Assistance, guidance and equipment for the future – that’s what we all need!

I am off to Westminster this morning to meet the new boss of the Single Finance Guidance Body. We’re not going to be talking dashboards – he’s in dashboard purdah till the consultation’s over. My agenda is AGE – Assist-Guide-Equip.

I don’t presume to think for everyone, or talk for anyone but myself, but personally I think we’re rather ignoring the role the state has and will play in helping ordinary people figure out their financial futures – especially the part of the future where money stops coming in from work and starts coming in from pensions.

We  underestimate the importance of this transition, we believe because we feel we can work for ever, that it will always be thus. But it isn’t. Many people find in their fifties that the opportunities and will to keep making money diminish. As John Cooper-Clark wrote of ageing bikers “Tyres are knackered, knackers are tired”.

Preparing for the longest holiday we’ll ever take

The realities of our older years are difficult to think about. The deterioration of mind and body is complimented by the joys of reminiscence, the peace of final years that should be devoid of stress – a time to enjoy families. While we have been mentored by parents and in the workplace, in retirement we are the mentors, the people others turn to.

It’s difficult to think about because there is no career path – all of us are on our own. Which is why a little guidance along the way is very helpful.

In my current thinking , I’m interested in how we help people into this new stage of life and particularly how we prepare them for the financial side of things.

I am sure that the majority of us will not be well-prepared, we’ll muddle through and look back and regret financial decisions we took that were not thought through. The decisions we take in our fourties, fifties and sixties about debt, savings and protecting ourselves and our families can and should last us a lifetime. That’s why I’m interested in simple concepts like the AgeWage- the replacement income we provide ourselves in our later years.

Bringing the Single Financial Guidance Body into being

We are now but a fortnight away from the arrival of a new name in financial guidance. SFGB doesn’t have any obvious resonance, it is a name not a brand – it inherits the brands of MAS and TPAS and most of the people who worked there, but it has to forge a new identity and relevance – which – it’s hoped – will make it the obvious place for us to go for assistance, guidance and to be equipped for later life.

John Govett is the new CEO, I want him to know that I’m rooting for him and for the SFGB. It’s a national resource and I want it to be known nationally. I will promote it.

At the same time, I will need it- as I needed TPAS – for myself and for the many customers of Pension PlayPen and AgeWage who need personal financial guidance and help for staff who often turn to their employers first.

John Govett has the job of making SFGB the next step for millions of us – who may start our exploration of the future tentatively – needing the kind of mentor that they’ve had all their lives – but won’t have in the future.

John has a lot of responsibility on his shoulders and he could do with support. I will be speaking with him this morning about how he can rely on mine and how I hope I can rely on his organisation.

The need for universal relevance

The Government has made some changes to the way we can organise our futures.

  1. We have a state pension that pays out a single amount from a different time. Understanding how this fundamental building block of the AgeWage works is a challenge for us and for SFGB
  2. We have new ways to spend our pension savings – PensionsWise (or whatever it will become) was set up to help us understand what pension freedoms mean and give us next steps in using them
  3. We have matters we don’t like to think of, the implications of failing health, the changes to the way we plan for this are yet to be announced but the strain on the NHS and younger generations is getting greater – the SFGB can help us here too.

I haven’t mentioned the dashboard , and I won’t in this piece any more than to say that the DWP’s current plan is that SFGB is where the dashboard will sit, at least for the first few years till commercial dashboards are unleashed on the poor unsuspecting public!

The current thinking appears to be that the Pension Dashboard becomes the first new deliverable of SFGB. This should make it universally relevant as Pension Freedoms should have made PensionWise relevant. That only 1 in 10 of us use our shot at PensionWise is a mark of failure not success. The dashboard (and PensionWise) should do better.

We need SFGB to be universally relevant, pensions and pension saving and debt management and long-term care funding should be things that all of us think about and prepare for. Of course not all of us will, but we can and should do better.



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The hidden costs of charges are pants!


High charges are pants

Yesterday’s Moneybox with Lesley Curwen was a cracker. It brought together the voices of a number of investors together with the views of Michelle Cracknell, Chris Sier and Gina Miller. All were clear and interesting

But the best contribution came from Jeff Houston , Secretary of the LGPS Advisory Boardad  who cited the West Midlands Pension Fund and made the issue real. West Midlands thought it was paying £11m but discovered it was paying £90m in investment fees. It  has subsequently brought this cost down by £30m. The £30m saving is being put to work keeping the streets of Wolverhampton clean, the libraries of Dudley open.

High charges are pants, as indicated by the pant-like illustration given us on the MoneyBox website!

pants 2

In total the LGPS pays £1bn in fees (Jeff admitted even this may not be the whole iceberg),  While Jeff ruled out suing fund managers – he promised some tough conversations to come.

The council tax payers and those benefiting from the services of local authorities in the West Midland have a lot to thank those running the fund. All over Britain pension funds are waking up to the fact that they can not only know how much they’re paying for costs and charges and (where they find they are overpaying) save their fund and its sponsors money.

This seemed pretty real to me,

Making money real for ordinary savers

The work done by Chris Sier is interesting to Jeff and to those running the big DB pensions that many of us are fortunate enough to still be in.

But it doesn’t really do it for the man or woman on the street (even Chris admitted he was bored by looking at the IDWG template).

What really matters to ordinary people , as has been confirmed by many surveys, is how much money they have to spend when they reach later years. This means comparing more than the minutiae but the total impact of what people pay and what they get for their money.

The only way we can compare what we’ve had as value and paid as money is against what others are getting and paying. This is called by the industry  “benchmarking”.

We do this all the time, look at the way we shop in supermarkets, or compare costs on Money Supermarket, or consider the value of a Christmas Tree on a market stall. We need a reference point before making a buying decision.

A chap came on Moneybox who had been trying to work out the costs of his Scottish Amicable Policy but said he’d got nowhere. Michelle Cracknell rightly pointed out that if you’ve got an old policy – review it.

But Chris Sier explained that trying to work out the internal rate of return on his pension was really hard and even when he’d worked out what he’d got from his money, he had no comparator with someone else’s return.

It was again left to Jeff Houston to tell us that by publishing the costs of actual charges of each of the funds run by members of the LGPS, he was giving his members the way to compare the value they are getting for their money.

Until we can compare how we are doing with other savers using a single means of comparison, ordinary savers who take their own risks, will be at a disadvantage.

This seems pants to me!

pants 2

It can be done

Let’s go back to the idea of Chris Sier’s that we measure our pensions by how our contributions have done (using the internal rate of return of our contributions).

What if every IGC and every Trustee and every SIPP provider and every Insurer with a load of legacy pensions agreed to publish an internal rate of return on your pension pot, based on the contributions, the growth and the amounts deducted from your pension?

What if, instead of this being an abstract number – it was presented to you against the internal rate of return against a fund invested in an average way – an average asset allocation, average fund management – average costs?

Suppose that instead of presenting you with a 14 page spreadsheet or even a 14 page pension illustration, this information was presented to you on your phone as a single number between 1 and 100 with the average set at 50 and your score being above or below that?

Doesn’t that sound the kind of thing that we should be trying to do? Does that sound pants?

age wage simple


Posted in auto-enrolment, corporate governance, pensions, pot | Tagged , , , , , , | 4 Comments

The People of the Abyss

people abyss

I went to Sherborne yesterday on a steam train. hook


I decided to spend the long journey home reading the People of the Abyss by Jack London – an account of London’s time with “vagrants” in London at the turn of the 20th Century. It is harrowing and desperate stuff, few of the people he lived with were likely to live long and London is constantly referring to his capacity to go back to “white clean sheets” – while vagrants had no hope of immediate or future comfort.

We still have people in the abyss of despair, living day to day to avoid death. I walk past them on the streets of the City, they bed down on my doorstep, I watch the callous behaviour we meet out to them on my TV. The problem is not abstract – it’s a real crisis every Christmas.

A couple of years back I spent a few days with today’s vagrants – who suffer a little less for Crisis at Christmas’ work.  Many of the people I saw were so outside the mainstream that they were not drawing the benefits they were entitled to. These included the state pension. The abyss is deep and for some it is hard for people to find the help to get what they are entitled to.

120 years ago , policemen used to roam London at night moving vagrants on so they could not sleep. They had to sleep during the day because they did not sleep at night. So the vagrants could not work and were excluded from hope.

We all have a responsibility for stopping people falling into the abyss. The abyss will not go away, it is the hopelessness that we call despair. Many of the people I see are in that abyss and we can only make their lives a little better by being kind to them.

But we can and must stop people giving up hope and dignity and entering into that state of hopelessness from which it is so hard to get out.

A beautiful and contemplative day

For me yesterday was beautiful, sad and tender. My mother heard that she can have a second knee operation which gives her the hope of rambling the Dorset hills again.

I sat on the other side of the aisle from a young man who was taking someone I assumed to be his grandfather out for a day on the train. It turned out the old man was just someone the young man was doing a favour to. What a fantastic act of kindness.

Reading Jack London’s “the People of the Abyss”, thinking of how my 86 year old mother will not give up hope and watching the unlikely couple across the aisle from me made me want to do my job even more.

How this touches pensions

As some of you may have read, I’ve been writing answers to readers questions in the Times. Most of the readers don’t have rich people’s problems. The one I have this week is from a lady who has £3,000 in retirement savings and is 59. I nearly wrote “only £3,000”, but that wouldn’t be right. This lady wants to start voluntary saving now.

The £100 a month she can save can be magicked to £125 by the Government incentive even if she doesn’t pay tax. She is self-employed and poor but she can invest in the NEST default which is an investment fit for a king. She can use the money she has saved in a bank account to pay off what’s left of her mortgage and boost what she can save for the future. She will have a house and a state pension in 7 years and she’ll have made the most of the little she has.

When people turn their minds to it, they can make a little go a long way. The problem is that many people like this lady, don’t have the hope to do something about their finances and get dragged into a financial abyss.

We live at a time when we talk about financial inclusion, demand people take financial advice and exclude 94% of the population from the kind of robust support they need to plan their finances. The financial exclusion practiced today is unintentional but very real.

When I wrote my response to the Times, I felt the hand of an unseen compliance officer telling me not to provide her with a definitive course of action, but if I can’t – who can?

Jack London didn’t take no for an answer, he went to the People of the Abyss and he heard what they were saying and he wrote about it and people read what he was saying.

Jack London was one brick in a road that led to a welfare state that means that the kind of horror he wrote about is much rarer than today

But people still die on the streets and they are usually old and financially excluded from what we enjoy. That can’t be right – we have to find a way to make homelessness a thing of the past. We have to help people manage their finances to include them in the benefits us lucky ones enjoy.



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Auto-enrolled through L&G/Ease – read this.

This blog is written for employers and advisers who have used or assisted with the ITM eAsE link to L&G’s workplace savings Plan. You are where you are – here is some context and some thoughts on your position]

For many years the L&G workplace savings plan was the #1 choice for small businesses looking to offer a personal pension solution to staff through auto-enrolment.

L&G more or less wrote the book in 2012 with both their group personal pension plan and its mastertrust; employers such as Marks & Spencer, Boots and Asda signed up. More recently Tesco has joined them. Attractively priced and offering the support of an impressive investment operation (LGIM), L&G continues to service its large and medium sized customers well.

L&G pioneered the IGC, setting up before others,  funding the IGC to run annual meetings with employers and offering a degree of transparency through its chair statements that set it apart. Governance on its master trust was and is equally impressive.

The strategy of leading the charge on auto-enrolment seemed consistent from CEO Nigel Wilson down. L&G had a strong social purpose and spoke out on it. It was the first organisation to offer a credible default that  took responsible investment seriously.

I am a Legal and General investor, investing in Future World, I have been described both within L&G and without as an advocate for their way of doing things. As regards the kind of company I work for (with 300 employees and strong employer contributions), L&G is a standout operation.

But not all employers are large and loaded.

One of the deals that L&G won on the way to becoming a dominant force in UK workplace pensions was a contract with the Federation of Small businesses.  The FSB is an important trade body to smaller companies, those with less than 50 employers. These employers are often paternalistic and take their pension obligations seriously. Many small employers contracted with L&G because it was the default provider for the FSB, either with the FSB’s financial services arm or with other employers.

Because L&G remained a stand-out workplace pension, it was often the choice for smaller businesses using Pension PlayPen, the online “choose a pension” service offered by me – with analytics from First Actuarial.

But somewhere, somehow, Legal and General as a life assurance company started to change. The management of the company shifted from the pragmatic customer focus of Kingswood to the more abstract wold of Legal and General Investment Management. The IGC – once led by Paul Trickett with members from the life company who knew small businesses changed too. Now the IGC is heavily focussed on investment and so is L&G pensions management.

There was a problem with workplace pensions; the smaller employers that had arrived from the FSB and through Pension PlayPen and a number of solid IFAs, were being offered a deal that did not meet LGIM’s target margins. A decision was taken to cut costs by automating service.

Over the last three years , the direct support offered to small employers and their business advisers by L&G has turned from excellent to virtually non-existent. Instead of contracting directly with employers to provide payroll with a supported service, new customers were required to use one of two external payroll interfaces. The first Pensionsync offers a link between employers and L&G which is free to use and works well. The second – is offered at a cost by ITM and though it has had some problems, has generally done the job.

A risky strategy

I have warned – on this blog and at IGC meetings – that the dependency on external software to solve a core issue for auto-enrolment – the payroll interface – is a big business risk for both L&G and its employers.

We have now seen one of the two providers crystallise that risk. ITM – who offer the “eAsE” interface will be ramping up its prices by a huge percentage at the end of January.

This risk was anticipated by Sage and other large payroll software suppliers – wary of the consequences of a failure or change in strategic direction. They demanded a direct interface with L&G and would not endorse any middleware approach

ITM is not failing, but since its MBO last year it is changing its direction. It clearly wants to make eAsE profitable in its own right and will argue that this huge price rise is justifiable on that basis.

But it leaves small employers contracting with L&G through Ease with a problem. Here is that problem, as described to me by one IFA with a large book of clients using L&G through eAsE.

As you know, it has been a painful journey to get to this stage:

  • Tie up with ITM and PensionSync
  • Subsequently 18+ months of issues with the ITM system itself
  • For a client who left a Payroll Bureau who had an ITM license, L&G would open up their old ‘Manage my Scheme’ service to allow employers to continue to administering schemes, although it would take 6 months to setup access.
    • L&G then further removed the ability to allow an employer to use the old L&G ‘Manage my Scheme’ service for employers who left a payroll bureaux who had a license of ITM. Despite older employers who setup in the pre-ITM era being able to continue to use.
    • An employer also couldn’t switch to a PensionSync enabled solution as L&G refused to take action despite pressure from Will, Chris and the team.
    • Essentially rendering their scheme redundant.
  • Ability removed for us to speak to anyone at L&G regarding clients plans with an email helpline the only method moving forwards.
  • Final nail in the coffin, ITM revamped pricing structure, alternatively a very tight timeline to make other arrangements by 31st January.
    • Essentially if the new increased upfront payment is not made by 31st Dec, all ITM L&G schemes redundant at end of January.

Thinking aloud, three positive outcomes (or minimum expectations from L&G) would be:

  • In event of needing to transfer scheme to alternative provider
    • Assistance in form of apology letter we can provide to employers explaining the decisions they have made to help manage a smooth transition.
    • Contribution towards our and/or employer costs associated with transferring to alternative arrangements.
  • Allow ITM employers to access old Manage My Scheme service within the designated timeline or contribution towards increased ITM fees
    • Here we would require guarantees from both L&G regarding the longevity of this solution and thus over the longer term I think I would prefer the former solution.

Finally, we are (an IFA) with 200 or so L&G schemes but I suspect the changes are impacting the FSB Workplace Benefits/IFS Employee Benefits who were also sucked down the ITM route.

A test of L&G’s metal

This kind of thing happens. L&G were not aware of the action of ITM and might argue that ITM is an independent organisation whose pricing is no business of theirs. I am pleased to see that the initial response of L&G management so far has been positive. They have recognised that this is their business problem and promised action.

The positive approach adopted by the IFA above is an obvious course to follow.

This is an opportunity for the IGC to exert some control. While the cost of auto-enrolment itself – fall to the employer – when those costs become intolerable, the consequences can fall on the member. High operational costs for auto-enrolment mean less in the kitty to fund the pensions. In extreme circumstances – they can curtail the activities of the business.

The fundamental problem goes back to the decision by L&G to move from a supported to an unsupported approach to small employers. This is not the time to argue whether promises were broken, but it is a time when attention has to be made to the matter in hand.

The ITM eAsE issue needs to be addressed immediately. January is a tough month for payroll and especially for the accountants who run payroll bureaux. This is not the best time to reorganise auto-enrolment and L&G must recognise some responsibility to rectify.

EAsE was and remains an endorsed solution. If that solution is no longer tenable for employers, it is imperative L&G takes back control of the payroll interface.

To quote from LGIM’s recently published “Retirement Income Riddle”

“As an industry we have a duty of care to support people in their decisions, to ensure they get the retirement they want, need and deserve. Providers, like ourselves, need to do more to help engage consumers and guide them to making better decisions”.

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The fight for proper dashboards is just beginning.



The collective intake of breath that greeted the eventual publication of the Government’s feasibility study and consultation paper was palpable.

Now – a week on – perhaps we can stop congratulating each other and get on with delivering a service that people need and want.

There are two outstanding matters to be addressed

  1. There are £20bn DC assets lost and unclaimed today in Britain
  2. There are going to be 50m abandoned pension pots by 2050.

At a Governmental level , these matters spell trouble for a retirement savings system.

For pension providers it spells an increasingly expensive claims experience

For ordinary people it means frustration and delusionment with a savings system that seems keen to take their money and not to give it back.

Off to see the wizard!

This morning I am off to DWP HQ for a workshop on how the dashboards will be delivered. Except dashboards  plural won’t be available in any meaningful way for 3-4 years after the pilot dashboard is up and running – and the pilot won’t be up and running till the back end of next year at earliest. I have heard these timescales described as challenging – given that the dashboard project kicked off in 2016 – I disagree.

If you could find your pensions, the dashboard could give people a chance to do something about abandoned pots, but finding them doesn’t look particularly easy.

Although there are plenty of numbers in the consultation document – nobody really knows how many pots are out there. We know that NEST has 7.1m, Now 1.8m and People’s 4m. The IGCs typically look after 1m pots and there are around 25 of them (including the GARs which should be IGCs. That leaves the unchartered waters – the 40,000 or so DC single employer DC schemes, the £400bn of non-workplace “legacy”DC and the SIPPS which are about the one part of the system that should be getting advice.

Finding pensions is going to be tough and it can only work if data is being mined in a productive way. It’s been nearly two years since Mark Falcon of Which wrote this excellent article on how to do open banking

What is clear today is that the challenges in terms of data sharing  needed to find pensions are very similar to the challenges the banking industry was facing then,

The essential message of the paper was this

The most effective way to promote competition is to ensure independent ownership and control

This call (and many like it) led to the intervention of the Competition and Markets Authority and to the break up of cosy relationships between those in the payment business.

The Pensions Minister – in his paper – repeatedly references this work but confusingly suggests that we can learn the lessons from Faster Payments – only once we’ve made the mistakes that Open Banking avoided.

Of course Pension Ministers are wizards, they can change things – and change things for the better. I’m going to the DWP this morning to see a Pension Wizard and I’m going to point all this out.

Dashboards that can help

I’m also lining up a meeting with the new CEO of the Single Financial Guidance Body – John Govett.

He’s now got the tricky problem of having to deliver a service that people want , not the service that the financial services industry seems to think they need.

My experience with TPAS is that what most people want – when they seek guidance is assistance in finding pensions , guidance as to what to do with them and the equipment to get on and do the job.

Dashboards that can help will do all these things, but a dashboard that doesn’t help will become an albatross around the SFGB’s neck.

The consultation is sub-titled “working together with the consumer”. It is not entitled “how the pensions industry and Government can maintain the status quo for a few years more”.

I will prevail upon Mr Govett to look beyond the end of the ABI’s nose for solutions to his problems. The SFGB is a delivery mechanism, it should not be turned into a governance body. The SFGB should be looking at new solutions to old problems , not old solutions to problems that don’t exist.

To this final point, the industry consensus that dashboards are a way to increase the amount people save is totally wrong. The dashboards are a way to help ordinary people find and then spend the money they have saved. Like with TPAS, the vast majority of pension custom that the SFGB will get will be from people close enough to retirement for pensions to be real.

We do not want to be told to save more (opt-out rates for the over 50s are the highest of any cohort), we want assistance guidance and the equipment to spend our money.

So I will be telling Mr Opperman and Mr Govett the same thing. We want our dashboard and we want it now. We don’t want it delivered old skool, we want it delivered proper digital. We don’t want lectures on saving more, we want equipment to spend better.

The campaign for proper dashboards is just beginning.

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Why do people take pension choices that make them sad?

drawdown 4.PNG

I’ve been reading a short report by Demos for Legal and General. L&G provide annuities and want to understand  the fall in the numbers of annuities purchased.

The retirement riddle is that the choices people are taken since the pension freedoms of 2014 aren’t making them happy, well or putting them in control.

I have to say I found some of Demos’ analysis baffling. It included “behavioural bias” – limited annuity purchases are plausible due to psychological or behavioural bias”. I’m not quite sure what this means but I’m totally sure that the following statement is incomprehensible to all but the most ardent behavioural scientist.

Hyperbolic discounting. “When people assign values to future pay-outs, the discount rate used to evaluate intertemporal choice is not fixed but varies in line with the length of the delay period, size and signs of the benefits. This effect is called hyperbolic discounting and is interpreted as ‘temporal myopia’.

I think  it’s simpler than that, I think people can see a bad deal a mile off. Investing their life savings into gilts with negative real returns is not a good way of providing a wage for life.

The report falls short in convincing us that people should be buying annuities. Given the choice of not buying an annuity, most people take that choice – whether in the UK, the US or America. Only in Switzerland are annuities popular, but that’s because they offer artificially inflated rates by a Government determined to get people to insure against old age.

“The retirement income riddle”  is still a good work

Despite some very obscure passages and a pretty dreadful introduction, the second half of the report is very good indeed. This is because it focusses not on academic research (see above) but on conversations with ordinary pensioners, some of whom are relying on an annuity and some on income drawdown,

If their research is correct, low earners do not feel as happy when they drawdown as they do when they have a secure income. The Demos people’s findings are interesting, if  a little worrying.

People on drawdown find it harder to take financial decisionslg drawdownPeople on drawdown are less happyLG drawdown3

and people in drawdown don’t feel in control

drawdown lg 3

This is worrying because of the £36.8bn which came out of DB last year – most is in drawdown.

This is worrying because 500,000 people a year are exercising their pension freedoms and very few are buying annuities (for good reason)

This is worrying because – as the report says about 20 times in its final section, there is precious little support available to people – and when it is available – it is not exactly going down a storm (only 10% of those eligible have been for their Pension Wise interview).

The report concludes on a sobering note.

As an industry we have a duty of care to support people in their decisions, to ensure they get the retirement they want, need and deserve. Providers, like ourselves, need to do more to help engage consumers and guide them to making better decisions. We hope this report, and our supporting activity with colleagues in the industry, enables this.

There is a more fundamental problem. People do not trust their provider to give them independent advice any more than they trust their annuity products.


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

Contingent charging – “commission” by another name?

ifa commission

Along with Al Rush, Jo Cumbo , Michelle Cracknell – I was interviewed yesterday by the BBC Moneybox team for a Christmas special on pension transfers.

It’s always good doing these things as it forces you to say what you really think.

Yesterday I found myself talking abut the curse of contingent charging which – like Paul Lewis – I consider as commission by another name.

In this I disagree with Al Rush who uses contingent charging to help what I consider “vulnerable customers” with special needs for cash rather than income.

For Al, the opportunity to charge contingently allows him to advise people on their DB pension rights in a way that he couldn’t if he had to demand a cheque upfront.

So when I wrote a blog on this earlier in the week, I was struggling with the conflict between “financial inclusion” and “consumer protection”. Frankly 9 times out of 10, I would argue that if you haven’t got the cash to pay for advice, you don’t have the cash to take the risks of pension drawdown.

Nic Millar pulled me up on “spotless” – (of course all advice should be spotless), I should have said “proportionate”.  The FCA are rightly worried that the proportion of those who pay a contingent charge and are worried about the advice is much lower than those who pay for the advice independently. In one sense  the risks of taking a transfer should be disproportionally promoted to those paying by a contingent charge. The Transfer Value Comparator should be posted at the front of any suitability report paid for by a contingent charge.

The other relevance of the word “proportion” is to do with numbers paying for advice out of the fund. In my view, the numbers out of all proportion to the need. The need for contingent charging is a “special need”.

The FCA’s definition of a vulnerable customer is interesting

vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.

The FCA’s report on the quality of transfer advice  contains this alarming set of statistics

As part of our review of the 18 firms’ processes we reviewed the advice they gave on 154 transfers. Our suitability findings were as follows:

  • suitable: 74 (48.1%)
  • unsuitable: 45 (29.2%)
  • unclear: 35 (22.7%)

These results are little different from their findings in 2017 and compare unfavourably with their research into retirement income advice where over 90% of advice was deemed suitable.

IFAs know what they are doing and what they are doing is providing unsuitable or unclear advice over half the time.

Can we really pretend that the disproportionate incidence of poor advice is down to IFA ignorance or lack of talent? I don’t think it’s that. I think the reason that IFAs get it wrong is that they have to distort things to get paid.

This is the problem with contingent charging, it distorts good quality advisers into poor quality advisers, it is storing up problems for the future and that the FCA has yet to address this problem – is worrying. The door has been left open for the FCA to ban conditional charging – I have called for that draconian action in the past

I am now going to change my position. I think it enough for the FCA require anyone who is requiring conditional charging to be deemed a “vulnerable customer”.

This is because I agree with Andrew Warwick-Thompson

but I see the needs of Al Rush. By making contingent charging available only to those with special needs, advisers will have to make sure the advice is proportionate to the special needs of the customer, the PI insurer and the regulator. There is one final point to consider – tax.


Right now – contingent charging is being used as a tax-dodge for higher rate tax payers, I can hardly see “wealthy clients” who can pay their taxes, being allowed to escape them through a regulatory loop-hole.

If the fact-find reveals that a client has the means to pay for advice, then the option of a contingent charge should not be available.

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

Re-deploying our pension winners!

Webb for Regulator?

This rumour has sparked a twitter storm among those who think Steve Webb is conflicted in potentially exercising the powers of the Pensions Regulator on policies he initiated as pensions minister.

Personally I see any conflicts as manageable. It is after all tPR who advise the minister on policy in the first place. It’s an open secret who in tPR advised Steve when he was minister and as that person is influential in Government policy today, we might logically consider him conflicted too.

Following this path, we would have no-one talking to anyone; a state of affairs that would be quite the opposite of good Government. The pension policy successes of the past ten years have resulted from open government – the failures from the diffidence of civil-servants and politicians to get things done.

The assumption that Steve Webb should play no further part in the governance of pensions is silly, we don’t have many people of Steve’s calibre and he’d make a good pensions regulator.

I’m not sure I want him as my pensions regulator for two reasons. Firstly there are others who could do the job – probably as well and secondly Steve is doing a very good job where he is – at Royal London. But that does not mean Steve shouldn’t be considered for the job of CEO of the Pensions Regulator.


The good that they do

Conflicts between those in public life are most apparent when they look to monetise their experience in private life. Steve is doing just this at Royal London, Gregg McClymont at B&CE and Ros Altmann at PensionSync are all being paid not just for their experience but for their influence.

Do we object to those who have served as MPs (or in Ros’ case as an active Baroness) influencing as lobbyists? All three are very vocal, very prominent in public debate and are all getting things done. Steve’s petition, Gregg’s work on health issues for builders and Ros’ campaigning on net-pay are examples of the practical application of influence for the public good. There is a dividend in having former politicians in the private sector, they move things along.

We may feel awkward that they are leveraging their positions in Government for personal gain but I think the judgement should not be “Whether” they do this – but “how” they do this. As they are opinion formers, they need to be challenged and I have challenged them on this blog.

In the case of these three, all are quite accountable, all engage in debate  and all three have been highly effective in their work. The proof is in the pudding and the pudding tastes good.

The good they might do

There are examples of conflicts that go un-reported which worry me more. I worry when I see senior civil servants from both FCA and tPR  working within consultancies and influencing the course of policy through what can only be called “insider knowledge”. I have made these points in relation to the RAA of BSPS (as an example). There are plenty of civil servants who have served time in Brighton or Canary Wharf  who could be tempted to arbitrage against regulatory weakness for commercial gain. We should call that out.

Does this mean that we should stop figures as disparate as Rory Percival and Andrew Warwick-Thompson from doing the work they are doing – NO!

We need experience in the private sector , but we need transparency. What we can’t have is the kind of kiss and tell relationships between former regulators and those currently in the job. I don’t think there is a lot of this about because we generally have the controls with the regulators to stop it. We also have scrutiny from the media, social and otherwise.

The good they will do

Someone will take on Lesley Titcomb’s role when she leaves in the spring of 2019. There are several candidates and I doubt that many will be life-long civil servants. I expect to see people who have worked in the private sector prominent in the selection proceedure.

I am pleased that Steve is being mentioned, not least because imagining him in Lesley’s place, makes me realise that she leaves big shoes to fill. She succeeded Bill Galvin who is now CEO of USS ( a highly political role). I hope that Lesley can do more work in the public sector but would feel comfortable working with or competing against her in a commercial role.

The jobs that people like Caroline Rookes , Charles Counsell and Michelle Cracknell do is important to pensions. All three will I think be under-employed in months to come. All three will be looking at how they can make a difference without creating conflicts for themselves.

People like these don’t get to the positions they’ve enjoyed without having done good work. Their potential to do more is great. We should not be stopping them applying for roles on the basis that they are conflicted, we should be asking them how they will manage those conflicts.

We don’t have such a talent pool that we can discard the talented on the basis that they’ve done their bit. If they have a bit more to give – we should be grateful!

Posted in Big Government, Blogging, pensions | Tagged , , , , , | 2 Comments

UK – OK! Disclosure battle won – now let’s win the peace.

jap soldier 2
The PPI have produced a really excellent paper “Charges, returns and transparency in DC – what can we learn from other countries?”

The report, sponsored by Which? explores UK charges for pension schemes against those in the US, Australia, the Netherlands and Sweden.

It’s not headline grabbing stuff – but it is good to hear a Dutch pension expert praise the system of cost disclosure developed by the IDWG.  The Dutch of course got there first, but they are now acknowledging that we are using second mover advantage to learn from their mistakes. Jacqueline Lommen  explicitly linked recent work on both cost disclosure and collective DC as examples of the progress Britain is making. This may not yet be reflected in popular sentiment, but (at least in some areas) Britain is getting back on its feet.

Winning the peace

From the table above, we can see one of the difficulties with the omni charge AMC that has been the standard way of disclosing costs to savers in the UK.

Individuals get a rough idea of what they are paying from the AMC (rough because it doesn’t include transaction costs) but they’ve no idea what the omni charge AMC is paying for. Enlightened providers, such as L&G have followed the European and American models and split admin and investment costs.

In the UK – this has been seen a dangerous disclosure, NEST tell us that they cannot tell us what they are paying for outsourced fund management because they have put themselves under a voluntary NDA not to.

I have has numerous conversations with People’s Pension about how much of the 50bps they charge members goes to pay State Street (their fund managers), how much meets People’s running costs and how much is kept back by B&CE to recover the costs of setting up People’s pension nearly 10 years ago.

Since I haven’t had an answer, I am guessing that the split for People’s is 2-15- 33. If People’s want to come clean with the real numbers – I’ll be happy to publish them.

Winning the peace means building on the disclosures we have and pressing home the advantage. Not everyone will want to know what People’s or NEST are paying away to external service providers, what they are holding back to recover costs and what their internal running costs are – but people like me will keep asking. Sooner or later we will be able to benchmark the efficiency of these organisations and rate them for the sustainability of their propositions.

That’s one of the peace dividends!

How much do we pay to spend a penny?

So far, we have focussed on getting people a good deal on their savings, but have done little to disclose what people are paying in the spending phase of their DC pension.

This is worrying as many of us will need to spend our retirement pot over as many years as we saved and – while we were fully aware while we were saving – we are likely to become more vulnerable as we grow older – and mentally tired.

The idea that we pay to spend our pennies is not one that occurs to most people, but we do. There is no charge cap on that spending either and the costs of getting our money are far from easy to understand.

Without the data, it is hard for me to write with authority on this. It would be great if PPI could follow up with a similar report telling us the international comparisons between the cost of our drawdown system and the costs people pay to spend a pension penny in Sweden, USA and the Netherlands.

Not much chance of peace this morning!

I am going to make my way down to Westminster this morning, to witness the spectacle of Frank Field interrogating Colin Meech and Jonathan Lipkin at the Work and Pensions Select Committee.jap soldier

It’s likely to be a lively affair. Colin is like the Japanese soldier who will still be fighting his war- many years after the rest of us went home. Jonathan will be there to provide him with a target!

Frank will have to go some to beat the outstanding chairmanship of Laurie Edmans and the brilliance of both panel and audience in the debate that followed. Thanks to Lawrence Churchill in particular – whose insights partly inspired this blog. I cannot say more as we were under the beastly Chatham House rule.

I am however able to post this slide which shows just how far we have come since the bad old days.

and I can remember – though not repeat the brilliance of one of the best civil servants I have ever met.


Posted in advice gap, Dashboard, dc pensions, pensions | Tagged , , , , , | Leave a comment

Lord share their data – but not yet!

botticelli-augustine (1)

Augustine’s wayward prayer – “Lord, make me holy – but not yet”, sprung to mind as I sat with the dashboardistas in Parliament yesterday.

The Government’s “Pensions Dashboards – working together for the consumer” is a pretty vague document which limps over the line – six months late – and with little for the consumer in the next five years.

What the consumer will get is pretty much what the DWP and the pensions industry wanted. There will be multiple dashboards – but not yet.

“The evidence would suggest that starting with a single, non-commercial dashboard, hosted by the SFGB, is likely to reduce the potential for confusion and help to establish consumer trust”(this statement – 205 – appears in bold in the printed document but not so – in the digital version)

Since the Single Financial Guidance Body has yet to start its work, I am not sure what the evidence is for the efficacy of a single, non-commercial dashboard. It’s true that in Australia, dashboard is a euphemism for a marketing device and it’s also true that European dashboards have been centralised and successful. But there is no evidence at all that a dashboard will work in the UK because it is non-commercial – or single.

Indeed – the Government’s attempts to make pension guidance digital to date – through the Money Advice Service – have been singularly unsuccessful.

The SFGB may be better, they have an influx of good blood from the highly successful TPAS and a new leader – John Govett  who see’s his purpose as to “help people transform their own lives”

John was at yesterday’s event. He told the audience he was keen to get on with it. I wish him good luck, the impact of the transition to SFGB has so far been to keep project dashboard waiting for the best part of the year – while we await his and his Chair’s arrival.

I say this in the absence of any other excuse for the appalling delays in delivering this digital project.

Giving the SFGB first shot at a dashboard is like opening a motorway with a convoy of tractors.

Confusion over open standards

There was throughout the meeting, a confusion by the extent to which Government could adopt the open standards (the pensions equivalent of the CMA9) that could give us “open pensions”.

There are sections of the document which show the same confusion. P198 states (in bold in the paper copy)

In order to harness innovation and maximise consumer engagement, an open standards approach that allows for multiple dashboards is the right way forward.

but it doesn’t have the courage of its convictions (P209)

While the department recognises the commercial opportunities created by multiple dashboards, it believes that there should be a single Pension Finder Service which is run on a non-profit basis and with strong governance.

Lord share my data – but not yet!

Governance overload

While the CMA got banks to share data through a system of APIs, the DWP has decided that pensions are too hard for that and resorts to “industry positions”.

In a section entitled “a dashboard section for everyone” there are paragraph after paragraph warning against individuals having direct access to their own data.

Again there are contradictions everywhere . In P195 we read (again in bold)

“It is important that for consumers, the provision of their basic information is free to access”

but consumers – especially those with low levels of financial literacy are not to be given access to information without the provision of that information being regulated and it coming with a dollop of guidance – if not full financial advice.

The result of all this uncertainty at the policy end is this ridiculously unwieldy governance structure which will atrophy open pensions into a monolithic bureaucracy that will MAS look agile.

dashboard governance model

And what will all this cost?

We were promised a feasibility study, but this study has no numbers. There is no attaching cost forecast, no financial justification – nothing to tell us what the cost of all this bureaucracy will be.

The Government is making great play of the £5m the Treasury has given the DWP to provide a hyperlink to the existing state pension forecast service. But finding the £20bn that has gone missing, displaying up to 50m abandoned pots and regulating the whole process as outlined in the paper is going to be a mammoth undertaking.

The cost of all this will – other than the £5m fall on the pensions industry through increased levies.

Dashboard cost model

These levies are unlikely to be paid out of margin, they will be passed on to consumers through higher charges. Another example of pensions abhorring a vacuum. Where costs are likely to fall – let’s find a new way to weigh our pension saving down with added cost.

Industry reaction

I am not sure how to best describe the feeling within the room. It was split between relief from the politicians and civil servants in the room that they had got something over the line and got people like me off their back, the PLSA, ABI , Which all of whom seem to think that what we have is a good outcome, and me, Romi Savova and Ian Mckenna, who see this as a hopeless waste of time and money – an opportunity wasted.

Thankfully there was at least one journalist in the room who was prepared to call the Emperor’s new clothes.

My conclusion

People have been given an expectation that they will be able to find their pensions and see their pension income and pots in one place. People will not want to wait for the SFGB to organise itself to deliver something in 2019.

In answer to question VI and  VII of the consultation, I very much doubt that most people would wait another five years to see the majority of their data in one place.

Question VI

Our expectation is that schemes such as Master Trusts will be able to supply data from 2019/20. Is this achievable? Are other scheme types in a position to supply data in this timeframe?

Question VII

Do you agree that 3-4 years from the introduction of the first public facing dashboards is a reasonable timeframe for the majority of eligible schemes to be supplying their data to dashboards?

My question to the Minister was this.

“When I went to the first public meeting on the Dashboard, I was 54. I am not 57. Should I be waiting till I am 62 to see my data in one place?”

In a year when we have seen the successful implementation of open banking and Faster Payments, when HMRC continues to roll out Real Time Information and is demanding we make tax digital, pensions are moving at a snail’s pace.

The ABI, PLSA and Which will be embedded into the delivery function of a dashboard. The DPW will Chair its steering group. To all intents and purposes – nothing has changed. The State is in no position to facilitate delivery – as has been proved by the last three wasted years.

Now yet another Governmental Body has been placed between people and their data, the SFGB.

Bureaucracy is killing the dashboard and with it people’s hopes to get their pensions back.

I cannot support this approach to the governance and the delivery of the dashboard. It will cost people more than it delivers, it is unwieldy, unimaginative and deeply patronising to ordinary people.

People deserve their data now – not to the timetable of the pensions industry and Government.


Posted in customer service, Dashboard, pensions | Tagged , , , , , | 2 Comments

Could “Dashboard-Day” be here at last?

Today’s a big day out for the dashboard-istas!

Dashboard event.PNG

Over the weekend , Theresa May linked herself to the pensions dashboard using the Daily Mail to pin her colours to the mast.

It is clear that the Pensions Dashboard is going to happen – the question is whether it will provide us with open pensions or be the love-child of  pension- industry in-breeding.

A social start

It is encouraging that DWP are organising this using social media site “Eventbrite”. It suggests that whatever comes out of this morning, will at least have been launched using social tools. That it’s a private pensions event may smack of Sir Humphrey but the registration process got things off in the right direction. That I was invited  is another step in the right direction.

I will be scooting (or Boris-Biking) back from Portcullis House to Bank for a slightly delayed Pension Play Pen lunch (we shall kick off at 1pm subject to me finding a rack for the beast). Details here  Please join me for lunch if you want to get a first hand recounting of whatever in the meeting, I’m able to talk about!

Why we need open pensions.

If you read yesterday’s blog, you’ll know that the concept of the Dashboard put forward by Frank Field in his letter to Guy Opperman is the opposite of “open pensions”.

The demands for compulsory data clearance, a Government led governance body, regulatory permissions to run dashboards and worst of all a single pension finder service will be resisted – at least by me – and by all those who want to see open pensions.

We call on the Government to consider data and cash transmission between pensions as the way they did banking in 2016/17.


The system advocated by the ABI and others that seems so successfully to have lobbied the W&P Select Committee would decrease competition leading to higher prices for the consumer. We would pay dearly for a single pension finder monopoly – whoever it was given to.

If we are in any doubt as to what the lobby was, we need only read this article in Corporate Adviser. The demands come from the people at the front of the queue for the monopoly.

The cowardly justification for the atrophication of open pensions into what these people want is fear of scamming. Those who claim to be anti-scamming are quite happy to see its continuation – albeit in offshore havens such as the Isle of Man. If you don’t know what I’ m talking about , read Angie Brooks’ excellent new blog “Long Term Savings Pig” which names the names.

We heard precisely the same scare stories from the retail banks prior to the introduction of the CMA9. We were told that open banking would be a scammers charter, a year on and most of those spreading that message are trying to buy-up the challenger banks.


If they aren’t careful, the Starlings and Monzos and Revoluts will end up eating them.

The Queen of Open Pensions will be there.

I’m very pleased to find out that Romi Samova, the Queen Bee – will also be at the “private pension meeting”. Like me, she has no interest in keeping open pensions private, no interest in closed room roundtables and no time for procrastination.

Like me, she is shocked by the delays that have precluded firms like hers from developing the tools to help people find the £20bn in lost pensions.

Like me, she is anxious that the pot-proliferation that could see (using the DWP’s own estimates) 50 million abandoned pots by 2050.

Like me, she wants to see genuine support for the 94% of us not taking financial advice. What she is doing with her Bee-Keepers is a model for that kind of genuine support.

The exclusion of Romi Samova from the Round Table held for the Work and Pensions Select Committee is a crime against the entrepreneur, a spoke in the hub of innovation and an affront to the consumerism that Romi stands for.

Not a time to hold back

When people hear about the scale of the problem, they are shocked. Shortly before the meeting this morning, I will be on BBC radio explaining to the good people of Hereford and Worcester how it came about that one of their listeners lost his or her pension. When I quoted the PPI estimate that there is not one lost pension but £20bn of them, the program producer nearly fell off her chair!

I will not press the negative, I will point to the future and hopefully a brighter future for those of us baffled by the pension system.

To get open pensions, we need open practices. We need open meeting not closed round-tables, we need a proper consultation- as promised by Amber Rudd at the TISA conference but two weeks ago.

Most of all we need a Government not pledged to the lobby of those who want to keep pensions closed. I trust that in Guy Opperman and Amber Rudd – we have two  politicians with the consumer – not the pensions industry – in mind.


Have a dashboard Christmas!

12 days of dashboard

Posted in age wage, Dashboard, pensions | Tagged , , , | 2 Comments

“Out of office” for ever?

out of office 2

How can I afford to go on holiday for the rest of my life?

It’s an awkward question that most of us put off till it’s too late. It’s why there’s all this talk of pension dashboards, the Government wants us to think more about retiring.

The trouble is we find it hard to get the information we need and even if we have the information, it’s hard to make sense of it. Even if we want  to make plans, we don’t get a lot of help.

94% of us don’t have a financial adviser and only about one in ten of us use the Government’s offer of free financial guidance from PensionWise. We aren’t good at getting help!

And we’re losing out, experts reckon there’s £20bn. of unclaimed pension money sloshing around our financial system. Things are getting worse, by 2050 the Government think there could be 50 million abandoned pension pots.

Something’s got to be done to help ordinary people organise their retirement money and make the most of their savings. People want to be told the truth, not the truth dressed up to suit.keep them

That’s why we started AgeWage

AgeWage is set up to help millions of savers find their pensions, organise their money and spend it. We’re not here to tell people off for not saving enough , we’re about giving people practical help with what economist called “the nastiest hardest problem in finance!

What we do is get data from the people who manage your money, we use this data to tell you useful things – how much you’ve saved, how your savings have done and how you can organise your savings for the future so you can spend them with confidence.

Depending on what interests you, we’ll answer other questions like “how much am I paying for pensions”, “how green is my pension” or “how can I bring all my pots together”

We will give you this information to your phone or – if you prefer – to your computer.

One of our advisers said the AGE stands for “assist-guide-equip”, we aim to get people “retirement ready” if that makes sense.

We won’t charge you for doing this , you pay quite enough for pensions as it is! The people who manage your money want to pay us to give you this support and the Government is supporting and helping us.

What are we doing?

We are raising quite a lot of money, a couple of million quid to be exact. We’re doing this from lot’s or ordinary people – not just from financiers. We’ll spend the money on the kind of digital things that turns Fintech into Pentech. But we’re also setting up support so you can speak with people who do know about pensions.

We’re setting up the deals with the people who look after your pension money so that you can see AgeWage scores on the stuff they send you each year.

And we’re going to spend some time in something called the FCA sandbox, where we’ll be working out how to best show you your information.

Why am I telling you about this?

We want AgeWage to become a household word which you think about when you start worrying about the future. We don’t want to sell you investments, tell you to save more or charge you hidden fees on what you’ve got.

We’d like you to know where we’re coming from and what we’re up to. If you want a piece of the action, we’ve worked out a way for you to invest in a clever way. If you fancy yourself a pension expert and have some time on your hands, perhaps you’d like to join our support team.

If you want to find out more – email

out of office




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Lost your pension? Play snakes and ladders – for all the DWP cares!

agewage snakes and ladders

This morning I will be on local radio with five minutes to answer this question.

The question’s prompted by a listener to Hereford and Worcester Radio who is sure he/she had a pension with someone somewhere but can’t remember much more than that.

It’s a nagging doubt that many of us have that we have money with someone but have no way of finding it. I have the same problem with betting accounts, I know that I have money with Sunderlands, Bet365, Jennings and others – accounts that I set up on the train down to Cheltenham to get that free bet, accounts I used once and never again.

I am sure that professional gamblers will look at me with the contempt that many will look at the person from Hereford or Worcester – how can people be so dumb?

I have moved beyond that question. According to the Pension Policy Institute , there is £20,000,000,000 of other people’s money swilling about in pension trusts, in the troughs of life insurance companies or “managed” in  “self-invested” personal pensions. The person from Hereford or Worcester is not alone.

Finding pensions

As a bit of a joke, the Sun newspaper and I did a do-it-yourself dashboard this summer where – instead of using a professional pension finding service like Origo or Experian, you tried to do it yourself. I don’t know if the Sun ever published the article digitally, but I took a snap of our DIY dashboard pension finding service at the time. It looked like this.

the sun

Do it now!

As you can see – once you go through steps 1-7, you are on to step eight – get on with it. “Things will get more expensive the longer you leave it!”  I think when we were doing this, we expected to see the results of the DWP’s feasibility study any day, that was June – this is  the last day in November.

Funnily enough, I’ve got a meeting in my diary for 11 am on Monday 3rd December – to meet the Pensions Minister in the rather scary Portcullis House. I don’t know if it will be “off with the blogger’s head” or an announcement on something. Could it be that the DWP are actually going to be doing something about publishing the feasibility study that should have been published in March?

Should I tell the person from Hereford or Worcester not to do anything now but wait till the DWP tell us that following the publication of the feasibility study they are now going to launch a feasibility study as to whether there should be one dashboard or many – whether the job of pension finding is going to get any easier?

Or should I just say what Sun readers were being told in June, that a pensions dashboard may help in the future , but that you haven’t got time to waste watching Government fannying around sorting it out?

Don’t let your pensions get in the way of politics!

I think I’ll resist slagging-off the Pensions Minister, Portcullis House sounds the kind of place you might not find your way out of in a hurry.

Instead, I’ll suggest that the ABI and the DWP have got this all sewn up, and that you’ll be hearing from them later, once the consultation has been completed. In the meantime they can play Pension Snakes and Ladders on this natty little board we’ve designed for you.

After all £20bn is just a drop in the ocean compared to the amount of extra revenues the Treasury will make from Pension Freedoms.

Politics is much more fun than pensions, especially for politicians – so person from Hereford and Worcester – you’re just going to have to figure it our for yourself!

agewage snakes and ladders

Posted in advice gap, age wage, pensions | Tagged , , , | 2 Comments

Now that’s what I call financial advice.

here comes the boys.jpg

The boys are back in town

I’m quoting Al Rush from the Facebook post he made yesterday evening following the meetings of steelworkers with MPs and Regulators yesterday.

 Al’s message to the steelmen

Sometimes, in my line of work, it can be dispiriting to work for people who are greedy to the point of unreasonableness. Sometimes, when you are putting together something for people and it comes off, it can be quietly satisfying. Yesterday eclipsed everything because not only was I in a room where we achieved the latter, but we all achieved it for people for whom the former couldn’t be more further removed.

I was, as always, struck by you being as respectful, proud and as dignified as you always are. James, my son, said to me afterwards, “Nat (his other half) has an Uncle Mick who works at the Scunthorpe plant and they’re all exactly like him except it’s rugby not football”. And it was meant as a 100% compliment. Chris, you said to me “We’re simple men”. You’re not – you’re ‘just’ straight down the line blokes who expected to be treated as you would treat others.

What’s nice about this is that you’re now able to do the stuff I know that some of you wanted to do – give the wife a decent Xmas, get married, slip a few grand to the kids so they can buy a house, pay off the mortgage etc. It also means that you can weather the current financial buffeting a little better by not dipping into investments, and that you might be able to fund any follow up action via Philippa with a far easier mind.

It was vital that you took the fight to London because you had to be seen to be fearless in the face of adversity and yet another knockback, and you had to be seen to be willing to have the controlled aggression, endurance and the stamina twelve months on, to mount up into your car’s and trains, and head east to take the fight to them, on their home ground. It also sent a string message to the legal representatives of anyone who may be the focus of later legal action “Don’t mess with us, we want a peaceful and quiet life, but it would be fatal for you to mistake our quietness for weakness”.

This morning, Philippa has organised a conference call with Henry and me to discuss the most pressing priority – namely present a case to FSCS within the next week to justify fine tuning the discount rate. So, life goes on. And so will your case. Ultimately, I’m sure, justice will continue to prevail. For now, slip back into cruise mode, take the long view, be prepared for long periods of seeming inactivity, be prepared to step up to the plate again when needed but above all.. just enjoy a Christmas with your families and loved ones.

But, it was an honour to go into battle with you and for you, and although rifles were loaded and cocked, it was an honour to win without a shot being fired. You were superb, and Wayne’s final word on your behalf summed it up perfectly. See some of you next week. I apologise for bumping some of you back a week. Someone put this on my Facebook page yesterday – I was gobsmacked.. I can’t believe we did it all in two weeks.

I was an observer, I posted after that I was gobsmacked – I really was. Most of all I was gobsmacked that at a day’s notice, the FCA, tPR, FSCS and so many members of parliament turned up, waited and then engaged. That goes for the press too.

Here we are.PNG

The argument

FSCS has agreed to review the compensation amounts they’ve suggested to steel men. They’ve agreed to do that within seven days, which is why we are gathering evidence now.

The main lever that will change compensation is the discount rate at which the loss is calculated. The rate used at the moment is 3.7% and is the general rate used on all transfers. During the meeting – FSCS suggested there might be special reasons for using a lower rate for steelworkers, which would increase compensation for this group.

A large number of IFAs and pension experts have been tweeting on this subject and they include Al Cunningham, who was present yesterday. All the tweets were constructive and together they present a balanced view. The cost of any FSCS claim will be largely met by these IFAs, their balanced view is most important.

At the nub of the problem is the issue of guarantees lost and the risk of over-compensation. If you take the view that the loss of certainty is key to the argument, then you would go for a risk free rate of 1.7-1.8% (the gilt rate). If you take the view that this would be giving those who’ve transferred the chance to game FSCS – then you stick with 3.7%. Old arguments are resurfacing from the days of mass miss-selling redress in the nineties.

FSCS is not a generous compensator. Some Steel Men have lost over £200,000 (as much to do with adviser incompetence as greed). The maximum pay-out on existing claims is £50,000. Though claims can increase to £85,000 from April, this is only for new claims.

So the liability for the Steel Men is capped. But the wider implications are obvious. My personal view is that the £38.6 bn that flowed out of DB schemes last year – was a disaster. The FCA consistently advise that a substantial amount of this money should not have moved and as it moved – for the most part – under advice. Redress will be expensive.

Necessarily the redress will be paid for by good advisers as well as bad and for good providers as well as bad. This is partly why good IFAs are so angry.

But the deeper reason for good IFAs to be angry is written into the post of Al’s. I wish Al, Chive and the wider IFA community the best.

I wish the Steel Men proper compensation – which needs to go beyond FSCS limits. Sadly, most of the IFAs involved in the worst excesses of what happened at BSPS, will not have sufficient resources or insurance, to properly pay. This is why it is vital that FSCS pays what it can – and without demur.

I’m very encouraged by this – from Al and the Steel men’s lawyer – Phillipa Hann.


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

For the ripped-off steelworkers – today’s about doing it together!

ripped off

Up from Wales – the Steel men last night

This morning, around 15 Port Talbot steelworkers will make their way from Paddington to Westminster to meet MPs – keen to help them in their pension plight. They will be greeted at the Cromwell Gate by a lot of media attention. Their fight, for proper compensation from the Financial Services Compensation Scheme, their leader- Al Rush.

The story is about steel men doing things together. That’s how they’ve always done things, it was what made them such an easy target for Active Wealth – one out – all out.

The nearly 8000 people who left the British Steel Pension Scheme did not end up in the same place. Their savings are now dispersed accross a wide range of funds , a number of SIPPs with many different advisers. Though the works have stayed open, the workers are no longer in one scheme. They have come together because they share in one grievance, which they will take to parliament today.

It is a sad way for their experience of collective pensions to end.  But these are resilient people and we hope that today will bring them compensation.

There is another way

While the events in South Wales last year, showed how collective trust can be abused, events in Central London yesterday showed quite the opposite.

Royal Mail Group and  CWU – the Communications Union unveiled their anticipated Collective DC pension design to guests and advisers. great event.jpg

Note that the advisers in question worked together collectively in support of the CWU and Royal Mail- who worked together in support of the 140,000 staff at Royal Mail.

They were not giving up on a pension – or as Terry Pullinger calls it – “a wage for life”.

Collectively we need income in later life.

Much as I like Damion Stancombe, I want no part in his world view. He works for a pension consultancy- but he tells the world he is done with pensions.

Damian, if you wanted to be impressed rather than be depressed,  you should have been at the RSA clubhouse yesterday!

If you walk down Whitehall to the Cromwell Gate this morning, you will – at 9 am, see the steel men – led by Al , with a retinue of supporters (including me), entering parliament.

There may only be 15 steel men this morning, but they have come a mighty long way both physically and metaphorically. To a great extent – they have come that way because of the leadership shown by Al Rush and a few other people who have not given up on pensions.

I raise my glass to those who are coming together!

As I head off accross town in a few minutes, my thoughts are for the steel men, my hopes are for the postal workers and my determination is that I am not giving up on pensions.

Collectively, we’re not selling any post-war fantasy, we’re selling the idea of a wage for life. I am a pensions man- proud of it. I work for a pension consultancy – proud of that. I run two businesses, Pension PlayPen and AgeWage – proud of that too!


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

Whitbread – you must pay up on the Government’s pension promise

net pay anomaly whitbread.PNG

This blog calls on Whitbread to pay the incentive outstanding to many of their staff before the sale of Costa to Coca Cola. If Whitbread refuses to do so, the Pensions Regulator should block the sale. If Whitbread wants to claim back the money paid on behalf of HMRC – it should join the campaign to sort the net pay anomaly and do so on behalf of everyone who believes a pension promise is not for breaking.

Thanks to John Ralfe for bringing my attention to an article in today’s Sunday Times.

In case- like me – you don’t have a full subscription to the Times. I can explain. Quoting James Coney’s excellent article

The £3.9bn sale of Costa Coffee to Coca-Cola could hit baristas’ retirement savings.

The Pensions Regulator has been warned that thousands of low-paid staff at Costa owner Whitbread have lost out on hundreds of pounds in tax breaks because of the type of pension they are enrolled in.

Henry Tapper, a director of pension firm First Actuarial, believes that once Coca-Cola takes over Costa’s scheme, workers will have their losses locked in, leaving them unable to claim them back.

He believes the company and its pension trustees could face a class action by workers when they realise they have been deprived of tax breaks.

Tapper said: “At the moment, the cost of restitution for these workers is quite small. The regulator needs to intervene to ask Whitbread for a special contribution to plug the hole for its lowest-paid workers. It won’t take long for a top-quality lawyer to realise that they could put forward a class action to get compensation.”

When the Sunday Times writes an article, especially when its published in its business section, that article is read. The Sunday Times has more clout than Henry Tapper by some way! The article continues.

As part of the sale of Costa to Coca-Cola, the Pensions Regulator is monitoring what happens to the Whitbread defined-benefit scheme, which has a deficit of about £320m. Whitbread has pledged to use cash from the sale to reduce the black hole.

Defined-contribution schemes are usually waved through in takeovers because it is impossible for the funds to have a deficit. However, a problem has arisen with so-called net pay schemes, which deduct pension contributions before tax is deducted. With these, workers earning more than the auto-enrolment threshold of £10,000, but less than the £11,850 personal allowance, miss out on government tax relief top-ups because they do not pay income tax.

About 1.2m workers in the UK are thought to be affected by this loophole.

The Pensions Regulator said it provided assistance to companies to help them decide which pension to pick for employees. “It is for employers to choose a pension scheme that is suitable for their staff,” it said, “including giving consideration to tax relief.”

Whitbread said it could not comment on the Costa scheme after the sale to Coca-Cola, “as we are currently in a pensions consultation with those employees”.

There is nothing new in this story. If John had wanted to, he could have dismissed several blogs on here, most notably my blog on September 1st, Whitbread, treat your Baristas fairly

He could also have read my blog “Can a DC plan be in deficit“,  He could have read my earlier pieces on this which date back to July 2015 and specifically my piece on Whitbread’s net-pay issues which I wrote almost exactly three years ago.

The Pensions Regulator has read the blog, I have spoken with it about the blog, they have dismissed it. Which is why I am pleased that the Sunday Times has picked up on this matter.

Treating baristas fairly.

The cost to the pension pot of not getting the Government Incentive is around £34 this year, it goes up to £64 next year. Most baristas don’t know they’re being short-changed- why would they? I wonder if the pension consultation with staff concerned has picked up on this issue, I’ve never met a Costa employee who knew about it.

If you go to the Whitbread Pension website, the issue doesn’t appear as a frequently asked question. Whatever the search  term I used – I could find no mention of the issue.

tax relief 3tax relief 2

tax relief 1

Try it  yourself

Sadly Costa baristas don’t read my blog, but some of them read the Sunday Times and some of them have enough nouse to come together and demand they get the extra money paid into their pension accounts before it is too late. Costa can’t pay the money to their pensions if they are no longer in Costa’s employ.

Meanwhile, the Pensions Regulator – which has a statutory duty of care to protect the members of all pension schemes, whether the mighty Whitbread Defined Benefit plan or the humble Whitbread workplace pension – should take note.

It is not good enough to dismiss the “net pay scandal” as an anomaly. If short-changing baristas is swept under the table, the issue will reappear, as the GMP equalisation issue reappeared, several years down the line.

At a recent payroll conference, the Pensions Regulator tried to blame small employers with impacted staff, for choosing the wrong master trust. It is true that the Pensions Regulator’s website does give some guidance on this issue, but it is buried several screens deep on its website. Most employers – like most baristas- don’t have a clue there is an issue. I am pleased to say that the delegates- mainly payroll managers – were in no mood to be berated for choosing to join the wrong scheme. If tPR thinks it can divert the problem onto small employers and master trusts it should think again.

After all, the largest employer operating net pay schemes – and the employer with the biggest liability in Britain – is the UK Government.

Why action on Costa is needed now.

It is going to cost the pensions industry £15bn to sort out GMP equalisation, it will cost a whole lot more to sort out the “net pay anomaly” – unless something is done about it now.

Now is the time to do something about it. HMRC are doing something about the anomalies surrounding tax-relief for Scottish people with local income tax issues, they can do something about the net-pay anomaly now.

If they do, it will sort out the problems for those auto-enrolled into workplace pensions going forward. As for the problems of the past, for many – the damage has been done, it is very hard to see how those denied their incentives will be compensated through their pensions, this leaves companies vulnerable- as I say in my article – to class actions from impacted employees.

When there is a corporate event – and the sale of Costa by Whitbread to Coca Cola is a £3.9bn corporate event, then the problem crystallises. That is what is happening now.

Thankfully, the Sunday Times has picked up on my blog in time. Thankfully that is , for the Costa baristas, but – more importantly – for the 1.2m other low paid workers who are in net pay schemes and risk being short-changed.

These are people- to coin the phrase – “just getting by”. They are not the people who the pensions industry cares much about – as can be seen by John Ralfe’s comment. But collectively, they are powerful.

It is time that someone in pensions stuck up for the low paid and James Coney is doing that. He is aware that there are others. The Low Income Tax Reforms Group is another. You can read their solution to the net pay anomaly here. Now Pensions is another. There are many more campaigning for the poor including my friend Kate Upcraft and  the CIPP.

The PLSA are at last waking up to an issue that must be acutely embarrassing to them. Consultants are also embarrassed -we have heard virtually nothing from them on the anomaly thus far. In 2015 I warned them.

But I suspect  the tide is turning.

It only takes the Pensions Regulator to accept that the money owed to the low-paid auto-enrolled is real money.

It only takes HMRC to accept that the promise of 4+3+1 was made to everyone enrolled into workplace pensions – whether they paid tax or not. It only takes the Whitbread pension consultation to raise this issue with Whitbread with some hope of support from those who have a statutory objective to protect their pensions –

for things to change.

This blog calls on Whitbread to pay the incentive outstanding to many of their staff before the sale of Costa to Coca Cola. If Whitbread refuses to do so, the Pensions Regulator should block the sale. If Whitbread wants to claim back the money paid on behalf of HMRC – it should join the campaign to sort the net pay anomaly and do so on behalf of everyone who believes a pension promise is not for breaking.


Scottish tax relief

A reminder that HMRC can do it


Posted in auto-enrolment, Blogging, napf, Payroll, pensions, PLSA, Politics, Retirement, Ros Altmann | 4 Comments

Did I get “value for money” from my workplace pension

IGC review 2018 full

The IGCs and how they are doing.


Am I getting value for money from my workplace pension?

is a different question to

Did I get value for money from my workplace pension?

the difference is more than one of present and past tense.

The first question requires a subjective assessment of the processes, costs, charges and utility of the workplace pension in the eyes of the expert

The second question is a matter of fact and can be answered yes or no, with reference to a benchmark of “how others have done”.

Too early to say?

Since IGCs (and latterly trustees of DC workplace plans) have had to make a value for money statement, there has been too little time to amass sufficient data to assess whether people have indeed had value.

Of the major IGCs , only Prudential have decided to test value for money by looking at the outcomes people have actually had. The vast majority of IGCs have preferred to answer the question in the present – using some kind of balanced scorecard of the value offered to members and the money they have paid for it.

This methodology has been largely discredited by the general research carried out by NMG in 2016/17 which found that ordinary people really didn’t give a hoot for any of the attributes of a workplace pension other than its capacity to deliver results at the end of the day. This suggests that outcomes based value for money assessment knock qualitative assessments into a cocked hat.

We are now getting to a point where most workplace pensions have been auto-enrolling members for at least five years, the argument that we cannot measure outcomes because we have insufficient data is becoming weaker by the day.

Do they mean me?

Most people aren’t interested in general statements about value for money. That is why there is never any comment in the press along the lines of  “XYZ IGC Chair says XYZ has delivered value for money”. You might as well say that the sun rose this morning.

People are very interested when you tell them that based on their personal outcome , they got or didn’t get value for money from their workplace pension.

When we analysed my workplace pension – which I’ve had since 2012 – this is what we found.

agewage vfm

This told me that relative to an average experience,  I had scored 76/100. This number was not based on anything but the value of my pot against the money I had paid for it. It’s only comparator was the value I would have got , for the same contribution set, had I invested in a typical way.

I can tell myself that I had  value for money  and can remember that score of 76 which I can compare with other value for money scores from my other workplace pensions.

Do they mean me? You bet they do! This is my value for money score.

The challenge to workplace pension providers.

The question “did I get value for money” , begs a personalised answer. It is not answered by a generalised answer around whether I am getting value for money, it isn’t properly answered by a “people like you got value for money” answer. People actually want to know about themselves.

We ask people to engage with their workplace pensions, but if they ask a specific question about “how they’ve done’, we give them performance charts based on metrics that have nothing to do with them (and which are generally designed for experts).

If I submitted a subject access request to Legal and General this morning, they would give me all the information I needed to give myself an AgeWage score. I can download from my website my contribution history which shows all the money that went in and all the money taken out of my policy since I started giving money to them.

If every policyholder with a Legal and General Worksave Pension did the same, I suspect that it’s robust machinery would hold up. But the same might not be said of other workplace pension providers and certainly could not be said of older pension systems.

The challenge to workplace pension providers is that every one of their policyholders or members, could – at any time – ask for all the information that it holds on them in digital format.

Indeed an IGC or Trustee could make such a request on behalf of its policyholders or members.

While it is doubtful that the Data Protection Act would make a bulk request on behalf of members legally enforceable, the duties of a Trustee or IGC Chair include making a value for money declaration to all policyholders/members.

The fact is that we are not getting individual value for money assessments not because they can’t be done, but because right now, providers are unwilling to do the work. It could be added that the IGC/Trustee chairs have yet to have seen anyone prepared to help them get this information.

Assuming that we have landed on a methodology for doing the work, assuming that telling people how they’ve done is valuable to them and assuming the regulators see individual value for money scoring as valuable, then this expression of value for money looks likely to catch on.

If it isn’t adopted by IGCs and Trustees – it may mean individual subject access requests being made on an industrial scale. This is a challenge to workplace pension providers.

Making meaningful disclosures

These words are directed at those in fiduciary control of IGCs and DC Trustee Boards (especially master trusts and the larger single occupational schemes).

GDPR and in particular the Data Protection Act 2018, give your customers rights to see their data in a digitally readable format.

Elizabeth Denham, the information commissioner, wrote an article that make this very clear. The whole article can be read here.

Let me quote three statements;-

Organisations should know what they’ve got and where it is, what they’ve done and why. Staff must have time, resources and training for creating and filing records.’

‘Organisations also need to make sure they have the appropriate technologies going forward to ensure that digital information is properly managed in the future.

That means technologies that can help to organise and search existing digitally stored data, as well as helping with disposition. Skills in digital management of records must be stepped up to meet these needs.

Simply saying it was “too hard” or “too expensive” to provide this data will not be good enough, either for the Government or for the people.

If we are to make disclosures about value for money, then they need to be specific and outcomes based. That will mean providing benchmarked statements of value for money similar to the one I’ve pictured. Either these can be provided piecemeal through individually generated subject access requests or they can be provided wholesale, through trustees and IGCs.

I would ask you , as you lead up to your next round of statements, to consider the implications of GDPR on disclosures and ask yourselves where you stand in your duties to members to properly answer the question

“Am I getting value for money?”

but also – the more difficult question

“Did I get value for money from my workplace pension?”

Posted in advice gap, age wage, pensions | Tagged , , , , , , , | Leave a comment

A day to remember #Armistice100

poppies 1

It is 100 years since the Great War ended. It is a Sunday and my church will start the morning service 15 minutes only so we can stand in silence together and remember.

There is nothing good to remember about people dying in conflict. As Wilfred Owen put it, we remember

The pity of war, the pity war distilled

It is not just the Great War that ended 100 years ago today that we remember but we remember the sacrifice of all those who have died in conflict before and since, people who gave their lives for their country or were simply caught up in someone else’s war.

Today is also my birthday, I popped out of my mother’s tummy shortly after 11 am on the 11th November 1961. My father who helped in my delivery , reminded my mother that she did not respect the two minute silence.

I feel awkward linking my birthday with so awesome a collective memory as that we have today.

But I take some courage from knowing that I was one of the first children who grew up without war and without national service, without rationing, without the threat of invasion.

That we are now sufficiently confident of peace in Europe, that we can think of leaving the union , tells me that war is no longer an existential threat to people living in this country.

There are those in Yemen , Syria and many other places on the planet who cannot live this luxuriously.  That we do is in part –  because we remember. We are keeping our promise , mindful of the grim foreboding present in the phrase “lest we forget”.


This is the 57th time my birthday has been celebrated, it is a memorable day right now because of social media  as much as anything!

But today is about remembering the dead more than the living. My charmed life is built on the lasting peace that came out of the horrors of two great wars. For all our worries about global annihilation, we have not fired a nuclear weapon in anger since 1945.

This is a truly amazing thing. Proof of the inter-dependency of nation upon nation. Though we have and have had wars, we have learned that our capacity to work together out does our inclination to invade and subject.

Whether I will live to die a peaceful death remains to be seen, it is something devoutly to be wished for, it is what I will be praying for this morning.

I wish for myself and for others many more peaceful remembrance days.

poppies 1

Posted in pensions | Tagged , , , | 2 Comments

More fun and games in the crazy world of pension transfers

Prudence 5

It didn’t take long for the ripples from the Lloyds Bank GMP equalisation ruling  to reach the crazy land of pension transfers.  Within a few days of the Judge Morgan’s verdict we hear that thousands of people are having their pension transfers delayed while Trustees work out what to do (or in this case – what not to do).

First some thoughts on the reports in the Financial Times (thanks Jo Cumbo)

  1. No one has yet shown me a scenario where the ruling could decrease a transfer value. I stand to be corrected on this, but the issue for the trustees is not about “claw-back”.
  2. The sums involved where someone is due more pension due to the Lloyds ruling are small. We’ve estimated the maximum capital payment at around £3,000. In the context of an average CETV of £450,000, we are not talking major adjustments.
  3. Reports that the cash payment of  “trivial” pensions are also being stalled (e.g. those so small that they can just be paid out as cash) suggests some trustees are just putting out a  blanket ban on pay-outs.

Second- some more general thoughts on trustee behaviour in these cases.

It seems right that when faced with the consequences of something they don’t understand in the first place, that those in charge slam on the breaks.

Here’s glamorous Chantal Thompson of Baker and Mackenzie

 “We understand that one firm is saying that trustees should not proceed with transfers until benefits have been equalised, albeit that there is likely to be a considerable amount of work required to equalise all GMPs under a scheme,”

It’s not clear whether the “firm” is an actuarial consultant or a firm of lawyers, either way it appears to be influential.

I thought the job of the adviser – who seems to be behind this – was to help Trustees to understand the consequences of the ruling on their scheme. It should not be hard to work out that if a transfer payment is made and there’s more to come, then more can be paid to where the first lot of money went.

In which case, a simple message sent to anyone in midst of transfer saying

“we may want to pay you some more as a result of this Lloyds thing – do you want the original amount now or do you want to wait till we’ve sorted things out to get your transfer”.

When in doubt – do nowt?

No doubt the “advice” came with a risk warning that – should transfers not be halted – there was a risk to the trustees (and pass-on risk to the sponsor).

But there’s an equal and opposite risk in this, which is the risk of putting the backs up of the members you’re trying to serve.

If you ban transfers, even for a few weeks, there will be people who don’t get their transfers paid in the six months window of a transfer value, people who may have to re-start the transfer process at great expense to all concerned.

So doing nothing is not a risk-free action at all. It just smacks of ignorance-induced panic.

Common sense needs to be applied

The word “pragmatic” used to appear in First Actuarial’s promotion of itself; we’ve rather stopped using it in favour of “common sense” and other phrases like “common decency” and ever “treating our customers fairly”.

I really don’t think that people who are currently going through the quite traumatic process of taking a pension transfer, should be made to pay for the ignorance of trustees of the impact of the Lloyds Ruling on their scheme.

The risk of under payment is small and can be dealt with in a common sense way as I’ve indicated above.

As for insurers refusing to accept transfers paid without GMP’s being equalised, this is even harder to understand. Is the thought that accepting the bulk of money today with the balance to come, too hard for an insurer to administer? What is the risk to the receiving personal pension?

I know that some pretty smart people who work in pensions read this blog and perhaps someone might like to contact me to tell me why the system is grinding to a halt? Is it the actuarial equivalent of the wrong kind of snow, or is there something that I’ve missed.

While I can understand Trustees and Personal Pension Providers being cautious, surely the solution is to take advice rather than slam on the brakes!

What of transfers past?

We know that £36.8bn flew out the DB door last year, the vast majority of the money transferred contained an allowance for GMPs given up. We also know that the Lloyds ruling could cost occupational schemes a further £15bn in increased liabilities. What we don’t know is whether the liability for those who have taken transfers (and signed away all rights) , who should have had the “windfall” of GMP equalisation included in their payment.

Nor do we know if the bulk buy out of members (where members signed away nothing), lays the onus to equalise (and meet the equalisation cost) on the people who insured the buy-out or the people who paid for the insurance (the trustees). The same could be said for other consolidations.

I don’t see anyone holding up the payment of pensions in November till the impact of this question is fully absorbed. That could be the precedent for the payment of CETVs.

So I am in the camp of Charles Cowling of JLT when he tells the FT

 “Our current view is that we should continue paying transfer values on a ‘business as usual’ basis — recognising that top-ups may be necessary at a later date once GMP equalisation is sorted,”

We need to treat people fairly. If we do, many of the problems that beset advisers – whether personal or corporate, in terms of Professional Indemnity Insurance, simply go away.

Or to put it more succinctly

Morality and prudence need to work together , not compete.

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Posted in dc pensions, de-risking, pensions | Tagged , , | 1 Comment

First Actuarial celebrates its special day


First Actuarial

Once a year, everyone at First Actuarial comes together in one place to work and play for a day. This is the day.

Most of us choose where we want to work and if we don’t like it, we go and work somewhere else. I’ve been at First Actuarial nine years now and I’m not going anywhere.

It’s not done to advertise your company as a good place to work on a blog. But I feel like doing just that this morning. It’s very rare that a small company can have done so much in its fourteen years , it’s not done to boast about your company’s achievements – but though I own no share of First Actuarial, I feel that it is “my company” and one that I can be proud of.

Yesterday I spent an afternoon and an evening with Allianz , my colleague Derek Benstead and other friends of CDC. I credit the CDC consultation paper that arrived this week to the deal done between Royal Mail and CWU. Not to put too fine a point of it, Hilary Salt, my boss – was at the heart of that deal. First Actuarial are making a difference.

I spent some time with Mike (the Bazooka) Otsuka. First Actuarial advise the university unions and it was with their advice that  helped the USS stay open.  First Actuarial has been a key influencer in the debate over the future of USS and by extension many other defined benefit schemes.

Each month we publish our FAB Index, which tells a very different picture about the state of pension solvency than the doom-ridden analyses of many of our competitors. Many of the schemes we advise use a best estimates approach to scheme funding and though there is plenty of prudence built into our valuations, we have moved the dial for many trustees and employers who see the advantages of long-term investing over a flightpath to buy-out.

But we are pragmatic and when employers and trustees decide that they are looking to offload their pension obligations to an insurer, we help our clients to prepare for and execute the deal. While we have strong convictions, we are not dogmatic. Our pragmatism arises from those who founded the company, all knowing what it’s like to own and run their own business.

It is this entrepreneurial spirit which is what I value most about First Actuarial. It not only allows me to work with those who own the company on business decisions but allows those Founders to share in the entrepreneurial work I do with Pension PlayPen and now AgeWage.

My job at First Actuarial is to help develop its business. I am allowed to write my own job description and execute independently. From time to time that means that we are out of step – when this happens we have frank discussions which get quickly resolved and we move on.

I cannot think of any other professional practice that is so accommodating towards their employees as First Actuarial. It really is a pleasure to work for our Founders and with nearly 300 other souls who by and large – feel as I do.

This year, by dint of others merging, us doing what we do as usual and thanks to a fair number of new clients coming to us , we are listed among the top ten consultancies in the UK. That’s quite an achievement for a firm that started from scratch in 2004. Credit to the 9 Founders who started out and who still run the shop

Why I’m writing this….

I’m not paid to write this, I write this because today is our special day and I hope that as well as my regular readers, some of my colleagues who don’t normally read my blog, will read this.

I hope that you, whether you work for First Actuarial or another organisation – or yourself – or if you don’t work – find some inspiration from these few words. It really is a great pleasure to work for First Actuarial, I’d like to think that First Actuarial feel the same about me. Can you say the same?

If you can, then you should thank your lucky stars. If you can’t then either you should set about changing the way you work, and if you can’t do that – maybe you should think about where you work!

Working for the wrong company is soul destroying, if you can’t properly say your as proud of your employment as I am of mine – do something about it!

Hilary Salt

Posted in actuaries, age wage, pensions | Tagged , | 1 Comment

This week – we hope to be able to talk about the “benefit of pensions” again!

This is a blog about the economic utility of pension management. It’s written because the first thing that hit me this morning was this almost confessional comment from George Norval, Group Pensions Manager at Berensden.

Is the DB Pensions Manager a dying breed due to industry trends?

My average peer is 15-20 years my Senior… it seems that “Pensions Management” is becoming stagnant as Large Employers bet on “age” rather than what an individual bring to the table    .  “Age” aka years in the industry don’t always get the job done, if you always do what you always have done you will always get the same outcomes… passion, drive, a can do attitude, rolling up your sleeves at times, charisma and great relationships gets the job done…. is it time the Industry look past “age” and more about added value and the dynamic new blood can bring to even bigger PLC’s out there, so much talent out there get put on the back burner when they are the real movers and shakers (MORE than capable to manage large and complex Scheme very well) that will reinvigorate much needed energy into our Industry … the top end loop seem to have become stale … just my two pence worth; not a criticism …more so an observation… having worked for major corporations over my 20 year career I’ve “seen” most prob. more in my career than my Avg. Peer yet my “age profile” may not reference that … is it time for new perspective in our Industry?

I live with a Pensions Manager, who became Pension Director at what was then Britain’s largest pension scheme (BT)  when she was 32. I remember meeting her with her colleague who was 20 years her senior – but her subordinate. I made the double mistake of assuming he was the boss because he was older and male. I have not been allowed to forget that!

Stella joined BT in 1997. Would BT appoint a 32 year old woman with only a consultancy background today? I suspect not. Would a 32 year old consultant put herself forward for the job – very unlikely. The fact is that DB pension management has atrophied as DB pension schemes have atrophied. Take a look at this diagram

life cycle open

What happens when you close collective benefit schemes is that pension managers become risk managers rather than benefit managers; that’s because pensions are seen in terms of liability management and not of reward.

The economic utility of pension management is at a stage of the cycle that so devalues the role of a pensions management that no millennial but a supreme optimist, would want to do the job – with a hope of making a career out of it.

Hope for the pension minded!

Last Wednesday I had a drink with Jon Millidge, the Reward Director of Royal Mail. With him was RM’s DB pension manager, Douglas Hamilton. Speaking with them I heard the phrase “what’s happening at Royal Mail is bl**dy brilliant”. What they were referring to wasn’t the state of RM’s share price, challenging the existential threat of Amazon and the internet or even staying strike free. What was being referred to was the pension scheme.

For the first time in a decade, I hear a Reward Director refer to an open collective scheme as “brilliant”.

The enthusiasm with which Royal Mail’s senior management have taken to CDC is something to behold. They talk of it as a way of rewarding posties who have given there careers for relatively low wages but a decent wage in retirement. That equation seemed busted and the CWU and other unions were prepared to go on strike to keep it in place.

That Royal Mail and their 140,000+ workforce are looking at pensions positively says a lot – not just for its pensions management but its unions and for the far-sighted attitude that led to them challenging the conventional wisdom and re-establishing a collective pension scheme – albeit without guarantees.

This week – let’s hope they get their reward

This week is when we hope that the anticipated DWP consultation on CDC will get itself over the line. There have been many headwinds, many created by the pension industry concerned that CDC challenges their consensus.  That consensus has led to posts like the one I started this blog with.

The dynamic new blood will return to pensions when pensions return to doing what they say on the packet. A pension is a reward granted to someone out of a lifetime of earnings – some of which is re-allocated to a wage in retirement.

A pension is not a big pot of money which can be drawn down with absolute freedom. Good as a big pot of money is – it is not a pension!

Pensions management is just that, the allocation of capital to paying people a wage for life. I hope that on Tuesday November 6th, we will hear how the pensions industry moves from the “closed scheme problem” to a new bright future. If I didn’t believe that this could be the case, I wouldn’t have been a Friend of CDC all this time! Hopefully George and the many dynamic would-be pension managers that he talks of, will be rewarded by a pension option that focusses on benefits rather than risk.


Posted in advice gap, CDC, de-risking, pensions | Tagged , , , , , | Leave a comment

Why we will miss The Pensions Advisory Service!


TPAS – taking the “scary” out of pensions!

By the end of this year, the Pensions Advisory Service will be no more, subsumed into the Single Guidance Body. By the end of spring, their vibrant “third world” offices in Belgrave Road will be empty.

Whether the goodwill that TPAS has built up can be transferred to the new organisation is open to doubt. What Michelle Cracknell and her team have built up has been quite remarkable. The word of TPAS is authorative and personal, it’s guidance but instructive guidance that has led many of us down the right path. TPAS has resolved disputes and soothed the savaged brow of many a baffled saver, many a baffled pensioner too.

What I ask of Government

I have written before that bringing together a failing institution (the Money Advice Service) with a successful one (TPAS) should be a processing of levelling up. Instead we see a levelling down. In its initial vision , Simon Kirby – the former Treasury Minister and Richard Harrington the last (in every sense of the word) Pension Minister, laid out its task.

Back in 2016, when the plan for the SGB was announced, Simon Kirby, said:

We want to help people take charge of their finances, and make the financial decisions that are right for them. This new body will ensure that help is readily available for people who need to access debt advice, information on their pensions or guidance on other money matters.

And the (full) Minister for Pensions, Richard Harrington, said:

We want to ensure that everyone has access to high quality and impartial financial guidance, to help them make the most of their hard earned savings

This new single body will be a place people can go for free, impartial financial guidance, and I look forward to hearing people’s views on our proposals.

Specifically – as far as pensions are concerned this means “guidance and information on matters relating to occupational or personal pensions, accessing defined contribution pots, and planning for retirement”.

You can hear the painful discussions about these statements, the arguments over the semantics of “advice and guidance”. There are the nods to the consumer and our “hard earned savings” and a nod to IFA in “impartial financial guidance” but there really is nothing – nor has there been anything since – that suggests anything other than a re-arranging of the deckchairs on the Titanic.

The Titanic is the failed monolith at Holborn Circus, the Money Advice Service. The Government’s intention is to lash TPAS to the sinking wreck in the hope of salvage, the fear is that the bigger ship will drag TPAS down with it.

I cannot ask of Government that it reverses its decision, but I do ask of the new Chair and CEO of the Single Guidance Body, that they understand that TPAS worked and MAS didn’t. If they understand this, they will respect the work that TPAS does , the culture it has created and respect the vision TPAS had for expanding its work.

What I ask of the pension industry

Firstly I hope that the outgoing CEO of TPAS will be recognised as she leaves service at the end of the year. I don’t know what the going rate is for gongs, but now looks a good time to nominate her for any honours going. The benches of the House of Lords have been cruelly denuded of pension talent this year. We can but hope.

Secondly, I hope that we will learn from what TPAS has and is doing. It is necessarily constrained – both financially and in terms of its terms of reference. There is much that can be done commercially that TPAS couldn’t do, but what TPAS could do is to demonstrate that it  always acted in the public’s interest. The phrase “independent” really does apply to TPAS.

I see there scope for the work of TPAS to be taken forward with the help of technology so that much of what it does can be replaced by digital services. I suspect that this would have been the plan at TPAS had it been given time and money.

I also see scope for the private sector to push harder at the boundary between advice and guidance. Simon Kirby vowed we would have access to information on our pensions via a pensions dashboard around the time the SGB was announced

Two years on we are still nowhere near having a pensions dashboard. The likelihood of that happening when needed recedes by the day. For people do not even have a proper way to find their pensions, let alone work out how they’ve done and what they can do with them, is ludicrous.

Here’s how things have detoriated.

dashboard timeline


But instead of addressing the simple issue originally discussed the various bodies who have sat on the various working committees have connived to make such hard work of giving people what they want , that we are now bogged down in the most obscure of pension arguments.

Dashboard timeline 2

Thirdly,  I ask of the pensions industry is to stop making such hard work of it. Leave ordinary people alone so that they can see their savings pot in one place, work out if they’re any good and take action so they can spend the money as suits them.

I say the same of guidance, we need to cut through all the complexity and get back to the questions people really want answering – how much have I got, how’s it doing and what should I do with it.

We will miss the Pensions Advisory Service because it always kept its eye on the ball and – despite having the expertise to deal with the most common of issues – it was always able to help people toward answering those simple questions.

I mean….

Dashboard timeline 3

The answer to that question is – DON’T!


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

“Do we need a dashboard- or just a pension finding service?” – Pension PlayPen lunch – Monday 5th Nov


Expect fireworks at the Pension Play Pen lunch on Monday.

The derisory £5m budget dished out by the Treasury to fund the dashboard suggests we won’t get much more than a damp squib.


But maybe the Treasury are right! Maybe we don’t need a dashboard but just a way to find our pensions.

Maybe people need just enough to get them started – access to their state pension rights and a list of who’s got their workplace pension money, their private savings and their DB pension rights.

Maybe we’ve made such heavy weather of the dashboard that the world has moved on?

What do you think?

If you are interested in dashboards, financial awareness or just getting people good quality lives in retirement, you should come to next week’s (Monday 5th November) Pension Play Pen lunch.

Where and when?

The lunch will be in the Partners Room of the Counting House pub at 50 Cornhill London

It’s 12 for 12.30 and everyone is welcome.

It costs around £15 a head – you can pay cash or by card or other payments, Receipts are available.

Hope to see you there!

counting house 5

The Counting House

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

Investment for beginners?

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Perhaps because I’m paying him to, my 20 year old is paying some attention to where his pension is being invested. I say “is”, but our first contribution to his workplace pension is awaiting his opt-in. Meanwhile he’s asking – so what’s happening to my money once I sign up?

To answer this question I pointed him to NEST’s Fund factsheets. Although the lad’s been to university, he remarked that following  this link was “scary”.

Despite the non-intimidating invitation (above) a NEST factsheet is not likely to make much sense to more than a handful of NEST’s 7,000,000 members.

Here for instance is NEST CIO explaining what’s been going on in the last quarter.

fawcettThisis not the stuff of everyday reading. What are “strong fundamentals”, what’s a “monetary policy tightening cycle” . What does “normalise interest rates” mean. This is not a commentary designed to be read by NEST members, it is aimed directly at people like Mark Fawcett who do factsheets for a living.

The impression that a 20 year old gets when reading this stuff is “get the f*ck off my land”.

Ownership of the “investment piece” is definitely not in the hands of the beneficiary but the investor and Mark’s language makes it clear that it’s him and his chums who will be talking with each other.

Factsheets are universally written like this, to use the awful word , stray readers are being “normalised” to the language of the experts.

How green is my pension?

The DC funds of NEST and (as announced yesterday WTW’s master-trust “Lifesight”, are increasingly invested in a responsible way with an eye to environmental, social and governance best practice. We might well asked why we have to include the word “increasingly”, but that’s because they are the exception not the rule.

Despite lots of noise, L&G have still not adopted its own Future World fund into its default. Despite having been CIO at B&CE and  People’s Pension for well over a year, the People’s Pension default shows no sign of green.

fawcett 2.PNGNEST’s recent announcement that it is going to increasingly “go green” in its investment strategy, translates into this statement in Mark Fawcett’s commentary.

This is great for finding out what Mark’s team are up to , but it is totally disconnected from the member’s purchasing experience. If my son wants to purchase fund management from NEST, should he be investing in the NEST commodities fund -if so – how does he do that? Or is that fund part of the foundation or accumulation phase of the NEST default. Or is it part of the NEST Ethical Fund? There are no answers to these questions in the Commentary and (short of phoning the NEST investment team up and asking) I know no way of finding this information out.

It is only when my son scrolls down the PDF to the individual fund fact sheets themselves, that he gets any answer to the question “where is my fund invested”. Each fund factsheet lists (as it has to do), the top holdings of the fund. The small print tells you that these holdings are “equities” and that 40% of the fund is invested in other assets such as “dynamic risk management” – whatever that is!

Apple, Amazon and other household names are on the list but there’s no comment on what makes them any more or less ethical, nothing here that a 20 year old engaged investor can get his teeth into.

Once again, there is a sense that this factsheet has been written for other investment professionals, the 7,000,000 ordinary members of NEST should “get off their f*cking land”.

Which is a shame, because Fawcett is getting it right with his fund management, NEST is producing the goods – year after year and has already got a magnificent story to tell.

We are (almost) all “beginners”.

Turn on your phone and go to its app store, you won’t find a NEST app that will tell you what you are invested in if you are in the default. There is no signposting to investors who might want to explore ways to get their money more responsibly invested. There’s no information or links that helps people understand the complicated terms in the factsheets (Sordino ratio” anyone). The assumption is that you either are in the club or need to go away and get your CFA exams).

But life and investment aren’t and shouldn’t be like that.

A very large proportion of NEST investors (possibly a majority according to recent Ignition House research) , do not know that they are invested. They know nothing more about how NEST their money is managed than how their bank deposits are managed.

They assume that their workplace pension should be invested responsibly and are shocked when they hear that it might not be!

People are used to be quoted interest rates when they give money to other people, they get that giving other people money means that you should get back more than you put in. The idea of investing and taking risk for more reward is totally new to many if not most of the 10m new savers who are – like my son – joining workplace pensions.

We are almost all beginners, but when we try to find out about what is happening to our money, we are treated as expert investors!

Surely there is space in the market for an organisation to take all the guff out of these investment commentaries and explain what is going on to people in a way they can understand. If the Government and its own pension can’t do this, then we need sane and sensible experts like Romi Samova to do it for them.

People like my 20 year old son will soon become disillusioned by the journey they are taking to answer the question “where is my money invested”. They want straight answers to a straight question and they find the investment commentaries, the factsheets and the ivory towers of those who write them, a big turn-off.

99% of people in NEST – don’t stray from the default. I would suggest that 99% of that 99% have never found out anything about where their money is invested – even if they looked.

Reading NEST’s investment commentaries makes me more determined than ever to help ordinary people get to know their workplace pensions.

I don’t need to be an investment expert to do that – and it wouldn’t help if I was!




Posted in accountants, actuaries, advice gap, NEST, pensions | Tagged , , , | 6 Comments

At work and after – how independent do we want to be?

This seems to me very sound. Jo Cumbo rightly reports the gender pension  gap in retirement while Jo Grady concludes that pensions reflect pay and the pay gap is lifelong.

It’s not as simple as all that – as Andrew Warwick-Thompson points out
AWT 6 But it’s still pretty simple….! Women are dependent on men for equal lifestyles. The question in my mind is whether that is a satisfactory state of affairs.

The State Pension should be a leveller.

The idea of a first pillar state pension – the Old Age Pension as some of us still call it, is that it pays a minimum wage to everyone and it’s based on citizenship. You get it if you are the CEO of a FTSE 100 company, you get it if you’ve been out of work all your life. You should get the same as a man or a woman.

Having spent a few days dancing on the head of a pin over GMP equalisation, I am all too aware that fairness is a very imprecise concept. To be “totally fair” is a very costly business (as companies will find out when the GMP equalisation bill hits the mat).

WASPI is not about fairness, but about promises and what was understood by them. Even if the WASPI women got all they desired , the fundamental inequalities between women and men’s retirement income would remain. For though the idea of a first pillar pension is based on a flat pension for all, in practice it still has elements of earnings related pensions within it and many women chose to opt-out of some pension accrual because – as woman – they could.

The State Pension should be a leveller, going forward it will be, but the inequalities of the past cannot be simplified, either in GMP or in the State Pension.

Society’s debt to those who do not earn

The problem with money is that it only rewards certain forms of economic activity. We cannot earn money for bringing up children or caring for our parents or for doing voluntary work – that’s because these endeavours are not rewarded with a wage.

The state pension is supposed to reward these endeavours by giving people credit for paid work they did not do while doing other unpaid things. And of course it provides a safety net for those who were unable to find paid work and ended up without much endeavour at all. Strictly speaking people who opted out of work on a voluntary basis should not be rewarded by a single state pension but we let that inequality through as we do many others, that’s a societal thing.

In place of self-sufficiency, society has created a concept of limited dependency. Women are expected to be dependent on men to a degree as part of the life-long commitment of marriage. Marriage’s break down and divorce settlements are supposed to replace dependency with a financial payment to recreate self-sufficiency for both parties. The State Pension is supposed to do that to.dependent 2

Self sufficiency or limited dependency?

So long as we do not reward mothers for mothering and carers for caring, we accept the concept of limited dependency. Far more women are dependent on men than the other way round. Increasingly women will be dependent on women – especially where gay relationships include children.

There is a lag between the changes in which we choose to live our lives and the change in the compensation between one group and another. That is because the concept of limited dependency lives on within structures like pensions even after other areas of society have moved to self-sufficiency.

Much of the vehement argument about inequality needs to be understood in the context of this lag.

I am a little old-fashioned in believing, as a man, that I have a responsibility to those who have dependency on me. I own  that I have both a social and personal responsibility for my family’s welfare. Socially, were I not to meet my commitments , I would be deemed irresponsible; personally, were I to let loved ones down by not meeting my financial promises, I would feel guilt and a lack of self-worth.

I know many women who have assumed exactly the same responsibilities, now being the main bread-winners in the family.

But there is still a lag in the gender pay gap and so long as we don’t reward motherhood and caring, then I suspect that there will continue to be a pension gap too – not least because all private pension provision is earnings related.

So we go forward with a system that accepts inequality in terms of pay and rations on the basis of personal and social responsibility to make sure those who are not supported by direct wage in retirement, get that support in other ways.

The  question is whether this fudged way of doing things is acceptable, or whether we seek to equalise in a more fundamental way. This is the question for all gender pay discussions but it is a question for pensions too.

It’s one I currently have no answer to. I may be groping towards a terms of reference to think about it more clearly. I’m pretty sure, it will take a longer lifetime than mine before this issues finds resolution.


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

The Treasury could make muppets of us all!


With something like 50m as a target customer base, the Treasury’s announcement that they will be allocating £5m to the Pensions Dashboard , suggests it is worth around 10p per tax-payer next year. My maths might be deficient , we might hypothecate 20p from each tax-payer but the grant to the DWP is still meaningless.

All we can read from Phillip Hammond’s statement is that the Treasury still wants a dashboard but that they don’t see an argument for paying for it. This is a long way from where we started back in 2016 and shows the folly of cutting the dashboard from its umbilical – the source of its funding. The Treasury no longer owns it, the Treasury no longer funds it.

And of course we are no longer talking of the Pension Dashboard in anything other than conceptual terms. Whatever is built will be multiple and people will be able to see their pensions in a number of different ways. This was the original conception and was part of a wider Treasury strategy to increase digital innovation in the private sector. The move towards Open Pensions is being resisted by a small cadre of pension providers who wish for the dashboard to be centralised and Government controlled. I find it extraordinary that this is considered a good idea.

Infact I’m quite encouraged by the Treasury’s position on this. If Phil Hammond can entice the mouse our of the skirting board for £5m of crumbly cheese, then the mouse will have to scavenge and compete in the kitchen. A big lump of money would be gorged like a big chunk of Gouda, the mouse would be fat before we got a dashboard.

So get on with it DWP, listen to what the paymaster is saying, there is a will for the dashboard to happen but no money for it – the money and the scavenging must happen within the pensions industry.

Talking of which, I’m busy raising money for AgeWage and know very well how asking for it , focusses the mind on what the value proposition is. My focus with my start-up has to be 100% on the consumer – without a product the consumer uses, all financial justifications fall away.

What is critical is that we understand what the dashboard will be used for and what it can hope to achieve. The Government has plenty of data on what the problem is, TPAS, the Money Advice Service and Pension Wise have been keeping records of the thousands of conversations we are having , explaining where we feel ourselves in need of help, guidance and advice.

I’ve had the chance to discuss this data with those who nobly work in these organisations, because social media lets me. This data drives my understanding of what the dashboard can do and should deliver.

Currently we are stuck. We have multiple pots and no idea what value we are getting from or what we are paying for them.

A dashboard should not just find these pots but allow us to interrogate them for the secrets within the fund values. We should be able to know the internal rate of return of each pot, how much we’ve paid for that return and how much value for that money we’ve had.agewage vfm

If we know what we have, know how it’s done for us, we can then perhaps move on to the trickier question of how to organise our money to spend it.

We are the Treasury’s muppets – and they hope we stay that way



Ah – but that’s the thing neither  the Treasury or the providers really need us thinking about!

Providers want and need us to hang on to our pension savings so that they can extract  the last penny of value from us – before either we or our pots run out.

The Treasury is spending 10-20p on each of us, in the hope of our spending our money as suits the Treasury, as fast and as stupidly as possible

The Office for Budget Responsibility’s fiscal outlook, published alongside Monday’s Budget, reveals a significant upgrade in the estimate pension freedoms tax take for 2018/19.

Page 113 of the OBR report  says the Treasury will net an extra £400million in tax as a result of people paying tax on their retirement withdrawals.

Based on the Spring Budget 2017 costings– which factored in a tax take of £900million in 2018/19 – this suggests a near 50% increase in revenue raised from the policy this year to £1.3billion, taking the total tax generated by the policy to £5.5billion.

We are as a nation, spending our savings like muppets. Perhaps this is the secret message of that £5m grant to the DWP and to providers.

“If you want your customers spending their pension pots on propping up Government finances, then sit on your hands.

If you want people to get value for their pensions money, give them the tools to cease their muppetry!

The Treasury has neatly outsourced the pension dashboard – the trouble is that the way we are going – our problem is its fiscal solution.




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

“GMP equalisation” – will the geeks inherit the earth?

admin 1

Every geek must have a tee-shirt

Few pension experts expect GMP equalisation to change people’s lives.

The Daily Express’ headline “Millions of women to share pension windfall” is plain wrong. GMP equalisation can benefit men as well as women. The Express, reckon 8,000 out of 235,000 pensioners will get a “windfall of £3,000 over their retirement, an amount worth around £10 pm. This is unlikely to be considered a “windfall” – even to the “lucky” 3%.

Ironically, the bulk of corporate costs of GMP equalisation aren’t likely to benefit the member at all.

Buried in the detail of the 250-page judgement is one important determination. The judgement determines that testing cannot be done on a blanket basis, using an actuarial formulation (known now as standard actuarial equivalence or “D1” model). This will come as a blow to many schemes (for whom D1 would have been a lot more attractive) and particularly to schemes that have outsourced the management of pensioners to third parties through buy-outs and buy-ins.

It will also come as a blow to actuarial practices that do not have administrative capabilities. LCP’s Pensions Partner Richard Mills commented on

“At LCP we are strong advocates of helping clients to run their DB schemes as efficiently as possible. We are giving serious thought to the alternative actuarial equivalence method (D2) for clients who regard ease of administration as a key objective”.

D2’s been around since PA93 but virtually unused. D2 does away with GMPs altogether but it can involve people receiving less pension to begin with, unless the DWP help out with some easements. D2 looks hard for members, trustees and employers (who could be taking on some onerous responsibility for future increases).

It looks the A, B and C methodologies are going to be the choices with C the likely favourite. We could call this as an “amount” based rather than a “value” based benefit. It will be conducted by administrators (on an annual basis) rather than actuaries (on a one and done basis)

The judgment’s greater cost to schemes will be from re-engineering administrative software and testing each member annually. My estimates of “testing” start at £25 per person per year (based on administrators having to keep another two records).

The implications of moving to administrative testing will be particularly daunting to schemes that are buying out pensioners or buying in insurance. On buy-outs it looks likely that fiduciaries and employers will have to look to the legal indemnities they’ve provided insurers. As for buy-ins, the onus to pay for GMP equalisation are likely to revert to the scheme, even if impacted members are paid for by an insurer.

So, the longer-term impact of the LBG Judgment may be a boost for pensions administration. This may well change the balance of power within many pension consultancies where administration has been commoditised at the expense of higher margin activities such as investment consultancy and actuarial driven services.

This could be an unexpected benefit of the judgment. Pension administration systems have been slow to adopt the new technologies associated with the blockchain and smart ledger technology is rarely seen. If the costs of GMP equalisation testing are considered unsustainable, expect to see investment in less manually intensive processing.

Pension administrators will likely prefer to see machines learn the processes of GMP testing. Especially if this frees them to work directly with members to help them understand and manage their pension benefits.

While it is too early to predict the pace of change, the LBG judgment is certain to catalyse a long overdue investment in pension administration towards straight though processing.

The phrase “in administration” has connotations of failure. But solving problems such as the annual “equalisation testing” is a challenge that many pension administrators will relish. One administration manager I spoke with yesterday had a simple reaction to the challenge –

“Bring it on!”

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Pension admin humour Pt2

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

Young people thinking about money


I’ve been asked to pontificate on how we should make pensions relevant for the young, in 750 words. My audience won’t be young and nor am I. In every sense of the word, this is a paternalistic project. If I’m not careful it will not just be paternalistic but patronising. The two words have the same Latin root (Pater=father), it’s generally considered that “patronising” is the condescending version of paternalism.

My immediate reaction is to hand the whole thing to my son, who at 20, has joined me and is researching engagement as part of AgeWage.  He’s already put me and my colleagues in our place when we have assumed how he wants information on retirement saving presented to him.agewage vfm

There is no way that people like me can get inside the head of someone less than half my age. The question is whether we can find a way of talking about later life savings at all.

I’ve written before about Iona Bain’s project NextGen – which is about promoting and encouraging the next generation in the pensions industry. Iona’s blog is required reading for anyone trying to understand how young people process information.

If people like me are to have a part in making pensions relevant to people like Iona, or indeed my son, we are going to have to empower them to write the articles, not be written to.

Sadly – the power is with my generation and the commissioning editor is asking for me – not my son- because that is the way things get done.

Next GenWhat Iona is doing, and doing well, is taking control of the message away from people like me and speaking for her generation directly..

It’s quite obvious to me, from everything that I see on my son’s phone, that the messaging for people under 30 needs to be radically different to get any impact.

What seems less clear is why what works for a 25 year old – should not equally work for a 55 year old.

In other words, shouldn’t we be putting the design of the messaging in the hands of people under 30 and let them get on with it? This may sound a little risky from a compliance point of view, but if the outcome of a compliant pension system is the exclusion of many people through poorly presented information, then perhaps there’s a bigger risk elsewhere!

“Young people are idealistic and have less barriers to save – discuss!”

One of the great surprises of auto-enrolment is that opt-out levels are so low for millennials and so high for people closest to retirement. The barriers to saving for people my age appear higher than for the impecunious twenty- some things struggling with debt, housing costs and starter-wages.

Is this because young people are so apathetic, they don’t know that they’re saving?

Or is it that they are sufficiently idealistic that they can embrace the concept of locking up money for thirty years for the future good?.

Intuitively, I say it’s the latter, though it’s been a long-time since my twenties.

Certainly the feedback from the millennials who are transferring pots to Pension Bee is that if they can save into a pension that makes sense to them, invest in funds that satisfy their idea of responsible investing and be looked after by bee-keepers who look and sound a bit like them, they will make positive decisions and transfer their pension monies to Romi Samova and her team.

pension bee add 4.png

So maybe I should be spending some time talking to Romi and some time with Iona and my son, before submitting any copy.

And maybe I need to forget about telling people how to talk to young people, and let young people talk for themselves. Perhaps that’s the dividing line between being paternal and being patronising.



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Financial Economics = Scorched Earth

tank lawn.jpg

John Kiff rolled his tank onto my lawn this morning.


Well he can roll it off again and take his flamethrowers with him. For in the long march back from Moscow, Kiff, Ralfe & Co are doing their best to make sure that collective pensions aren’t just suffocated, but that they never return to haunt our boardrooms again.

In the mixed up world of Financial Economics, the fact that this summer people didn’t die very often, is seen as “bad news all round”.

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If you want to read the good news that so many of us are still alive, you can do so here.

How has it come to this?

It was not so long ago that pension funds wanted employers to pay dividends, it provided them with the cash-flow to pay pensions. Thanks to financial economists, the use of equities by pension funds is frowned upon. The Pensions Regulator can castigate employers who pay their shareholders dividends because most pension funds don’t rely on dividends anymore – they don’t own any equities anymore and that’s because of FE “scorched earth”.

The flamethrowers spouting fire from the FE tanks are now being trained on CDC, which (for them) is showing alarming signs of reviving collective pension provision. Even thought CDC provides no more risk to the corporate balanced sheet than Group Personal Pensions, Stakeholder Pensions and DC master-trusts, CDC is seen by financial economists as bad news.

In the context of John Ralfe’s observation that people living longer is “bad news all round” , you can understand why FE is so skewed against any form of  pension provision not underwritten by risk free assets. The philosophy behind Financial Economics is entirely divorced from the concept of “human well-being”.

This is why it is so entirely inappropriate to be applied to pensions, because pensions are paid to people to help them enjoy the second halves of their lives. Pensions ironically help us live longer. I know this because when I was told by Nurse Rebecca that I had the body of a man six years older than my age, I legged it to the gym!

By comparison, the best thing someone who is drawing down from a capital reservoir built up in an individual DC plan is “die”. It is especially good – if you are a financial economist – to die before you get to 75. That’s because your pension pot can transfer to your next of kin as tax-efficiently as possible.

This is what I mean by “scorched earth” thinking.


The genius of John Ralfebot – whoever he or she really is – is to recognise that it is Financial Economics that has turned John Ralfe into the twitter monster he declares himself. I am quite sure that the real John Ralfe is a carefree , cricket loving, moor tramping cove – who I could happily spend a day with.

But put him in FE mode and he and Ralfebot become inseparable, Ralfebot really is John’s Doppelganger, what Yeats called his “anti-self”. Ralfebot is the ultimate expression of Financial Economics. He is all about FE

Human values will reassert themselves

The de-huminisation of pensions, as advocated by Financial Economists, fulfilled by the FE scorched earth – will not last for ever.

Common sense will prevail. People will start celebrating us living longer – fake deficits will be revealed for what they are – pension funds will return to investing in patient capital and not in short-term debt.

In the meantime, we can have a bit of fun at the Financial Economist’s expense. They really are very silly indeed!


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GMP equalisation – what a waste of time and money

waste of moneyI’m too close to the Lloyds Banking Group two year legal case against its trustees to venture opinion on the rights or wrongs of the legal decision. I simply hope that the judgement turns out to be the least worst option.

But of the business of requiring GMP equalisation I have this to say

“What a waste of time and money”

Or as Ros Altmann puts it

Contrary to press reports, the bonanza of extra pension payments will not happen, around three quarters of the 235,000 Lloyds Banking Group DB members will not receive any more from the judgement than they had before. Only a tiny number will benefit from a meaningful increase in their pension  (measured at above £5 pm).

It is not the members who are getting a bonanza payment, though some schemes will – purely by quirks in scheme design, be more effected than others.

Nor is it actuaries who will benefit from GMP equalisation. The judgement suggests that the actuarial equivalence method (D1), that everyone uses today, cannot be used going forward – in buy-outs and buy-ins, meaning that many trustees on buy-ins will be back on the hook and many buy-outs will be revisited for the legal indemnities provided by trustees to the buy-out merchants , where the law hardens,

In theory it will be administrators who will benefit from all this, as they will be required to do the testing , member by member. Since the impact of GMP equalisation is so complex, there are no hard and fast rules that can be applied so we are looking at the building of complex administrative machinery and a lot of manual processing (unless someone applies a block chain type solution – which seems highly unlikely).

The unfortunate conclusion we have to draw from yesterday’s ruling in the High Court is that there are unlikely to be any winners from this, just an awful lot of deckchairs moved from one side of the Titanic to the other.

Chelsea fans can liken GMP equalisation to the Winston Bogarde of benefits.

winston bogarde 2.jpg

Bogarde – 3 years on the bench without a game

That we should be attending to deckchairs when there are more fundamental problems with a sinking ship – is very sad indeed. But I suspect that it is the necessary consequence of a wider legal system which is attempting to equalise the states of gender that have been with us a few millennia!

I am not going down that road!

So what in practice will this mean?

First things first, pension fund administrators will have to adopt new processes and that will require investment in automation or a lot of manual work.

The estimates I have seen suggest that quite apart from the initial investment in technology to adapt systems (a multi million project for each software supplier), the extra cost of administration will be around £25 per person a year. This is a straw that may well break a few camels.

You cannot just wish away this cost as it appears to be there whether you outsource the pension problem to a third party or keep it in house. Buy-out costs will inevitably increase as those administering the buy-out – include the cost of the extra administrative burden. Past buy-outs may well be revisited and trustees who thought their job was done , may have to be woken from their slumbers.

What in practice, GMP equalisation will mean is that a few people will find themselves the random beneficiaries of a little extra pension for the rest of their lives. No one will get less pension – unless the extra cost of providing pensions breaks the camels back and schemes fall into the PPF. I think it unlikely that schemes will fall into the PPF because of GMP equalisation , but I suspect that when the post-mortems are done – the attribution of misery will include the ongoing bills for GMP equalisation.

The extra cost of benefits will impact corporate balance sheets, albeit marginally and it will be another reason that pensions will be hated in the boardroom, amongst professional shareholders and it will be another disincentive for investment in companies with large DB workforces (or at least a heritage workforce of deferred pensioners).

I can see no joy in the advent of GMP equalisation.

I am sure that the Lloyds judgement will result in a deluge of legal and actuarial briefings over the next few weeks, seminars will be arranged, canapes will be enjoyed, wine will be drunk as people bemoan the fate of their pension schemes.

Those who are winners will be informed and they will be non-plussed by the tiny windfall that they receive. Those who get no windfall may feel aggrieved , in a beggar my neighbour way – though this unlikely to be water-cooler stuff as most people who will get a windfall with have left the company.

The admin software suppliers will be kept busy as will administrators. I guess there is a kind of job security about being a pension administrator  (the pension lawyers will see to that). But it is a joyless task, to be checking GMP equivalence for the rest of your career – it is a colossal waste of administrators time – time that could be better spent.

There will be a lot of non-compliance and the Pensions Regulator will have another duty to enforce. Exactly how all this will be audited is yet to become clear but no doubt there will be whistle-blowing to be done – with all the conflicts that involve.

If I am painting a picture of unremitting misery, it is quite intentional. When it comes to GMP equalisation I have said it once and I will say it again

What a waste of time and money!

waste of money 2

Exactly that

Posted in advice gap, pensions | Tagged , , , , | 8 Comments

Pre-budget apprehension

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There is nothing like the threat of losing a tax-break to get people to value it. The Annual Allowance is under threat, so the Money Purchase Allowance, there are some still worried about higher rate tax-relief on contributions.

In my little world, raising money for AgeWage’s SEIS has seen a flurry of pre-budget interest from SEIS investors. The rules for higher rate tax payers look very generous. So I’ll be donning my bicycle clips and collecting applications from distressed millionaires this morning!

The behavioural aspects of budgets are always the same. A long build up with the Treasury planting rumours in the hope that they can test the waters of public opinion, the build up in the morning as the tension builds to a climax in the morning before. Then there’s the speech in which high level platitudes are delivered – insults returned. Finally there is the real hard work when experts read through the detail and opine on the consequences in budget newsletters, many of which will be out the same evening as the speech.

If you think about it, it is one of those little rituals of British public life that allows everyone – for a few hours – to engage about money – principally – their money.

Gone of course are the days of a penny on the pint and a shilling on a pack of fags. Duties are dwarfed by the impact of Brexit. We are now trying to balance the books against a world could be upon us in less than six months. We are living in a world of anticipation, fear and exhilaration. No one will get the Brexit that they want!

The budget can only position the ship to sail into the eye of the storm in hope that it will have re-emerged this time next year in reasonable shape. I think this calls for the nautical cliché, “battening down the hatches”.

Today’s budget is about tomorrow’s Brexit, but it must also be about our financial futures whatever our relationship with Europe.

It would be a sad waste if the Chancellor did nothing on pensions. I mean that the Chancellor ignored the “net-pay” pensions problem. I mean too that the Chancellor did not return to the tax- inequalities of the pension system which is fast becoming a “wrapper for the wealthy”.

Aligning the tax-incentives of pensions to the public good is long-overdue. Right now they are aligned to the good of the wealth management industry which is showing little signs of reciprocity. The wealthy are not giving back to the state, choosing to invest in ways that suit the wealthy not the ordinary person. Pensions are no longer a means of keeping middle England out of dependency on the public purse but a leg up for the aspirational mass-affluent and a hand-out to those at the top of the wealth ladder.

It really is time the Chancellor recommitted to a root and branch reform of the taxation of pensions to make pension saving a mass market activity whose incentives are enjoyed by all equally.

My pre-budget apprehension is not about the curtailment of allowances to the wealthy, but about the less- wealthy’ s incentive predicament being ignored again.

My worry is that auto-enrolment will in time be discredited by our failure to deal with the “net-pay anomaly”, my worry is about millions who are saving for their future who will not get pensions at all. My final apprehension is that millions who reach the stage of winding down from work in the next decade will find the process of converting pot to pension just too hard.

“Battening down the hatches” applies to the pension freedoms too




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“No dash in dashboard!” (Paul Lewis)

no dash.jpg

I’m not sure about the provenance of his info (the link is broken) but Paul doesn’t tweet without good reason. This is important.

Thanks to FT Adviser’s pension guru,  Maria Espadihna, I can give you the proper link which confirms what Paul was reporting – the state pension is not certain to be part of the dashboard project – as considered in the upcoming (Sic) DWP feasibility report.

The tweet hints at something I’ve been thinking for some time; that the pensions dashboard is going to be no such thing – it’s going to be a “retirement savings” dashboard.

If you can exclude the state pension , you can let off the occupational DB schemes including the tax-payer sponsored schemes – the LGPS and the unfunded pension schemes.

Let’s face it , knowing what you are getting from these schemes isn’t hard, it’s a defined benefit!

Unless you decide to cut and run, taking a transfer where you can, your defined benefit pension doesn’t need a dashboard, it just needs a link – which is what the Government Gateway is. Nice as it sounds to have pensions alongside pension pots, there’s a counter argument to say that it’s thoroughly confusing. A pension pot is nothing to do with a pension – unless you decide to annuitize it – by purchasing an annuity or exchanging it for rights in a DB scheme.

So – heresy as it is to say it – I’m not that fussed if the Government keeps the state pension, its other unfunded pensions and even funded DB pensions “off-dashboard”.

Infact , I suspect that in doing so , it might put the dash back into the dashboard!

Not just a dashboard – we need a steering wheel!

I’ve said it before and I mean it. People have three fundamental concerns about their retirement savings

  1. What have I got?
  2. How has it done?
  3. What should I do?

Nobody should have too much difficulty finding a DB pension – there’s a flipping link on the DWP website that helps you do it. It isn’t hard. Here it is

But finding out what you’ve got and getting it on a single “dashboard” screen is a lot trickier, you can pay Experian to search their orphan asset register, you can rummage through your bottom drawer or you can play pension detective yourself. But it is a tough job tracking down all the bits and bobs, especially as most of the companies you worked for have by now changed names or merged, the same can be said for the insurers and third party administrators that looked after their pension arrangements. As for personal pensions – you need to be an archivist to work out who owns what!

So we need a dashboard pension finder service.

We also need some way of working out what our retirement savings have actually done for us. I say this because everyone I know who gets a pension statement with a fund value on it, asks the same question – “have I done alright?”. It’s human nature, you have given people your money for a number of years and you want to know whether you got lucky, picked a winner, got value for the money you gave them!

And finally we need to know where to go with all this money, we need the steering wheel to drive our swag off into retirement with a plan that ensures that our car doesn’t run out of petrol but takes us to some nice destinations.

Frankly this is quite enough of a headache for most of us without having to wonder about “pensions” !  Pensions are something altogether different, they are the wage in retirement things we used to get from work – or still do if we work in the public sector.

People are quite up to differentiating between what they get as a pension, and what they get as retirement saving. Some will even want to top up their pension by converting retirement savings to income for life (see above) , but the dashboard is really about the money we’ve already saved.

The dashboard cannot in itself be a holistic financial planning tool

I am sorry to dash the hopes of financial planners country-wide, but the chance of getting a single view holistic dashboard from which people can plan their financial futures is pretty well zero.  Frankly the inclusion of the State Pension (and other DB) on the dashboard is a nice to have at best or a confusion at worse. I am not upset at the prospect of the state pension not appearing on my dashboard, I am quite capable of factoring it into my financial planning so long as I can find out what it gives me and when.

Take the State Pension out and give me the tools to find my pension , see how its done and work out how to spend my money – and I’m done! Give me a dashboard and a steering wheel!

Now get on with it!

We’re supposed to have this dashboard up and running next year. Fat chance at this rate of progress. This great report due out from the DWP in March is already 7 months late and it doesn’t show any signs of appearing any time soon.

The DWP bit off more than it could chew, got bamboozled by the ABI with all kinds of nonsense about compulsion and a single state delivery mechanism and is now having to walk carefully away from those promises.

The DWP should be explicit about what it can and cannot do (with the emphasis on the latter) and now let the private sector do for pensions what they did for banking (e.g. open them up!).

Enough fannying around and leaking of this and that through the trade press. Guy and Esther should publish and be damned! In my view they will be damned a lot less, for being brave, honest and accepting that what we need is a retirement savings dashboard and a proper portal to our pensions!

agewage vfm


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Transparency isn’t tactical! Thoughts on day 2 at PLSA.


The Pension Dashboard was under discussion again at the PLSA conference in Liverpool.

I am not clear from Opperman’ s words what has held up the publication of the DWP report on its feasibility , but that report is still not with us and it was due in March.

In the meantime , the messages get more and more obscure. Here is the ABI on the need for compulsory data

Yvonne Braun of the ABI says schemes need to be compelled to share their data with the Pension Dashboard. Earlier today, the Pension Minister did not commit to compulsion. #engagement

and here is the same ABI spokesperson saying that they don’t

Yvonne Braun of the ABI doesn’t believe that small pension schemes should be compelled to hand over data to the Pensions Dashboard.

— Josephine Cumbo (@JosephineCumbo) October 18, 2018

What people have a right to, under the Data Protection Act 2018, is the data that a third party has on you – and people have a right to it in machine readable format.

Which kind of trumps any special pleading from the ABI. The fact is we have a right to the information and people (like Alan Chaplin) are already testing that right and getting the information – in reasonable time.

What the dashboard does is to act an aggregator and an agent. As an aggregator it brings together data from a number of sources; as an agent – it acts for an individual at an individual’s request.

What the Government needs to do is to confer on organisations setting up a Pensions Dashboard, the power to act as an agent and the facility to make numerous data requests from a single request from an individual.

All that the Government needs to do is to address these questions. They do not need to build a dashboard, they need to make sure a dashboard works.

Transparency isn’t tactical

In a week when we learned from the PPI that £20bn is unclaimed by people with pensions assets, we also learn that we may be getting a new kind of pension statement.

single statement clear.PNG

Its simpler , clearer and more real but it is incomplete. It is incomplete because it doesn’t have the costs of the plan on the statement, you have to go somewhere else (see bottom para) and no doubt by the time you’ve waded through you’ll be sufficiently bamboozled you wish you’d never bothered.

I am told that the reason we can’t be told how much our pension cost us last year, is because of the ABI, the same ABI who want everything compulsory on the dashboard unless it’s too hard for a scheme to produce.

As with the Dashboard, the plan for the Single Statement is to give people an idea of what they’ll get in the future (point 3 at the top – in green). The ABI are very keen for us to know that we won’t have as much as we need and keen for the statement to solicit greater saving. Savings are good for the ABI – they make money on savings – that’s the point.

What neither the dashboard or the illustration are very good at – is giving us an idea of how we can have this money back – the spending. In fact – when you flip the statement to the back page, you don’t get much help on spending at all.

single statement clear 2.PNG

I’m concerned about that £752 pm. In particular I worry about this statement

When you turn your Pension Plan into an income, you don’t take a lump sum, you want the same amount of money each month, and you don’t want an income for anyone else after you die”

This is not what people want at all! They want a lump sum (tax-free), they want a wage for life that keeps its value despite inflation and they want to look after their loved one.

The £752pm looks a dodgy number to me, cooked up to keep everyone smiley – but easily sussed as a “wrong-un” by savvy punters. It’s the kind of number that brings illustrations into disrepute!

While I love the simplicity of language, the only thing that I am left with is the message that I can save more into the plan. The back page feels like an ABI sales aid- not a pension illustration.

I remain hopeful

Like my friend Andy Agethangelou, I am frustrated and optimistic. I’m frustrated at the slow pace of change but optimistic that change will happen.

The ABI seem to be standing in the way of change at every step, they are the one constant.

Those like Ruston Smith and Quietroom, who produced the statement, are to be applauded – they must be pretty frustrated too.

Guy Opperman sounds pretty frustrated, but like me and Andy, he sounds hopeful too!

Transparency isn’t tactical – you either are transparent or you aren’t.

Transparency isn’t a marketing tool , to be deployed as suits an organisation

Transparency is a state of mind – AKA – honesty and integrity.

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Don’t pander to pension populism! Zurich big-wig hits out at “freedoms”

stefan 3.PNG

“I have no time for populism” , was the astonishing rebuttal of top Zurich Insurance shrink Stefan Kroepfl. Kroepfl, who is global head of life business analysis – is no lightweight, nor was the discussion that ensued at this Dutch pensions conference.

Kroepfl went on to passionately endorse the principle of annuitisation and the importance for ordinary people of converting pension savings into a wage for retirement.

The mood in a roomful of Europeans, me , Malcolm Goodwin of Aviva and Joseph Liu of L&G was strongly The concept of giving people unlimited freedom in exchange for healthy tax-breaks, did not sit easily with this audience.

There was considerable interest about incentivisation. Clearly pension are still being “sold” across Europe and the c-word (commission) was heard regularly. It was good to have a discussion on how Britain has effectively banished commission, not just by the RDR but more fundamentally through the nudge mechanism of auto-enrolment. The discussion around auto-enrolment focussed on distribution and it was interesting to hear delegates from Eastern European countries talking of moving to auto-enrolment for second pillar pensions.

The problems with selling insurance and the image of insurance salesmen was a theme of the afternoon and perhaps the most interesting discussion focussed around linking the premiums we pay for health related insurance products to our health. We are of course familiar with this in practice, through firms such as Vitality, but one question got to the heart of the matter

“are you doing this because you care about your customers and are mindful of your reputation or are you doing this because you want to sell more policies?”

the answer was of course “both” but this was tested by a second question

“So why don’t you promote physical and mental well-being to those to who you provide annuities and long-term savings products”.

This thorny question of commercialism and image is a crux for this conference. There is a pleasing bluntness about its expression, here is a title of a session today

“Boosting sales through innovative products that appeal your customer”

Getting paid for giving the customer what they want is of course what business is all about, but the crux is that this is populism in its most extreme guise.

George Osborne was paid handsomely for delivering the populist agenda of pension freedoms but I wonder just how easily these freedoms sit with the British public, their advisers or those who manage the platforms from which our retirement planning is to be delivered. We are either at the start, middle or end of a global stock market correction. It is hardly a crash but it has brought out a fresh wave of nervous statements from drawdown providers on the perils of over-generous drawdown targets.

At the same time, the Prudential Regulatory Authority’s technical consultation paper about lifetime mortgages has sent the share price of annuity and lifetime mortgage provider into a tailspin (having lost 60% this year, it is one of Europe’s worst performing stocks). The reason for the loss in confidence in the insurer is market perception that it will have to bolster its capital reserves to continue writing new guarantee business.

As Citywire’s Jack Gilbert pithily puts it

Four years after Osborne’s pension freedoms nearly killed off the annuity market, the government’s regulators are on the verge of dealing it another major blow

A middle way?

There has been precious little talk at this conference about collective provision and risk sharing. I tried to introduce the subject but my words fell on arid soil and all questions turned to my comments on auto-enrolment.

I sense no appetite for risk-sharing among the European insurers, but here I may be using a select group to ignore a wider problem. I will be hearing from Allianz in a few days in a private meeting they are arranging to explain how collective DC will be distributed in Germany.

Judging by the polarity of debate at this conference, a middle way is badly needed, not just in Britain but in Europe too.



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AgeWage – a mission statement

age wage

AgeWage is on a mission. We want you to know about the money you’ve paid for retirement. This means knowing how much you’ve saved, how much your investments have grown and knowing what you’ve paid for that investment growth.


We’re not interested in teaching you how to become an investment expert, telling you about the complexities of pension products and blinding you with actuarial science. We want to keep things very simple and tell you about what you’ve got in numbers.


Every pension pot you own has an AgeWage number we can give it. The number is a value for money score out of 100, the higher the score the better. The number is made up of what you’ve paid, how it’s grown and what’s been taken out to manage your money. Of course you can have the details as well – but from what we’ve been hearing, most of you want that simple consolidated number to begin with.


No one has ever before set out to tell people the value for money they’ve got on their pension savings. This has been because until this year, you haven’t had the right to ask for the information we need to give you that score!


AgeWage is uniquely positioned to do this work for you, our future customer. We are and will continue to be

  1. Independent – our customer is always the saver, the person who gets to spend the pot
  2. Well managed – our team of experts are widely acclaimed for their integrity, experience and dedication
  3. Transparent – we will always share with you how we are paid and by whom


Being Independent, well managed and transparent is part of our mission, we will not deviate from these three values.



We have taken the decision we will not manage your money. We will not have an AgeWage wealth management solution and we don’t want to be owned by anyone who does!


Well Managed

We have a management team comprising Chris Sier, Henry Tapper, Ritesh Singhania and Andy Walker. We have an advisory team including John Quinlivan, John Mather and Con Keating. We have the benefit of shareholders who will contribute in time to delivering our mission.



Chris and Henry in particular have campaigned for transparency – themselves and as part of other initiatives. For instance Chris has Chaired the FCA’s Institutional Disclosure Working Group and Henry is a part of the Pensions Regulators stakeholder team, delivering transparency in regulation.

What we expect to achieve.


Most people build up a lot of pension baggage through their careers, we want you to be able to take control of your money by understanding how its been managed. If you don’t like what you see, we’ll allow you to compare alternatives. If you want to spend your savings, we’ll show you alternatives and allow you to choose what’s best for you.


We’ll also help pension providers to help you. We are already working with workplace pension providers – helping them to help you. We hope to improve the efficiency of auto-enrolment providers by helping you build one big pot rather than many small ones – this helps keep their costs down, which benefits everyone. We’re also helping insurers with what are called legacy pensions make sure these are giving value for money and – if they aren’t – make sure there’s a path for you to get your money into policies which give you better value.

This is the “how”, the “who” and the “what” about AgeWage.
You’ll see a lot happening with AgeWage but you won’t see much change in our mission!

age wage simple

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Pension Tax Reform is the “art of the possible”.


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Nicky Morgan is right

Everyone knows that pension tax-relief is broken and those who try to cling on to the current system do out of vested self-interest (and I include one former pensions minister in that statement).

Wealth managers have come to view tax-relief as a “wrapper”, a convenient marketing tool to direct client’s wealth into capital tax mitigation schemes (aka SIPPs). The sector’s latest trade body even calls itself the “Tax-incentivised savings association” or TISA for short. The 10% of us wealthy enough to want wealth management now consider tax-incentivisation a right not a privilege.

Which is why I have sympathy for Nicky Morgan who is quoted in the Daily Mail  as Chair of the Treasury Select Committee .

The Treasury committee said tax relief on contributions was ‘not an effective or well-targeted way of incentivising saving into pensions. The Government may want to consider fundamental reform.’

This apocalyptic consideration has been ruled out by Philip Hammond and for good reason. His rebuttal of the Select Committee’s call is in this week’s Money Marketing

Responding to the committee today, the government has said that its consultation has shown no agreement on the path forward.

It had already consulted at the summer Budget in 2015 over whether pension tax relief reforms could strengthen incentives to save, but saw no consensus in a way to meet the key goals it set out then.

The response reads: “The government is also aware that any changes to the pensions tax relief regime could have significant impacts for pension schemes, employers and individuals. While the government keeps all taxes under review, no consensus for either incremental or more radical reform of pensions tax relief has emerged since the consultation in 2015”.

Impossible reform

Fundamental reform of the tax-relief of pension contribution impacts everything, it impacts payroll systems, HMRC coding and providers. Most of all – it upsets people and at a time when everyone is super-upset – that’s not good.

A flat rate contribution structure might be implemented and circumvented by moving higher rate tax-payers into salary sacrifice. “Scheme Pays”, might help the Treasury, but it would be a nightmare to administer at scale. Where it is employed at present (mainly to collect tax on contributions that breach the annual allowance, it is already building up administrative problems for the future.

Nicky Morgan is right to press for fundamental reform, the current system incentivised people to retain wealth in pensions wrappers, not to save. The success of auto-enrolment suggests that people would rather be nudged than incentivised (most people don’t know they’re getting tax-relief or even what tax-relief on pension contributions is).

But the Daily Mail is wrong in implying that Nicky Morgan is calling for a change in the budget, the job of a Select Committee is to guide Government in long-term strategy. It would be failing if it did not call for reform but Hammond is least likely to introduce reform in the teeth of BREXIT.

Instead, look to the capital elements of pensions for Treasury “top-slicing”. If you want to understand how fiscally exciting the Annual and Life Time Allowances are, read New Model Adviser’s excellent summary.

The AA and LTA are vulnerable for three reasons

  1. there is plenty of fat to be skimmed off  (see NMA numbers).
  2. it is easy to collect tax (using RTI) from those with money in pension “tax-wrappers” (the wrapper makes “wealth” a sitting duck).
  3. targeting the rich is considerably less politically challenging than depriving the poor.

On point 3, I hope that Philip Hammond will read the reminder we are sending him about NET PAY. The scandalous silence of the wealth industry on the deprivation of government incentives for the poor is matched (in ignominy)  by their ridiculous bleating for the rights of the rich to harbour money in tax-exempt SIPP wrappers.

When will see true reform?

Reforming pension tax-relief is the art of the possible. At present it is only possible to tinker by “salami-slicing” pension capital allowances. When the Government feels it is in calmer waters, it will no doubt look at Nicki Morgan’s suggestions. The Treasury came darn close to proper reform in 2015 but ducked it , fearing the consequences of a BREXIT vote. They got BREXIT and fundamental pension reform is “impossible”.

Don’t think that this is the end of the matter, the fundamental reform sits on the shelf – waiting for the “possible” moment.


He’s right too!


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Keating on Ralfe, CDC and morality

Last week’s Corporate Advisor’s Pensions Summit featured a debate on the merits of CDC pensions. Johan Ralfe presented the “case” against the introduction of CDC. In the main, with all the showmanship of Barnum and Bailey, this resurrected old and long-rebutted criticisms. His “magic beans” made yet another appearance. The offer of a line by line response was declined during the debate, a situation this blog will correct. The “case” such as it is, is a collection of errors of analysis and logic, and their repetition, despite frequent refutation and disproof, can only be considered a case of wilful ignorance.

The principal assertion made was that CDC is a game of pass the risk parcel; that no-one will join as they risk being the last person in the scheme. This is scaremongering. It ignores the fact that this is the position of all scheme members under traditional DC; they are permanently alone. It would be a very strange world in which members declined a remote possibility of facing difficult choices for one with certainty of those problems.

This was expanded to an outright untruth: “end to end first cohort benefits at expense of last cohort”. The risk-sharing rules within CDC are designed to, and will ensure equity, fairness among all members at all times; these are mutual support mechanisms, not subsidies. No intergenerational transfers of risk or funds occurs. We describe one set of such rules later.

These risk-sharing rules can even ensure that overgenerous awards, which may arise from trustee judgement and discretion in this process, are eliminated early.

In response to the rhetorical question: “How is equity risk premium shared?”, this “end to end” fabrication was followed by the even more bizarre:

“The current generation take the premium …; The next generation take the risk”

The equity risk premium, when earned, is captured in the performance of the asset portfolio, and in the current members’ equitable interests in that. There is no separation in time of the risk and reward, nor can there be.

The argument proceeded to develop a novel, but incorrect, theory of risk: “Can transfer risk from one person to another or one cohort (sic), but can’t make it disappear” This is some imagined law of conservation of risk; but, in general, risk is not immutable. Those risks of our own creation can certainly be eliminated by our own corrective actions, and there is much about financial markets which is of our own creation. We were then treated to a complete non-sequitur: “If risk did reduce with time so those with long horizon could take more risk, no need for CDC”. The higher returns expected from CDC asset portfolios arise not from some excess return associated with long versus short term investment, but from the fact that the funds are invested for a longer period of time, over both the accumulation and decumulation phases. Indeed, for any arbitrary return, that expected from the average decumulation phase exceeds that from the accumulation. This answers another of the questions posed: “where does this extra juice come from? Investment for a longer time. The extra return has been a feature of the findings of all academic and professional simulations, and there have been at least eight studies of CDC around the world.

The juxtaposition of factual inaccuracy and irrelevancies is quite remarkable. Take the sequence:

Longevity pooling?

Maybe, but not spelled out

Can this be achieved more easily?


Longevity pooling is a feature of all CDC designs. Life-long pensions introduce longevity risk, and this is the element that poses the greatest problem for traditional DC members, who face applying drawdown strategies and annuity purchase at retirement. It is simple, requiring no explicit action, and has been the backbone of the life insurance industry for centuries. If there were an easier path it would have been discovered long ago.

The presentation posed a number of questions; all of which have been answered many times before. But for completeness, they are answered again here:

“How are investment risks shared between different generations?” There is no sharing between generations, all current members face the common risk, and experience the common return of the collective asset pool, the pension fund.

“Who decides when target pensions are adjusted up or down?” Scheme rules will determine when pensions and the interests of members are adjusted. There should not be any discretionary element to this. In the absence of risk-sharing, the current pension payments would be cut when a deficit arises.

“How is asset allocation decided?” Asset allocation of the communal fund is determined by the trustees in the light of market prospects and the scheme’s specific situation.

“Who appoints Trustees? How are they paid?” Trustees are elected by vote of the membership. Whether they are paid or not is scheme specific, and subject to the approval of the membership.

Who regulates CDC?” This is an open question, to be answered shortly by the Department of Work and Pensions. However, it seems most likely that this will be the Pensions Regulator, rather than the FCA or some new body.

“What happens if people stop joining?” This takes us full circle back to scaremongering. CDC is not dependent upon the arrival of new members. It could run off over time, or it could be wound up immediately. This involves no loss of capital to any member. It could merge with another scheme. Members may anyway transfer the net asset value of their interest to some other qualifying pension arrangement at any time. In wind-up, CDC may revert to its traditional DC roots.

The design of a CDC scheme and the rules by which it operates are important. The start point is the award of some chosen benefit target and setting of its associated contribution. This is a matter of discretionary judgement for the scheme trustees. It should reflect their best estimate of returns achievable; it should not attempt to recover past shortfalls, nor to distribute any surplus.

The contribution made and the target benefits projected define a rate of accrual for the pensions, individually and collectively. This determines both the individual’s (equitable) interest in the scheme and fund, and the target liabilities of the scheme at all points in time. It would be totally inappropriate to value the target liabilities using gilts, the expected return on assets or any of the so-called fair value methods. This rate (with loading for administrative expense) also constitutes an explicit target rate of return for the asset portfolio.

If the trustees have been over generous in their awards, this will show rapidly as a scheme deficit which is persistent and growing; scheme rules would then intervene and cut the interests of all members. By similar token, pensions could be increased if the scheme is in surplus.

The concerns over intergenerational inequity are eliminated by the risk-sharing rules. There are many feasible designs and operations of these rules. We offer here one of the most elementary. The operation of these rules is simple. If the scheme is in deficit then, in the absence of the operation of the risk-sharing rules, the currently due pension payments will be cut by the proportion of the deficit. Simultaneously, the interests of all non-pensioner members will be cut in similar proportion. This will maintain equity among all members.

The risk sharing rules cover both the amount of total support available for pension top-up and the duration of rule operation. To avoid cuts, the most basic time limitation would be that deficits must be cured within a period which is inverse to its magnitude – a ten percent deficit within ten years, a twenty percent deficit within 5 years, and fifty prevent within two years – provided that the overall total support limit has not been reached. An overall limit to support is necessary to avoid downward asset spirals which would create inequities. The amount is scheme specific, but for a scheme with membership split 60 – 40 non-pensioner – pensioner, ten percent of the total assets is sufficient cover for all but the most extreme and unusual of market circumstances. The key to maintaining fairness among members is that along with the payment of the top-up to pensioners, the interests of all non-pensioner members are increased in similar proportion.

This alters the relative claims of non-pensioner members to pensioners. It also increases the required rate of return on the asset portfolio. The magnitude is though modest; if all ten percent were utilised the required rate of return would increase by approximately ten percent.

One positive effect of these rules is that they provide an incentive for new members to join when the scheme is in deficit. They will receive the best estimate award from the trustees and an immediate further increase from the operation of the risk-sharing support.

The asset portfolio has an investment horizon which is far longer than traditional DC, as it covers also the decumulation phase. While the traditional DC fund objective is to maximise asset values at all times (within a particular mandate limit) there is an explicit target return for the CDC portfolio. The presence of the risk-sharing rules further modifies this mandate. They lower the requirement to achieve the target return from an annual objective to achieving the target return on average over the period during which risk-sharing rules may be expected to operate. This permits truly long-term investment strategies, including those which are indirect in operation. As the fund is all there is to pay pensions, the performance of the asset portfolio is a central concern.

The degree of utilisation of the risk-sharing limit, and its related expected time to exhaustion constitute an important new risk metric for CDC schemes. It is the period within which pensions are effectively assured.

The question of communication with members was raised: would they understand that the pensions were targets, which might not be achieved? This feature can be explained in all introductory literature, and of course, it will be reinforced by the availability in near-real time of the asset value of the member’s interest together with the pension income equivalent of that, together with the original target.

Returning to the original debate, it is far from clear why these objections should be raised, beyond the venality of the fee bonanza around DC pots at retirement. The question which these objectors need to ask themselves is: what if I am wrong? If they are, and are successful in their efforts, then many pensioners will have been deprived of a good and dignified retirement. This is more than the best being the enemy of the good, it is a question of morality.

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“Legacy” is a dirty word – AgeWage would ban it!

Pension hackathon

We need a “pension hackathon” to speed up the pace of change

Not so long ago, well in the late nineties , I attended a series of meetings to ward off the impending threat of stakeholder pensions. The meetings were organised by Allied Dunbar and I attended as the “pinko” from Eagle Star who wanted members of our schemes to get a good deal.

It soon became obvious that the priorities of our joint business (we were both owned by British and American Tobacco) was to ensure we had happy shareholders – happy advisers and that the management teams – of which I was a part – remained in place.

Stakeholder pensions offered lower ongoing fees, no exit penalties, precious little to pay advisers with and a threat to our back-books – which could all too easily be “cannibalised”. The language of the day was boorish, blue from the sales people and obscure from the product teams. If we weren’t swearing at Government officials, we were arguing over measures of embedded value. In these discussions , the customer was nowhere. The management teams have now been disbanded as has Allied Dunbar and Eagle Star.

The world moved and the dinosaurs didn’t

The world we find ourselves in today is a different place. We’ve been through the Stakeholder experience, that proved a warm-up for auto-enrolment. We are now in a world of Fintech – maybe even Pentech.

The new kids on the block are the old mutuals – Royal London and Liverpool Victoria have reinvented themselves as not for profits which deliver to members what few of their rivals could. They have survived as workplace pension providers where many haven’t. Prudential has continued to thrive, but primarily as a with-profits fund. Legal & General has turned itself into a successful fund manager and has shed its old life company in all but name. Standard Aberdeen are trying to do the same.  Meanwhile the bulk of the investment from auto-enrolment is going to organisations that weren’t heard of even ten years ago, People’s Pension, NEST, NOW , Smart, BlueSky and Salvus have revived the concept of defined contribution occupational pensions.

Meanwhile, we have almost forgotten that £400bn of our savings has not moved on. It is stuck in the land of the dinosaurs , a kind of financial Jurassic Park where our money is prey to all kinds of monstrous charging structures that feed the raptors.

Why “legacy” is a dirty word.

In this new world – there are new standards of transparency. The old charging structures and ways of talking to policyholders and members are increasingly an embarrassment. They embarrass the brands of the new mutuals and they compromise their management. The legacy books also stand in the way of a positive relationship with regulators. Firms like Royal London find they have first and second class customers and that sits ill with their strategy.

In an ideal world , all legacy would be able to migrate on a “no worse terms” basis from old to new. Firms like the Prudential and Royal London and Phoenix and Scottish Widows are talking with me about how to accelerate the transition from old to new. But, however much they want to rid themselves of the past, they accept that the best for many of their policyholders may still be to come. The guaranteed annuity rates within many policies need to be honoured, as do terminal and longevity bonuses. Many with-profits policies offer guaranteed returns that are valuable in a low interest rate world.

But there is precious little help for these insurers in communicating these subtleties to their staff. There simply aren’t the advisers, or information delivery systems, in place to engage with the owners of the £400bn. As the MD of one large insurance firm told me recently,  they have no way of engaging with their customers.

Legacy is a dirty word, but it’s likely to remain in common parlance for a time to come

Speeding up the migration to good

At AgeWage, we’ve got ideas which we think can help people understand what they have and what they could have. Our ground-breaking work is helping people to see not just the value for money of what they’ve been saving into – but the value of doing new things with money.

In this we’re being supported by the FCA who are actively engaging with us on how to help ordinary people make decisions on what they’ve bought in readiness for spending it.

I’m even looking forward to going to a two day Pensions Hackathon, organised by the FCA – which will enable firms like AgeWage to engage with some of the providers I’ve mentioned. Technology can help – and we’re determined to prove it!

agewage vfm

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

Death by 10 million pots – how to solve the small pot crisis

Prisoner exchange

Prisoner Exchange should be a win-win


There are 10 million new savers into workplace pensions. If every saver changed jobs 10 time, that would mean 100 million new pension pots- unless some means of rationalising pot proliferation can be found.

The DWP estimate that by 2050 there could be 50m “abandoned” pots, by which they mean pots that no longer get an employer contribution. For members of master trusts and policyholders of contract based workplace pensions, this means the prospect of a messy job trying to bring pots together to manage cash-flow in later life. For employers there is the prospect of fielding calls from long-lost employees tracing pension rights and for the operators of workplace pensions, this means a claims process that could wipe whatever profit the small pot ever generated.

This is why we are facing a “small pot crisis” and the time to do something about it is now. Preventative action is hard to  justify as it goes against the Mr Micawber inherent in the strategy department.


Mr Micawber Something  will turn up

The idea that “something will turn up” by means of Government Action or technological advance or some radical shift in saver’s or adviser’s engagement – is speculation. It is risky to speculate.

Which is why responsible and forward thinking master trusts and the managers of workplace GPPS are looking to solve the problem now. The radical solution , put forward by Tom McPhail of Hargreaves Lansdown calls for individuals to be able to tell employers where they want their money to go. This would involve employers being able to clear pension contributions to a variety of providers. To date most employers have struggled to manage an interface with one provider and it’s unlikely that many will voluntarily adopt clearing as an employee benefit. The prospect of a Government backed clearing system, as is in place in Australia is at least a decade away.

The second idea which is jokingly referred to as “prisoner exchange” sees workplace pension providers working with each other to pass small pots between each other so that the member is offered an automatic transfer of old pot to new. Providers I have spoken to envisage this happening with a member having to intervene to prevent the transfer (effectively an opt-out). The right to transfer to the next provider would be given to the old provider as part of the enrolment process.

This has the advantage of being relatively painless for employer and member and puts the administrative onus on the providers in who’s interest it is to clear-out small pots and to accumulate big pots.

The rules governing transfers are considerably more generous to transfers without consent under an occupational trust and it is not surprising that it is the master trusts that are pushing for “prisoner exchange” and the GPP and GSIPP providers who favour clearing.

There is however a major hurdle to be cleared before any progress is made – regulation. The FCA and Pensions Regulator have objectives to protect members. The enforced aggregation of pots, whether through clearing or transfer, requires the consent, no matter how passive, of members. The alternative would be against all the principles of freedom and choice inherent in our pension and savings systems.

While the vast majority of us savers would acquiesce to pot aggregation or the pot for life system advocated by Tom McPhail, there is a vocal minority who will favour self-determination and the right to stay put or indeed to transfer to a pot of their – rather than an employer’s choosing.

These people will demand evidence that what they move to (or stay with) is worthwhile. Currently there is no way of telling whether value has been attained by the member for the money he or she has put into their workplace pension. Consequently any regulator is likely to kybosh both approaches on the basis  that the majority of transfers will be “blind” and that those who save for a lifetime in the pot of their original workplace pension provider , may find themselves at retirement with a sub-optimal outcome.

Sub- optimal outcomes and blind transfers happen, but their has to be an opt-out process to ensure they needn’t.

At AgeWage we are working on a system that allows people to see the progress of their savings in terms of what they have got and what they have paid for it. We call it value for money scoring and an example is below.  We think that the kind of information members need to feel comfortable with pot aggregation could be in place by the end of the decade and we’re working hard to make sure it is.

agewage vfm

Posted in advice gap, age wage, pensions | Tagged , , , , , , , | 2 Comments

How GDPR helps us make sense of pensions!


Adrian Boulding has written an excellent article about the new cost and charges disclosures. I will quote only the conclusion and urge you read the rest of it here.

Can we hope to obtain full investment charges data onto a pensions dashboard in a format that is understandable to the majority of savers? No!

Can we obtain disclosure to the point that an adviser can make sense of it all? Maybe.

Being realistic, however, advisers are as time-poor as their clients are demanding. So I am left with one last hope, which is that we can obtain asset management disclosure to the level that specialist adviser firms – the ones that service financial advisers, trustees and IGCs – can make sense of all this data and pass on their findings.

Adrian’s implicit admission is that people will not be able to work out the impact of costs and charges on the outcomes of their savings policies. I disagree.

Let me give you an example;

Supposing I was to look at the value of my pension policy I’ve saved into for the last few years and discover it was worth £100,000. I might be happy, I might be sad , but most likely I’d be mystified. There is no way of knowing if I’ve had a good deal from contributing the money I have.

Let’s suppose that I was given another figure – a theoretical figure – £150,000.  This is the amount I would have had from that pension policy if I hadn’t had to pay the butcher, the baker and the candlestick maker for managing my money.

I don’t think I’d have to be a genius to work out that the cost of my policy was £50,000.

Now let’s suppose that I was allowed to know the amount that was contributed to my policy over the years. Money might have arrived from my personal contributions, from what my employer paid, from HMRC as tax relief and even from the DWP (if I used the policy to contract out of SERPS/S2P. Let’s say my total contributions had been £80,000.

In a very simple analysis of what has happened to my policy, I’ve got back £20,000 more than I put in and the pensions industry has had £50,000. The value of my policy has been £20K and the money I’ve paid to get it has been £50k.

Such an analysis reflects badly on all the parties involved in the running of the policy. Anyone looking at these numbers would be hard pushed to justify the “intermediaries”  between him/her and the money getting 2.5 times the return that he/she did.

If it had been the other way round, and the individual got £50,000 value and the intermediaries got £20,000, then the equation might look right.

The trouble is , that ordinary people are not able to get this simple information in their hands. I think they should. Not only do I think they should be able to get proper information about the total costs they have incurred , but I think they should be told the total amount that has been contributed and the value those contributions have grown to today. What is more, the Government agree.

How GDPR help us

The Data Protection Act 2018 (which incorporates GDPR) gives us all the right to see the data that is held by others on us, and to see it in machine-readable format – that means in a way that a computer can process the information (data) to make sense of it.

What that means is that since May of this year, you and I can get all the data needed to see how much we’ve contributed, what has been taken by intermediaries and what we have left.  We have the right to this information, but not yet the means to make sense of it.

What I am intending to do with AgeWage, my new venture, is to get this information, make sense of it and to present back to people the value they have got for their money so they can make sense of what has happened to their savings since they made them.

Whether that makes AgeWage what Adrian calls “a specialist adviser firm”, I doubt. Whether this makes AgeWage a very valuable venture, I have no doubt. AgeWage will be the first organisation to tell people the value they have got for the money they have spent on pensions. There is a great deal of “value” in that!


agewage vfm

The single number score that tells you how you’ve done.



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

Will a “Transfer Value Comparator” work?


DB transfer activity has begun to stabilise, with far more transfers being quoted and taken every quarter compared with the position before the new freedom and choice flexibilities were introduced by the Government in 2015. Bart Huby LCP Aug 2018

LCP, one of the brightest of pension consultancies estimate the average pension transfer value at £448,000, twice the value of the average house in the UK.

Before the introduction of Pension Freedoms only 10% of CETV quotes they issued were taken up, that figure now stands at 29%.

Last year Barclays Bank’s massive pension scheme reported £4bn taken via individual transfers, they’ve accounted for an expected 20% (nearly £5m) to flow out this year.

Small wonder that LCP had to book a bigger hall to present their “Survey of DB Transfer Comparators”. A year after the Port Talbot scandal broke, transfers are still the big news.

What’s the big deal about Transfer Value Comparators (TVCs)

The FCA hope that transfer activity will not just “stabilise” but improve in quality. It is introducing a way of comparing Cash Equivalent Transfer Values with what would be given up. The joint paper between Royal London and LCP has an illustrationTVC 2

LCP estimate that for someone 10 years away from retirement, the TVC will on average show that someone only gets 57% value from the CETV, this rises to 75% the year before retirement but even then represents a loss of 25% purchasing power in taking the transfer.

The FCA want us to consider this loss as the price we pay for freedoms – or at least for the flexibility that having a big fat cash pot brings – over a wage for life.

Also presenting at the event was Steve Webb, who’d been up all night to get happy (or at least performing on Radio 5 Live). Steve showed a chart which explained what people valued from having a big fat pot and all those things were behavioural not fiscal. People like the inheritability of a pot, they like its flexibility to be spent as the owner chooses and of course they like the idea that it is their money- not an insurer’s or trustees’.

What the FCA are hoping is that people will stop and think how much they are prepared to pay for those heuristics- even 25% of £500,000 is well over £125,000.

This – they hope – is the big deal about TVCs.

Is this the right way of presenting the argument?

Steve Webb pointed out the principal risk of the FCA’s approach

“There is a serious danger- if the advisers think the bar charts are “nonsense on stilts” that they are going to struggle to deliver TVCs to clients”.

Webb pointed out that in the original FCA mock-up he’d been shown, the TVC appeared on page 30 out of 43 –  by which time the former Pension Minister had given up the will to live. He went on to say that recent versions have seen the TVC move up to page 5, but it clearly is not being treated as “headline news”.

Webb pointed out that for people who are trying to get rid of a guaranteed wage for life , presenting them with the cost of repurchasing what they have given up is hardly the most intuitive of advisory tactics.

For Steve Webb and Royal London, The TVC arrives to some scepticism, with which I have some sympathy.

Why can’t you just repurchase what you’ve given up at the same price?

The FCA have chosen to set the TVC as the full cost of buying back the pension lost, it could be put the other way round and express the amount of pension lost if the CETV were used to buy an immediate annuity.

The reason that TVCs repurchase so much less than the pensions given up is threefold

  1. Individual annuities do not enjoy the economies of scale achieved by group schemes paying pensioners from a payroll. They also involve insurance companies taking a margin. This makes them inherently more expensive to provide than scheme pensions and hence they purchase pension pound for pound than the pension they replaced
  2. The time between a pension coming into force and the CETV being taken is investable time. The TVC is calculated using a risk-free rate of return whereas the CETV is discounted against the investment return of scheme assets (on a best estimates basis. The TVC does not enjoy the investment return the Scheme Pension gets between its calculation and normal retirement.
  3. The scheme pension is itself invested and is not invested in risk-free assets, you have to put aside less to pay a scheme pension than an annuity because of the greater freedom trustees have than insurers.

Add together the greater operational efficiency, the opportunity cost of purchasing an annuity early and the long term investment disadvantage that annuities suffer against scheme pensions, you get to why TVCs are so much lower than the scheme pensions they are compared with.

Financial economists like John Ralfe will look at those three points and will say “bollocks”, but them is the rules.

We expect economies of scale, we believe in the equity risk premium.

The Transfer Value lottery.

Much of LCP’s presentation was spent explaining something I’ve touched on this blog before. The biggest factor impacting the CETV is the discount rate being used to create it.

Since the discount rate is a function of the investment strategy and the investment strategy is decided upon by the Trustees, CETVs are effectively a lottery – as far as the member is concerned.


The chart above shows how someone who’s CETV value is calculated using a discount rate generated by the scheme being invested in 80% risk-free assets will get the blue circle’d 70% TVC while the poor wretch with a scheme invested only 20% in risk-free assets will only get a 50% TVC.

The conclusion is that not all transfer values are calculated the same , but the output of the CETV – a cash amount paid into a personal pension, differs only by the size od the payment! That is a total lottery as far as the member’s concerned.

For Trustees, the equation is simple. If you think people will take any notice of TVCs, the more aggressive your investment strategy, the less likely you are to lose prospective pensioners through CETVs. Conversely, if the intention is to get rid of your scheme, the faster you “de-risk” from equities to gilts” the more transfers you can expect.

Ongoing questions for people who transfer.

Having had 24 hours to cogitate, I agree with LCP’s four questions

  • What is the Transfer Value Comparator?
  • How do transfer values differ between different schemes?
  • How does the scheme’s investment strategy impact the TVC?
  • How might TVC illustrations impact the number of members transferring?

No adviser – advising on a transfer, should ignore these questions. If I was the FCA and I wanted to know that the person who had paid for transfer advice, had understood that advice, I’d be focussing on these questions which might be rephrased for ordinary people

  1. What did you make of the Transfer Value Comparator?
  2. Did you understand how your CETV had been calculated – do you think you did well?
  3. Did you understand what your former pension scheme was investing in and how it affected your CETV
  4. Did the TVC influence your decision to transfer – and if it did – how?

Are we asking these questions too late?

My worry, and it’s clearly a worry in LCP-land too, is that in 10 years time, the vast majority of those in DB schemes will have reached pension age. By then they’ll have either taken a transfer or it will be too late to do so.

While it’s good that the FCA are still testing the water on what works, it’s bad that in the meantime there’s a risk that the TVC test won’t work and that we’ll be revisiting this subject in three years time after another Port Talbot.

The FCA could have taken a much more draconian step to reduce transfer activity and banned contingent charging. On this Royal London and LCP do not see eye to eye. I don’t see eye to eye with Steve Webb on this either.

Royal London’s position is that advisers can be trusted and mine is that the only advisers who can be trusted are those who work on an upfront fee – paid whether the transfer is taken or not.

I know that some advisers who I do trust (such as Al Rush) work on contingent charging but I cannot make the rule fit his exceptional probity.

My conclusion with regards TVCs is that they will be effective as advisers want them to be and – so long as we have advisers working on a “no CETV no fee” basis, they won’t make much difference.

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Payroll are tomorrow’s Pension Experts!


I spoke at the CIPP Conference at the National Exhibition Centre at what payroll can do to help staff understand pensions and in particular – the pension freedoms.

Here are my slides

I think there are three things that hold payroll back from becoming pension experts.

  1. Pension experts who’d like to keep payroll in their box
  2. Payroll experts who lack the confidence to say it as they see it
  3. A general fear about talking about pensions without being a regulated financial advisor.

All three reasons need to be challenged.

  1. Pension Experts are few and far between and for the vast majority of the million plus employers in the UK there is no “pension expert” in-house or available for hire.Where there are pension experts, then they should be talking to and learning from payroll – payroll people should not be excluded from pension education.
  2. Payroll experts are highly qualified analysts trained in the minutia of tax and auto-enrolment compliance, they are trusted to get things right, few others in an organisation have the trust of everyone. Payroll experts are ideally suited to deliver the tough messages of pensions – they say things as they see them and they say things right.
  3. Though some pensions fall under the FCA’s remit, most don’t and even the ones that do (GPPs) can be explained in general terms. As long as people stick to giving information rather than opinion , they will stay on the right side of the guidance/advice line.

Step forward payroll!

Whether you run a bureau or lead an in-house payroll team, you should be pressing to become authoritative on workplace pensions.

Even if you have a pension team in-house , payroll people need to be stepping up to the plate and offering their expertise on tax, national insurance, salary sacrifice and all the minutia of auto-enrolment compliance.

But in most cases, it’s not just the employer who needs help, it’s staff. The presentation I gave yesterday can be downloaded from slide share by simply pressing on it  from this blog. First Actuarial aren’t precious about the IP in the presentation, if you want to present our talk-through on tax and NI, please do! If you want to use our Muppetometre, please do.

We are delighted to help employers who need our help. If you would like a chat about how we can do this (and when the clock starts ticking!) , just drop me a line at





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Will “DC deficits” become a thing of the past?

News of HMRC’s “change of position” with regards the “net-pay- anomaly” is welcome, and long overdue. It came in the form of a letter sent in response to a request from respected journalist Jo Cumbo of the FT.

It has been greeted with little enthusiasm by the majority of the pensions industry. This in sharp contrast to NOW pensions, who got the momentum together for the joint letter.

Commenting on reports in today’s Financial Times that HM Treasury will tackle any differences in how pensions tax relief is provided, Adrian Boulding Director of Policy at NOW: Pensions said: “We’re pleased to see the government making a firm commitment to resolving the anomaly in net pay schemes. This is an important issue which has been swept under the carpet for too long. We look forward to working with HM Treasury and HMRC to make sure all savers are treated equally.”

Here is the only public comment I can find from a UK pension consultant.

It is very good that Hymans published that research back in April, but it only tells half the story, the vast majority who are overpaying on their workplace pension contributions by up to 25% are not in multi-employer master trusts, but in single employer sponsored occupational schemes.

The deficits between what a low-earner enrolled into an employer’s occupational pension scheme is every bit as real – in terms of outcome – as the deficits of which so much is made, in our DB plans. Both will result in a material loss for members. Deficits are very real, very numerous and they reduce DC cash balances just as the PPF reduces DB pensions.

Since the low paid can now but auto-enrolled into DB schemes (including Government schemes), it is likely that a significant proportion of those losing out because of the impasse, are consulted on by Hymans Robertson, WTW, Mercer, Aon and my own First Actuarial. For DB members, it is a question of over-payment of contributions not the reduction of benefits, but the impact amounts to the same thing. The low-paid are being ripped off and the pensions industry hasn’t seemed to be giving a monkeys.

This is why this is an industry problem and not just one particular to master-trusts and why the PLSA put its name to the letter which has prompted this change of position.

News of this “change of position” came on the same day we heard that the Competition and Markets Authority are to launch a Market Study into the role of auditors in occupational pension schemes. Professional Pensions reported yesterday

Defective” company audits could mean millions of savers in pensions funds are “losing out”, says the Competition and Markets Authority (CMA) as it launches a probe of the audit sector.

I hope that the report will include the issues highlighted here and elsewhere on the failures of auditors to report on DC Deficits.

Payroll welcomes the news.

I was (and will be again today), speaking at the CIPP annual conference in Birmingham. The reaction to the news that everyone contributing to a workplace pension would be given the promised incentive, was greeted with enthusiasm. This from people who have day to day contact with the people affected, people who understand the risk to their employers (or for bureaux- customers) of being a party to a scandalous situation.

Speaking to the CIPP’s Helen Hargreaves (a co-signatory on the letter) , the reported change in position has clearly been seen as a win for common sense and natural justice.

We now need to ensure that the implementation of any change is fair to the low-paid. This is what I hope the signatories to the letter will urge the Treasury to do.

With understandable reservation…

The note of caution sounded by some related to the possibility that the change of position was part of some wider conspiracy against low-earners. This from one person who commented to me by email

Let’s hope their solution isn’t to stop tax relief for non taxpayers. Wouldn’t put this past HMRC.

This view, that HMRC are preparing to dumb down pensions generally , focusses for many, on the possibility of the Chancellor announcing in the budget a move to flat rate tax relief on personal contributions.

Though nothing is impossible, it is difficult to see how this would work. Most employers now have the capacity to disguise employee contributions as employer contributions through the use of salary sacrifice. Working out what has been sacrificed and extracting cash from the imputed amount will require a “scheme pays” type mechanism.

For such a system to be introduced will require extensive and expensive changes in processes at both HMRC and from pension and payroll providers. I do not think that such a disruptive move would carry political support from a business friendly conservative party, nor social support from a country supposedly engaged in helping out those “just getting by”.

Are pension experts embarrassed?

So I am minded to ignore the Jeremiahs and take the silence of most pension experts as the embarrassment of knowing they have done little or nothing about this problem for the many years that it has been known.

I suspect that the silence among consultants on the issue has been because they not only advise on the design and administration of the net-pay schemes that are at the heart of the problem, but they administer them too.

If the solution to the problem is “retrospective”, then the bill for restitution will be a disputed bill. Will it fall to the administrators, the advisors or rest with the trustees?  In a DC trust there is no contingency for restitution, the costs of working out fair shares and allocating monies in line with the losses incurred would be substantial.

It is more likely that the revenue will draw a line in the sand and expect any new practice to be forward looking. This will still put a great deal of strain on the software designers on whose record keeping systems most of the net-pay schemes sit, the administrators who will need to change processes, payroll who will have a job to do ensuring that any tax anomalies arising from the changes are recorded and of course employers and trustees who will have to explain all this to bemused low-earners.

Is this just too awkward?

It’s all very awkward isn’t it? It’s not the kind of dirty linen that the occupational pensions industry wants to be talked about, especially as this not a problem that impacts contract-based plans run by insurers or master trusts operating on relief at source (NEST and People’s Pension for instance).

It’s a problem that has run on too long and that needed to be addressed. The twin spurs pricking the sides of the Treasury’s intent are undoubtedly the problems surrounding Scottish Income Tax and the imminence of the Budget.

My personal guess is that the “Net-Pay- Anomaly” offers an embattled Chancellor an opportunity to give to the poor some of what he’s taking from the rich (by way of reduction of pension allowances).

If this is what Phillip Hammond does, I will not be against it. The pension taxation system is so biased against low-earners in favour of those with large pensions and pension pots, that any form of redistribution is to be welcomed.

Phillip Hammond does not need to feel awkward about being seen to solve the net-pay problem, but I’ll be making him feel very awkward indeed, if after the letter  sent to Jo Cumbo at the Financial Times, the Budget remains silent on this issue.


Better late than never

Posted in advice gap, annuity, auto-enrolment, pension playpen, pensions | Tagged , , , , , , | 2 Comments

The conflicts of interest facing pension trustees



Robin Powell of the Evidenced Based Investor, interviewed me this week. You can find the original interview here, Robin’s work is important, I hope a few readers will come to his seminar- advertised at the bottom of this piece.

One of the most exciting things about helping to campaign for greater transparency in UK asset management over the past few years has been the chance to be part of a community of highly motivated and principled people.

The likes of Chris Sier, Andy Agathangelou, Con Keating and Gina Miller have devoted huge amounts of time, and most of it totally free of charge, to improving outcomes for consumers.

Very much part of that group is the pensions consultant HENRY TAPPER. Henry is a supporter of the Transparency Task Force, of the growth in workplace pension take-up through auto-enrolment, and of the move towards collective defined contribution (or CDC) pension schemes. His blog, Pension PlayPen, is a go-to resource for everyone involved in institutional investing in Britain.

In this interview Henry discusses the current state of institutional investing and the conflicts of interest that exist within investment consultancy. He also explains why trustees have been so slow to adopt a more data-driven, evidence-based approach.


Henry Tapper, how did Pension PlayPen come about and what was your vision for it?

The Pension PlayPen was conceived as a place for pension professionals to congregate and have fun. It was at the time when the Bribery Act was coming in and many of my friends thought the days of taking corporate bribes were over. We ganged up and did our own entertainment out of our own pocket without having to trouble the corporate gift register!

The PlayPen has a big following and is now an important part of the UK pensions landscape. What’s the secret?

I’m surprised that you think that it is important — that’s very flattering! We’re still going after 11 years and Pension PlayPen has evolved into a website for helping employers choose a workplace pension, a 10,000-strong LinkedIn group and a blog with over one million reads. I think it’s about consistency, sticking to your guns and having a clear vision of what’s right!

I notice you aren’t afraid to speak your mind!

I live in a constant funk that I’ll be taken out! Seriously, I’m like rhubarb; the more you beat me up, the better I feel!

Something else we have in common is our support for the Transparency Task Force. What do you feel the TTF has achieved?

A lot of people laughed at Andy Agathangelou when he started out and he’s proved everyone wrong. Andy brings people together because he’s so positive. He’s consistent, persistent and unremittingly optimistic. That’s a pretty amazing combination! TTF is now a factor in corporate decision-making and that’s the mark of Andy’s achievement.

Human nature being what it is, though, we’re never going to see total transparency in investing, are we?

It’s back to TTF. If those who have the power to change things feel encouraged to do so, then they will. Right now, Andy’s creating the conditions for change and it’s now up to the awkward squad — me, Chris Sier, Gina and Alan Miller, yourself and others — to drive home the advantage.

As you know, I’m an advocate of low-cost index funds. Why do you think trustees still tend to prefer actively managed investments?

We need someone to blame. Choosing an active manager who performs reflects well on trustees, and if the manager fails, it’s easy to blame the manager for the trouble you’re in.

Does the continuing reliance on hedge funds surprise you?

Our governance structures are slow moving, we were slow adopters of hedge funds and we’re late to abandon them.

As you know, private equity seems to be flavour of the month, and yet PE has a big transparency issue, doesn’t it?

The Railways Pension Scheme lifted the lid on the costs incurred by private equity managers. Any fiduciary allocating to this asset class now has to explain why they’re investing in such an opaque form of investment. There’s a lot to be said for private equity, but transparent it is not.

One problem I’ve noticed is that trustee training is often provided by product manufacturers. That’s a clear conflict of interest, isn’t it?

There’s an industry in trustee training and as the question points out, it creates an agenda which points the trustee at investing in products which generate a margin reckoned to be among the highest in any industry in the UK.

The FCA is currently looking into competition in the investment consultancy sector. What’s your view on that?

Investment consultants are important to the proper functioning of occupational pensions. But they have put themselves into a conflict where they find themselves marking their own homework. The Competition & Markets Authority review must help them resolve that conflict by ensuring they are genuinely independent of the products they advise on.

Finally tell me about your latest project, AgeWage?

AgeWage is my new venture to help ordinary people find out how their pension pots have built up and whether they’ve had value for money. I’m very excited by the opportunities this gives ordinary people who struggle to understand what’s happened to their pension savings  — or how to spend them!

Thank you for your time, Henry. And keep up the great work you do on behalf of investors.

Henry Tapper is one of the delegates at our free educational seminar, Evidence-Based Investing for Trustees, in London on Wednesday 17th October, which we’re holding in conjunction with the Cheltenham-based financial planning firm RockWealth.

As well as me, the speakers are Lars Kroijer, the former hedge fund manager turned indexing advocate, and David Jones, Head of Financial Adviser Services (EMEA) at Dimensional.

The seminar runs from 0830 to 1030 at the Amba Hotel, Charing Cross, WC2N 5HX. There are still places left. If you’d like to attend, simply email Sarah Horrocks at

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34 firms under investigation by FCA for non-disclosure of investment charges



true and fair

Alan and Gina Miller’s True and Fair Campaign

The Times are running this story as a result of a tip-off by professional charge-busters and founding members of the awkward squad SCM Direct. If you don’t know what SCM Direct is, that’s because you aren’t one of their clients, SCM Direct is the wealth management business of Alan Miller (of New Star fame) and Gina Miller (famous for just about everything but especially for “Remaining”).

Here’s the Thunderer with the evidence presented it by the Millers

The rules were first set out by the EU in April 2014, so the industry has had years to prepare, said Miller.

“It’s time for the chief executive of the FCA, Andrew Bailey, to demonstrate that he is willing to be the industry enforcer rather than the industry lapdog.”

In one case, a (Times) Money reader with lasting power of attorney over his 98-year-old father’s affairs asked the wealth manager Canaccord Genuity for the charges on his parent’s £700,000 portfolio.

In an email, an investment director at the firm said its management fee was 1.25% and a flat £30 commission per transaction would also apply. The reader asked SCM Direct to check. It emerged that the 1.25% did not include VAT, underlying fund charges or transaction costs. The overall charge was closer to 2.75%, meaning an additional £10,500 in charges were not initially highlighted.

Canaccord agreed the full charge was nearer 2.75%, but said it was asked specifically for only its own management fee and commission charges and intended to disclose the full cost to the client “ahead of an expected face-to-face meeting”.

David Esfandi, chief executive of Canaccord, said: “If there are any suggestions we have been less than transparent with our fees, we would strongly refute that.”

Research conducted by SCM Direct in May shows the Investec Click & Invest website presented its charges as ranging from 0.35% to 0.65%, depending on sums invested, and underlying fund charges averaging 0.6% (0.75% today). However, this did not include transaction costs, which add a further 30% to the fund cost.

Investec said: “We should have clearly shown the transaction fee within the average underlying fund charges. We have amended our website and apologise if this has caused confusion.”

SCM Direct also highlighted potential breaches by Coutts, Tilney Bestinvest and Wealthsimple.

Coutts said: “We already include details of the platform fees and the main fund charge at several points in the customer journey. In response to Mifid II, we have added the funds’ transaction costs to our Fee Tariff Document, which is readily available to clients. Next month, we are launching an integrated solution, including a personalised digital calculator, to further improve transparency.”

Tilney Bestinvest said wealth managers relied on fund management groups to provide accurate information. “We are currently in advanced dialogue with data vendors to enable us to secure this data and satisfy ourselves that their coverage is comprehensive.”

Toby Triebel, Wealthsimple’s chief executive Europe, said: “Both our management fee — 0.7% — and underlying portfolio charge are visible on our website, in addition to being highlighted through our help centre and magazine.”

Utter Hogwash

Even I , a seasoned watcher of corporate bull, was startled to read such utter hogwash from seemingly reputable organisations.

If you can’t t understand your charges, that is not “true and fair”. Being “in an advanced state” of complying with something you’ve known was coming for 14 years and has been law for nearly a year now is NOT GOOD ENOUGH.

The Miller’s point is a good one. If the FCA are not going to enforce its rules, it shouldn’t make them and we should live in the Wild West of fund management as practiced in numerous jurisdictions round the world (read Angie Brooks for details).

It’s not good enough to stand idly by and allow this bad practice to continue and I’m 100% behind Alan and Gina’s “True and Fair” campaign. Read about it here.

The proof of the (investment) pudding is in the spending.

You might think this article is leaning a bit too much on the Millers, after all they’ve made a fortune from investment management. I don’t doubt that they’ll continue to make a fortune by running a “clean shop”. The point that the Miller’s are making by running a successful business on “true and fair” lines is that you don’t have to be uncommercial to be honest.

I am aiming to be as successful as the Millers by setting up AgeWage to tell people “truly and fairly” how their lifetime savings products have actually done relative to the money they have paid to the financial services industry.  Value for Money is something we think is inherent in the simple equation “money-in, money out”. There can be no excuses in the final reckoning; when it comes to saving the proof of the pudding is in the spending.

We now have the tools

Working out “ongoing charges figures” (OCFs) is good and it’s what should come out of the legal requirements to disclose from MIFID II and PRIIPS. But OCFs and other percentage based measures only play to the people who understand percentages and the way compound interest works.

More important to people when they are judging things are measures that tell them what value they are getting for your money. Which is why I want to turn performance and charges into a single score that relates – not to some abstract notion – but to your understanding of what’s gone on.

Since the Data Protect Act 2018 and (to a lesser extent GDPR), we have all been able to get to the data about ourselves necessary to understand the value and the money we’ve got from our savings. AgeWage is simply a way for people to have this information brought together to tell them how their savings have done and how they are likely to do in the future.agewage vfm

In both intent and practice , AgeWage is born out of True and Fair and this blog acknowledges Alan and Gina Miller, Chris Sier, Andy Agethangelou and the other members of the awkward squad, who are gradually wresting back control from those who intermediate between us and our investments.

Posted in advice gap, age wage, pensions | Tagged , , , , , , , , , | 2 Comments

The net-pay scandal gathers momentum


Key “net pay” (or variations on the phrase) into the keyword search on this blog and you will find over 30 articles going back to early 2015.

It was Kate Upcraft who first put me on to the problem which emerged as the auto-enrolment entry band did not align with the entry level for income tax. She explained that not just the relatively few people auto-enrolled into net-pay occupational schemes then, but the huge number auto-enrolling since, could lose out on the Government promise of 4+3+1 contribution structure (with the 1 being a percentage of pensionable payroll, which earned a Government incentive. To put it bluntly, net pay schemes put 12.5% of your contributions at risk.

Of course the risk isn’t very real for the higher paid who are unlikely to get out of bed for less than £1000 pm; the risk falls on the lowest paid who often are the least advantaged in society.

I argue that those people who don’t get the ‘1’ are in contribution deficit and I’ve told the Pensions Regulator that if they are prepared to

block employers with DB plans from completing corporate transactions until DB deficits are plugged, they should do the same with DC. Whitbread’s sale of Costa to Coca-Cola is a case in point. We do not know how many Costa employers are missing part of their pension entitlement, but – knowing the nature of work at Costa, we can imagine it’s quite a few. I want an audit of DC contribution shortfalls to be carried out now and for the restitution of promised incentives to be completed before the deal is done.

This is why I am proud to be one of the signatories on the letter to the Chancellor, delivered by NOW Pensions.

Progress so far.

The Daily Mail’s This is Money has run its piece which is very comprehensive. You want a link?  Here it is .

The Daily Express has also run a good piece. Here it is

And there are various articles in the trade and political press; here they are

FT Adviser – Altmann and Webb demand tax loophole is closed

Pension Age – Industry heavyweights urge Chancellor to fix the net pay anomaly

Actuarial Post – Now Pensions signs letter to Chancellor on net pay anomaly

Professional Pensions – Govt urged to take action on net pay anomaly as experts sign letter to chancellor – Campaigners press government for action on pension tax relief

Financial Reporter – Campaigners call for government action on pension tax relief losses

CIPP – Campaigners press government for action on pension tax relief

Money Age – NOW: Pensions co-signs letter to Chancellor to prevent AE being ‘undermined’ – NOW writes to the Chancellor on behalf of the pension unloved.

Well done the few – what of the many?

It’s all very well for the pensions industry to squeal about rich people’s problems, (Annual Allowance, Lifetime Allowance, IHT thresholds), but it’s incumbent on all of us to come to the help of those who don’t have financial advisers and aren’t valuable to pension providers.

I’m really pleased to see those who put their signatures to the NOW letter. They deserve applause.

Caroline Abrahams, Charity Director, Age UK

Baroness Ros Altmann, Chair, pensionsync

Troy Clutterbuck, CEO, NOW: Pensions

David Dalton-Brown, Director General, Tax Incentivised Savings Association (TISA)

Anne Fairpo, Chair, Low Incomes Tax Reform Group of the Chartered Institute of Taxation

Helen Hargreaves, Associate Director of Policy, Chartered Institute of Payroll Professionals (CIPP)

Paul Nowak, Deputy General Secretary, Trades Union Congress (TUC)

Nigel Peaple, Director of Policy and Research, Pensions and Lifetime Savings Association (PLSA)

Henry Tapper, First Actuarial and Pension PlayPen

Steve Webb, Director of Policy, Royal London

But where is the ABI on this?

The ABI can generally sit smugly on the right side of the debate, because the GPPs which form the bulk of their corporate pension business operates on a relief at source basis. Though some insurers run master-trusts on a net-pay basis, the ABI declined to sign the letter as they could not mobilise their membership behind it.

What possible detriment could there be to the reputations of insurers , in calling for the low-paid to be given a break? I am saddened that the ABI are not signatories, I hope that they will put their weight behind the campaign within the next three weeks.

All eyes on the budget

In three weeks, Philip Hammond will deliver the 2018 Budget. He speaks for a Government run by Theresa May who pledged, on appointment to help those just getting by.

If Theresa May is reading the Express, the Mail and the many other publications I hope will follow, she may want to nudge her Chancellor a little further. For the untold number of us Brits who participate in auto-enrolment and don’t get the break they’ve been promised are precisely the people who struggle to “just get by”.

Esther McVey and Guy Opperman should be rattling the Treasury Gates. Opperman in particular- he asked to have the title of Minister of Pensions and Financial Inclusion. If you believe in financial inclusion and are happy to take the credit for auto-enrolment , why are you excluding the newly “included” from what you promised them?

Posted in advice gap, pensions | 4 Comments

Play “Stick or twist” in the workplace pension lottery!


Stick or twist 1If you changed jobs, would you prefer to stick with your current workplace pension or join your new employer’s scheme (leaving a little pot behind you)?

It’s a tough choice, and the more you think about it, the tougher it becomes. For example, some workplace pensions – the ones that have a fixed monthly charge – are particularly tough on small pots, others – which rely on an annual management charge – are easier to leave behind. Pensions are so complicated, isn’t it easiest not to bother? After all, that’s why auto-enrolment has been a success, people didn’t bother to consider opting out!

But what’s good a small pot to you in retirement, you’ll probably want to “aggregate” it into a bigger pot at some time in the future, so why give yourself the problem? Wouldn’t it be easier to take the pension you started with to each of your future employers and hope that you got lucky first-time round?

I know there are people who say “don’t put all your eggs in one basket” but it’s not much fun having lots of tiny baskets when you are managing your retirement finances! The value of diversifying across lots of workplace pensions is at best unproven!

This is why the Pensions Minister, Guy Opperman is consulting with pension providers about operating a clearing system for auto-enrolment, just as happens in Australia. How this idea might work would be for payroll to pay not to a provider, but to a clearing house, which directed the payment to a provider selected by the member.

The member decision could be simplified into the binary choice I gave you at the top of the article and a default could be used “if you don’t choose to use your current pension, you’ll be auto-enrolled into the new plan”. This is rather easier than defaulting into the “current plan” as that assumes that the current plan is still available to the new member and it mightn’t be able to receive contributions from a former employee.stick or twist two

There are then two obstacles to offering the choice to members, the first is the technology, (the extra cost of clearing) and the second is the nagging doubt it puts in people’s minds -“have I made the right choice?”

Of the two, the second is the hardest. When Stakeholder Pensions were introduced back in 2001, the idea was that because there were no exit penalties, people would be able to take one stakeholder pension to another as easily as we exchange pound notes for loaves of bread. It didn’t turn out to be the case as regulations were introduced requiring people to take advice before moving money.

The reason for advice was it was thought that not all Stakeholder Pensions were created equal and that people could do financial “self-harm” if an adviser was not involved. In practice, advisers learned that they could take hansom commissions in helping people switch money, a practice that was banned from 2013. We now have the awkward situation where people cannot move their own money from pot to pot, but advisers can’t be rewarded by commission for doing so. As people are reluctant to pay advisers fees, the pots tend to stay where they are and the result’s the DWP estimate there will be 50m abandoned pots by 2050.

These pots are expensive for providers to administer. They not only have to keep a record, but ultimately, they have to manage a claim on the pot – which wipes the lifetime value of pot management to the provider. One providers told me he wanted to manage an army of well-drilled soldiers, not a “prisoner of war camp”. The analogy is apt, small pots are captives like prisoners, another provider talked to me of bulking the transfer of small pots as “prisoner exchange”.

In order for us to move on from the problems that are building up for providers and consumers, we need to find a way for small pots to be transferred without detriment to member. This means either reducing the cost of advice to zero or going back to the original premise, that once you’ve sufficiently regulated stakeholder or workplace pensions, moving from one to another doesn’t require advice at all.

In the long term, we need a system that allows us to easily “twist” and move our pots from one provider to another, or “stick” with one workplace provider for our savings careers. Tackling the twin obstacles of technology and advice is now high on the Government’s agenda.

stick or twist 3

Posted in auto-enrolment, pensions | Tagged , , , , , , , , | 3 Comments

Why would management fees be any cheaper for #cdc than DC?

newton blake

Blake’s view of Isaac Newton (see final paragraph)

It’s a question posed by John Ralfe- to me – on twitter. It’s a serious question and one that Jeremy Cooper, doyen of the Australian Super system is clearly interested in too.

The question cannot be simply answered with reference to academic theory. Having just read a short and very understandable academic paper on the advantages of tontines over life annuities, I am in no mood for further academic wrangling. If all CDC was about was rearranging deckchairs, then I’d be looking to the lifeboat!

What is my answer?

If the answer doesn’t lie in actuarial science or in financial economics, perhaps we should look at what creates the inefficiencies’ in DC. What cannot be denied is that people pay a vast range of fees for having their DC pot managed. Last night I was with Quietroom , watching vox-pops of people being shown the fees they were paying, most of the people were not just unaware of these fees, they were unaware that there were charges on their DC plans in the first place.

The comparator two people used was with their bank

“I might as well take my money out and put it in the bank where I know what I’m getting and I won’t get charged”

One answer to the question is “governance”, individual DC plans, especially when they move away from employer funded to individual drawdown, have very little governance. It is easy for an advisor or a non-advised drawdown provider, to charge what they like. There is no-one to stop them.

Another answer is in the nature of a “trust”. If we consider the not for profit principle that has been at the heart of collective occupational pensions for the past sixty years, you can see it as the continuation of a benevolent paternalism that has persisted much longer. It is the paternalism of Joseph Chamberlain and the 19th century industrialists who built Bourneville and Port Sunlight. It is a cultural aspect of our British way of life, it is what is expected of our bosses.

This expectation that bosses will set up trusts for the welfare of their staff – run on a not-for-profit basis, has not gone away. It is implicit in relations between unions and employers and accepted by both sides. These collective arrangements are the inspiration for multi-employer schemes, the Pensions Trust, the Social Housing Pension Scheme, B&CE’s holiday plan – the People’s pension. The concept of the state as a super-employer lives on in the national acceptance of NEST as a good thing.

The alternative to the brutality of the market, is the protection of the trust.

So – for most people – the collective solution is a natural solution. It is part of our culture in a way that the American 401k system isn’t. The Australian alternative – where the state is all powerful and decrees the way Super is managed, is no alternative to the British system of “trust”. The fact that we trust each other and our employers and the Government to provide for us collectively, is of major advantage to the British pension system.

That – since the mania for personal pensions – we have done all we can to destroy that trust in favour of financial empowerment of the individual – has not made that trust go away. The system of collective pensions is still in place, it is simply looking for an upgrade.

Five practical advantages of the collective approach to DC

These five advantages are not specific to CDC, they are advantages that spring from the collective mind set talked of above and can be implemented through trustees because of trust. Those who  don’t believe that trust exists will poo-poo these arguments, I would ask for them to show of proof that trust does not exist.

  1. The investment management agreements that can be negotiated by organisations representing billions, reduce the margins of fund managers and return that value to consumers through the not for profit mechanism – economies of scale in the purchasing of investment services
  2. The recording and documentation of records for a large group can be managed by repeatable processes (smart ledgers) which use straight through technology. The administration of collective pensions is cheaper than the administration of individual plans.
  3. The payment of pensions under a collective arrangement is considerably cheaper when everyone is being paid in the same way (a wage for life). The substitution of a rules based  pensioner payroll for an individually driven drawdown plan, cuts down on payment costs.
  4. The communication of what is going on , is – in a collective DC plan – a one to many job, rather than an agonisingly difficult process of explaining on an individual basis. The advisory costs of CDC are minimal, the costs of advising on individual plans, especially in drawdown, makes drawdown unfeasible.
  5. Finally, CDC – by dint of it being run on a not-for-profit basis , is feeding less mouths. The cost of intermediation of a one to many scheme is intrinsically less than a great number of individual plans.

Can this be proved?

I think it can and will be proved. It cannot be proved in practice till we have CDC schemes and my hypothesis that we can tap into the great goodwill of trust to make CDC happen and keep it going – is just that.

Academics will point to risks in this approach and in as much as I am relying for my arguments on concepts like goodwill, I will be deemed to be airy-fairy by some financial economists.

But if we left the world to Newton, we would have no poetry, if we left the world to the financial economists, we would have no pensions!


Good luck to those debating CDC at the Corporate Adviser Summit today.

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

Schools staring into a pension “abyss”



Contrary to indications that the Teachers’ Pension Scheme (TPS) employer contributions for 2019-20 would be set at 19.1%, schools have now been told  that the figure from September 2019 will be 23.6%.

The Teachers Pension Scheme, along with all other unfunded public sector schemes, is required to complete a valuation every four years. The valuation has two main purposes: to assess the scheme’s assets and liabilities – the cost of providing scheme benefits in the long-term; and to recalculate the employer cost cap to determine whether it remains within the parameters set out in 2015. The outcome of this valuation is the need to increase employer contribution rates by 4.5%. This figure is well ahead of any formal or informal prediction heard in the last 6 months.

This increase could  have a profound and damaging effect on the finances of schools and will threaten the viability of some as the cost of the increased contributions will have to be absorbed within the school’s financial plan. Schools were given no indication of the magnitude of the new contribution rates which came “out of the blue”.

Further details are outlined below. You will see that maintained schools will receive funding support in 2019-20; independent schools will not.

I’m indebted to the local government association for this information

Teacher Pension Employer Contribution Increase

 HM Treasury recently published draft directions to be used in the valuation of public service pension schemes. The Government Actuary’s Department has now completed their calculations to provide indicative results of the 2016 valuation of the Teachers’ Pension Scheme (TPS) to the Department for Education (DfE), the key results are as follows:

  • Implementation of the change to the employer contribution rate will be 1 September 2019 (rather than 1 April 2019) due to the delay in this announcement.

  • The estimated employer contribution rate will be 23.6 per cent, for the period 1 September 2019 until 31 March 2023.

  • The biggest impact on the employer contribution rate has been the change to the SCAPE discount rate that is used to assess the current cost of future benefit payments; the SCAPE rate will change from CPI + 2.8 per cent to CPI + 2.4 per cent from April 2019.

  • There will be funding from the DfE for the financial year 2019/20 to help maintained schools and academies meet the additional costs resulting from the scheme valuation, a consultation process will take place to determine final funding arrangements. Funding for 2020/21 onwards will be discussed as part of the next Spending Review round.

  • The SCAPE discount rate sits outside the employer cost cap process that was introduced for the 2015 career average TPS as this is a financial assumption. The indicative result also shows that the cost cap has been breached due to the value of member benefits having fallen. This is due to assumptions about earnings (pay increases lower than expected) and reduction in life expectancy. Discussion will take place with the TPS Scheme Advisory Board to recommend changes to the scheme design for career average section members of the TPS to align member costs to the cost cap.

Does anyone know what this will really mean?

The Financial times reports that the Treasury said the increase to 23 per cent was in the right ballpark, but not yet a final figure, and that it reflected lower long-term forecasts for the economy, which will weaken the finances of unfunded pensions in future.

The Treasury has pledged to provide the Department for Education with sufficient compensation for 2019-20 for state schools, further education colleges and independent special schools, but only to “take the change into account” in its 2019 spending review for later years.

Unions are worried, however, that the change in the contribution rate will act as a disguised spending cut after 2020.

Speaking to the Financial Times,  Kate Atkinson, a specialist adviser on pensions to the National Association of Head Teachers, said the union was “extremely concerned” about the long-term impact of the changes on school budgets.

Ms Atkinson said it was “all well and good” that the DfE had promised the anticipated increase in contributions would be “funded” for the 2019-20 financial year, although she pointed out it was unclear what the department meant by the terminology.

“It’s not entirely clear how they’ll provide the funding- . Will it be on the exact cost that each school is facing, or will it be on a pro-rata basis that will end up with some winners and some losers?”

The association was still more concerned about the position after the first year of the increases. “After that,” Ms Atkinson said, “it’s staring into the abyss.”

An unwinding of a hidden cross subsidy- or something else?

What is most worrying about GAD’s valuation is that it implies that the economy is unlikely in future to be able to support current spending plans. The NHS is absorbing its imputed increase in pension costs under the new NHS spending plans, but the relief for teachers is non-existent (private sector) and looks very temporary for the state sector.

With increases in life expectancy falling and public sector wages pretty well static since the start of austerity, we would have expected unfunded pensions to have become more rather than less affordable.

Has the true cost of our public sector pensions been disguised all these years, with the public picking up the balance of costs not collected from schools and teachers?

Or is this nothing more than a stealth tax, where the Government are over-charging for pensions to replenish its depleted coffers.

Will this precipitate calls to scrap defined benefit pensions for the public sector, as called for recently by Michael Johnson?

Those familiar with the USS JEP report – will know all about that trick.


Since this article was published, the Government has published this useful guide to SCAPE and why they feel benefits will have to rise ( justifying increased employer charges). I am unconvinced that this isn’t a civil servants way of giving him/herself a rise in reward at the tax-payer’s expense.


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Pension Dashboards – time to respond!

At a recent PPI seminar, Laurie Edmans reminded us that he had been responsible for helping Government nearly deliver combined pension forecasts in 2004 – nearly 15 years ago.

I wrote to Laurie thanking him for chairing an excellent event and he wrote back – responding to my comments on dashboards – much of which are included below.

Good luck with the minister etc – as long as something gets going – and ASAP!

Here’s the immediate AgeWage response – which like the response to the CDC consultation will evolve. Please feel free to mail me at with your thoughts. I’m not right, but I’ll be a lot righter for your input!


Dasboard response

List of questions for consultation

Wider benefits of a dashboard

I. What are the potential costs and benefits of dashboards for:

a) individuals or members?  

The PPI tell us that £20bn is missing – lost to consumers because they cannot find their pensions, if this money can be reunited with consumers through a properly operated pension finding system, the dashboard will have succeeded. 

The proposals for a single pension finding service are too vague to be costed. To find pensions, there needs to be a way to interrogate the many databases of insurers , SIPP providers and the in and out of house administrators of occupational schemes. A manual search will be very costly, a digital search means having limited access through an API (application programming interface). The cost of APIs can be reduced by the Government standardising the API.  

b) your business (or different elements within it)?

AgeWage sets out to assist, guide and equip people for their financial later life. To assist people we need them to find their pensions. Most people can find their pensions themselves but those who have trouble often give up and disengage.

To do the guidance and to equip people for the future we need people to engage. If the pensions dashboards help people to engage then they will help our business. But if people have to wait too long just to find their pensions, they may lose interest. This could be bad for business.

Architecture, data and security

II. Do you agree with:

a) our key findings on our proposed architectural elements; and

b) our proposed architectural design principles? If not, please explain why.


The proposals mistake the way technology has progressed. We no longer live in a world of centralised databases that store data on everyone. Data is spread around. There are ways to find data- they include data scraping, a technique in which a computer program extracts data from human readable output coming from another program. Data is highly problematic, it should not be relied. Instead we need to access data via APIs to databases.

The Government has a role to play here; it needs to set up a system of verification. This is hinted at in the paper but not explained. 

The Government needs to create a common API protocol to make it easy for organisations with databases to allow pension finders with verification credentials to find people’s data and get it to dashboards.


Providing a complete picture

III. Is a legislative framework that compels pension providers to participate the best way to deliver dashboards within a reasonable timeframe?

Knowing that compulsion is coming may have some advantage to some organisations. But knowing that it won’t be coming for at least five years (the timetable that the paper sets out), will not be getting those with the data particularly agitated.

We live in a world where failure to meet consumers reasonable expectations is met with immediate reputational damage. Social and conventional media picks up on it and organisations suffer commercial damage. This is more of a risk than the threat of Government intervention in a few years time.

Actually compulsion is less important than the societal need to treat customers fairly. No new legislation is needed to enforce this societal need, it is policed and enforced by consumer organisations and by the tough justice of the media.

IV. Do you agree that all Small Self-Administered Schemes (SSAS) and Executive Pension Plans (EPP) should be exempt from compulsion, although they should be allowed to participate on a voluntary basis?


V. Are there other categories of pension scheme that should be made exempt, and if so, why?

We would partially exempt Defined Benefit schemes from having to display their wares on a dashboard. We know from transfer requests that there is no end to the granularity of detail that can be requested. I would suggest that all that needs to be requested of a DB scheme is the prospective pension at scheme retirement age.

Implementing dashboards

VI. Our expectation is that schemes such as Master Trusts will be able to supply data from 2019/20. Is this achievable? Are other scheme types in a position to supply data in this timeframe?

Most master trusts should be able to supply data pretty well immediately. Some have built API layers into which external organisations can plug. Master trusts should be able to advertise themselves “dashboard ready” – assuming they have built and tested the API for pension finders to use

VII. Do you agree that 3-4 years from the introduction of the first public facing dashboards is a reasonable timeframe for the majority of eligible schemes to be supplying their data to dashboards? 

The data architecture is wrongly considered. Schemes do not need to deliver data as you would send a letter or email, they need to make their data for those with verification to get the data. This is what we mean by open pensions.

Should it take 3-4 years (from the point where the non-commercial dashboard is ready) for provider databases to  be open for inspection –

No. Though some data is in bad state (and needs to be cleansed), it is better to get on with things now and make it possible for those who have got their act together and are dashboard ready to go first. 

Keeping a simple dashboard of those ready and those not would be a useful function of Government. Testing that organisations are dashboard ready would be another useful function. We would like to see a dash for the dashboard – rather than this distant time horizon.

VIII. Are there certain types of information that should not be allowed to feature on dashboards in order to safeguard consumers? If so, why? Are there any other similar risks surrounding information or functionality that should be taken account of by government?

The Data Protection Act 2018 allows anyone the right to access their data in a machine readable format. There may be exceptions to this (where the data is a matter of national security for instance) but data relating to your pension – including the timing and incidence of contributions , fund value, prospective pension at SRA and so on – fall within the scope of DPA 18. There is nothing that should stand in the way of someone’s data access request.

IX. Do you agree with a phased approach to building the dashboard service including, for example, that the project starts with a non-commercial dashboard and the service (information, functionality and multiple dashboards) is expanded over time?

No. There is no sense in this. There is no such thing as a non-commercial dashboard. The Single Financial Guidance Body (SFGB) will be run as a business, as were TPAS and MAS. To suppose that SFGB will not consider its goals as targeted on delivery, is to suppose that SFGB will be run on a non-commercial basis.

SFGB is not for profit but so are many financial services companies (Royal London and LV, People’s Pension and NEST for instance. The building of the technology to make dashboards work should be – as the title of the consultation suggests – a matter of “working together for the consumer”.

X. Do you agree that there should be only one Pension Finder Service? If not, how would you describe an alternative approach, what would be the benefits and risks of this model and how would any risks be mitigated?

No. There should be only one protocol for finding pensions, one verification regime, one API. But any accredited pension finder should be able to get the data. Accrediting a pension finder service is not going to be hard. The process has been done with “Faster Payments” and can be done with “Pension Finders”

Protecting the consumer

XI. Our assumption is that information and functionality will be covered by existing regulation. Do you agree and if not, what are the additional activities that are not covered?

The dashboard is doing nothing new, will show nothing new and needs no new regulation. All that should be new is the speed at which data is delivered, this needs the creation of data standards, 

As mentioned above, the accreditation and oversight of pension finders will need to be formalised and we recommend that an independent organisation – the Competition and Markets Authority be commissioned to do for pension what it did for banking. Essentially we see pension dashboards as an extension of open banking regulation. 


Accessing dashboard services

XII. Do people with protected characteristics, or any customers in vulnerable circumstances, have particular needs for accessing and using dashboard services that should be catered for?

It is inevitable that some people will struggle to use pension dashboards. Not everyone is or wants to be computer literate let alone phone literate. Simple matters like using a computer keyboard are beyond some people. Some people still have trouble accessing the internet. 

All of these issues should not prevent us getting on with it. 


XIII. The department has proposed a governance structure which it believes will facilitate industry to develop and deliver a dashboard. Do you agree with this approach? If not, what, if anything, is missing or what workable alternative would you propose which meets the principles set out in this report?

Applying 20th century governance to 21st century problems is not a good idea. I see no reason why the governance structure proposed in this document will be fit for the present let alone the future. We can look at open banking for answers. Build the service and build the governance service to meet the problems that arise. Do not build the governance in anticipation of problems that may never happen.

A greater agility is needed in the conception of dashboard governance.

Costs and funding

XIV. What is the fairest way of ensuring that those organisations who stand to gain most from dashboard services pay and what is the best mechanism for achieving this?

The consumer pays, that is the rule of business. The key to the dashboards success is for the consumer to pay as little as possible. That means keeping levies down by managing the finding of pensions and their digital display as effeciently as possible.

The idea that you build an infrastructure over years before launching is out dated. You test and build as you go along and discover your costs as you progress. You find out your users and apportion costs accordingly. You don’t determine cost apportionment till you know your costs and your users.


XV. Do you have any other comments on the proposed delivery model and consumer offer?


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The FCA finally get to the bottom of why transfers have been mis-sold.

port talbot 4

I feel like singing hallelujah!

The FCA’s findings from their transfer review are brilliantly presented here by NMA’s Talya Mistry.Misiri

Here’s how she sums things up

The findings highlighted that less than 50% of advice was suitable. It said that several firms failed to collect sufficient information on clients’ personal circumstances, such as other pensions arrangements or retirement plans. Where this information was collected, firm did not fully consider it when making a recommendation, the regulator found.

What the FCA’s findings show is the fundamental preconceptions that have crept into wealth management about what people want from their savings

The FCA observed that the firms were relying on ‘generic objectives’ during fact finds with clients who wanted to transfer. This included using terms such as ‘flexibility’ or ‘increase pension’ without going into detail about what this meant to the client.

It said firms were not asking ‘whether the client is able or willing to take the risk required to achieve those objectives, or why they were prioritised ahead of the other needs and objectives of the client’.

Under a slogan separating “facts” and “myths” , Misiri details the specific preconceptions as misconceptions

The FCA said firms were putting too much emphasis on the inheritance tax benefits of a transfer.

In an eerie echo of the Brexit debate , Misiri looks at the philosophical basis used to recommend transfers

Firms were ‘basing a recommendation on the client’s objective to take control of their pension without exploring the reasons for this

The one-size fits all approach, continues with regards cash-flow planning

According to the FCA too many firms were not considering how much clients were spending or had coming in before making personal recommendations

The fundamental objective of any retirement plan is to ensure the money lasts as long as the client, but once again the FCA found advice wanting

….the regulator was concerned that advisers had not considered what happens when a client lives longer than expected after transferring their pension.

Advisers simply ploughed their furrow with little attempt to think about a client’s situation holistically

‘recommending a transfer because the client wanted immediate cash and income in retirement and to leave death benefits to their heirs without considering or demonstrating to the client the impact that achieving one objective may have on the client’s other objectives’

Meanwhile, the product into which their client’s money was to be transferred was simply not up to the job

The FCA found evidence that advisers did not look at how charges might affect a client’s income after a transfer.


The FCA’s report also details inadequacies in the way that some financial advisers talk about risk and explain risks to clients.

I have seen many angry comments from advisers, but I have also read this wise council from Rory Percival.

Underpinning all this is a fundamental question of agency. Every criticism comes down to an adviser putting a sale before advice , a wealth management product before a pension and his or her own interests before a client’s.

Why this desire to sell products? The answer must be staring the FCA in the face, it is of course because without the product, there is no way for the adviser to get paid. The product is not just providing the initial fee for the advice (under what has become known as contingent charging), but usually it provides ongoing fees. Those ongoing fees can either be embedded in the product as investment management or collected by an advisory agreement. Occasionally fees will be paid to unregulated bodies (such as Celtic Wealth) as marketing allowances.

In all cases, the perverse consequences of contingent charging are plain to see. I jump for joy and shout hallelujah because I know that an evidence-based regulator has now got it.

With all these brilliant insights, it is impossible to think that the FCA can continue to tolerate contingent charging as the primary means by which a financial adviser is paid on transfers.

Contingent charging is the root of transfer evil. It turns advice into a sales process. It focusses the adviser’s mind not on the client’s objectives – but on the advisers. It leads to decision making which is designed to put the adviser first.

Evidence of the destructive power of contingent charging are everywhere. In the midst of a turbulent week in politics, Nick Smith had the chance to put to the Prime Minister the plight of one of his constituents, diddled out of his pension saving. The Prime Minister had this to say in parliament

‘I’m very sorry to hear about his constituent in relation to his pension and the actions of that financial adviser,’ ….. ‘I will ensure the Treasury looks at this issue with the FCA in these sorts of cases”.

The litany of sad stories emanating from Port Talbot and elsewhere repeats the same fundamental failing. It is a failure to prevent the conflict of interest between the client and the agent.

I will finish with the sad story of Richie Clayton who lost £169,000 by investing his transfer value into the predecessor of the Vega DFM into which so many Active Wealth clients were placed. Here’s his testimony to NMA

“There were 750 of us who all exited [took redundancy] at the same time. Celtic Wealth then began contacting people who had come out, all of whom had quite high sums in their pension funds, I had a contact from within the unions at the steelworks who recommended the company.

I was contacted several times by Celtic Wealth saying: “you need to sign up, you’ve come out, you won’t be protected. If Tata pull the plug on Europe, they’ll take your money, you won’t get a penny. If you die tomorrow, your wife, children won’t get anything, you need to do it as soon as possible. I spoke to a few people at the time and everything looked good. They didn’t tell me about the risks.’

So long as we continue to allow advice to be paid for on a contingent basis, stories like Richie’s will be repeated. We need to cut this cancer off before it spreads. Sadly with £38.6bn transferred out of DB last year alone, I fear we may be too late. Many people will have to live with the consequences of what the FCA has found out – not just today, but for the rest of their lives.

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