeks to promote.

The Government has committed to daily press conferences and a torrent of social media, but right now a little less might be more. Let’s have tweets that are right and helpful, inspiring us with confidence in the Government’s strategy and not delivering fake news

NHS – Proper measurement

Posted in pensions | Tagged Euclid, Euclid of Alexandra, Euclid of megara, Imperfect Scoratic, NHS | Leave a comment

Powers during wartime- tPR and funding.

Posted on May 11, 2020 by henry tapper

Talking Heads-Life During Wartime.

Jo Cumbo has written a fine piece in the FT’s Pension Expert .

She is sympathetic to the Pension Regulator’s current dilemma and supportive of its position over deficit holidays.

To be exact, Jo is supporting the balanced position between the tough stance tPR adopted prior to the pandemic and the de-prioritisation of pensions (against preserving cash) advocated by some in the UK and adopted by many in the USA.

In the US, corporates can postpone DB #pension payments for the remainder of 2020 under emergency COVID-19 measures. In contrast, UK companies allowed 3 month #pension payment holidays.https://t.co/6tHuJkr78W

— Josephine Cumbo (@JosephineCumbo) May 9, 2020

The Regulator and “its powers”

Jo Cumbo writes positively of the 3 month easement given to employers on deficit repayment contributions but in looking forward she is less certain

.. the dilemma the regulator now faces is what to do beyond June 30, when it is due to review its emergency three-month easement. Without the benefit of a crystal ball, it is difficult to know whether the emergency measures will still be fully required, or will need to be loosened even further.

I have been advocating that the Pensions Regulator continues to hold a strong hand to the tiller, to the annoyance of respected commentator George Kirrin.

Aren’t you being a little inconsistent about tPR here, Henry?

Yesterday: “I call on Guy Opperman, Charles Counsell and David Fairs to call off this DB consultation and to take the decisive actions that have seen elsewhere in Government.”

Today: “Right now, I see the DWP kicking cans down the road (TPR DB funding consultation, pensions dashboard and taking on the FCA over transfers). Let’s hope that some of the tools – CDC – tPR powers, dashboard legislation – are unlocked soon and we get the Schemes Bill through.“

Without proper scrutiny of the Pension Schemes Bill by our legislators, those “tPR powers” could move the DB consultation up from guidance to statutory authority. Be careful what you wish for.

Right now, the Pensions Regulator is rightly nervous about being seen to assume powers not vested in it, for the purpose of meeting its twin objectives of protecting members and the Pension Protection Fund (which aren’t entirely at odds).

Our funding consultation is about the balance between member security and affordability. Why would you still not have that debate? You might think a little differently today than you did when we wrote the consultation but surely it is right to have the debate, that is the point?

— David Fairs (@david_fairs) May 5, 2020

I can see David’s point and perhaps I’m being rash in calling for a fundamental re-think of the pension promises we have made. In many ways, schemes – especially schemes that have immunised against market volatility, are able to look forward with a degree of confidence, sufficient as they are becoming. For the trustees of the biggest schemes, the pandemic still affords the luxury of consultations

But Jo’s point about the smallest 2000 DB schemes is a good one

“The regulator already has concerns about the quality of trusteeship in thousands of smaller schemes where governance and administration has been found to be patchy.”

Poor governance and admin are the symptoms of under-supported schemes. The principal argument for consolidation seems to me that where standards are low, the covenant is weak and whether the consolidator is the PPF or a commercial superfund, members would be less at risk from being in a big scheme.

The Pension Schemes Bill originally intended to provide consolidators with a better regulatory framework to take on small schemes. Instead the DWP went with giving tPR more power and with CDC.

I anticipate a flurry of comments from George Kirrin, Robin Ellison and Con Keating who are implacably opposed to granting tPR emergency powers, but I suspect they will need to act decisively by June 30th without consultation and pushing the regulatory envelope.

In a gnomic statement on twitter, David Fairs suggests that he may become the Matt Hancock of the pensions world.

Sometimes the right decision might not be a popular decision or an easy decision particularly in a crisis. https://t.co/4z3lxURZIg

— David Fairs (@david_fairs) May 6, 2020

Life during wartime

There are clearly trustees, employers and advisers who are able to look at the current economic situation with sanguinity. Some may have sponsors who’s covenant is actually improving.

But there is a much larger contingent who see lockdown as an existential threat to their sponsor , to their funding and to their scheme’s capacity to meet their obligations.

The question of whether they should all head for the PPF is not one that can be determined in the normal consultation cycle. Put bluntly this is “life during wartime” and as David Byrne put it “I ain’t got time for that now”.

The new toolkit , in preparation for tPR – includes a radical new type of funding solution – CDC. There is time over the next few months for the DWP to work with tPR (and the FCA) to look at ways to avoid funding meltdown later in the year. This time is to pensions what December to March were to healthcare, a window for preparedness.

Despite my natural instincts to see market driven solutions though consultation, I think the Pensions Regulator and DWP should be scenario planning right now for worst case scenarios. I hope that by the time they have to take decisive action, they can be confident that the provisions of the Pension Schemes Bill are enacted and that we can see Government standing up and being counted – as effective emergency pension regulators.

Posted in advice gap, age wage, pensions, Pensions Regulator, Retirement | Leave a comment

Pension Scamming – Justin Cash and I talk frankly

Posted on May 10, 2020 by henry tapper

To activate press the play button in the embed below

I’m found here talking to Money Marketing’s Justin Cash about pension scamming and financial resilience. It was a good day to speak as we’d just launched our anti-scam game http://www.scam-man.com.

Doing a podcast by Zoom (I think it was Zoom) is weird. Prior to Lockdown, you’d physically get to the meeting, think about what you are going to say and deliver an accomplished performance with the help of your compliance department.

This conversation appeared as a diary item, popping up in my calendar 10 minutes before we went live with the WeWork server flickering on and off. If I sound a little discombobulated at times, it was because I was frantically trying to find enough signal to keep my conversation with Justin going!

But back to my theme, I was asked whether the Pension Regulator’s extra letter to those executing DB transfers was going to be effective. The problem is simple – many people don’t read the letters they get sent, they get warning fatigue.

We found in Port Talbot that one of the most effective tactics of Active Wealth Management was to tell punters they’d be getting a pile of letters from the British Steel Pension Scheme and the FCA warning them not to transfer. What the steel men heard was that Tata were trying to stop them get their money, the warnings made it worse.

What people wanted was someone to talk to and that’s what people thinking of transferring want today. I’m pleased that the FCA and tPR are giving help to pension administrators on what they can say to pension scheme members at this time. I’m pleased that many pension administrators continue to work from home and – like me – find themselves speaking on important matters outside of the workplace.

In such a time as this, there is no time for shilly-shallying. If a pension administrator spots a scam -whether on a DB transfer or anywhere else, he or she has a responsibility to raise a red flag.

There are of course rules that must be followed and they include the Anti-Money Laundering rules about tipping off. But there are also rules around how we treat vulnerable customers and at this time of lockdown, the assumption must be – that everyone should be treated as potentially vulnerable.

What I am saying in the podcast, which despite my incoherence is brilliantly managed by Justin , is that at this time, we need to step up and take responsibility for the protection of people’s pensions – especially where we see financial self-harm.

The very best IFAs do intervene and stop people busting their LTA protections, missing out on Guaranteed Annuity Rates, triggering unnecessary exit penalties and overpaying advisory fees. People like John Mather and Al Rush fearlessly prevent self-harm.

But at this time, we must recognise that sometimes , a withdrawal from a pension scheme , even if it creates a tax-hit or is struck when the market is particularly weak, must be expedited. When money is needed quickly , then it is the responsibility of all intermediaries to ensure that the supply chain isn’t blocked.

Here I am aware that the customers interests and the advisers are not necessarily aligned. Where the adviser preaches financial resilience to avoid his losing client money from a pension withdrawal, then it could be argued that the scam is in the delay. i wrote yesterday about why we cannot allow the phrase “financial resilience” to become a justification for delaying the necessary payment of money.

There is a very simple rule in all this, it is that transparency is the best way forward.

Which is why I love these new rapid response podcasts. Being put on the spot to say what you think at a time when you have none of the usual support mechanisms means that you have to take responsibility. It’s scary and it’s rewarding and I urge you to listen to what I’m saying by activating the podcast link at the top of the blog.

I also advise subscribing to future blogs (by those more coherent than me) by pressing this link

The link is here

Posted in advice gap, age wage, pensions | Tagged justin cash, money marketing, pension scammers, podcast | Leave a comment

What’s happening in intensive care?

Posted on May 10, 2020 by henry tapper

Nicola Oliver analyses the latest ICNARC report which tells us what is happening to patients in England and Wales in Intensive Care Units (ICUs). These numbers relate to hospital admissions and don’t cover those being treated in care homes and elsewhere. The latest study of causes of death in care homes was in 2018 and can be accessed here. Thanks to Nicola for helping us to understand the latest available data on this subject.

THREAD
The latest @ICNARC report is now out with, for the first time, multivariate analysis. So, stepping into @ActuaryByDay shoes, here’s the summary, and a link to the full report. https://t.co/LfXFs1ExOH @COVID19actuary @ICS_updates
1/

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

The downward trend for admissions to ICU continues; the effects of social distancing evident
3/ pic.twitter.com/GAzQgIm5UT

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

As predicted by @ActuaryByDay last week, London no longer dominates the top 3 as far as geographical concentration is concerned though overall, London continues to have the greatest number of cases. Otherwise there has been very little change in the order
5/ pic.twitter.com/9dPeCQhKMb

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

Multivariate analysis was conducted on a cohort of ~ 6000 patients and included those discharged alive from hospital within 30 days and those ending critical care within 30 days. Prognostic factors were selected based on what is already understood about critically ill patients
7/

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

The next chart may come as a surprise given that it suggests that the mortality HR for males is broadly similar to females once known variables have been accounted for. However, we can also see that ethnic disparities persist, this must be addressed urgently
9/ pic.twitter.com/BJxi4uK2tW

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

Risk of death was associated with increasing BMI compared against a reference of a BMI of 30. This is in line with what is understood about the health impacts of obesity, though would be interesting to see if there is any data on those considered underweight
11/ pic.twitter.com/EN1Ei7uxiV

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

Additional analysis on physiological factors are captured in the full document. Please note that in multivariate analysis, association DOES NOT in any way confirm causation. Thank you to @ICNARC for compiling this analysis in such a timely manner and for the earlier presentation

— Nicola Oliver | Medical Intelligence (@NicolaMedical) May 9, 2020

this report can be found here

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Will COVID promote ESG or destroy it?

Posted on May 9, 2020 by henry tapper

This time last year I was talking with BNY Mellon about using AgeWage as an ESG platform to help investors vote their shares. It’s not we decided to do (though there is one Fintech that’s taken up the challenge). The BNY Mellon office is largely empty today and I’m writing to them to turn off the 24 hour a day street lighting it provides to the Blackfriars backstreets (where I’m locked down).

Today the air I breathe is cleaner and corporate leaders are forced to consider how to be a good employer amid record job cuts. But will the immediate improvements in ESG be maintained or will we return to a 1970s style dystopia as imagined by Robert Shrimsley

Regress or Progress?

Before the pandemic I was reading the optimistic thinking of Rebecca Henderson and John Elkington in their new books about the future of capitalism

I have no reason to suppose that a nation that has voluntarily locked down for the NHS, would not be prepared to pay in higher taxes and lower wages for an economy where environmental , social and governance values were prized higher than they were.

Put very simply, people want purpose and the pandemic has given us purpose in abundance. Which is why I am optimistic that Henderson and Elkington are right and that the pandemic will be a green rather than a black swan.

Driven from below

Yesterday we were asked to cast our minds back to May 8th 2045 when Europe started a period of peace that has lasted 75 years. What we won most on VE day, was a victory over war. What was created in the 1940s and 1950s, the welfare state and the NHS, are replicated throughout Europe. The pandemic is posing the greatest threat to this new world order since the war ended. But reading a recent article by Lottie Meggitt – (my reason for talking with BNY Mellon) , I got my answer to the question in the title of this blog. Lottie wraps up her article

Not since the Second World War has the concept of ‘shared value’ been so relevant.

If we maintain the purpose with which we are tackling COVID-19, not just in the UK but around the globe, then I think Lottie and those like her – will be the people to make it happen. But doing business differently , as the “shared value” approach demands, is only possible with a social consensus.

The strong sense of purpose that brought in the NHS and welfare state after the war, enabled these forces for good to be constructed when Britain was financially least robust. It was the determination of the British people that what had been fought for , should materialise that made social progress in the decades following the war, a reality.

COVID-19 will promote shared value and the ESG agenda

Irrespective of the price of oil , the state of the aircraft industry or any of the other reasons why ESG funds have outperformed, the key argument for ESG is the social purpose that is carrying us through this lockdown as it carried people through the last war.

We want a Britain fit to live in and the pandemic has shown us just how fragile our stewardship is. We are not masters of our own destiny but subject to the malign influence of COVID-19. When we are rid of COVID-19 we will remain vulnerable to the next existential threat.

And in the knowledge of our vulnerability , the great issues of sustainability – asked by the ESG agenda become a lot more urgent

Not since the Second World War has the concept of ‘shared value’ been so relevant.

Lottie Meggitt

Posted in ESG, Financial Conduct Authority, pensions | Tagged BNY Mellon, ESG, Lottie Meggitt, Shared value, sustainability | 1 Comment

Club Vita’s latest picture of the Covid-19 data.

Posted on May 9, 2020 by henry tapper

Club Vita is an actuarial resource that helps pension schemes understand what’s going on death and health wise. It uses big data sets to create pictures which non-actuaries like me can understand. If , like me, you want to understand what is the real impact of COVID-19, you must look behind the Government figures. That is what Club Vita does, and in this report there is the information that helps us understand

How the various death tolls for UK COVID-19 differ
Where people are dying
The UK’s management of the virus relative to our peers
Reasons for the impending quarantine on those coming into the UK
Scope for easement in Lockdown to be announced on May 10th by the Prime Minister.

This is one aspect of the “science” that the Government is talking about. It is actuarial science and it helps us not just in our social planning, this information informs business in its operational planning and of course economists in their market forecasts,

Here then is Club Vita’s latest briefing, the original of which you can read here. It is good that Club Vita is sharing its knowledge through blogs and reports. Like the COVID-19 Actuaries Response Group, it is a credit to its profession.

Covid-19: The latest picture

Last week we explored how the death tally shared at the daily Downing Street briefings were materially underestimating the true scale of COVID-19, due to a combination of “missing” and “missed” deaths. Since then the official statistics have been revised. However, underreporting remains an issue.

Sadly, our previous conclusion remains true: the true loss of life directly and indirectly from COVID-19 is likely to be double the official tally. As at 5^th May 2020 that could mean the loss of 60,000 lives across the UK.

In this blog we explore the latest data, and how the issues of “missing” and “missed” deaths have evolved over the last week.

The “missing” deaths…

The daily numbers being reported in the media are those on the official government site. Initially these figures covered deaths in specific locations and often only included those who were tested positive for COVID-19 prior to death. This misses a significant number of COVID-19 deaths.

In particular, England’s contribution to the daily tally previously only included hospital deaths. However, from 29 April the approach used in England was revised to include those who died “in the community” (generally, but not limited to, deaths in care homes). This approach is closer to that adopted in Scotland.

In both countries the ‘official’ count continues to only includes those deaths where the individual tested positive for COVID-19. As such they exclude those with symptoms of COVID-19 but for whom no test was carried out.

There will therefore still be issues with ‘missing’ deaths, as reflected in differences between the official figures and those published by the ONS (along with similar publications from the respective national statistical agencies of Scotland and Northern Ireland).

How has the change in approach impacted the ‘missing’ deaths?

The latest statistics from the ONS include COVID-19 deaths registered up to the 2^nd May, where there is a mention of COVID-19 somewhere on the death certificate, regardless of location.

Focussing in on the 24^th April we can again compare what we now know had happened in terms of deaths (i.e. including those deaths registered between the 24^th and 2^nd May), with the official statistics published the following day. This provides an indication of the level of “missing” deaths. (We have chosen the 24^th of April as it is the end of the last week detailed in the ONS publication.)

The change in approach to the data published for England has reduced the under-reporting gap, however a significant issue remains.

We estimate that the official figures may understate direct COVID-19 deaths by around 40%, equivalent to some 11,500 missing deaths, which would bring the total UK death toll to over 40,000.

The “missed” deaths…

Our second blog of last week looked at the issue of ‘missed’ deaths; the un-seasonally high levels of deaths which make no mention of COVID-19. The past few weeks have seen around 2,000-3,000 more such deaths each week than is usual for this time of year. These deaths may sadly be indirectly related to COVID-19.

This trend has continued, with the latest data suggesting some 3,500 ‘extra’ deaths (excluding COVID-19) in the week to 24^th April, bringing the total since mid March to over 12,000.

^{_{Weekly figures for Scotland use a different definition of weeks, running from Monday to Sunday rather than Saturday to Friday. The chart above is based on using the Scottish data for the week ending on the Sunday immediately after the date shown on the horizontal axis.}}

We estimate that the total ‘missed’ deaths, allowing for experience over the last few days, may now be as high as 20,000.

Combining these 20,000 “missed” indirect deaths with the 11,500 “missing” deaths not counted in official COVID-19 statistics, suggests that the combined direct and indirect loss of life from COVID-19 may now already be 60,000 lives across the UK

Have deaths peaked?…

Understanding the wider death toll is one of the key factors to consider when contemplating moving towards ending lockdown. While the headline daily deaths figures have been tending downwards for a week or two, there were concerns that the ‘true’ figures may still have been increasing.

The fact that the total weekly deaths figures (including all deaths) appear to be starting to decline is therefore very welcome news. Hopefully this has continued since the 24^th April.

What do we know about the COVID-19 deaths?

The death registrations data includes information on where a death took place. While the reduction in COVID-19 attributed deaths is clearly welcome, it is noticeable that the proportion of such deaths occurring in care homes has been increasing steadily.

_{NB: Figures for Scotland use a different definition of weeks, running from Monday to Sunday rather than Saturday to Friday. The chart above is based on using the week ending on the Sunday immediately after the date shown on the horizontal axis.}

We can also see that care homes have seen a noticeable jump in deaths, both with and without COVID-19 on the death certificate. The COVID-19 impact appears to have started later in care homes than the hospital deaths; with no sign of a peak as at 24^th April.

Given the ongoing concerns around availability of PPE in care homes, alongside the challenges care homes can face in isolating those symptomatic of COVID-19, it seems likely that we will continue to hear sad news of tragedy emerging in UK care homes.

All of the team at Club Vita wish to extend our condolences to anyone who has personally been touched by bereavement in recent weeks. We know that these deaths leave behind people who are missing loved ones. Our thoughts are with you…

Posted in actuaries, advice gap, coronavirus, pensions | Tagged actuaries, Club Vita, Covid-19, Hymans Robertson, PPE | Leave a comment

“Financial resilience” – austerity’s twin brother

Posted on May 8, 2020 by henry tapper

The images of financial resilience

In the aftermath of the collapse of Northern Rock in 2008, many savings institutions were hit with a run on deposits from savers keen to put their cash under the mattress.

Mark Scantlebury and Vincent Franklin, who were then setting up Quietroom tell the story of how they were called in to stop people withdrawing their savings. Subsequently, HBOS credited the pair in saving £400m flying out the door. But the strategy that Quietroom advised upon was not intuitive to the bankers – quite the opposite.

Quietroom suggested that the call-handlers and tellers , rather than making it difficult for people to have their savings back, promoted Halifax as a bank that would make it easy for savers to withdraw their cash – no questions asked.

And as soon as it became clear to savers that they could have their money, they stopped and thought about it, and they stopped withdrawing – because they trusted the Halifax again. Lock-ins, even partial lock-ins – are usually counter productive.

The mark of a good pension system…

Is that it puts the right money in the hands of the right people at the right time. Clearly in Australia, where Super is seen as a good system, a lot of people who need money right now – are getting it.

Down Under, nearly 10% of the Aussie workforce, or 1m workers, have taken advantage of emergency measures to dip into early to their Super, or pension pots, if facing Covid-19 hardship.

— Josephine Cumbo (@JosephineCumbo) May 7, 2020

I suspect that this is considered a “bad thing” by most pension people. But is it? If you follow the Quietroom logic, the Super system is working fine. Nathan Long, who is a really good guy, has I think got his tone wrong (if I can be so Hancockian)

One to watch. I’m hopeful there will be renewed focus here in the UK on building financial resilience in the months ahead, once we’ve pulled clear of the crisis.

— Nathan Long (@LongPensions) May 8, 2020

For me, “financial resilience” is usually associated with saving money not spending it. I guess many people will consider HMT’s furlough scheme the opposite of financial resilience. But it is underpinning the current lockdown and the lockdown is generally accepted as necessary. I have tried to suggest that rather than preaching to savers, the gospel of financial resilience, we preach the gospel of Quietroom and offer savers over 55 “ease of access to their savings”.

I was thinking of how to build resilience from younger ages, but the balance is important at older ages too. This is the time to use cash in an emergency fund to prop up taking reduced withdrawals from drawdown because of market conditions.

— Nathan Long (@LongPensions) May 8, 2020

Nathan’s last point is particularly interesting as it is when market conditions are tough, that people want money (toilet rolls etc). We become hoarders because we fear – irrationally – that if the money is not under the mattress – it isn’t ours.

But of course as soon as you make it easy to get your money, the issue with trust disappears.

But if money held for a rainy day cannot be drawn on that rainy day – without a big chunk being taken out by “market conditions” , then people have a different problem.

Sunny day money stays invested because it’s not needed but if you are advertising a rainy day pension (with all the freedoms) with sunny day money, then people are going to grumble. You need an “all weather” fund that you can draw on whether its rainy or sunny. Part of the problem people have with pensions is that whenever they want their money – the market conditions are raining cats and dogs!

“Financial resilience” is austerity’s twin brother

The last financial crisis taught people that when the financial system buckled, they had to pay the price. Austerity cannot be promoted a second time in two decades and nor can “financial resilience”. People need to be aware, that even if its just a sidecar, their pension saving is theirs to spend without lectures on financial resilience!

Andy Leggett supports Nathan’s position by characterising it a “putting customer’s first” and I’m quite sure a lot of financial planners and SIPP providers do feel that stopping people raiding their pension is just that.

@LongPensions not sure I quite get your point Henry but putting customers first should be in shareholders’ long-term interests

— Andy Leggett (@sipphound) May 8, 2020

But I’m not sure that the customer sees it that way at all. The customer sees paying his bills as more important than having to pay extra tax on a big pension withdrawal, or being hit for six by market conditions.

Vulnerability

One definition of vulnerability is a “lack of financial resilience”. Two months ago a whole load of customers who are feeling vulnerable felt anything but. The IGC reports all spoke in glowing terms about how the insurers were treating their vulnerable customers, usually without referencing the likely impact of the pandemic.

When we come off furlough, then we may see up new vulnerable customers numbered in millions. They will be needing an extra wage and a good proportion of them will be of an age that they can draw it from their pension pot (s).

I notice that the Government is considering setting up a COVID-19 Digital Sandbox to help those who’ve become vulnerable, use financial services to meet those vulnerabilities.

My questions to financial services providers – holding money for people in pensions are

“what steps are you taking to make sure that money can easily be accessed from their pension and how can people get help to mitigate the risks of penal taxation and market conditions?”

To my mind this is what the vulnerable customer is interested, not in lessons about getting “financially resilient”.

Posted in advice gap, age wage, pensions | Tagged AgeWage, Covid-19, financial reslience, Government, pensions | 1 Comment

Why we’ve failed to build a national care service

Posted on May 8, 2020 by henry tapper

Sage seem to consider the major problem in care homes the impact it is having on the R number. At least that is how it is being reported. Sage member Professor John Edmunds told the FT

Covid-19 infections in hospitals and care homes had pushed up the R number to between 0.75 and 1.

The rate of new infections in the community is “levelling off,” , but the country had been left with “residual epidemics” in hospitals and care homes. The community transmission rate had “come down quite sharply” but the R in hospitals and care homes was not going down at the same rate,

Prof Edmunds added. Dominic Raab, foreign secretary, agreed that the situation had been “a real challenge” owing in large part to the ebb and flow of people through homes, but added this could be controlled.

We will have to wait to know why the R in care homes isn’t going down, but whatever the answer is, it will come too late for those in these homes who have died, whether residents, or carers.

“Residual epidemics” may sound a side-effect of the pandemic, but they are in fact the fastest growing aspect of the pandemic in the UK

Because many deaths in care homes are reported by GPs without the patient being tested for COVID-19 , many of these “excess deaths” are not being reported on the official figures for COVID deaths,

Later numbers unavailable,

This is allowing the impact of the “residual epidemic” to be downplayed. Indeed the tone of Government reporting is now shifting to blaming the care homes for the R getting stuck and for non-residents having to stay inside.

A national care service

The crisis UK care homes are now in is not unique. Other European countries have been reporting high excess death rates of as much as 60% of total hospital deaths – again.

The numbers in my blog in April will certainly by now have been exceed. Care Home deaths are thought to account for a high proportion of the gap between total excess deaths (between 55 and 60,000) and reported COVID deaths (30,000).

The elephant is out of the care home, and is now trumpeting 20 years of Government failure to create national care service, to match our NHS.

In Labour’s Towards a National Care Service, published last autumn, we were reminded that 1.4m people in the UK go without the help they need to perform basic activities of daily living. The document was an update of the Command Paper in 2010 when Gordon Brown was prime minister. Since 1999, there have been 11 green and white papers on the need to reform and improve care but there is still no proper in strategy and it shows.

What Labour called for and we rejected

Labour’s plans were widely dismissed as too radical and formed part of the “policy failure” that was seen to have made Labour unelectable last year. The electorate weren’t in a mood to listen to arguments for spending on the vulnerable.

This is not a party failure, it’s a general failure of Government created by an electorate who have stood in the way of a proper debate on the issue. Indeed the failure of Teresa May to win an overall majority in 2017 is in part attributed to her botched attempt to make reform of elderly care an election issue.

Rather than make the failure to address the inadequacies of our care system with a national care service, a political issue, we should be asking ourselves what have we individually done to engage with the elephant.

I should point out that one area of financial planning provision that has lagged all others is the provision of products and advice on the private funding of long-term care. I hope that this change as we go forward.

The PM’s belated admission of failure

In one of the few signs of compunction for failures so far, Boris Johnson said last week that he bitterly regretted the care home crisis. This is not regret for the R number not dropping to 0.5 (see above) but grief for the casualties of logistical failure

it has been enraging to see the difficulties we’ve had in supplying PPE to those who need it” but the government is now “engaged in a massive plan to ramp up domestic supply”

Care homes are not quarantined from society, people come in and out of them and they bring out infection. Many of the residents in care homes were in hospital and were taken out to care homes to free up beds. The infection was brought into care homes with them.

And while we clap each Thursday for the NHS we do not clap for the carers, despite them taking the same risks and performing the same duty of care to their patients.

There is a double standard at work which results from this 20 year long failure of parties and electorates to treat those in residential care as part of our health service.

That they are dependent on others is a sign of their cogitative and physical decline. Were these people younger, they would be more valued and Ros Altmann is right in campaigning for the rights of older people to be treated with the same dignity as everybody else.

As part of the realignment of priorities following the end of the pandemic, we must make sure that we build a national care service of which we are as proud as the NHS.

Posted in actuaries, advice gap, coronavirus, pensions | Tagged CARE, Care Homes, Covid-19, long term care, NHS, Social care | 2 Comments

COVID-19 ; Vaccines and Antivirals

Posted on May 7, 2020 by henry tapper

Nicola Oliver

What is a vaccine?

Vaccination is the administration of a vaccine to help the immune system develop protection from a disease which is achieved by essentially imitating an infection. Vaccines have historically been constructed to contain either inactivated viruses or attenuated (alive but not capable of causing disease) viruses. Following administration, the body’s adaptive immune system is stimulated and primed to recognise the infectious agent if it is exposed to it subsequently. This may take several weeks to develop.

More recently, wider approaches for construction of a vaccine have been developed. This includes, for example, an mRNA vaccine which provides a synthetic mRNA of the virus, which the host body then uses to produce the viral proteins itself thus mimicking the natural infection of the virus.

Widespread immunity as a result of vaccination and herd immunity is largely responsible for the eradication of smallpox.

Vaccine production

At the start of the production process, the antigen is generated. The next challenge is how to actually manufacture the vaccine. There are many different vaccine-making platforms, each with its own set of advantages and disadvantages.

It takes between 6 to 36 months to produce, package and deliver high quality vaccines to those who need them.

Current status of vaccine development against Sars-CoV-2

Coronaviruses have caused two other recent epidemics – severe acute respiratory syndrome (SARS) in 2002-04, and Middle East respiratory syndrome (MERS), in 2012. In both cases, work began on vaccines that were later shelved when the outbreaks were contained.

These vaccines have now been repurposed for human trials, specifically by Maryland-based Novavax, and biotech company Moderna in Cambridge (USA) who are developing the vaccine in cooperation with the National Institute of Allergy and Infectious Diseases.

In addition, CanSino Biologics in China has also entered phase 1 testing of a vaccine. CanSino also markets a vaccine for Ebola virus in China.

The table below presents an overview of vaccine development.

The studies in phase 1 or 2 are summarised below. As can be seen, there is considerable variation in the potential study completion date.

Moderna ‘mRNA-1273’

The dosing of the first participant in a phase 1 study of the so-called mRNA-1273 vaccine was announced on 16 March 2020. The early-stage, or phase 1, trial will test the vaccine on 45 males and non-pregnant females between the ages of 18 and 55. The primary and study completion date is 1 June 2021.

Moderna’s primary objective is to assess the safety and reactogenicity of a two-dose vaccination schedule of its mRNA candidate. The trial’s secondary objective is to study the immunogenicity to the SARS-CoV-2 S protein.

CanSino Biologics ‘Ad5-nCoV’

The phase 1 trial will be conducted in 108 healthy adults 18 to 60 years of age in Wuhan, China. The study’s main objective is to examine the vaccine’s safety, and researchers will also evaluate efficacy measures, including levels of an antibody against the spike protein on the coronavirus cell surface which effects entry to cells through binding to ACE2 receptors, as well as neutralizing antibody against SARS-CoV-2.

The primary completion date is estimated to be 30 December 2020, and study completion date is 20 December 2022.

Inovio Pharmaceuticals ‘INO-4800’

INO-4800 is a DNA vaccine candidate being developed by Inovio in conjunction with Inovio’s proprietary platform hand-held smart device called Cellectra. As of 28 April 2020, this phase 1 trial is fully recruited with all 40 healthy volunteers receiving their first dose, with interim immune responses and safety results expected in late June 2020. The estimated primary and study completion date is April 2021.

University of Oxford ‘ChAdOx1 nCoV-19’

University of Oxford researchers have begun testing a COVID-19 vaccine in human volunteers, the first doses were administered on 23 April 2020. This randomised controlled study will recruit a total of 1112 participants and is planning to reach primary and study completion by May 2021.

Sinovac

Sinovac has commenced a Phase I clinical trial, a randomized, double-blinded, placebo controlled study, for its vaccine candidate against COVID-19. As of 13 April 2020, enrolment of the first group of volunteers and the first dose of vaccination for these volunteers have been completed. Final study completion date is proposed for December 2020.

Biontech & Pfizer ‘BNT162’

The first cohort of BioNTech’s Phase 1/2 clinical trial has been dosed. Twelve study participants were dosed with vaccine candidate BNT162 in Germany since dosing began on April 23, 2020. The study will also assess the effects of repeated vaccination following a prime injection for the three vaccine candidates that contain uridine containing mRNA (uRNA) or nucleoside modified mRNA (modRNA). A fourth vaccine candidate, which contains self-amplifying mRNA (saRNA) will be evaluated after a single dose of vaccine. Subjects with a higher risk of severe COVID-19 disease will be included in the second part of the study. Primary completion is not expected until 2023.

Novavax

Novavax has produced and is currently assessing multiple recombinant nanoparticle vaccine candidates in animal models prior to advancing to clinical trials. Initiation of Phase1 clinical testing is expected in late spring of 2020.

Antivirals and other pharmaceutical approaches

There are currently no pharmaceutical treatments that are specifically indicated to treat COVID-19 in terms of being able to eradicate the disease from the human body. Individuals that require hospitalisation are managed according to their clinical need by each body system. For instance, intensive care units have established protocols for respiratory support, cardiovascular support, and renal support.

So where are we in terms of developing a specific pharmaceutical to treat COVID-19?

Antivirals

The aim of antiviral therapy is to minimize symptoms and infectivity as well as to shorten the duration of illness. These drugs act by arresting the viral replication cycle at various stages. Antivirals are currently used to treat influenza viruses, herpes viruses, hepatitis B and C viruses, and HIV.

The image below displays the viral replication cycle; antiviral drugs work by inhibiting this cycle at a number of different stages.

There are currently 47 antiviral drug trials registered with phase 3 clinical trials for the treatment of COVID-19, 138 in total across all trial phases.

Remdesivir has been recently recognized as a promising antiviral drug against a broad spectrum of RNA virus (including MERS-CoV) infection in cultured cells. It’s key mode of action is through interference of the action of viral RNA-dependent RNA polymerase causing a decrease in viral RNA production.

Remdesivir is not yet licensed or approved anywhere globally and has not yet been demonstrated to be safe or effective for the treatment of COVID-19; trial results to-date have been disappointing. There are 19 clinical trials registered at www.clinicaltrials.gov which are testing the effect of Remdesivir on patients with COVID-19; 11 of which are actively recruiting, one is terminated and one is suspended.

Favipiravir is a further drug under clinical development and has a similar mode of action to Remdesivir. There are 12 clinical trials registered at www.clinicaltrials.gov which are testing the effect of Favipiravir on patients with COVID-19; however, none are actively recruiting at this stage.

Other pharmaceuticals

In addition a number of other classes of drug are being investigated for their utility in treating COVID-19. This includes ACE inhibitors, monoclonal antibodies, (MABs), and anti-inflammatories. The drugs under investigation include existing (hence, ‘repurposing’) and novel compounds.

It’s also worth noting the use of convalescent serum as an effective treatment. This describes administering antibodies from blood donated by people who recovered from COVID-19 and hyper-immunoglobulins. A convalescent plasma program has been instigated by physicians and investigators from across the US, and similar programs have been initiated in the UK and EU. The convalescent serum studies are focused on treating patients currently facing severe cases of COVID-19.

Posted in actuaries, advice gap, coronavirus, pensions | Tagged Antiviral, Coronavirus, Covid-19, Nicola Oliver, Vaccine | Leave a comment

The end of furlough and what it means for pensions.

Posted on May 7, 2020 by henry tapper

A question was asked of the DWP on April 24th filed under “Pensions: Advisory Services”

To ask the Secretary of State for Work and Pensions, what discussions she has had with the Financial Conduct Authority (FCA) on when the FCA plans to (a) publish and (b) implement regulations directing pension savers to Pension Wise when they choose to access their pension savings.

The question was answered on May 4th, on Tersea Coffey’s behalf byGuy Opperman

The Secretary of State has not personally had discussions with the FCA in relation to this matter, however senior officials at the FCA, DWP and MaPS are working closely together on this and will continue to do so.

Existing Financial Conduct Authority (FCA) rules require firms to signpost to their customers the availability of pensions guidance via Pensions Wise. These include, for example, rules requiring firms to issue wake-up packs, designed to be one of the main sources of information for consumers about their options for accessing their pension savings.

Furthermore, the Money and Pension Service (MaPS) has undertaken trials to gather evidence on the possible ways to help encourage more people to take Pension Wise guidance before accessing their pension, fulfilling the requirement upon Government and the FCA set out in the Financial Guidance and Claims Act 2018.

MaPS, with Behavioural Insights Team (BIT) will publish an evaluation report of the trials in Summer 2020. We will use the evidence provided from the trials to help inform and assess the impact of the trials and conduct a consultation prior to implementing any regulations. For the FCA this also includes a duty to consult on the proposed rules. The due processes that DWP must take to lay regulations and the FCA must take to make rules will be followed.

The terminology

The DWP has done its best to expunge the word “advice” from its pension lexicon. The Money and Pensions Service (MaPS) has replaced the Money Advice Service and the The Pension Advisory Service. Pensions Wise most definitely doesn’t provide advice and “guidance” is the watchword for all Governmental interventions when people are in the pre-retirement zone.

But parliament still files these parliamentary questions under “pensions advisory‘ because that is what the layperson expects to get when navigating the pensions equivalent of the “strait of Hormuz”.

The Financial Conduct Authority regulates financial advice and is arms length to the Treasury, MaPS delivers guidance and is arms length to the DWP.

Anyone coming to this afresh – say from abroad – would recoil from this outbreak of acronyms, especially when learning that trials on nudging people towards Pension Wise have been conducted by BIT – itself an acronym for the newly independent Behavioural Insights Team.

Assistance is furloughed

One theme of my recent blogs is the need for the Government to toughen up on matters of advice and guidance. I am saying to the Pension Regulator not to consult but be decisive on the rules surrounding pension scheme funding. There is no time of space for deliberation and consultations make cowards of us all

And MaPS is clear on what people should be doing before accessing money from their pension.

They should be clear about the investment implications (especially if cashing out from funds invested in the market)
They should be clear about the tax implications, especially if large amounts are being withdrawn
They should have options to take advice laid out for them

Although all the information needed to take good decisions at retirement is available online, (and on the MaPS website), there is no obvious route to follow – no clear pathway.

Sadly, rather than accelerate the investment pathways to be offered by providers , the FCA has given providers the opportunity to delay their implementation (due in August) because of the epidemic.

I am vey worried that we are entering a period of financial hardship for many people with the assistance people need – in a bit of a mess.

A digital pathway to pension freedom?

And even in the best of time, decisions are tough for those with pension freedoms

The FCA’s business plan, published in April, cites pension freedoms as diving consumer harm.

The pensions dashboard is awaiting legislation that may or may not receive Royal Assent before the summer recess in July. In any event, it too will be “consulting” in the autumn and it looks increasingly unlikely that this key consumer tool will emerge from MaPS either this or next year

We now hear that the FCA have further plans

Prior to the pandemic the FCA had been exploring the concept of a digital sandbox, which would allow innovative firms to test and develop proofs of concept in a digital testing environment, and enable greater collaboration to solve industry-wide problems.

We hear in Professional Advisor that

The regulator has decided to move forward with plans sooner than anticipated so it can provide support to firms looking to tackle coronavirus-related challenges facing firms and consumers.

It said it will particularly support firms developing specific coronavirus-related work, and will evaluate the effectiveness of the feature or tool through the pilot.

The FCA believed developing a permanent digital testing environment would provide significant value to financial services on the whole.

The foundations of the sandbox would include giving users access to data, regulatory calls-to-action and access to regulatory support, as well as the ability for fintech and regtech firms to list their application programming interfaces and solutions to encourage exchanges of information.

The FCA said it would keep the industry updated with information on specific proposals for launching a coronavirus pilot of the digital sandbox.

It sounds as if the horse may have boulted before we even get to the stable door.

Need for a clear statement on how this fits together

With so many initiatives going on, it is hard to work out what the overall strategy is. MaPS , the FCA, HMT and DWP all have a need to work together but it seems hard to see how this is gong to happen without someone taking charge.

I am pleased that there is such clarity from the Treasury

NEW: The UK government has "no plans" to change tax rules to ease early access to pension pots for workers hard hit by the #Covid-19 crisis. pic.twitter.com/CHHyy1izmR

— Josephine Cumbo (@JosephineCumbo) May 6, 2020

There is a need for one voice from Government that is authoritative and provides clear advice to people about what they can and cannot do with their pension pots once they reach 55 and we need one of the elected or non elected “leaders” to stand up and be heard.

Perhaps we should find a COVID-19 savings Tsar – a Martin Lewis for pensions?

When the furlough is over

So far, people have been broadly shielded from the economic consequences of the pandemic. The furlough is providing many people with a broadly equivalent standard of living and many who are outside its scope have been drawing on savings rather than pensions. Nonetheless there are already signs of emergency withdrawals from pension pots.

The use of Pension Tax Free Lump Sum to meet emergency needs is sensible and an advisable decision for the over 55s, but for those not there yet, the opportunity to raid money early is a chimera presented by scammers.

Unfortunately, the opportunity to speak out on pensions is being missed because the spokespeople are falling over themselves not to give advice. initiatives such as that described by Guy Opperman at the top of the blog and outlined by the FCA in its recent statement on the Digital Sandbox are pointing in the right direction. But we need more than a “nudge unit” and “guidance” to stop people financially self-harming once the furlough is over.

With savings levels for the majority of the population at around £100, the immediate consequence of the removal of the furlough will be unemployment leading to personal debt and the kind of desperation that leads people to pension liberation.

When the furlough is over , we may find the withdrawals from pension pots from the over 55s spiking and insurers and trustees should be preparing themselves and their members for that occurring.

This really is a time for financial leadership from Government as the furlough looks like ending very soon.

Posted in advice gap, age wage, Big Government, FCA, pensions | Tagged Furlough, MAPS, MAS, pensions, TPAS, TPR | Leave a comment

Kick-starting a new pensions commission?

Posted on May 6, 2020 by henry tapper

Josephine Cumbo

Jo Cumbo is Britain’s foremost pension journalist and respected not just as a news hound but as a serious commentator. As an Australian, a mother and someone 20 years my junior, she represents an independent type of thinking that provides insights from looking at things in a different way.

Jo’s perspective through this current crisis is important in itself, but her capacity to listen to others and assimilate differing points of view into a central thesis, makes her authoritative. She is unflattered by praise and fierce when crossed.

Jo has put out a call for views on what the current lockdown will lead to – this is the message

I am gathering thoughts on the big issues facing pensions from the Covid-19 crisis, whether that be mass unemployment; tech change or the switch to Working From Home. How will these trends impact saving and retirement ambitions for the young and old? Email josephine.cumbo@ft.com

— Josephine Cumbo (@JosephineCumbo) May 5, 2020

Jo may not be a one woman pension commission, but she could be the maven to a Government body set up to manage our ambitions about life in retirement. Since I started talking with Jo about this, I’ve seen a couple of friends sending in contributions. Each one is worth space on these pages, but collated, edited and properly organised by Jo, I am sure together we could recreate the dynamism that made our last pension commission – 16 years ago – a success. I have opposed pension commissions in recent years as talking shops, but the urgency of the current situation demands a congregation of minds and Jo Cumbo.

Not for everyone. Social inequalities in pension provision mirror these during working life. Reasonable to think we are soon to see substantial increases.

— Debora Price (@GerontologyUK) May 5, 2020

… and overall financial management. Retirement savings cannot be looked at independently from other elements of someone’s wealth, debt, earnings and protection. The technology exists to help people in work & otherwise efficiently & holistically optimise their financial health.

— Marc Hommel (@marc_hommel) May 5, 2020

I think we will continue to see increasing proportion of workforce become ‘contractors’ or ‘gig workers’ or ‘non-permanent’ (whichever label you want to apply) – despite the IR35 debacle. And employers increasingly demand and rely upon a ‘non-permanent’ workforce. Thus we ….

— Marc Hommel (@marc_hommel) May 5, 2020

Big issues for many are:
1. reliance of pensions on the stock market with looming post-Covid-19 recession
2. Indebted governments post-Covid-19 cutting state pensions and tax incentives for saving in private pensions

— 𝙶𝚛𝚊𝚑𝚊𝚖𝙴𝚕𝚐𝚒𝚗 ☕️🎸💻⚽️🐋 (@GrahamElgin) May 5, 2020

I’ve put my views , written over yesterday’s lunch and published as I sent them. If you are interested to send her yours, then she can be contacted at Josephine.cumbo@ft.com. Jo’s particularly interested in views by close of play today (May 6th).

Technology is the key to recovering some of the ground we’ve lost to COVID-19

Our biggest issue in the short term is mass unemployment especially where technology cannot replicate – physical labour. So technology could initially make things worse (in terms of employment).

But technology make things better in terms of productivity. Not since the purge on manufacturing in the late 70s onwards have we seen such a threat to traditional labour. This is a real threat to chunks of the workforce who had seemed inviolable. Large amounts of local and central government, transport, hospitality and office services seem replaceable, if the concept of home-working embeds itself.

Technology could keep Britain on its feet by improving productivity, in the long term technology will create jobs -if we can adapt, but as in the late 70s, this change looks very daunting. Perhaps the most interesting aspect for pensions is not the impact of technology on obvious things like comms and admin but the changes the pandemic could make in social organisation.

Will we see a surge towards collectives – as the “we’re all in this together” spirit reasserts itself, or will personal freedoms come to the fore and we see an every man for himself approach? I see the traditional forces of collectivisation – employers – as receding into “facilitation” with payroll and a smaller contribution to pensions (both DB and DC).

But I see the new collectives, the master trusts and to an extent the insurers, playing a leading role in pensions organisation (this sounds a bit Australian). If I’m right, then the unions look a bit stranded right now, they need to find new friends at places like NEST , NOW , People’s and Smart who stand to gain in importance as employers pack pensions in (as a fiduciary force).

Will the master trusts fill the void left by DB and start offering “pensions” again – as opposed to “investment pathways”? Or will pension saving become a feeder for the wealth management industry, with people’s retirement accounts becoming their main source of later life liquidity? This is a big unanswerable! We will have to wait and see how brave some of these providers are.

Consultation makes cowards of us all

Right now, I see the DWP kicking cans down the road (TPR DB funding consultation, pensions dashboard and taking on the FCA over transfers).Let’s hope that some of the tools – CDC – tPR powers, dashboard legislation – are unlocked soon and we get the Schemes Bill through.

I hope that what will come out of COVID-19 will be a much more demanding public who won’t stand for poor value for money and will put their foot down to get the information they need to make proper decisions as they start retiring. I think the state will have to keep the big safety nets – PPF ,Pension and Universal credits and State Pension in place. But they’ll become intolerably expensive – so I can’t see the triple lock lasting if inflation kicks off and I can’t see people accepting a PPF haircut without an option to transfer out.

I’d like the DWP to start thinking of lighter solutions – such as a CDC section for the PPF and a CDC option for DB schemes that otherwise would dump and run (I mean pension pre-packing).

If this means an orderly move away from guarantees, so be it. One of the questions- as your note puts it – is to find a way to “afford what we need”. Guaranteeing pensions may be what we want – but like so much else – is it what we need?

Henry AgeWage

The new pension commission starts here

— Henry Tapper (@henryhtapper) May 5, 2020

Posted in pensions | 3 Comments

COVID-19; Out of Africa?

Posted on May 6, 2020 by henry tapper

Dermot Grenham

Cases in Africa

If the COVID-19 situation and outcome is far from clear and certain in countries such as UK, the same could be said with even more justification for countries in Africa. Just as questions can be asked about the accuracy of the data for say UK cases and deaths the same questions can also be asked about the accuracy of the data from Africa.

The latest map of cases (as at 5 May 2020) in Africa shows: (1)

The top 10 countries in Africa, by number of confirmed cases are:(2)

Country	Confirmed cases
South Africa	7,220
Egypt	6,813
Morocco	5,153
Algeria	4,648
Cameroon	2,104
Ghana	2,719
Nigeria	2,802
Guinea	1,710
Cote d’Ivoire	1,432
Djibouti	1,116

These figures compare with current figures of around 1.2 million in the USA, 250,0000 in Spain, 210,000 in Italy, and in the 150-200,000 range for France, Germany and the UK (3).

The lower prevalence may be partly due to less testing (South Africa, for example, with a population of 56 million is doing around 7,500 to 10,000 tests a day while Italy with a population of 60 million is doing well over 60,000) and less extensive health care systems but it will also reflect many areas in Africa being less connected with places suffering more from the COVID-19 crisis. However, it does not seem that there has been any noticeable spike in morbidity nor hospitals overflowing with patients, so the current lower prevalence rates may well reflect the reality of the situation and not be an artefact of the amount of testing. In some countries, the cases that have arisen were due to those returning from abroad and restricted to people of a certain social milieu.

Epidemiologically it has been speculated that Africa’s warmer climate and younger population makes it more difficult for the virus to affect people and if it does, the symptoms may be relatively mild and less noticed. The following charts comparing Japan and Uganda clearly illustrate the demographic difference.

Although COVID has a high infection rate, it is possible to believe that African countries have built up, during the past few decades, a robust responsiveness to epidemics (eg cholera, measles or Ebola). In the DR Congo for example, they successfully managed to contain the last Ebola epidemic despite it happening in a part of the country with recurrent security problems. With some flexibility, the experience accumulated in dealing with other epidemics could be used to deal with COVID 19 without lockdowns – or at least, not such severe ones. But, the presence of other disease such as HIV-AIDS and malaria may make some sectors of society more vulnerable.

Responses to the COVID-19 crisis in Africa

Many governments in Africa have also imposed lock downs to deal with the pandemic. For example, on 23 March, President Cyril Ramaphosa President of South Africa addressed the nation and announced a 21-day national lockdown effective from midnight 27 March to 16 April, with the deployment of the South African National Defence Force to support the government. On 9 April the President announced a two-week lockdown extension, until the end of April. This may have been enough to not just ‘flatten the curve’ but to significantly reduce the spread of the disease.

In Kenya, there has not been a lockdown on the same scale although travel restrictions have been imposed within the country and many events and large gatherings have been cancelled. Rwanda has focused on raising public health awareness of the importance of hand-washing and wearing face masks in public. They are making special provisions for cross-border truck drivers who could bring the virus in from other counties. Many, if not all, African countries have suspended international flights.

However, this may not have as much of an effect as, say, in Europe and the US. Fewer people in Africa will be in the age groups that would require shielding in other demographically older countries although the relative proportions of those with co-morbidities is not known.

On the other hand, the economic impact of a lockdown, to the extent that they are adhered to, may be much more severe in African countries or certain parts of those countries than they are in Europe (where the economic consequences are bad enough). African countries have less well developed social insurance and protection schemes, and rely more on informal and community-based support systems, which can come under strain if lockdowns and social distancing are imposed. In many parts of African people need to go out each day in order to earn what they need to buy the food for that day to collect water. It is hard to socially distance in areas of urban overcrowding and poor infrastructure.

The motivation for staying home to protect a nation healthcare system is less applicable in countries where there is a limited healthcare system to protect and where other causes of death such as malaria and measles and poverty in general are much more serious. The current number of COVID cases in Africa is not just small but small compared to the incidence of other diseases which more developed countries have largely got under control or eradicated. There is also less incentive for people to try and protect their health service if they cannot realistically access due to cost of distance.

African countries may therefore be better advised to take alternative approaches to lock down, such as shielding the most vulnerable while letting the rest of the population continue to go about their lives as best as they can and over time build up ‘herd immunity’.

One additional impact that the virus will have on African countries will be the aid and remittances they received from more developed countries. Governments’ aid expenditure is often formulated as a percentage of GDP. As GDP is expected to fall this year this could reduce the amount of aid to Africa. Remittances from the African diaspora can be more important than aid but, as people in the diaspora lose jobs or see their own earnings reduce, flows to their home countries may fall. African countries may therefore see a reduction in income to their country which will affect the trajectory to economic and social development.

McKinsey & Co have commented on the impact of COVID-19 on Africa (5). In their least-worst case scenario, allowing also for the impact of the collapse in the oil price, they estimated that Africa’s average GDP growth in 2020 would fall from 3.9 percent to 0.4 percent. Their worst-case scenario saw a -3.9% fall in GDP. The impact would vary by country. Prominent voices inside and outside the continent have already started asking for debt forgiveness from international organisations such as the World Bank. President Magufuli of Tanzania recently cancelled a USD10 billion loan from China, as he judged it was impossible to pay back, insisted on taking more serious preventive measures but avoiding at all costs lockdowns that would devastate struggling economies.

As the history of pandemics shows, food shortages after a pandemic could lead to more famine. According to the Global Report on Food Crises (2020), more than half of the global population affected by acute food insecurity is from Africa. If in the normal course of events these numbers were expected to double (from 135 million in 2019 to 265 million in 2020), after a pandemic they would certainly worsen. Although many African countries have great potential in terms of farmland, the reality is that they can barely feed themselves. Foreign direct investments from countries such as France, the UK, the US or China are more turned to mineral resources, and local governments invest little in the agricultural sector preferring to buy food from abroad.

Conclusion

These are clearly early days in the development of COVID-19 in Africa. Therefore, it is difficult to know with any certainty how this is going to play out over the coming months. One thing we can be sure of is that it will be different to how the pandemic has unfolded in Europe and the USA, and this may be for both better and worse. The direct health impact may not be as great as elsewhere but the economic consequences of lockdowns in African countries and the knock-on effects of reduced economic activity in the external markets for African goods and services are likely to have major adverse impacts on Africa’s economic development, and hence on health and education.

Africans are, though, resilient and resourceful. If Africa turns out to have a low infection rate, the area end up being a very attractive destination for the provision of goods and services, especially f countries and organisations start looking for alternatives to China.

References

¹ http://covid-19-africa.sen.ovh/

² (Ibid)

³ https://www.worldometers.info/coronavirus/#countries

⁴ CIA World Factbook and indexmundi

⁵ https://www.mckinsey.com/featured-insights/middle-east-and-africa/tackling-covid-19-in-africa

Posted in coronavirus, pensions | Tagged actuaries, Actuaries Response Group, China, Covid-19, Dermot Grenham | 1 Comment

All plans off for DB funding proposals

Posted on May 5, 2020 by henry tapper

John Ralfe and Steve Webb don’t see eye to eye

I’m sorry to have missed the FT’s DB funding debate, it sounds like a lively affair!

Mercer, the professional services firm, last week estimated the aggregate accounting deficit for DB schemes for the UK’s 350 largest listed companies was £52bn at the end of April, compared to a surplus of £10bn the month before, as equity markets and interest rates experienced record falls.

Recommended Final salary schemes Pension transfers under lockdown Sir Steve Webb, former pensions minister, said it did not make sense to continue with the consultation in the current environment.

“It was a document written in a different era,”

said Sir Steve, now partner with Lane, Clark & Peacock, a firm of actuarial consultants.

“This isn’t just a three-month blip and everything goes back to normal. We are in a different world, at least for the medium term. If you look at that (revised) funding code, scheme recovery plans were going to have to be a lot shorter. Does that make sense in the world that we are now moving into?”

The debate is raging not around the financial economics of mark to market valuations but of the priorities that we put on pension promises against other promises in the workplace. So John Ralfe can find support for a hard line position from Mark Rowlinson and Mike Harrison – normally moderates in this debate. Meanwhile the former pensions minister has moved towards a less regulated approach.

This realignment is – as Webb says – around your view of whether business as usual after the pandemic is on old or new normal. Forgive me for using politically charged terms but this is really about conservatism and liberalism with the conservatives looking for a return to the old certainties and the liberals, looking to a progressive future.

It is enervating to have such debate and I’ minded of Wordsworth’s recollection in the tranquility of older age

Oh! pleasant exercise of hope and joy!

For mighty were the auxiliars which then stood

Upon our side, we who were strong in love!

Bliss was it in that dawn to be alive,

But to be young was very heaven!

There is now an opportunity to re-evaluate the way that pensions work for people that takes into account the wider societal issues of employment and welfare. Consideration for those too young to have benefited from DB, for those who were not fortunate to have worked for an employers with a strong pensions covenant or an employer at all.

Consideration too for the massive cross subsidies between one group of tax-payers and another that has led to a large proportion of the UK workforce finding themselves dependent on the state pension, pension credits and the scraps of workplace pensions whilst paying taxes for their peers to retire on career average or a final salary based pension – as well as rights from the state.

The polarities of this debate are intensified by the insistence by those who have them, on guarantees and by those who don’t – on the capacity to save.

The capacity to save

For future generations of those retiring, the option of a pension from private means is dependent on their capacity to save. The primary driver for this capacity, is the ability to work. We are facing, when this furloughing is done, a massive hike in unemployment which will include many over fifty losing work which they may find it hard ever to recover.

Those who talk about the recovery plans of defined benefit pensions would do well to consider what recovery plan there is for the older worker in a time of sustained recession. So I side with Sir Steve Webb. Shortening recovery plans risks driving the remaining employers accruing guaranteed pensions into closure. It drives employers with closed DB plans and weak covenants into the PPF and it means that millions of workers will be facing even greater hardship in their personal recovery plans.

I don’t think that those who have charge of DB pensions (and were among the 700 people who could attend this session) have got the message

Poll taken at the start of the FT debate

The follow-up question

For me – the key question

A direct appeal to David Fairs, Charles Counsell and the Pensions Minister

Yesterday , Guy Opperman tweeted in praise of the current measures being taken by Government to protect workers from the most grievous impact of the current situation

Mind blowing Stats ⬇️
24% of all UK employees have been furloughed … in 2 weeks.

Whatever your politics, this is unprecedented, and a massive effort by govt 👏👍 https://t.co/7nEgGiCXAl

— Guy Opperman (@GuyOpperman) May 4, 2020

I agree, the Government has acted decisively and have been very effective. The intervention of the furlough shows that for limited periods – we hope between now and vaccination, Government can spread the acute pain of destitution , exchanging it for the long term ache of higher taxation. It’s called smoothing and it’s what Steve Webb is suggesting happens in pensions.

Against this view is the Darwinian view that schemes who are strong will survive and the rest will go to the wall

“…those schemes that have already got long-term targets and journey plans and mitigation…. are coming through the crisis in relatively good shape.”

Spot on from @TPRgovuk.

You don’t stop flying the #pensions plane when you hit turbulence. https://t.co/6uR5ytRBoe

— Mike Harrison (@HigherEdActuary) May 5, 2020

I strongly disagree with Mike’s position. I call on Guy Opperman , Charles Counsell and David Fairs to call off this DB consultation and to take the decisive actions that have seen elsewhere in Government.

And most farcically, the USS are pressing on with their valuation

The poster-boy for the “no retreat- no surrender” hard line , espoused by Mike and others is USS. Even in the teeth of the gale it decides to press on with a valuation that will surely be torn to shreds by the impact on universities of the incapacity of students to use the campuses they have so expensively constructed. The underinvestment in teaching is now being exposed. The lack of prudence in competing for students through ever more extravagant extra-mural facilities is resulting in a realisation that many universities are under exponential threat

Prof Adam Tickell, vice-chancellor of Sussex University, tells @BBCr4today some UK universities will not survive the current economic crisis. #USS

— Josephine Cumbo (@JosephineCumbo) May 4, 2020

The FT, unlike many in the pension industry, has recognised that we cannot return to the old certainties

The business world can never go back to the way things were https://t.co/iXtdRBB2y6 via @financialtimes

— Josephine Cumbo (@JosephineCumbo) May 5, 2020

It is now time for the pensions industry to decide whether it wishes to cocoon itself in the certainty of yesterday or move forward with the rest of the country. I urge you to listen to this webcast (free to listen thanks to the FT)

A full recording of this afternoon’s #PensionFundingStorm webinar with @david_fairs @stevewebb1, Judith Fish and myself is now live and free to view on the @FT website.https://t.co/Dt7BQQaY3M

— Josephine Cumbo (@JosephineCumbo) May 1, 2020

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The still small voice of calm

We are being kinder

We are already be kinder, let’s not let this Cummings’ episode stop that.

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Cummings matters to the liberal elite – because he represents us.

How this reflects on us?

Damaged goods?

No apologies – no regrets

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DWP FOI and the absence of briefing

Repeat offenders?

Shocking

So come on DWP- do the work – you’re not in furlough.

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In the public good

There is little genuine comfort in being absolutely right

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The issue

Fund substitutions – can of worms

So what is tPR worried about?

Broader issues for fund platforms.

Differing approaches to self-investment

Conclusions for investors

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We all love a baddie

We want the baddie on our side

Cummings is the person we don’t dare to be

Is Dominic Cummings running Britain?

Does it matter if he does?

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The problem

Widow, 96, with dementia gets £117k after she’s paid wrong state pension for 20 YEARS

So what is Steve Webb doing about it?

We should be giving Steve Webb credit, gratitude and support!

So what can you do?

What should Grandma have got?

SUMMARY

DETAILS

Widowed or divorced

Over 80

Exceptions

End point

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This is what Pension Bee’s – Queen Bee – Romi Savova has to say

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Compare Martin’s with our pension messaging

Our messages are mostly junk

Do you want to be like Martin Lewis?

Shoot the message not the messenger

If you can’t tell you people what their data says – I will.

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The language of Trust

The protection of GDPR

Getting people to listen to you

Repeating the dose

Using our data against us

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#Carehomedynamo

The challenge

The problem

My suggestion

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We employ asset managers for a reason

While some asset managers make sense of the noise – most don’t

The race to virtue..