The Gravy train is still at the station!


This is a post from an asset manager. You cannot comment on the post as Muzinich has turned off the comments facility on Linked in.comments

I am wondering what the “appropriate” response to the post is.

Should it be

  1. Muzinich are big swinging dicks -being to be able to hire a large private room in one of London’s most expensive restaraunts.
  2. Muzinich didn’t get anyone to turn up (doesn’t look max capacity to me). This joke being corporate sabotage by a disgruntled employee.
  3. Muzinich got people to turn up but didn’t want to implicate them in this “freddy-freeloader” convention.
  4. Muzinich are showing their conspicuous consumption to impress us

Do people still think that it’s a good idea to advertise corporate excess , dressed up as a seminar – in a public place? Clearly the answer is “yes”. Clearly the answer should be “no”.

Who/where were the guests?

A perusal of the Bribery Act is all most people need not to be photographed attending a posh event like this. That Muzinich has attracted a max-out suggests that they have promised anonymity and….

  1. Bloody good food . wine and service
  2. CPD
  3. Networking with people who might offer you a better job

This is known – outside of financial services circles – as a gravy train. It is about as unlikely that we can know who attended, as that we can comment on the post.

Why this conspicuous consumption?

It isn’t hard to work out who paid for this event. If you want a clue try Muzinich’s linked in profile.  

Muzinich & Co. is a privately owned, institutional-focused investment firm specializing in public and private corporate credit.

This is an American company selling stuff into the UK to consultants and institutional buyers. The consumer will never know they are investing through Muzinich , through the DB pension scheme and consultancy community””

We know who Muzinich’s customers are, but it looks like us consumers are ultimately paying the bill.

Here is a picture of the leads of Muzinich’s London office (courtesy of their website)


These are the guys who post the piss-up, “late cycle credit investing seminar” turn off the comments box and protect their customers and consultants from the likes of me.

Not a lot of diversity- huh!

This is where your money goes

This is part of the process i call fractional scamming. There are hundreds of Muzinichs out there. They hang out in 1 Lombard St and the Ned and all the other places only too pleased to receive your money.

Don’t be any doubt that it’s your money – these guys are spending. And whoever were in the room were eating and drinking away your life savings.

That Muzinich feel it appropriate to post their events on Linked in , suggests that the Bribery Act is a dead duck and that – for all the efforts of Chris Sier and Andy Agethangelou,  the gravy train is still at the station – at least for this lot,




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

Are you and your savings “retirement ready”?

age wage


I’m getting fit, which is a long way off saying “I’m fit” in any sense of the words. But just getting rid of the first few pounds has put me in a much better frame of mind.

Many of us put off organising our retirement finances – just as I’ve put off going to the gym. The enormity of the task ahead is too daunting, the cost of a financial adviser (like a personal trainer) is too high and anyway, nothing’s gone wrong – yet!

But there’s always that nagging feeling that while you put things off, things get worse.

Income continuity?

If you are in your 40s and 50s, you may be thinking about how you might wind down and use your savings to supplement your earned income. If you are later in life, you may be wondering how to call it a day and budget to live on what savings you have got.

Planning a budget for a month ahead is hard enough, but when you are trying to allocate savings to events years away, it’s so hard that most of us just give up. One of the troubles is that we are used to planning with the certainty of an income in mind.

And like it or not, most people – by the time they reach their forties – have reached a plateau – their natural level of income -whatever that may be. The prospect of losing that base level of income drives most of us.

Isn’t it odd that at some arbitrary point in time, we determine that we can switch from earned income to unearned income and rely on our savings to provide us with that income continuity?

Continuity or guarantee?

Personally, it is the reasonable prospect of a steady income, which is what I look forward to. Nice as it is to have guaranteed increases in my Zurich Pension, I am prepared to give up guarantees on my DC pot, for a degree of certainty that the money I’ve saved at work and when self-employed, provides me with “income continuity”. After all no one ever guaranteed me work more than three months ahead!

For me – CDC works fine – a promise of continuity of income, not a guarantee of what that income will be. Together with the State Pension which i get at 67, I feel that my DC savings, if transferred to a CDC plan (which I intend to do), would probably allow me to pack it in if the Pension PlayPen, First Actuarial and AgeWage (my three jobs) stopped paying me.

And like the Royal Mail staff, who are waiting for what they want to come along, I have a plan B. So I feel I am “retirement ready” (though not ready for retirement). I have a plan B!

Why do I sound so confident?

A few years back, I drew up a list of all the retirement savings I’d made (including ISAs and investments in my businesses) and I decided on what I wanted to do. The ISAs I left alone- they might not be optimal, but I’d made my bed and now I would lie on it. I didn’t want to spend a lot of time worrying about my mortgage repayment fund!

As for my income, I knew I had some DB and I decided to maximise the income I could get from it , by not taking the cash sum (tax-free as it was) because it would cost me such a fall in income (the actuarial factors for swapping income for cash weren’t good for me).

I am confident in the state’s ability to pay my state pension and I got lucky – having been contracted out – I discovered I can make up the lost entitlement to state pension by working through till 64 – after which I will get a full pay-out – fully inflation protected – perhaps over inflation protected.

But the single thing I did – which makes me very confident, is that I brought all the little pots I’d built up over the years – together in one great big pot. It took me some time, some of the money couldn’t transfer without penalty till I was 55 and some of the money transferred very slowly. But it all came into my one big pot eventually.

Which means, that when I come to spending my savings, I can do it in a manageable way.

Getting retirement ready with AgeWage.

Because it was so hard for me (a so-called “pension expert”) to get all my pension pots into one big pot, I’ve decided to start a business called AgeWage, which helps ordinary people – the 94% of us who don’t choose to, or can’t afford to – take financial advice.

AgeWage will provide (through my and other people’s blogs and advice columns) – a personal fitness regime for your retirement finances.

More importantly still, it will help you to understand the historic value of your pension pots. AgeWage will do this by valuing your pots using a scoring system called the AgeWage Algorithm (AA). Each pot we look at – we’ll research by looking at all the contributions you received from your bank account, employer, national insurance rebates and tax relief.

And we’ll look at all the money that came out of your pot to pay advisers, fund managers, brokers, dealers, custodians, lawyers and of course the pension providers themselves.

What AgeWage will do for you is provide you with a single number- which is  your historic pension fitness score. We call it….

age wage simple

Just an example

And the number and screen colour will change depending on whether you can move this money without penalty. Green numbers are transferrable and red numbers aren’t. For instance if you have transfer penalties and they fall away soon, you may be better off keeping your money where it is.

What AgeWage does.

The analysis within the number is not “subjective” – it does not rely on “opinion”. It is “objective”. It is created by data. So long as the data works and the algorithm converts the value your pot has given you and compares you with the money it has cost you, that number is infact an objective “value for money” score.

Even the colour of that score is determined by an algorithm (one that picks up on oddities like exit penalties, terminal bonuses and guaranteed annuity rates).

What AgeWage doesn’t do

AgeWage won’t tell you what to do. There are literally hundreds of pension providers who will offer you ways to spend your money (or pass it on to your inheritors). At the moment these include SIPP providers, workplace pension providers , personal pension providers, annuity providers and I hope that in the future they will include CDC plans!

That choice is yours – and though AgeWage may in time help in the choice of your future way of spending your money, we won’t ever try to sell you one way over any other.

If you want advice, we may point you to good advisers – but we won’t be giving you advice.

Getting retirement ready

As I prepare for my daily battle with my weight and failing limbs, I realise that the pain I’m going through is worth it. Every extra day I live is a happy day- and a well funded day – thanks to my having a wage for life from Zurich (thanks) and from the State (thanks in anticipation). I want to protect myself from living too long, because I intend to be extremely healthy and live into extreme old age !

Financial fitness goes hand in hand with personal fitness, they are my two life goals, I have an after-life goal too – but that’s a matter of faith!

If you want to become retirement ready, keep reading my blog.

If you want to help me at AgeWage, drop me a line – we will need lots of people testing our hypothesis over time! We may even end up giving you a job!

If you want to use AgeWage, you’ll have to wait a few months while we analyse enough data to be able to make our numbers definitive.

We’re in deadly earnest,  Chris Sier and I want to get you retirement ready!

age wage

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Pensions that make you want to live longer!

Henry cheers

The way things were!

Nurse Rebecca is pleased with me. I’ve lost 19 lbs in my first month of recuperation from TapperTubby syndrome.  Regular access, reduced alcohol consumption and a cutting down on high cholesterol and high calorie food are apparently making a difference.

In one month I have, according to Nurse Rebecca, become one year younger. If I continue on this trend I should be back to being a 61 year old (fitness wise) by the time I turn 57 (November)! If I carry on to my targets – I might be 56 again!

Incentives to live

I have an incentive to live, each year I live longer is worth financially around £36,000 to me. Last month, my DB pension from my time at Zurich became £36,000 more valuable to me! I am determined to win back the six and a half years Nurse Rebecca claims I’ve lost from being overweight and under exercised.

A DB pension is an incentive to live longer.

This all became very relevant to me when I was at the Quietroom conference yesterday. I had to leave half way through, but got to heard a great talk from someone who was encouraging people like me to take tiny steps towards wellness as the Marketing Director of Weight Watchers. I nearly jumped up onto stage to testify how right she was (but I’m not using Weight Watchers).Claudia 2

Right on queue, Claudia’s watch went off  (she claimed by accident), it was telling her she’d hit one of her walking targets for the day (she should have used a podium). The reminder of success is precisely what I got from Nurse Rebecca – Kerching – a pound lost a grand gained!

But as I contemplated the good news re my DB pension, I felt a commensurate loss with regards my DC pot, which will now have to stretch further. Most young people – and many of my age – will only have DC pots and the state pension. The state pension is of course DB but we all like to think it’s our private pots that really matter.

If I’d stayed at the Quietroom gig, I could have listened to Judy Parfitt of Vitality. According to my friend John Mather, Vitality now offer you a retirement savings scheme of which the charges rise or fall depending on your fitness. You save faster , the faster you can run!

Because this scheme is DC, you’ll need more in your pot, if you approach retirement Claudia 3

A DC pot is a disincentive to live longer!


Can I have the best of both worlds?

Not yet you can’t! But I suspect that by the time I get to my mid sixties (give it a few years), you may be able to slip into a general pool of people – as a fit person – with a real chance of outliving your peers.

All that time in the gym earning you a cheap Vitality workplace pension will pay off as you put your feet up in retirement.

How- you might ask- can a DC pension do this?

The answer – in my imagination – is for me to switch the DC pot that I have built up into a CDC scheme. A CDC scheme pays a wage for life – for all of my life – not just till my normal life expectancy – or to the point when someone requires me to buy an annuity.

A CDC scheme that allows me to save as I like – that pays me a pension for as long as I live is the best of both worlds for me!

What’s more, if I can swap the job of managing my wage for life with the manager of my CDC – I might have the time and freedom – to enjoy my later years!

I suspect that a stress free retirement will be both healthy and long!


Henry Tapper

How I want to be (Again)!

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Shaking up pensions with Quietroom

quietroom shaking.PNG

Early this morning , I’ll be up the Farringdon Road with Quietroom, shaking up pensions. I’ve just looked at the agenda

If we want to get folks fired up about pensions, we need to start doing things differently.

That’s the theme for the latest event from award-winning communications experts Quietroom. It’s aimed at anyone in pensions who wants to improve engagement – and it’s all about fresh thinking.

About the Event

We’ll hear from people who’ve solved similar problems to ours in other sectors – they’ll share what they’ve learned about motivating people to change the way they eat, exercise and work.

We’ll bring some new voices into the room, people who know something we don’t and whose ideas we need to hear.

Together we’ll come up with some practical ways to get better results – for ourselves and for the people whose futures we shape.

Pension people cannot change by looking at each other, we need to look outside and compare ourselves to people who’ve been shaking it up elswewhere. The people I’ll be hearing from this morning will (I hope) give me some perspective.

shake up.PNG

This is not the first time Quietroom have done this. You can read the fruits of a previous “shake up” here.

Or – if like me – you like to listen and watch – here’s Vince introducing the last event

Well done Quietroom

Posted in dc pensions, pensions, Pensions Regulator, Popcorn Pensions | 3 Comments

“Making workplace pensions work” – the Pension Regulator’s new approach

making 2.PNG

New livery – new approach

I’ve been on the Pensions Regulator’s stakeholder panel a couple of years and this gets me a ticket to their Annual Conference. I haven’t bought the new vision in previous years, but yesterday’s event, held in County Hall, pushed the right buttons. The TPR Future Program is what a quicker more proactive and tougher regulator should do, I give it a thumbs up; though I’m far from certain it will deliver the protection it promises to members.

£34.6bn left DB plans to uncertain destinations last year, the masthead of this blog reminds us that over £3bn of that amount left BSPS – much from Port Talbot steelworkers.

You can read the document “Making workplace pensions work” here.


First my concerns

My doubts focus on the yawning gap between the FCA’s supervisory approach, focussing on providers and the tPR’s risk-based approach , focussing on schemes. Where the FCA has its focus on member outcomes, the Pensions Regulator focusses on trustees, employers and (to some extent) advisers. You might see these as complimentary, I see the gap.

I saw the gap in yesterday’s discussion of scheme consolidation. It is one thing to focus on benefits of economies of scale, it is another to ignore “member detriment”. The concept of “homogenisation” was bandied about. If you were cream – would you want to be homogenised with skimmed milk to make a more marketable product?

The first of TPR’s statutory objectives is to Protect the benefits of occupational pension schemes. Homogenisation does not sit well with that objective. Dumbing down of benefits to meet the commercial needs of superfunds , employers and to protect the PPF- cannot be achieved at the expense of member benefits. A  transfer resulting in a marginal improvement on PPF benefits (with a weaker provider covenant) , “protecting member benefits”.

Second , my applause

The re-branding of the Pensions Regulator to “TPR” will save my fingers a lot of typing. The new logo and font are simpler and more focussed. While this may seem cosmetic, it is more than that, it is worth looking good if you have an image problem. Carillion, BHS and  USS, have given tPR an image problem, something had to change – it has.

Sadly, one thing that shouldn’t have changed, the incumbent CEO- Lesley Titcomb, will change. Though we still have 6 months of Titcomb, she will be missed. TPR Chair Mark Boyle reminded me after that it is the team that counts, it’s the leader of the team that counts the most – Lesley Titcomb will be hard to replace. My applause to her.

Lesley Titcomb 10.png

I’m really pleased with the new team – nonetheless. Nicola Parish is not to be messed with, David Fairs is authoritative and personable, Liz Hickey is as good a communicator as her demanding post requires, Mark Birch is solid ( a rock in a hard place). I am pleased that Jo Hill is joining in November, she will bring a capacity to analyse and use the Pensions Regulator’s data-set, something which has not happened enough to date.

So what’s new?

The new regulatory model has emerged through the TPR Future programme, the new operating model that fulfils regulation will – according to TPR

“cover all operations- defined benefit, master trusts and other DC schemes, auto-enrolment and public service schemes”

What is new is that big schemes (the 25 biggest according to FT, 60 biggest according to NMA) will get one to one supervision – effectively their own TPR account manager, the smallest schemes (mainly the 30,000 of so EPPs and SSAS’) will get not much more than statistical oversight. Whether one to one is done purely on scale or on a risk and scale assessment is unclear – my impression was that risk was part of the selection process. Risk selection is more sensible in terms of targeting problems, though it would be hard for a risk-selected scheme to avoid being labelled in “special measures).

Regulatory focus on small schemes will be targeted on those most likely to fail their members. Here – the digital skills of Jo Hill should make a difference. The scheme returns are digital, the auto-enrolment team has long used digital RTI to identify potential failures, this is surely the way forward for TPR’s small schemes approach (whether DB or DC). TPR call this “horizon scanning”.

Here the question of consolidation becomes relevant. “Comply and explain” (if you don’t) , should be the mantra for the small schemes unit. But TPR need a clear policy on “destination”, (as Pete Glancy of Scottish Widows pointed out). It is not good enough to drive small schemes out of the frying pan into the fire.

Other “news” is the announcement of a new “test and learn” online guidance service – to help 21st Century Trustees.

Standards of what “good looks like” will be implemented. TPR acknowledged yesterday that there may in the past have been an over-emphasis on “bad” – it’s good to see the bar for good practice being more precisely set.

The Auto-Enrolment escalating penalties model, will become common in other areas of TPR enforcement

“We will drive compliance through a process of systematic and escalating interventions with those we regulate …we will intervene and take appropriate enforcement action”.

When’s this happening?

TPR say that all this change is happening now. Horizon scanning’s going on today, the “one on one” large scheme initiative will begin in October. Work in progress includes oversight of the ASDA/Sainsbury merger (and Whitbread’s sale of Costa to Coke- not mentioned yesterday). Recent successes cited include work with GKN and Melrose.

By and large, I am with TPR, it is doing a good job with DB plans going through changing sponsors. My one reservation is that tPR currently do not recognise the DC deficits, such as those in the Whitbread pension scheme resulting from low income members missing out on tax relief (AKA the Government incentive).

If the Pensions Regulator is to be taken seriously in meeting its statutory object to protect members, it must require occupational DC schemes – whether master trusts or single employer schemes (like Whitbread’s) to make good the individual DC deficits – before clearance is given on deals.

Currently TPR think I am joking – I am not. This focus on small DC pots needs to happen now.

A clean bill of health?

Well almost – I still don’t see why FCA/TPR are so distant – geographically and in tone and culture. I still think that having two regulators causes an artificial divide between retail and institutional and that that divide is pernicious both to regulation and pensions.

In the long term- I want one pensions regulator – whether based in Brighton or Stratford and I want that regulator as good at regulating macro – as TPR and as good at regulating micro – as FCA.

Till that happy day, I am pleased to see TPR making progress, but warn it against complacency. It is still not protecting members as it should and – if TPR are reading this, I will not be shutting up about the net-pay scandal or the other issues mentioned above – where member interest are in peril.

making workplace pensions work

Desktop version



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CDC guarantees nothing! If that freaks you out – CDC is not for you!

It being early on a Sunday morning, the coots playing around Lady Lucy and a wind rustling through the willows, I’m minded to turn my mind yet again to John Ralfe’s queries on CDC.



They are all fair questions – though any answers will be dismissed by the Financial Economists as #smokescreen #bollocks etc. It’s not the FE’s that I want to convince, I’d like the non-expert pension enthusiast who reads this blog to know that there are answers to these questions which make CDC a viable option for certain people and certain employers.

We don’t live in a command economy, CDC will not be imposed on anyone, there should always be an opt-out. In my opinion, there should even be an opt-out for CDC pensioners.

But to the questions

  1. I would say that CDC is more certain than DC, since DC offers the higher risk in retirement. Pooling of longevity , of market risk and of the operational expenses of paying an income for life, makes CDC more attractive to people like me – who don’t want to manage our wage in retirement. This does not mean that someone who wants to DIY isn’t better in DC – those people will avoid CDC
  2. For a CDC member transferring into CDC 5 years before drawdown – the remarks above are particularly applicable. They will find life considerably easier in retirement and – unless they like managing their own money – will see CDC as very convenient. It is of course impossible to put a percentage on the advantages of the pooling of risks, because there will be winners and losers (see below). But for most people CDC should be a very attractive way to consolidate DC savings in the years leading up to retirement.
  3. CDC need not be less attractive for someone who is 35 years away from NRA. There need not be any cross subsidy between young and old in CDC – though scheme design will play an important part in the way CDC works. I suspect that some CDC structures will try (post Brexit) to introduce age-tiering into contribution structures , while others will find other ways to balance the interests of each age group.  Again, it would be extremely foolish to put numbers to the answer without having a context.
  4. I cannot see any reason why youngsters should be happy to sponsor older people’s pensions. It happens – it may be happening now – and it can happen in reverse. We should strive for inter-generational fairness, recognising that inter-generational solidarity is what pensions are all about. Both equality and solidarity are desirable. If people are determined to account for their own shares and not participate in a pool, they could and should opt-out of CDC.
  5. It’s true to say that – using the definition of risk that FE provides, CDC is “riskier”. Most DC drawdown strategies work on a glide path towards the purchase of an annuity that provides the guarantee of an income for life. This glidepath is inexact, it has to assume things about individuals that may or may not happen, so people can find risks in the timing of the de-risking. If individuals choose not to -de-risk and stay in growth assets, they can find things going wrong quickly. This generally happens in the later stages of drawdown when people are generally less lucid in their financial thinking, but it can also happen in the early stages – due to sequential risks. CDC provides protection against all this, by pooling longevity and market risk collectively!
  6. Actuaries decide the expected returns on assets and Trustees will generally take their advice. It is possible for Trustees to decide for themselves but this very rarely happens. The business of predicting expected returns is of course an inexact science, but best estimates are generally accepted as being just that.
  7. Best estimates are constantly being refined in the light of experience. This is a function of “big data”, the bigger the data set, the more accurate the best estimate.
  8. No CDC scheme sets out to wind-up, CDC is by definition an open collective scheme which is designed to last as long as their is need for it – potentially for ever. If however the scheme has to close, then it may well be wound up. There are a number of scenarios, a benign wind-up may simply see assets and promises transferred to another scheme. In a less benign world, where something has gone wrong, then assets will have to be distributed to DC pots or a haircut on the target may be offered from another CDC scheme.
  9. Transfer values can be calculated as regulations allow. It is possible to imagine a shadow fund approach where people get a value based on the timing and incidence of contributions (based on a unit value created by the CDC fund) or it could be that a CETV is calculated in a manner similar to the way DB CETVs are calculated. With the latter method, there would need to be a means to protect the fund in adverse circumstances (similar to the operation of insufficiency reports).
  10. It might be desirable for a CDC scheme to build in protection for families – such as a Death in Service , spouses pension , dependent lump sum or a combination of all of these. This is a question for individual scheme design and not for regulators (other than the cost of any dependent benefits need to be targeted not guaranteed (unless the scheme intends to insure them – in which the cost of the insurance policy will become part of the target benefit formulation.

I appreciate that I cannot give better answers at this stage , than these. The Financial Economists will no doubt see my answers as woolly and that I have not consulted a financial model when giving them.

I am on a boat and about to spend the day with a group of people who may never have spent a day on a boat before. I imagine they are looking forward to the adventure, as I am looking forward to CDC -with a mixture of excitement and trepidation!

However, I have the benefit of some experience at boating, and I have the benefit of some experience of pensions. I firmly believe we will have a great day on the river and I firmly believe that CDC will be a great success for those who choose to use it.

But I am guaranteeing nothing!

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I was ashamed of my pension colleagues

Michael johnson

Yesterday, as a guest of CWU’s Deputy General Secretary , Terry Pullinger, I spent a morning at the Westminster City Forum’s conference on Next Steps for UK Pension Funds.

The Conference dealt with the regulation of DB pensions, consolidation and the future of CDC.

This may sound pretty thin gruel but much of the morning was lively. David Fairs, speaking in his new post as Policy Director at the Pensions Regulator, challenged the audience to think of a world where the Pensions Regulator decided the strategy of pension schemes (as well as determining how that strategy was implemented). It was (I hope) a tongue in cheek challenge, designed to get us thinking of the implications of putting his organisation in charge of DB’s future. It solicited a typically robust response both from within and without the room.

Having spent the last 25 years at KPMG, Fairs knows all too well the danger of giving any party too much say in the running of DB pensions. I was surprised that so many of the room appeared to agree with his hypothesis that we could give tPR fiduciary control.

So much for tPR scope creep – what of the DWP?

We were given an entertaining interchange between DWP’s Julian Barker and Liberal Peer Archie Kirkwood. which consisted of Kirkwood deferring to Jeannie Drake on all technical matters and Barker reassuring the audience, that (subject to the Lords behaving themselves) we would see the legislative timetable fulfilled so that the key items (DB white paper , CDC and various other matters) appearing in next year’s Queen Speech.

Kirkwood kept the show on the road with some robust chairmanship of a number of disparate voices – including the exuberant Andy Agethangelou. At one point the conference seemed to be heading for some positive conclusions but no sooner had the debate switched to “what could go right” but it veered back to how we could cut members benefits. The first part of the morning – having started well, concluded on a minor chord. The suggestion hung in the air – flatulated by Michael Johnson, that CDC could be used to dismantle what remains of open DB pensions in the UK.

As one senior civil servant remarked to me “we appear to have snatched defeat from the jaws of victory”.

A truly awful second half

I returned to the conference, after a busy 20 minutes “networking” , with some hope of some second half goals for CDC. I got nothing of the kind. Instead I got a dreary presentation from Dutch Professor Hans Van Meerten which explained how CDC had gone wrong in Holland. Sadly the audience seemed unable to understand Van Meerten’s message that the same need not happen in the UK and it was obvious that the audience were now ready for blood.

They got it from Michael Johnson. I have rarely heard a more objectionable presentation than that given by this economist and so called thinker. Johnson seems tied to the mantra of Thatcher. Driving him is his obsession with the cost of the state pensions and the desire to dumb all pensions down to the lowest common denominator. CDC, in his book is a means of deflating DB.

Because he has made his money in the City, he now feels independent. Because he works for Thatcher and Joseph’s think-tank, he considers his views carry  weight.

They do. They carry weight because they are aligned entirely with the interests of the financial services industry for whom he is a flag-bearer. He speaks for the destructive force of neo-liberal economics that has no regard for anything but the pursuit of wealth for the few at the expense of the many.

Royal Mail as a case study?

Jon Millidge and Terry Pullinger were introduced to the conference as presenting a “case study”. Royal Mail is not a case study, it is the main event.

Earlier in the week I had chaired a joyous fringe meeting at the TUC conference where Pullinger had shown us how pensions could be returned to the people who wanted their “wage for life”.

Pullinger and the Royal Mail’s Millidge found their words falling on deaf ears.

The audience, picking up on Van Meerten’s warnings, assumed that what had happened in the UK would happen here. This despite every speaker making it clear that CDC  in the UK was a variant of DC not of DB.

Questions to the panel that followed the case study included suggestions that unfunded state pensions should be funded (to show how unaffordable such folly would be). The audience luxuriated in the comfort of Michael Johnson’s oratory and decided that consigning ordinary people to auto-enrolment DC pensions was perfectly acceptable, so long as they could continue to spend morning’s doing nothing but listening to Johnson confirming their a priori right to all the money.

Staggering arrogance of an over-indulged pension elite.

By the end of the second half , I had concluded that there is no point in Royal Mail and CWU spending time talking to “the pensions industry”. The force for good that their proposition is, should not be sullied by exposure to Michael Johnson or what he stands for.

I was deeply ashamed to be part of an audience which, for the most part, had no interest in restoring public confidence in pensions. Indeed, I think that what I saw in the room was the heart of the problem, the scabrous self-indulgence of a self-perpetuating pensions oligarchy who have created themselves  the title of “experts” – but who are nothing of the kind.


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“Green pensions” consultation gets record response.

Green 4

According to my sources at DWP, the consultation on how trustees of DC occupational pensions (including master trusts) listen to members views on “matters green” got record numbers of respondents – over 3,500. Apart from the consultation on pension  following the British Steel Port Talbot fiasco, the consultation was massively popular.

Most of these consultation responses were from people who cared about the environment and saw how their pension pots were invested as their personal responsibility.

This tallies with research published by Ignition House and commissioned by the DC investment forum that found that ordinary people (e.g. the people who our pension plans are for), expected their investments to be invested responsibly – even if that meant sacrificing racy returns from irresponsible investments.

So this Government paper matters.

Clarifying and strengthening trustees’ investment duties

I’m including the ministerial foreword from Guy Opperman which is extremely well written and well worth reading. Too often we misunderstand the mood of the people who we are supposed to be working for. On this issue, I think there can be no doubt, it is time we started listening to what people want from their investments and giving it them.

I am very pleased to be publishing the Government’s response to this important consultation on Clarifying and Strengthening Trustees’ Investment Duties. I wish to thank the 89 individuals and organisations who responded to the consultation and the 3432 pension scheme members who offered their views through a questionnaire. Their input has been supportive, challenging, considered and passionate – but always invaluable.

It remains Government policy not to direct the investment decisions or strategies of trustees of pension schemes. We will never exhort or direct private sector schemes to invest in a particular way. Trustees have absolute primacy in this area. I would also like to confirm that it was not our intention to give the impression in our original consultation proposals that trustees must survey pension scheme members or must act on members’ views about how their scheme is invested. Feedback on this point was helpful and we have amended the regulations to make the position clearer.

Nevertheless, in line with the conclusions reached by the Law Commission, I do believe it is possible and appropriate for trustees to take account of members’ views in certain circumstances. I therefore wish to offer clarity to trustees that they can do so; and offer clarity to members of the circumstances in which their view might be considered.

The vast majority of respondents supported the proposed change to regulations to clarify trustees’ duty to consider financially material risks and opportunities – whether those are traditional, such as company performance, interest or exchange rates; or broader such as those resulting from environmental, social and governance considerations including climate change.

A few dissenting voices expressed scepticism about the effectiveness of this measure. But for me the situation is simple – if there is confusion that these issues are to do with personal ethics, or optional extras, or can be dealt with through the addition of a ‘environmentally friendly’ chosen fund, then we need to address that misperception by ensuring that the law is clear. This is about the hard-headed fact that – given the time horizons of pension saving – broader considerations are likely to present long-term financial risks and opportunities to the solvency of DB schemes and the value of members’ DC (and in time Collective DC) pensions.

I was glad to see a widespread consensus that all pension schemes have a role to play in the oversight of firms in which they invest and to whom they lend. We therefore have maintained our proposals on stewardship, and in one area extended them, to put trustees’ responsibilities beyond doubt. I accept that the scope for smaller schemes to make changes will be more limited, but even where the range of actions is as narrow as switching between asset managers or between funds, trustees have a crucial role to play. Choosing a manager who can demonstrate high quality engagement, who partners effectively with co-investors and who votes accordingly where they see poor or questionable practices should improve returns for all.

Similarly, we intend to continue with our proposals to require schemes of 100 or more members with DC sections to produce a report on how they implemented their investment strategy, and to publish it alongside other material. These measures again received broad support.

I recognise that we are working here with private trusts. But private trusts can learn from one another, and transparency can lead to more effective competition and better outcomes for the members to whom trustees have loyalty. It is also right that DC scheme members, who bear the investment risk, and for whom employer contributions are normally conditional on remaining invested in the employer’s chosen scheme, can compare policies and raise issues of concern. Pension schemes and their service providers receive significant contributions through tax relief, and have a key role in corporate governance, as I have explained. So it is right that they have broader public accountability.

Finally, stakeholders confirmed our view that requiring a policy on impact investing at the present time could be confusing and counter-productive. Therefore we will maintain the current position that the preparation of such a policy should be wholly voluntary for pension schemes.

Nevertheless, investing for social, environmental and economic impact remains a subject I am passionate about. I will continue to engage across and beyond Government to identify how we might remove barriers and make it easier to invest in a way that supports the sort of world we want to live in.

Guy Opperman MP Minister for Pensions and Financial Inclusion

AKA – “It’s up to us to get off our rear ends!”

I’ve no idea who these two charlies are – but I enjoyed what they were saying – read the consultation response – but if you can’t be bothered – watch this!

Posted in auto-enrolment, Dashboard, dc pensions, pensions | Leave a comment

Pots follow meerkats?


We all know the problem but it was well put in a recent NOW pensions press release.

“There has been a stratospheric rise in pension saving since the introduction of auto enrolment. The ONS data shows that active membership of private sector DC schemes has risen from 1 million in 2012 to 7.7 million in 2017. This makes very encouraging reading….

“One of the side effects of auto enrolment will be an explosion in the number of preserved pension entitlements. The ONS data shows that this is already happening with an increase from 11.2 million in 2016 to 11.6 million in 2017. This underlines the needs for the Pensions Dashboard which would help people keep track of their growing number of pension savings.”

Showing people what they have is one thing (it’s a dashboard), but giving people a steering wheel and a means to drive forward is quite another.

Pot proliferation is a threat to workplace pensions

Speaking with another prominent master trust on Friday, I realised that it’s not just the consumer that needs small pots to move on. Back in the 1990s I saw how small pots ruined the economies of scale achieved  by the Kingfisher DC plan – unable to bring charges down because of the cost of administering deferred member’ tiny pots.

I fear the same will happen with auto-enrolment workplace pension providers.  For all the economies of scale from the increased assets under management, the profitability of a master trust will be dragged back by the millions of small pots they are building up.

Even a not for profit pension scheme like People’s Pension or NEST pension can do nothing since its primary purpose is to stay in business to pay the pensions in years to come. For the “for profit” sector, we are already seeing consolidation and a drop in service standards as firms like Standard Life and Legal and General struggle to justify being in the workplace pension market to shareholders.

The proliferation of small pots poses an existential threat to workplace pension providers and must be addressed if we are to continue to have the world-class workplace pension system we enjoy today.

Government intervention may not be the answer.

As with the pension dashboard, it is unlikely we will see Government wanting to fulfil on the delivery of the solution. When Ros Altmann dumped the Steve Webb “pot follows member” initiative in 2015, it was because there weren’t enough resources in the DWP to make it happen (the same reason that CDC regs. weren’t pursued).  As with CDC, the policy went away , but not the problem. CDC has been forced back onto the Government’s agenda by demand from a large employer, it is likely that pot-follows- member may also return to the policy agenda. But it will take a major catastrophe (such as the failure of a workplace pension provider) for that to happen any time soon.

If we are to see a solution to the pot-follows- member problem, it will have to come from the private sector. If the private sector can create an initiative that captures the imagination of the public – and so Government- then DWP and Treasury engagement may follow. But the ball is in the provider’s court.

I think that sitting back and waiting for Government to legislate is not the way for workplace pensions to get consolidation. They will have to get off their backsides and make this happen for themselves. Government intervention should not be relied on, indeed Government interference would probably cause more harm than good at this stage.

What can providers do?

There is a need for workplace pension providers to work together harmoniously to solve the problem of pot proliferation. A pure pot follows member system would see the pots from one period of employment transfer to the pot of the next employer. Leakage from workplace pensions would happen only when someone chose to transfer out of workplace pensions – say to a non-workplace pension that offered attractive features.

I suspect that most workplace pension providers would – despite some leakage outside their network – become more profitable from pot- follows- member

  1. They’d see assets under management remain the same
  2. They’d see administrative costs fall

Add to this the increased engagement of ordinary people in their “one pot” pensions and you have a recipe for more voluntary contributions and greater member loyalty over time. When members start asking their next employer , who their workplace pension provider is, then we may even see employers pressing for clearing to multiple workplace pensions (the Australian system).

This will only happen if we can make the process of moving one pot to another easy and happy.

Below I give three handy tips to the CEOs of the mass market pensions. Helen, Patrick, Troy, Andy E, Emma, Andy B and Phil – are you listening?

1.  Compare the meerkat?

Workplace pensions should learn from price comparison sites how to get the mass market to take collective action. When BGL (owners of Compare the Market) wanted to incentivise people to use their site, they gave parents meerkats on completion of a transaction, BGL are now the second largest purchaser of toys in Britain (behind Macdonalds), the cost of these toys is tiny compared with the improvement in profitability. The main motivator for people buying insurance with CTM is pressure from kids – addicted to meerkat toys.

I don’t suppose that NEST will be giving away meerkats any time soon , but if they wanted to incentivise their members to transfer to them small pots from others, or incentivise members with small NEST pots – to transfer them away, it may be these kind of incentives that work better than enhanced transfer values.

2. Use popular routes to talk with members?

Yesterday, the Sun published an article about pensions that focussed on consolidation. I don’t know what the reading figures for it would be, but as it was a double paged spread, I suspect it will get more reads in a weekend than this blog will get in a years.

If NEST and Peoples and other mass- market providers want to talk to their members, they need to use the mass market press and find ways to their younger members hearts – other than newsprint! I don’t want to lecture on social media – I’m too old for that!

I’d also suggest that the mass market providers start talking with mass market comparison websites such as Compare the Market, Money Supermarket and  Go Compare – even U-switch and Confused.

Where people are used to taking online decisions, there are established journeys in people’s heads that might work for pensions  as well as for electricity supply or motor insurance.

For mass market solutions, we need mass market media and mass market transactional capabilities. Neither the pensions trade press or existing financial advisory services have the scope to perform mass -market migration of the type need for “pot follows member”.

3. Get digital?

Well I would say that wouldn’t I? It’s no secret that I want to create in AgeWage a means for ordinary people to compare what they’ve got (dashboard), point towards what they want (steering wheel) and consolidate (foot down on the throttle)!

I’m keen for people to do things but I don’t want them to do silly things. I don’t want them incurring big transfer penalties on legacy (see Pension Potty article), I don’t want people missing out on terminal bonuses and guarantees annuity rates, and I don’t want people ditching providers that could help them spend their pots wisely. So we need a responsible system of comparison.

But we can’t do a mass migration of assets – as would happen if pots did follow members without the help of digital technology. Infact the long-term solution looks likely to involve smart ledger technology (the notorious block chain). In the short-term, what is needed is an agreement between providers not to block transfers and to welcome small pots when they arrive at their door.

In this the Origo Exchange will be vital. The more use that is made of this fantastic invention the better. I urge those providers still to sign up to Origo – to do so. I will continue to promote the Pension Bee initiative to name and shame those who don’t (the Robin Hood Index).

Making it happen!

I suspect that much of what I’m talking about is actually happening and providers are talking about how to fulfil on pot follows member – without my interference.

But I’m embarking on a round of meetings over the next few weeks to see what appetite there is among workplace pension providers to pick up on my three tips

  1. Use of incentives
  2. Use of mass market integrators
  3. Use of digital technology.

I hope by Christmas, to be able to report good news- and I hope that there are a few more caring souls like David Veal – who get what we are about!

Good pension report in the Sun. There should be a website to compare pension costs and a calculator. Surprised some entrepreneur has not produced one

— David Veal (@DavidVeal12) September 9, 2018


Sun comparison.PNG

AgeWage hopes to be part of that process!

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The public debate on USS is elevated by King and Kay.

One of the joys of Ralfebot is his sense of mischief. He takes the mick out of everyone -including of course himself. The thought of John Kay or Mervyn King joining any intellectual movement that I’m in – is “looney cubed”.

It’s the other way round. I  read the work of John Kay to understand how economics work and if something I say on this blog ties in with what John Kay says on his blog, I am pleased that I’ve interpreted this great man right. As for Mervyn King, I assume he’s a good bloke as he co-wrote the article.

But it’s good that Kay and King have written about the current challenges facing collective pensions schemes as they have and this shortened version – that doesn’t need access to the Times Higher Education website is still a brilliant read.


For the second time this week, I have come across the phrase ” The best has been the enemy of the good”, the other being in a debate on CDC earlier this week. Kay uses it to explain how the reaction to Maxwell made pensions so secure that no-one could afford to keep them open.

We have never had a public debate about what is an affordable level of risk, only a private conversation between trustees , regulators and employers about what is an affordable level of contribution. The risk bar has been set so high that the Royal Mail has been forced to abandon all guarantees.

Should the USS follow suit and become a CDC?

As well as sitting at the feet of John Kay, I also sit at the feet of the philosopher Mike Otsuka and actuaries Derek Benstead and Hilary Salt.

I will allow to discuss that question but I do not think that the guarantees within the USS scheme are unaffordable, it seems to me they form part of the reward for being a UK academic and they should not be given up without the consent of those who benefit them – and not without adequate compensation.

I think there is a strong case for USS considering up-grading its DC scheme into CDC.

The alternative proposal, which the JEP may consider is moving to a lighter form of DB – which is more focussed on rewarding USS members with bigger pensions and less focussed on the guarantee of such pensions. Moving to a WinRS style of pension might allow the USS to re-embrace risk and invest for growth – rather than to protect the past.

Whether the USS will move towards the low guarantee model, the no guarantee model or continue as it is , needs to be agreed by all parties. What is clear is that it can no longer be agreed by a tryst between the three parties – regulator, employer and trustee. Members are too involved in the debate to be side- lined.

Should the members decide?

As Terry Pullinger of CWU reminds us, the validity of Royal Mail’s approach to Government to have its CDC arrangement is underpinned by the 90% of the CWU’s Royal Mail membership that insisted on it (the alternative being industrial action).

Choices as delicate as WinRS v CDC v current USS DB are unlikely to see such a clear cut vote from membership. But I am surprised that in the consultation that has been going on, there has not been a plebiscite!

And if there was a plebiscite, would it be binding? This brings in a question of benefits across generations and brings us back to John Kay’s article which concludes

Any plan to provide pensions 50 years from now involves uncertainties and therefore should involve an explicit discussion of how risks are shared among employers and employees and between generations.

Recent tinkering with USS benefits have all referenced the immediate solvency of the scheme to the sound of tins being kicked down the road. Those sounds have been heard in the trustee boardrooms of all our DB schemes. There is no explicit discussion of how risks are being shared among employers and employees between generations- anywhere!

Well there might be on the pages of John Kay’s blog, and in emulation mine. But – to use the ending of Kay’s blog

Economic models are indispensable, but as guides to thought, not substitutes for it. A model should never be treated as an oracle that emits obscure but unchallengeable verities

It is not for economists or the pension elite to decide, it is for the people to decide, and by the people, I mean both the members of USS and those who pay for the university system on which this all sits.

That is King and Kay’s point – and it’s one I am happy to endorse!

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What’s Hillsborough got to do with it? WPC, pensions and Transparency

walk alone.jpg

This was the question on the lips of several members of the public gallery as they left the Work and Pensions Select Committee evidence session which you can watch here . If you have an FT subscription you can read Jo Cumbo’s report of the event here.

In truth it had, until Frank Field brought Hillsborough into the discussion been a rather dry debate, focussing on the iniquities of asset managers in not giving up data to the LGPS and other such obscurities.

The Chair, Frank Field, who at one point seemed to have fallen asleep, roused the gloom-laden event by extolling the then Home Secretary (Theresa May), for requesting that the Yorkshire Police revealed all the data that they had. This simple request, contrasted with previous requests (specific) and had proved successful.

Field’s point, as I understood it, was that a principals led call on Financial Services Companies to reveal everything, would be more effective than a call for specific data.

This is an important point and one that – post GDPR – is of considerable relevance in the dashboard debate. We are led to believe – a data request to someone with your pension information (a fund administrator, third party record keeper or a bundled administrator) triggers a response that must fully disclose all relevant information. It should follow that a request for data (for instance on how much a fund or administrative service costs) must be disclosed.

As I’ve made clear on this blog, I am not for mandatory data provision and I don’t think that Theresa May’s stipulation carried with it the force of law. The data that it made available resulted from someone who carried authority (a Home Secretary) demanding that the right thing be done and be done for the public good.

I believe that Government can do the same with regards to the data that people need to make good financial decisions on pensions, whether those people be the fiduciaries of the Local Government Pensions Scheme or ordinary folk like you and I , trying to make sense of our pension affairs.

Revealing bad news

There is a second aspect to the revelation of data in the process as part of a process we now call “transparency”. It is this.

Necessarily, putting data in the public domain makes it open to scrutiny and will reveal that some of that data is wrong. In the case of Hillsborough, some of the information made available to the public, implicated certain people in deliberate cover-ups, sometimes downright lies.

It is inevitable, in the provision of data through a dashboard , that some of the data will reveal unpleasant truths. Whether through ignorance, weakness or deliberate fault, some data that pension providers hold – was wrongly recorded and remains wrong to this date.

What Theresa May did, in requiring all Hillsborough information to be made available, was what the GDPR did in May this year, it turned the onus of data provision on the data controller who has a principal based requirement to tell people what they hold in terms of data, whether the data be right or wrong.

If it can be proved that the data held is deliberately wrong, then the data is fraudulent, if the data arose through sloppiness or “weakness” then there is a case for civil action and if the data is recorded wrongly through ignorance (which I take may be no fault of the data recorder), then there may be no case to answer. But whatever the reason for mistakes,.people have the right to scrutinise the data that is held about their financial affairs and the pension dashboard will be part of the process that gets them there.

Can individuals make sense of so much data?

Thinking about Field’s analogy, I realised that the forensic work that went into uncovering what happened at Hillsborough is analogous to the kind or work that would be needed to work out if someone had received value from a pension provider, for the money handed to them,

Ignorance, weakness and deliberate fault , may all have been at work but in the vast majority of occasions, best endeavours will have been employed by the providers to deliver the service promised. Most football matches do not end in disaster. Despite the gloom of the meeting yesterday, most people get a reasonable result from their pension saving,

But to date, there has been no way of knowing whether people have got value for money, there has been no historic assessment either of the policies and schemes entered into, nor of the treatment of money in/ money out and what happened to the investments!

That is about to change, or at least it will change if I can fulfil the business plans for AgeWage.

What I am wanting to do.

I’m tucking this away at the end of the blog about the “Hillsborough analogy”, but you will read this again and again in weeks to come.

I believe that people are entitled to know not just what their pension pots are worth, but whether they got value for the money they paid.

In one sense I will define “money” as the amount paid into the pension pot and in another I will define it as the money taken out of the pot in charges. It is possible to compare achieved outcomes to expected outcomes by using model price tracks and model charging structures, it is possible to assess VFM at a contract level through a comparison of achieved performance and actual charges.

As well as giving people a proper assessment of what their investments have done historically, I want to give people a fair choice of options going forward. I want people to be aware of all choices available to them in the new world of “freedom of choice”. But I also want people to take their own choices, without having to sacrifice a huge amount of their savings in advisory fees. I want the choice itself to contain the word “free”, since most people will not want to pay as much to spend their money than they already have in building it up.

This is the fundamental aim of AgeWage – to allow people to keep their savings and have them paid back to them in the way that suits them. Whether this be a pure AgeWage  or as a cash-sum is an individual’s choice. It is not mine to influence other than to put information forward in a way that makes choices and their impact clear.

Was Frank Field right to mention Hillsborough?

Coming as he does from Birkenhead, Field will know how provocative any mention of what happened to Liverpool fans will be.

I was there when he made the analogy and I know he was not being flippant or provocative, he was trying to illustrate a crucial question that we all have to ask if we are to properly understand “transparency”. The truth about Hillsborough remained hidden for fifteen years, it took Big Government to get the truth in the open. The truth was demanded by a Home Secretary -not by a court of law – it was revealed out of respect for the authority of Government.

I take Field’s analogy to be about the mandating of data into a dashboard (or directly to LGPS and other institutional investors). If we pass laws that require providers to produce the information, we do no more than the GDPR has already done. There is quite enough “law” out there. If instead we rely on the intentions of Government to make information about people’s pensions available to them, then the onus passes from enforcers to delivery.

The DWP has realised this. Just as Auto-Enrolment would not have worked if we had prescribed NEST as the sole provider, so the Dashboard would not have worked if the DWP had created and managed the central data process.

The DWP looks no more likely to mandate data provision than to run the database. But it looks very likely to rely on Government’s authority, to ensure data is provided in the way people need it to make proper decisions on how to invest and ultimately spend their pension savings. In this they do of course need to know the value of the income streams coming their way from defined benefits (especially the state pension).

Frank Field was absolutely right to use the Hillsborough analogy as it brings to life both the importance of Government (Theresa May’s intervention) and the role of those holding the information (the  South Yorkshire police). Substitute Esther McVey and the financial services industry and the analogy is there.

The catastrophe of Hillsborough was violent and specific. Every football fan who has ever stood on the terraces feels the awful impact of Hillsborough. The impact ignorance, weakness and deliberate fault on our retirement finances is not violent and general. But it too can be catastrophic.

We need – both from Government and from pension providers, the kind of pact that followed May’s intervention. We need to have the information in the public that doesn’t just tell us what happened, but allows us to make plans for the future. That is the final analogy with the Hillsborough inquiry.

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I want to choose my dashboard please!


Thankfully the Government has seen sense, it is not going to provide a one size fits all Volkswagon dashboard, it’s going to offer us a motor-show of choice!

The Government is not going to build or maintain a pension dashboard.

The Government has decided not to build one big dashboard  but leave it to the “pensions industry” to build it’s own. This of course was the original Treasury idea as articulated in September 2016.

What is being ignored by “industry commentators” is that in the intervening two years we have witnessed a Fintech revolution, evidence of which includes

  • the successful introduction in the UK of open banking
  • the rise of a new kind of pension provider (Pension Bee, Evestor etc.)
  • the dominance of digital price comparison sites over mass market financial decision making
  • the success of the FCA’s innovation unit and especially it’s sandbox.

In the face of the extraordinary advances in financial technology, the “pensions industry” has obdurately dug its heels in and called for Government to build a dashboard.

Having been seduced by the big commercial pension providers and their trade body (the ABI) into believing it could do Fintech, the DWP has -very wisely – thought again.

This will not of course stop the crazies from demanding state control of our pension decision making. Sadly I have to number my good friend Gregg McClymont among their number. People’s Pension now want to put the Pension Dashboard in the hands of the Single Guidance Body. The only thing the SGB ever had going for it was the prospect of it being run by Michelle Cracknell, since that went, I have been trying to forget the huge amount of time and energy that will be wasted on yet another vanity guidance project.

The Single Guidance Body is no more the home of the dashboard than a second row forward is a fly-half. The SGB is a placebo for those who believe they have been made free of pension by the pension freedoms, it will be an idiot’s playground.

Those, like Jo Cumbo, arguing that we need a “big bang” dashboard that provides everything we want in one place, are living in dreamland. We will get there with tiny-steps, the Government would never have got there!

The Government is going to make it easy for the private sector to build and maintain a pensions dashboard.

The main thing that a pension dashboard will need to do is find data. In case no one has noticed – the private sector is very good at doing this. Google finds data.

There are a number of organisations who already find pensions data. Origo has its new hub (albeit an expensive subscription service) but it also has its pension finder service.

MoneyHub will (for £2 per month) find and display your pension data on a dashboard.

Yesterday, Pension Bee announced that you would be able to find its platform on Yolt.

The integration of financial products onto banking platforms like Starling, Monzo and Revolut is progressing so fast that for a generation of us (eg the millennial generation) pentech will be a reality before we’ve made our next mug of Horlicks.

Help with pensions

If all this sounds a bit frightening to the “Pensions Industry”, just wait till the price comparison sites get to grips with the opportunities “open pensions” can mean to them.

And what is good about the Government’s announcement yesterday is not just that they won’t be getting in the way, but they will commit resource to helping. We will have to wait until the publication of the feasibility report. I know that this report is ready to go, I’ve even discussed it with a DWP mandarin – and I’m quite sure it will address the issues to do with reliability mentioned two years ago by Simon Kirby in the Aviva Digital Garage.

Of course this will mean making DWP data available to the private sector via an API. Why wouldn’t it? The current means of accessing your pension data is via the super-clunky Government Gateway- that has to change if we are to see our state benefit entitlements with the swipe on our phone,

And of course it will mean jogging along reluctant pension providers (not least the third party administrators who run our occupational pension schemes). If you want an indication of who will be the reluctant adopters, you need look no further than Pension Bee’s Robin Hood Index (see video below).

If the likes of Willis Towers Watson continue to refuse to play with Origo and the other data integrators, then they will be named and shamed by Pension Bee, by me and by an ever increasing group of digital commentators fed up with their regressive – anti-customer tactics. Meanwhile organisations like People’s Pension – which has actually built an API site into which developers can plug their kit, will get rounds of applause!

This constant process of naming and shaming is the only way to get to provider’s hearts. For their hearts are defended by their wallets and if you take away the embedded value of their “reputation”, you touch their beating hearts (bless them!).

Three good reasons to be a pension dashboard provider

  1. Cash-generative; data is the new currency; if you become a data controller and do it well, you become a hugely cash-generative business
  2. Social purpose; if your business model has social purpose, that purpose is enhanced by your providing a popular service to the public
  3. Brand; 25 years ago, there was no google. Brands like theirs have grown because they have become a force for good, delivered to their social purpose and made huge amounts of money in the process. The embedded value in such a brand is greater even than its immediate revenues.

The gain-sayers will tut-tut about my brazen commerciality, they will argue that I am exploiting social purpose for commercial gain, as if the two are mutually exclusive. Gregg McClymont will mumble stuff about the benefits of “not for profit” (as if his living didn’t depend on the earnings and embedded value of People’s).

Whether we like it or not, we live in a capitalist society driven by trade. It’s what made Britain great in the 18th and 19th centuries and it’s what will make Britain great again in the 21st.

I don’t want to see a Pension Dashboard – I want to see the car! I want a steering wheel to point me in the right direction, and I want a chassis and engine to get me where I want to be. Like the 94% of the population who don’t take advice, I want to be able to do all this without having to hire a chauffeur,

Thankfully, the roadblock that has been stopping people like me getting on with it, has now been removed and hopefully the people blocking the road (DWP) will not help the traffic move freely.

The Dashboard is dead – long live pension dashboards!

Here are those whack Bee- Keepers reminding you of the good, bad and downright ugly!


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

“Are people that dumb?” Compulsion and dashboards.


Are people this dumb?

The FT are running a story about the “pensions industry” regrouping around Plan B and doing their own dashboard. There is indeed a conference in September about this and I’d urge you to go (I hope to contribute). There is very likely to be an announcement some time in September by the DWP about what they intend to do and in the meantime – the “industry” is deliberating!

I found myself reading the FT piece and the comments of the industry and asking myself “are people really that dumb?”.  Take this statement from the article.

A dashboard with partial or incomplete information risks lacking integrity at best and misleading people about their retirement position at worst,” said Tom Selby, senior analyst with AJ Bell.

Tom’s usually on the button when it comes to “industry” concerns and at the top of the list is a concern that some pension data controllers (e.g. those with legacy and occupational schemes with sub-scale administration) will be let off the hook.

The “hook” – in this context – being the flow not just of data – but of assets – as people vote with their eyeballs when they compare a rubbish old plan with a shiny new (AJ Bell style) new one.

It is very hard to see beyond “compulsion” as the reason the ABI and co. want the DWP to boss the dashboard. But the aggregation of old pots into new pots – desirable as it is to the shareholders of the big modern providers –  is a scary process. There are plenty of bear traps into which the unsuspecting policyholder can fall. There are precious few people who know where the bear traps are and the paths to avoid them. What’s more, it’s easy enough for charlatans to set up and lead unsuspecting aggregators into new bear traps (of the charlatans making).

Compulsion – the last refuge of the ABI.

I am not for compulsory participation in dashboards, any more than I’m for compulsory adoption of the IDWG template for cost disclosure or indeed compulsory contributions into workplace pensions.

The success of auto-enrolment has been the small numbers of opt-outs and the high number of “stay-ins” (Remain does at least win one battle!). Had we had compulsion on pension contributions, we’d have had an outcry from the vocal minority of refuseniks and from advisers who properly were stopping their clients from contributing more. Compulsion brings all kinds of unanticipated problems and – as the Australian Royal Commission is finding – it does not necessarily benefit the consumer in terms of product efficiency.

If we accept the dictum “data is the new money”, then we can see the ABI’s call for compulsory participation in the pension dashboard, as the last gasp in a decades long plan to mandate profitability for its members from the public purse. Compulsory participation in the pension dashboard would be a licence to print money for modern pension providers.

Would an incomplete dashboard hurt us?

“Consumer detriment” is the FCA’s phrase for people like you and me risking getting ripped off. Tom Selby (and I suspect “the industry”, want a world of complete information. They know what this means – advice!

What happens when you mandate providers to send data to a single dashboard? You get people yelling – incomplete information! Because as soon as you’ve got the pension dashboard, you find yourself wanting an ISA dashboard and the next thing you know, you are subject to paralysis by analysis.

“Data creep” works against the consumer, who is beguiled into thinking that they cannot take decisions on their own, without the helping hand of an adviser. Advisers are great, they use all the right products for the product advisers.

The biggest bear-trap of all – would be the DWP bear-trap, where unsuspecting people would find themselves caught up in a multi-year build of a dashboard that would make the delivery of Cross Rail feel on time! When they finally made it onto a DWP dashboard, the first thing they would be told – would be that they should not take decisions on the information on the dashboard without taking financial advice.

That would be because the DWP (like the Pensions Regulator and Pensions Wise and even TPAS) would not have the balls to risk people taking decisions on what “incomplete information”.

Mandating the provision of information through a DWP controlled pension dashboard would be a disaster for consumers, it would force us into advice, it would stunt the growing market in PenTech, it would only benefit the incumbent pension providers.

Are people so dumb that they can’t decide on incomplete information?

Absolutely not! People take decisions on incomplete information all the time. They press buttons marked “pay”, “send” and “order” when they feel they have the right information. “Right” in this context, means “trusted”. Integrity does not have to imply completeness – it can also imply “trustworthiness”/

The integrity people need to make decisions relates to their trust in the information they can gather , not a yearning to know everything. If we had to wait for complete information we would never do anything!

People are not dumb, they will act on incomplete information and take good if not perfect decisions. We cannot hope for perfection in decision making any more than we can expect perfectly complete data-sets!

It seems to me , the biggest risks data controllers take, in restricting access to data – is to lose the data and the money behind it with people voting with their feet. The second biggest is the PR disaster that would follow such practices (witness Aegon v Pension Bee)

What’s to be done.

Simples; the DWP should return to the earlier Treasury model and focus on enabling data to flow freely between providers and dashboards in the way it is beginning to do in banking. We can have open pensions as we have open banking and that will lead to a much healthier market than could ever be achieved by the DWP owning the dashboard and acting as big brother on data.

There is plenty of “pentech” out there, the FT rightly points to Origo – I could point to organisations like MoneyHub, Pension Bee, Evestor  and my own AgeWage and Pension PlayPen as examples of organisations trying to release ordinary people to take their own decisions in a sensible way

Last month, I stood in front of the pensions people in the DWP and told them to throw their dashboard into Room 101. I was not wanting an end to dashboards, I was wanting dashboards to flourish.

Let’s hope what is to be done, is to build portals of information for ordinary people to see what’s coming their way in terms of “capital” – DC and “income” – DB when they wind down from work.  Income of course includes the State Pension (which is already accessible though it could be more so). DB benefits are hard to trace but easy to understand when found. It is our great hinterland of DC pensions which is most challenging.

What’s to be done – is -= as with auto-enrolment – for new players to step forward and challenge the old. What should not be done is to hand a few large providers a meal-ticket for the future by centralising the dashboard in one Government department and mandating information to flow through the DWP’s hub.

One thing’s for sure, we sure need a way to simplify pensions, and the sooner we move from the bad world of tree-destruction to a new one of easy to read digital info= the better!


not workplace pensions

But would you like this blog delivered you in the post?



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Whitbread – treat your baristas fairly.


Whitbread is selling Costa Coffee to Coca-Cola for £3.9bn.

This is good news for shareholders who picked up Costa in the late 90s for a measly £19m. It’s also good news for the Whitbread defined benefit pension scheme which has a £289m shortfall – some – if not all of that will be plugged, but employees get nothing and it looks like the “net-pay” Whitbread DC scheme will continue to skank low paid employees out of the Government incentive on auto-enrolment contributions.

Alongside the shareholders, the DB pensioners and of course Whitbread’s management (who will be making tidy bonuses out of this), the interests of those who actually serve at, deliver to and maintain Costas 3000 UK shops – seem to rank pretty low.

So low in fact that Whitbread have operated a net pay scheme for them, which denies them the 20% Government incentive in lieu of tax relief.



Lesley Williams, former Chair of PLSA and head of Whitbread pensions famously said that those that don’t pay tax – don’t get tax-relief. She was right, they are supposed to get an incentive which is paid to members of NEST, People’s Pension , the Legal and General Master trust and other occupational pension schemes – paid by the tax-payer.

But Whibread’s low income pension savers don’t get this valuable incentive because it is too administratively difficult for Whitbread’s pension trustees to do. That’s cack.

Sorting NET-PAY doesn’t COSTA lot.

There are tens of thousands of low paid employees at Whitbread, it’s not just the COSTA lot, it’s all the people working in Premier Inns and other Whitbread occupations.

What happens is that those who earn (in one pay period) above the minimum contribution for auto-enrolment, get enrolled into the Whitbread workplace pension – a pension just for Whitbread employees. If Whitbread enrolled them into NEST, or People’s or any number of insurance based personal pensions, they’d get the incentive, but because Whitbread operate their pension under “net-pay” the low-paid miss out.

How many of the Whitbread employees are losing out we don’t know, it depends on how effective Whitbread are in playing the postponement hokey-cokey and how many of these staff opt-out. I would like the Pensions Regulator to do an audit and find out!

There are likely to be a lot of people auto-enrolled – especially because most of these staff are on variable hours, meaning that they are constantly spiking into auto-enrolment eligibility ( a bit technical this – but the payroll people know what I mean).

Why net- pay – anyway?

I asked someone at the Pensions Trust, another net-pay scheme with a lot of AE enrolled low earners in it, this very questions. Her answer was that “everyone does it”. That is a rubbish reason.

Most large companies operate net-pay schemes because that is how their defined benefit schemes are run and net pay is good news if you are a higher rate tax-payer, as you get all your tax-relief up front and you don’t have to claim it back via self-assessment. That’s why most DC schemes are “net-pay”.

Occupational pension scheme managers, who are notoriously snobbish about NEST and contract based pensions, don’t like the thought of handing over the reins to a third- party. So they continue the pretence that they can do better than insurers and the providers of master trusts. Most of the numbers I have seen show that they can’t, their pension provision is very expensive as they rely on third parties and don’t have the scale of the bundled providers, and they pay a fortune for bespoke investment and communication strategies that are little more than “vanity plays”. Is Whitbread a case in point? You bet it is.

Most companies who run net-pay schemes aren’t bothered about the consequences because low-paid people don’t matter and higher rate tax payers in their employ do.

Why NET-PAY might cost a lot!

If Whitbread are reading this, they may be getting a queasy feeling in their tummies. What if a class-action lawyer works out that their trustees are denying their staff 20% of their contributions into a workplace pension, out of a flagrant disregard for fairness?

Might there not be a case for retrospective action to be taken to restore the inventive to those who have been denied it?

Might this not be ruinously expensive in terms of contributions and administration?

Might this not be considerably more embarrassing to Whitbread than this little blog? Would they like to have the Pensions Ombudsman,  the Pensions Regulator and the national press crawling all over them?

Restore the Incentives to your low-paid staff now – Whitbread!

Now is the time for Whitbread to put this matter right. They should with immediate effect set aside a portion of the £3.9bn sale price for pension restitution to low-paid staff denied their Government Inventive die to Whitbread’s pension administration failings.

They should employ a data specialist to trawl back and provide an independent assessment of individual entitlements to contributions and then accelerate those contributions by the performance of the fund to find individual entitlements.

If by any chance those entitlements create further problems for staff (for instance they exceed the individuals annual allowance), Whitbread should compensate, as they would their top executives.

They should get this whole business signed off by the Pensions Regulator and – once restitution has been paid, they should switch their scheme to relief at source without further delay. If that means getting a new administrator – so be it. If that means moving to a bundled basis – so be it.

The Pensions Regulator should make sure this happens. It is every bit as important that DC contributors get their pension deficits sorted – as the lucky DB members.

If Whitbread don’t sort things for their low-paid pension savers, the Pensions Regulator should consider blocking the deal.

Whitbread – you are not alone.

Up and down the country, there are many net-pay schemes as injurious to low earning pension savers as Whitbread’s. Whitbread – were they to tackle this issue would set an example to the rest, many of which are competitors to Whitbread.

Of course there would be casualties, the pension consultants would hate it, as most of them are also the pension administrators operating net-pay.

The high-earners would get grumpy as they’d not get the cushy ride on tax-relief they had before.

HMRC wouldn’t be too pleased, as they are coning it out of low paid employees.

But anyone interested in restoring confidence in pensions , would be delighted- me especially.

Let’s nail NET-PAY now



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Frank Field – a Labour warrior.

Yesterday I reported that Chris Sier and Andy Agethangelou were appearing in front of Frank Field’s Work and Pensions Select Committee. Today I’m writing about Frank Field.

The first time I came in touch with Field, I was a very out of my depth pensions salesman, who’d blagged his way into an academic pensions conference in Oxford.

Frank Field was speaking and afterwards I introduced myself. He was then “thinking the unthinkable” but he proceeded to do the unbelievable. He asked me whether I wanted a lift back to London and offered to continue our conversation in the back of his ministerial car. I only accepted a lift as far as the park and ride, but that act of generosity has stuck with me.

Frank Field

Still Frank

So when Jo Cumbo, wrote this statement of support, I – along with many of the people I admire – retweeted and liked it.

Even if Jo was wrong, and I think she is right,  my support for Frank Field would remain, for the way he gave me confidence when I had no right to be asking the questions I asked about how we treated the less advantaged in our society.

Frank Field, thinks about little else, his religious, political and social self is driven by an almost obsessive belief in the importance of treating all citizens fairly. Like my Father, his opinions are born out of a personal ownership of the problems he sees before him.

I am very pleased that Frank Field will continue to be chair of the Work and Pensions Select Committee and look forward to attending  Wednesday’s oral evidence session.

For anyone who wants to find out more about Frank Field, it’s worth reading this excellent article published by the BBC yesterday, in response to the announcement of his resigning the whip.

Holding the Government to account


Jo’s comment is perceptive. The Work and Pensions Committee is not there to make policy but to hold the Government’s conduct to account. Some question the relevance of this function, there being an opposition pensions spokesperson in Jack Dromey.

But the cross-party thinking of the WPC is not driven by the whip and can talk common rather than political sense. Another Committee, the Treasury Select, recently condemned a key Treasury strategy – using ISAs for everything – despite being chaired by Nicky Morgan – a conservative,

I suspect that Field will be recognised retrospectively by a “grateful “pensions industry when he leaves the commons and the Select Committee, which looks like being at the next general election.

It is of course easy to praise someone in retrospect. The fear that Field currently commands over the Pensions Regulator, the FCA and even the two key ministries (HMT and DWP) currently engenders plenty of gossip, back-biting and bitterness. Many who will sing his praises when he’s gone, are currently celebrating his demise.

I’m with former government whip and Labour MP Siobhain McDonaghon who said on Newsnight last night (Aug 30th)

“For me Frank Field is what a Labour warrior should be… don’t we want in our politicians and our MPs mavericks who are prepared to stand up and say it as it is?”


Here is the Frank Field resignation letter to chief whip Nick Brown


Dear Nick,

I am writing with considerable sadness to inform you of my intention to sit as an Independent Labour Member of Parliament. I am resigning the whip for two principal reasons.

The first centres on the latest example of Labour’s leadership becoming a force for anti-Semitism in British politics. The latest example, from last week, comes after a series of attempts by Jeremy to deny that past statements and actions by him were anti-Semitic. Britain fought the Second World War to banish these views from our politics, but that superhuman effort and success is now under huge and sustained internal attack. The leadership is doing nothing substantive to address this erosion of our core values. It saddens me to say that we are increasingly seen as a racist party. This issue alone compels me to resign the whip.

The second reason is that a culture of intolerance, nastiness, and intimidation now reigns in too many parts of the Party nationally and is sadly manifest within my own Constituency Labour Party (CLP) in Birkenhead. This is, I fear, just one example of a phenomenon that has tightened its grip on CLPs across the country and is being driven, in part, by members who in previous years would never have been able to claim Labour Party membership.

My original submission to the Party on a specific bullying issue goes back eighteen months. Many submissions have since come from me as well as from loyal Party members. No decisive action has been taken. At best, the Party’s failure to act on these numerous complaints about the thuggish conduct of some members demonstrates a wilful denial. At worst, it serves to legitimise appalling levels of bullying and intimidation of lifelong Labour supporters.

You know that I wrote to the Labour Party nine months ago about the atrocious behaviour of the then councillor Louise Reecejones. That Ms Reecejones should not be a member of the Party, let alone represent us in public positions, has been underscored by decisions taken by Wirral Council.

As you know, she was found guilty of using her position as a councillor to intimidate members of the public. She has refused to apologise properly for her behaviour, and for breaching the Council’s code of conduct, even though one of those on the receiving end of her attack has only now a precarious hold on their livelihood.

The charge sheet against this individual’s suitability ever to hold office, let alone represent the Labour Party, has been detailed to you in separate correspondence. While she was withdrawn as a Council candidate in Wallasey, she has still been able to join the Party’s shortlist for another seat and continues to hold an official position within the local Party.

I intend to continue to represent Birkenhead in Westminster, as I have had the honour to do so for almost 40 years, and I will do so as an Independent Labour Member. I shall of course remain a Party member as I have been since 1960. The values I have espoused during this time will be same that will continue to govern my conduct and I also intend, providence willing, to represent those views when the next election is called.

Few events would give me greater pleasure than to apply to the Parliamentary Labour Party for the whip. But great changes in the leadership’s stance on the issues outlined in this letter will need to take place before I will be able to do so.

Best wishes,

Frank Field

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Why every hidden cost matters.

Value recognised

A lot has been made about the hidden charges of running a fund over the past ten years. Over this time there have been two high profile campaigns to bring them into the open.

In the retail space, Alan and Gina Miller have run their “true and fair” campaign that has shown where the extra costs consumers pay for funds arise, gives an idea of their quantum and shows how much of this cost has not led to better performance – but the reverse.

In the institutional space, Colin Meech and Chris Sier have been working on data provided by LGPS to show that institutional clients suffer from the same problems as retail ones. Their problem is different – the assets are usually more diversified and more esoteric, the hidden costs are perhaps harder to find – but no less pernicious to performance.

The work of these people has been supported by commercial organisations who have profited from the reduction in the money institutional and retail customers leave on the table. Organisations such as Novarca have for many years been working with institutional buyers, not just to identify these costs, but to reduce them. Typically the commercial model has worked on a cut of the savings made in years following the consultancy work.


The value of work by pioneers such as these – is recognised by the FCA in their various value for money studies, by the DWP in the work they are doing on occupational trust disclosures and in the wider European context – through MIFID II and PRIIPS.

It has been given industry prominence by the work of Andy Agethangelou through the transparency task-force.



Value delivered?

However, the value of the pioneer’s work has yet to be recognised in this country by consumers and it’s worth asking “why not?”

true and fair3

Job done?

Firstly, many organisations are now buying funds for consumers with a keen eye for value. Speaking with an IGC on Friday, I was struck by its sense of weariness, it felt it had done the work, delivered the value and could do without further lectures from the FCA and others (especially when the FCA’s fund disclosures template has still officially to be delivered).

For those organisations that have got ahead of the curve and delivered value, there has been insufficient recognition that they have done a good job. Some might say that this job should have been business as usual for institutional purchasers, but clearly it isn’t. My study of the declarations of IGCs last April saw transaction costs recorded from negative to 36bps. Many IGCs were still saying they were unable to get slippage calculations from their insurers (or in the case of non-insured platforms – directly from the managers.

There must be some carrots for those who do the job, as well as a stick for those that don’t. Recognising good IGCs , trustees and statutory bodies, for good fund governance, is critical to the ongoing success of VFM as a concept.


Job not done?

Those we know are doing the job of cost disclosure and cost management properly are outnumbered by those who are doing it badly or not at all.

We know this anecdotally, by talking with those supplying data for MIFID II and PRIIPS (such as Alan and Gina Miller) and from organisations such as Simplitium who collect data and analyse it.

There is too inconsistent a picture between those bothering , not bothering, doing the work incompetently and perhaps a few who are deliberately supplying the wrong data. We are yet to find a way to separate the sheep from the goats.

How does a consumer get a feel for what is good?

If a fund is reporting costs on a “true and fair” basis , then it should be assessable for the value we are getting for the money paid.

But while we may know the impact of costs on performance (and perhaps the value of that money), the bigger picture – of whether the consumer is getting value from the fund as a whole, or the contract with the insurer or from membership of an occupational trust, remains unanswered.

It is as if one tiny part of the jigsaw has been completed, while the frame of the picture lies in disconnected pieces on the table.

The reporting of the overall value of a person’s “savings pot” is measured by outcomes. Costs may be very high, but if outcomes are high- then high cost savings pots are delivering value for money.

But there is no standard way of performance reporting which looks at returns net of charges and compares them with the gross return ….. and then benchmarks this score against what other options would have delivered.

So consumers have no real way of seeing how their savings have done, compared with the savings of the next person.

Why do transaction costs matter?

The point is this; if google maps can chart the Amazon Delta, it can get you from London to Southampton.  Mapping the pension genome needs to be as complete as mapping the human genome or the geography of the planet.

Novarca template

Novarca’s reporting template.

We do not need to know what is happening all over the world , or all over our bodies, but we need to know we can when we need to. Precisely the same goes for pensions.

The vast majority of pensions have transaction costs measured and under control, but there are places where this is not the case. Consumers need the confidence to know that where problems exist, someone is putting out the fires, cutting out the cancer and extinguishing the unnecessary costs.

Leaving it to third parties is simply not good enough. Read about what is happening in Australia right now, where Regulators let the market do what it liked for decades. The result is the findings of the Royal Commission.

We are about restoring confidence in pensions, this can only happen if people feel pensions aren’t going to rip them off.

We commit our savings to pension products for longer than any other type of financial plan, they really are “whole of life”. Those who get to manage those products have a whole of life financial obligation to deliver value for the money we pay them.

The intense scrutiny on the most hidden charges is the way that those who act as our fiduciaries can show that they mean business. It is up to those senior in pensions to ensure that a system of performance measurement which encompasses not just these hidden charges but all areas of charge that lead to performance are measure.

And last of all we need to display the performance and the drags on it , in simple ways that make sense.

Otherwise, we’ll continue to be regarded like this!

true and fair



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By the time I get to Phoenix

Glen Campbell’s masterpiece is the musing of a man who has left his woman a note on the door – explaining he’s leaving.

Each verse tracks his journey through Phoenix, Albuquerque and beyond and how he imagines she’ll wake up to the reality of being dumped. It’s a beautiful song with a bitter theme.

It puts me in mind of another dispute, between Phoenix and certain pension commentators.

Mike’s quote highlights the seemingly contradictory approach adopted by Phoenix towards exit charges on their extensive back book.

  1. One view of Phoenix is that it is a Zombie that buys life companies pregnant with value that can be milked by shareholders.
  2. Another view is that Phoenix can drive efficiencies from badly run businesses to the mutual advantage of shareholder and policyholder.

Since social media  exclusively subscribes to view one, I will write a blog explaining why view two is commercially more plausible.

What the £68m write down means

All pots smaller than £5,000 that had charges in excess of 3 per cent per year will now be capped at that level with no exit charge applied, or at 1 per cent per year for workplace pensions.

All pots larger than £5,000 where charges exceeded 1.5 per cent per year will now be capped at that level, or at 1 per cent per year for workplace pensions.

These changes apply to 250,000 unit-linked policyholders out of a million, the remainder of whom already have charges below 1.5 per cent.

It also takes the total average annual charge across these million policyholders to 1.1 per cent and covers the Abbey Life book.

A gift horse?

gift horse 2

Let’s not look a gift horse in the mouth – we need to understand the gift and the horse – but this £68m looks like real money to me and money that could and should be taken.

I may be entirely wrong, and will be able to comment further later in the day – as I am meeting people connected with Phoenix to get clarity. But here is my argument.

Why it pays for Phoenix to reduce exit penalties.

That Phoenix’s back book is a mess is in no doubt. This hotch-potch of life companies has recently embraced such unlikely bedfellows as Standard and Abbey Life. Policyholders from these insurers join life books from Royal Sun Alliance, Alba, Britannic, Axa, Scottish Mutual, NPI and Pearl Assurance under the Phoenix Umbrella (you can follow the history here – Phoenix itself goes back to before the French Revolution).

For Phoenix to achieve its stated aims for its customers, Phoenix has to treat its customers fairly. It is directly in the eye of the FCA who are in the middle of a review of “non-workplace pensions” – the £400bn of our money, managed in what the life company call their “legacy”.

Life companies can justly claim that the reason that so much of these books carries what today would be considered inordinate charges, is that it is advised business. By “advised”, life companies mean that a salesman – called an adviser- sold the policy to the policyholder for a commission paid by the life company, which was to be recouped over the life of the policy.

There were two assumptions made at the point of sale

  1. that premiums to the life policies would be maintained over the life of the policy (in retirement plans typically through to 65)
  2. that advice would continue to be offered for the same duration,

In a handful of cases, this is the case. My friend John Mather started his career in 1973 as an Abbey Life “adviser” and is still advising today – at the age of 70). Many of the policies he set up in the 70s were minded by him till maturity. John is the exception that proves the rule

The reality is that only a tiny percentage of the policies that form the Phoenix back book were maintained, most became “paid up” and many could not be restarted. The front-end commissions paid to advisers were paid for from a few contributions and this concentrated their impact. The policies in the back book are now carrying the weight of these charges and – understandably – if they are terminated early, the policy conditions demand that the outstanding “advisory” debt is returned by means of exit penalties.

The assumptions made by the pricing actuaries of the various life companies were wrong. Not only were they wrong, but the actuaries had plenty of evidence that they were wrong. High turnover of sales advisory staff and low persistency of contribution payments was evident from day one. The whole business of life insurance sales over the period leading up to RDR in 2012 (40 years) was founded on these false assumptions!

Life insurance is sold not bought – “advice” is no more than a veneer for “sales” and most of the policies had no more chance of being maintained than a rowing boat crossing the Atlantic.

Phoenix knows this, the FCA knows this and the FCA knows that Phoenix knows this.

It pays Phoenix to offer members an amnesty on exit charges – because it is considerably cheaper than reducing the charges themselves. Phoenix understand “nudge” and “nudge” is on their side.

However, but it sounds like Phoenix has listened to Glen Campbell’s ” By the time I get to the Phoenix” and particularly its desperate last line

“she just didn’t know – I would really go”

You don’t write off £68m from your profits if you aren’t serious about letting go… do you?

Exit penalties and “nudge” – treating customer fairly?

In an interview with New Model Adviser last year, Andy Moss, CEO of Phoenix was asked about exit fees.

In March the Financial Conduct Authority introduced a 1% exit fee cap for the over 55s, how has this affected the Phoenix group?

It has had pretty much no impact. As a result of the exit fees cap we are not seeing a sudden increase in people wanting to exit their policies above what we would have expected anyway. It is interesting because we have always looked at our book and felt the exit fees didn’t have a big impact on people.

Certainly Phoenix’s latest half yearly results bear testament to this, Phoenix is prospering despite putting aside £68m to meet the impact of people taking their money early (without exit penalties).

It would be cynical of me to put only one side of the story, Moss also explained

Of those below age 55 around 85% of our book don’t have exit fees. We have to bear in mind there are different charging mechanisms for life company products, and historically exit fees are there to recoup the initial cost of the policy. They do run off over time and a lot of our policies are now a lot lower.

What we are doing on an ongoing basis is looking at the value for money of our products and exit fees are only part of the picture – we have to bear in mind with a lot of the older products many have guarantees. So it is not quite as straightforward as looking at the charges; it is a combination of both the benefit and the charges.

The reality is that without a lot of help, the consumer is in no position to take any decision at all. A carrot of “value” is dangled – while the old horse is being whipped from behind with lashes of charges. Maybe – if he gets to journey’s end – that carrot will be the horses’s, but will the pain on the way be worth it?

carrot stick horse

This is not a picture that brings to mind “treating customers fairly”.

What is needed.

Phoenix should know all about “nudge theory” and the power of inertia. After all, it’s Peterborough HQ shares premises with NEST!

There are two good outcomes for Phoenix – with regards its back book

  1. Policyholders who stay , stay happily, content in the knowledge that they are being treated fairly and with information to prove it
  2. Disgruntled policyholders are allowed to leave gracefully and do not create the bad headlines that Phoenix are currently getting.

Pension Bee, which has done as much as anyone to highlight the wicked charges meted out to some of the 15% mentioned by Andy Moss, are the first to applaud the £68m provision in the 2018 results to meet the write offs from people taking charges.

But for Pension Bee and me and the Lang Cat and the FCA to be satisfied, we need to see Phoenix nudging policyholders to take the decisions that are best for policyholders, not just for shareholders. That means properly explaining the value for money of staying and leaving and making it easy for those who want to leave – to leave.

Policyholders need to be reminded that the door is open and shown options outside.

The devil and the angel in the Phoenix

I am minded to give Phoenix the benefit of the doubt and to assume that they will not cynically cut exit penalties as a cheap alternative to cutting back-end charges for those who stay.

It has possibly the best IGC in Britain, an IGC that is left to get on with its job independently and which has consistently shown it has teeth.

If Phoenix means what it says, it should be putting the “value for money” information – it claims to be getting on its back book, to the policyholders in a meaningful way. I don’t some actuarial report that nobody can read, but  a plain statement that explains the options “legacy” policyholders have.

To this end, I am off to talk to Phoenix!




This article is purposefully ignoring the running argument over with-profits MLR’s but and will cover this issue separately


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Who cares? And how do we pay them?


Except Care isn’t free

News that the Government is mulling a new Care ISA – to be funded from retirement savings will be greeted with joy within the bubble and indifference from the vase majority of people who do not plan for the consequences of later life dependency.


Long Term Care is not a savings issue, it is an insurance issue. I’m with Sarah Wollaston, the Tory MP who chairs the Commons health and social care select committee who said introducing a care Isa would be a “colossal mistake” that would only work for a small number of wealthy people.

“This won’t solve the care crisis at all. There is no pooling of risk.”

We all care.

We all have elderly relatives or friends. We see elderly people in the street struggling and our natural instinct is to try to help.

It is in our genes to help elderly people, probably because our genes recognise our later selves in those we are helping.

The business of looking after others is different from looking after ourselves. We look after ourselves by keeping fit, avoiding poor food and laying off the booze and fags.

We look after others by calling on them , phoning them, sending them pictures on Facebook. Many people give up their jobs to nurse their parents. Some go further and become professional carers and some go into business and run care homes. The business of looking after others is primarily funded by the taxpayer – through the NHS or direct payments to those who do the caring or run the care homes. This is social insurance.

We are now asked to consider – diverting a part of our retirement savings into an ISA pot that is tax-advantaged to the next of kin if care is needed, or tax-advantaged to the saver – if it is.

A tax advantaged retirement pot, providing further tax advantages to those who pay income tax in retirement and inheritance tax when they die.

I feel we are being sold the usual wall-paper, while the plaster crumbles behind.

The ISA – the last refuge of a lazy policy maker

Someone, probably Michael Johnson, has got it into the Treasury’s head that every social problem can be solved by the ISA family.

There’s an ISA for savings, for pensions and for housing and now we’re going to have one for Care.

Each ISA ticks the box of some failed management consultant in the Treasury , who can explain the policy to some Brexit obsessed minister in a three letter word.

Each Minister can unveil their solution to a future crisis with minimal impact of short-term revenues and with no accountability over outcomes.

The annihilation of the welfare state continues, with those who can save, doing so as a tax-arbitrage and those who can’t, excluded from the party.

Thankfully there are responsible politicians like Sarah Wollaston, who see beyond the cynical wall-paper job and continue to worry about the fabric of our society.

It is not much fun being elderly but it is a lot more fun if you have care and proper care to boot. Putting out the message that Care is earned from financial prudence has some overt merit. But it will result in over cautious spending of retirement savings which is counter productive

Much better are solutions that require taxes to be paid and tax-revenues to be invested into better care, better care homes and greater awareness of all our need to care for the elderly.

Rewarding those who care

At the top of my list – in terms of priorities – are those who care for others voluntarily, and get scant reward for doing so.

They are the people who deprive themselves of income, out of love, or respect or simply duty. They are not properly rewarded. Carer’s allowances are pitifully low. The Government proudly boasts we could receive £64.60 a week if you care for someone at least 35 hours a week. That’s less than £2 per hour, about a quarter of the living wage.

If we are to have a just and fair society – we should begin by rewarding those who do care, rather than rewarding those who have the money – with further tax-breaks.

We are fed up with vote-winning ISA policies that paper over the cracks. We have had a number of reports over the years (Dilnot being the most important). All have called for a proper recognition of the importance of care as something to be insured socially.

Let’s remember, the first brick that fell out of the wall when the Tory lead crumbled at the last election, was the social care brick. When the Government dispensed with a proper responsible policy to win votes, the public turned against the policy architects.

As a nation, we aren’t stupid. We can see through this Care-ISA nonsense.

We all care, but some care more than others, society should be rewarding the carers, not messing around with “Care-ISAs”.

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The “wonder” of wealth

As Dr Chris Sier entered the Corinthia Hotel on Wednesday, en route to a cup of tea with the AgeWage management team, he noticed a gentleman handing over his Bentley keys  to the doorman, with a fifty pound note as a tip .


Doorman at the Corinthia Hotel

Chris joined us genuinely surprised that so little value had been offered for the money.

I wonder about wealth!

The “wonders of wealth” are everywhere to be seen in London Town.  Everyone who is wealthy is “extremely happy”- at least on the outside. Of course the point of the host of celebrity magazines is to expose that underneath the botox, the super-rich are just the same as us. Some are well-adjusted and most are bonkers.

Funnily enough, the same can be said of the happy people who inhabit the Cockpit pub in Blackfriars. My conclusion is that wealth doesn’t make you happy or sad, it just hermetically seals your façade in an aura of well-being.

If you are part of a money making concern that churns out £50 notes by the sack-full, spraying them around the Corinthia, is a totally logical thing to do. I guess that this is why so many St James Place customers are happy with what they are getting, there are rules to the club.

For St James Place is the “gentleman’s club for the mass affluent” just as The Corinthia is “the gentleman’s club for the celebrity”.

That’s the wonder of wealth management.

The gnomic Eugen has made a splendid comment on my post on why everyone loves platforms. 

eugen platform.PNG

I find people talk about their investments with HL and SJP with the same rictus grin I find on those drinking tea in the Corinthia. Wealthy people have to wear their wealth on their sleeves, or else it is nothing. A low cost portfolio of tracker funds managed by Vanguard (or a free one managed by Fidelity) just doesn’t do it for wealthy Joe, there has to be a polo pony and an oak panelled atrium in the mix.

The same old crew who loved Equitable Life

Adam Norris, who made his fortune from Hargreaves and is now managing the fortunes of his racing car driver son, told me a great story of one of his early marketing coups.

As a young buck in the Hargreaves marketing team, he found many HL investors complaining about letters they were getting from the Equitable Life , telling them that the returns they’d been promised, weren’t coming any more.

Adam decided to become a member of the Equitable Life Society and invested the minimum premium to get him to see the rules of the club society. They included one rule that enabled him to request a list of all other members of the society. He couldn’t market from the list but he could read it.

He got his team to type all the names into the HL database and discovered a 70% match with HL customers.

He mailed those matched and offered them a discrete exit from the Equitable Life Society onto Hargreaves Lansdown investment platform. HL took £30m in the first month.

We love our clubs

Opposite the Corinthia, is the National Liberal Club, where I hang out. Clubs are great places as they offer you the Corinthia at rather less and you don’t have to tip the doorman (although it’s nice to do so from time to time).

We love our clubs because they make us feel special and I am no different from anyone else. But if the cost of owning your place in the club stops you being financially comfortable , then it is time to throw off the rictus grin and (for me) return to the Cockpit.

I hope Eugen writes his study of HL investors.

In one of the great poems of the English language, Samuel Johnson explores the “vanity of human wishes”. There are 368 lines in the poem, here are four of them, that could define the Hargreaves Lansdown investor,

Where Wav’ring Man, betray’d by vent’rous Pride,
To tread the dreary Paths without a Guide;
As treach’rous Phantoms in the Mist delude,
Shuns fancied Ills, or chases airy Good.

Nothing changes, Johnson was echoing Juvenal , Eugen echoes Johnson.

So long as rich people have fifty pound notes to give away, Hargreaves Lansdown and St James Place and the majority of wealth managers will exist. They will promise much – not least a club where those of lesser means are excluded.

Other clubs are available


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The problem with platforms (is that everyone loves them).

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Platforms are a relatively new but significant and growing distribution channel. The platform service provider market has doubled since 2013 from £250bn to £500bnassets under administration (AUA). This growth in AUA has been driven by rising markets and increasing levels of investment. More consumers are using platforms, with an increase of around 2.2 million more retail customer accounts between 2013 and2017.1 Platform revenue from retail consumers reached £1.3bn in 2017, up from £750m in 2013.

So begins the FCA’s interim market study on investment platforms , published last month. It finds a market that is generally delivering for consumers. However it identifies five issues that where platforms can fail us.

  • Switching between platforms can be difficult.
  • Shopping around can be difficult.
  • The risks and expected returns of model portfolios with similar risk labels are unclear.
  • Consumers may be missing out by holding too much cash.
  • So-called “orphan clients” who were previously advised but no longer have any relationship with a financial adviser face higher charges and lower service

Many of these issues have been covered in this blog recently. For instance I reported how Hargreaves Lansdown are making an eye-watering 48% margin on cash holdings and expect this margin to increase to nearly 70% as interest rates rise (and distributed interest doesn’t).

Net revenue on Cash increased by 15% to £42.1million (2017: £36.6m) as increased cash levels offset a slight decline in the net interest margin to 48bps (2017: 49bps). This was in line with our communicated expectations at the Interim results announced in February 2018 that margins would be within a 40 to 50bps range. Cash accounts for 10% of the average AUA (2017: 11%). At the start of the year the Bank of England base rate was 0.25% before being increased to 0.50% in November 2017.

With the majority of clients’ SIPP money placed on rolling 13 month term deposits, and non-SIPP money on terms of up to 95 days, the full impact of the rate rise takes over a year to flow through. Following the base rate change to 0.75% on 2 August 2018 and assuming no further rate changes, we anticipate the cash interest margin for the 2019 financial year will be in the range of 60bps to70bps. Cash AUA at the end of 2018 was £9.6 billion (2017: £8.1bn).

I print this in full because these are the exact words that appear in the HL preliminary results (p6). 

What concerns me is the impunity that HL feel they have to consumer regulation. That they can actually boast that customers in cash (representing more than 10% of platform assets) can deliver such mighty returns to shareholders suggests a brazen arrogance that needs addressing.

The FCA fully understand the problems they are identifying

Take these additional issues raised later in the paper

  • Platforms employ commercial practices which may restrict fund managers ’ incentives or ability to offer fund discounts to competitor platforms, and this may reduce competition on fund discounts.
  • Platforms could improve how they present fund charges at different stages of the consumer’s decision making

The report lays out a number of initiatives that – if implemented – would lead to platform customers getting better deals and better information. The issue is not that the FCA don’t know what is right, the issue is whether they can enforce change. I suspect that they need some encouragement and that will not come from within the platform industry

Who can address these platform problems?

A theme of the FCA’s interim report is that platform customers are generally happy. This is something I know to be true. Customers of the largest advised platform (St James Place) and of the largest non-advised or D2C customers are very happy indeed. They are treated with kid gloves, made to feel special and generally tickled out of their money like trout.

Customer satisfaction levels are generally a poor indicator of long-term value for money but a good indicator of short-term profitability. Both HL and SJP are extremely profitable and both are now stalwarts of the FTSE 100.

The impression the report gives is of deference to this success rather than concern about potential customer detriment. “kid gloves – iron fist” doesn’t seem an appropriate formulation.

Where SJP and HL lead…

My concern is that despite murmurings from regulators , other platform providers and even the financial advisers who support these platforms, there is no inclination within the wealth management industry to challenge the hegemony or the margins of HL and SJP.

They appear to provide cover for smaller platforms who can point to their larger rivals with the phrase “we’re not as bad as them” or perhaps “we’re only following SJP/HL”. I hear a lot of bad practice justified in this way. If the FCA is serious about driving down costs and improving completion it has got to get a lot tougher on enforcing better practice.

Dissenting voices

There are independent voices – the Laing Cat and Boring Money are both asking the right questions. But their research is primarily being purchased by platform managers, regulators and advisers.

The challenge of genuine disruption comes from outside the bubble, not within.

It is only the FCA that can properly address the problems of platforms and they cannot do so, by accepting consumer sentiment as an endorsement of platform success.

The fact is that platforms are way too expensive, too opaque and afford advisers an opportunity to milk clients unmercifully.

All too often, regulation catches up with the problem, after the event. The FCA appear to have identified platform problems “in real time”.

In due course, the true cost of the problems identified will feed through to poor outcomes.

  • You cannot employ a 4% drawdown rate and pay 3% in charges.
  • You cannot have over 10% of your platform in cash and boast about anticipated margins of 60-70% on that money.
  • You cannot charge clients who have lost their clients more for less.

We need dissenting voices that do not accept that contented clients are necessarily getting a good deal. I have worked in an occupational pensions industry that has accepted poor value for money for decades and has been happy to do so – such was the marketing skill of those who stripped funds of their returns, while we chugged round Britain on corporate beanos.

I see the same thing happening in the platform market and I’m going to do everything I can to ensure that platform customers are smiling, not because they are being treated with kid gloves, but because they are getting value for money from the platforms they employ.

vanguard 6.jpg

There may be trouble ahead….



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Mr N – a corrupted system and natural justice


Putting things right with the lawyers

I’m pleased to see that efforts are being made to meet Mr N’s legal fees , working out how to get restitution to the Northumberland Police’s pension scheme. Though he was successful in getting back in the scheme, the ombudsman did not grant him his costs arguing that he could have fought the case without recourse to professional advice.

I suspect that the Pensions Ombudsman also had it in mind to slam the door shut in the face of countless ambulance chasers keen to make a killing on no-win no-fee deals in Mr N’s wake.

The fact remains that Mr N has not got the money to pay his fees and since he has opened the door to people similarly unfortunate, it is good that people are rallying around. I understand that there is a pending criminal case to follow, it is important that Mr N’s anonymity is maintained for the moment.

Putting things right with the trustees

I’m also pleased to hear that there is last a conversation being had between the person organising the victims of fraud’s affairs (Angie Brooks) and those acting as trustees of the majority of the derelict schemes which the scammers used to steal the victim’s money.

We shouldn’t forget that the first port of call, to finance the restitution of Mr N’s pension will be the London Quadrant pension scheme – or what’s left of it after pillage from the original scammers.

The judgement will no doubt have come as a surprise to the trustees who are now subject to the unwelcome scrutiny of those seeking these funds (ironically the police pension fund). While I am sure that nothing is amiss in the trustee’s management , I am sure they feel that further claims on their primary source of remuneration (the remaining member’s fund), less than helpful.

Of course the vast majority of the management fees in cases like this are to lawyers.

Calling casuistry when you see it!

If you’re beginning to detect an anti-lawyer thread in this blog, you are right. Thomas Jefferson famously said “It is the trade of lawyers to question everything, yield nothing, and to talk by the hour”. The lawyers have been talking by the hour over the Pensions Ombudsman’s determination against the Northumbrian Police and for Mr N and the London lawyers are very far from happy.

That is because no ordinary person can afford a London lawyer’s fees , meaning that they rely solely on trustees, regulators and employers for a maintenance of their very reasonable lifestyles.

These lawyers have no masters but their clients and their clients are under threat from Mr N and his like.

Let us remember that Mr N took financial advice from a regulated pension transfer specialist – as he was told to by the FCA. He transferred his money out of his defined benefit pension scheme – as he was advised to by his IFA. He transferred his money into an occupational pension scheme that had been given its status by Her Majesty’s Revenue and Customers and he sought restitution as he was supposed to, through the Pensions Ombudsman.  The only thing that Anthony Arter found he had done amiss, was to employ lawyers.

As I have written earlier, Mr N is a hero

But this has not stopped the lawyers from finding Mr N to be the architect of his own demise..

In an opinion piece, published in Professional Pensions, Edward Brown , a pension  lawyer at Hogan Lovells has delivered the following judgement on Mr N.

It is easy to feel sympathy for Mr N – who has potentially lost all of his benefits in a scam. But it is a regrettable feature of 21st century life to conclude that if something bad happens to someone then someone else – with the means to pay – must be at fault. One can conclude that the authority is not to blame without needing to believe that Mr N is the author of his own misfortune.

This is extremely sophisticated (as in employing sophistry). Without committing himself to any view, Edward Brown allows us to read that Mr N is the author of his own misfortune. What does Edward Brown think? Does he subscribe to the views of 21st century life or not?  Who is this “one” that’s making this conclusion? There is not “one” voice here – but several – the inference is clear as  the lawyer dances on his pin with glee.

Edward Brown hides behind periphrastic phraseology and earns significant brownie points from other lawyers for implying Mr N is the architect of his own misfortune – without calling him it.

This kind of thing may work in legal circles Edward Brown, but it does not work with me.

I hope that Edward Brown has the opportunity in time to meet with Mr N and with others like them. They are the people who uphold the law and who assume that IFAs and pension scheme trustees and fund managers are honest. They do so because they believe in the legal system, the HMRC, the FSA (as it then was) and the Pensions Regulator.

For a member of the legal system to infer Mr N the author of his own misfortune is tantamount to siding with all the breakdowns in the judicial system that led to an innocent man – who did what he was told -being put through three years of intense anguish.

But of course Edward Brown said no such thing – the rhetoric said it for him. This is worse than sophistry – this is casuistry. This is the use of the legal system to say one thing and get away with saying it altogether.

Natural justice alive and well in the 21st century

I have sat in the Royal Courts of Justice and seen the treatment meted out to the victims of the Ark Pension Scam, people like Susan Flood (who can take some comfort from this determination). I have seen lawyers call on judges to “poke the victims with sharp sticks”. I have seen victims break down in tears for shame of their actions – when they have behaved admirably. All this has happened because of the cruelty of lawyers who have apply the letter of the law not its principles, who push legal niceties before natural justice.

I have had the chance to meet Mr N  and speak with him. I know other members of the Northumbrian Police Force and no-one thinks Mr N a chancer – he was and still is a very good policeman.

It is extremely hard for us privileged professional class to have any idea of how hard pensions are to them. Mr N put his trust in the system and agreed to pay its fees and he was let down – not just by those who advised him, but by those who could have protected them – and according to the Pensions Ombudsman’s verdict – didn’t.

Mr N had one advantage, he was not intimidated by lawyers. That is why he persisted and why he is back in his scheme.

No doubt there will be many training courses arranged for trustees by lawyers to help trustees do the due diligence that Northumbria Police did not do. No doubt there will be administrators looking at their files for instances of their allowing transfers into London Quadrant and schemes like it. No doubt there will be a few squeaky bums in the offices of some of the IFAs – over the forthcoming criminal proceedings and no doubt lawyers will be making money from all of this.

Lawyers are paid to keep people on the right side of the law, they are not paid to vilify those who do the right thing and then get ripped off.

This message to Edward Brown and anyone else inferring  Mr N “the author of his own misfortune”, is that they remember there is a higher law than that which we serve – there is natural justice, I applaud Anthony Arter for siding with natural justice.

edward brown.jpg

Edward Brown

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Why funds should be free!

My friend Robin Powell has produced a series of disruptive info graphics around comments he’s garnered following Fidelity’s announcement of “free funds”. He’s also written a good blog on the subject.

Of course “free funds” is a disruptive idea and should be viewed with suspicion

I thought to include some of the reasons why Fidelity might regret their decision here – thanks to all those listed below who get paid for marketing funds at exorbitant prices – thanks too to those who – like me – see “low-cost” as “welcome-cost”.

henry fund managers.jpg

Seemed a reasonable question…

But it seems that there’s a cost conspiracy against us – and our bosses are in on it.Fund costs 6.PNG

I am very glad that I wasn’t at this event as I might not have survived it. Here’s a sample of more tough talking going on…

Aviva investment proposition, workplace benefits Jason Bullmore explained what this focus on cost meant for providers. He said: “From a provider perspective we see an absolute focus on cost and this has got to change”

Jason is keen to point the fingers that the villains who are forcing fund management prices down. Apparantly it’s not just employers but consultants (like me)

“In our master trust we have to have a very low cost basic default. This pressure comes from both the employers and consultants.”

But there seems to have been a noble faction of consultants at this meeting

Mercer solutions leader, DC & individual wealth Philip Parkinson said: “Does the consultant community not have a responsibility here? All the sponsors come to us for advice about which master trust to choose. So do we have the responsibility to raise as a priority investment, and challenge the focus on cost.”

The harm we can do ourselves in seeking a bargain is spelt out in the Times, much to the approval of Martin Gilbert, head honcho at active fund manager Standard Aberdeen.

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It’s good to see the relationship between journalists and fund managers remains at arms length

I’ve bust the Times pay-wall to grab the gist of Ian King’s “fund terrorism” warning. Ian focusses on the battering investors got from investing into the dotcom bubble through companies like Baltimore technologies.

Despite this happening 18 years ago, it is still being trotted out as if all the active managers in the world knew!

Of course one of the reasons tech-stocks went through the roof in 1999 was because of the active fund managers who ran tech funds but I suspect that Martin Gilbert didn’t, or if he did – he can’t remember which of the various companies that comprise Standard Aberdeen did or didn’t!

Fund 7.jpg

But back to the main event. It seems that we have a thing or two to learn from hedge fund managers.

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Wow – if any one person can earn that much in a day, shouldn’t I be putting my money with him? Oh- wait – that’s what he earned from my money!

The other side of the coin

We all know that Warren Buffet advises everyone who can’t keep up with him (like me) to invest in simple indices (like the S&P 500).

Robin Powell has been interviewing clever people who explain why

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and he explains why it’s the “buy and hold” passive funds which are best placed to exert pressure on the environmental, social and governance policies of the companies they invest in.

Before I get carried away..

  • Yes I invest heavily in private equity. I’ve invested hundreds of thousands of my own money in Pension PlayPen and now AgeWage.
  • Yes I do pay a fortune to invest in funds like Fundsmith and L&G’s Future World.
  • And no I am not invested in zero cost funds (yet).

I do believe that entrepreneurs , backed by private equity , can achieve more quicker – which is why I will be seeking private equity to grow my businesses.

I do believe that there are good men like Terry Smith out there, who can manage selective stocks on a buy and hold basis, better than the allocations within an index.

I fervently hope that the money I have in expensive index funds, can move to zero price funds – where all I am paying is the opportunity costs of not getting the revenues from stock lending. But for now – I am happy to line the coffers of passive fund managers – because I prefer paying a little over the odds to them for what I know, than an indeterminate amount to active managers, whose charges could be anything… As Robin has me saying!

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And finally for advisers…

In a recent blog, I explained why I see value in financial planners and little value in wealth management. Had I had the savvy to read Robin’s timeline, I’d have had the blog in a picture.

fund 16.PNG

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AgeWage submission to the WPC on Pension Transparency

I am submitting evidence on behalf of AgeWage, a company set up to help people work out if they are getting value for money from their pensions (and pension advice).

I am a Director of First Actuarial and Founder of Pension PlayPen. I appeared before the Committee with BSPS members as part of the Pension Freedoms Enquiry, I blog as the Pension Plowman at

AgeWage wishes to submit evidence because its founders, (myself, Ritesh Singhania and Dr Chris Sier) believe that transparency is the best disinfectant to clean up pensions tarnished reputation.

Contained in our response and the blogs that expand it is a blueprint to make pensions and pensions advice more transparent.

Our response to the enquiry is set out here. Longer responses are available via links to blogs at the end of each section or by searching

  1. Higher-cost providers don’t generally deliver higher performance, and usually eat into clients’ savings. So long as we have the right data and the means to analyse it, we can answer that question “fund by fund”, “product by product”.  The aggregate of all the answers will eventually enable us to generalise. There is no short cut – the task is massive but it is one that is within the compass of data scientists and one that the pensions industry could and should undertake, more about our view here.
  2. The Government is doing a good job ensuring that workplace pension savers get value for money. The responsibility for making workplace pensions work, is all of ours. We should be relying on Government to create the framework, we should adopt best practice as a matter of course, more about why we think so here
  3. We see regulating providers as more important (for Government) than empowering consumers. We need better products, products first – empowerment second. – You Should not empower people to make good use of poor products. The regulation of pension products for auto-enrolment by both FCA and tPR has been a success – they’ve kept a proper market going, driven away the crooks and it looks like we’re moving towards a future where we can draw our pensions collectively. More of the same please! A fuller explanation here
  4. We see three ways to encouraged savers to engage with their savings either we can convince people to engage directly with their investment, or we can get people to engage with stewards or we can offer digital engagement. But we should be wary of ever expecting most people to pay much attention to their pension, most people just want to “know where to sign”. Find out more here
  5. Investment transparency is more important to savers than they know (or experts are prepared to admit). People cannot be expected to know the unknowns. The onus is on those expert in pensions to make pension investments clear and comparable. “Value for Money” is a way of thinking about what we have, which makes pensions easier to understand and manage. We explain this here.
  6. If customers are unhappy with their providers’ costs and investment performance/strategy, there barriers to them going elsewhere. Currently the system is set against people moving. It’s hard for people to know whether they are being penalised for moving, so in the absence of good information, they tend to stay where they are. This tends to reward the bad pension providers. More information here
  7. Independent Governance Committees could be a lot more effective in driving value for money. We’ve analyzed the performance of over 20 IGCs and the odd GAA over the last four years. We think they suffer from poor recruitment and that they do not get to their members to find the real issues. They’ve done good things in ensuring providers cap charges and can do more in ensuring data flows to dashboards. We explain more here
  8. Do pension customers get value for money from financial advisers who provide financial planning. Value for money from wealth managers is not so easy to find. We see plenty of product bias in the advice given by wealth managers and it looks like recidivism to a pre-RDR world. Those advisers who offer financial planning tend to have clearer charges which people understand. We explain the differences here.

We see a groundswell of support for Pension Transparency, evidenced in the work of the Transparency Task Force. We call on Government to recognise the Zeitgeist and support the work of Andy Agethangelou and his advisory committee.

We see Pension Dashboards as a way of bring transparency to ordinary people. We do not support the provision of a single dashboard but urge the committee to promote the conditions in which the private sector can give people access to their pensions and the information they need to manage them.

We call on the pensions industry to exert itself to help the 10m new pension savers who have arrived through auto-enrolment. Equally we call on Government to ensure that they have pension options when they mature, fit to retire on.

Henry Tapper

August 9th 2018

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Do IGC’s improve our value for money?

value for money

This is the 7th and penultimate blog , addressing the Work & Pensions Select Committee’s questions on pension transparency. This time the exam question is

Are Independent Governance Committees effective in driving value for money?

My short answer is that – for the money they have been given – they could do a lot better.

On the composition of IGC boards

In as much as…

  • IGCs have become an effective diversifier of revenue streams for firms of independent trustees.
  • IGCs are successfully integrated into insurance companies business as usual procedures
  • IGCs offer an alternative to trustee and non-executive roles for those seeking “portfolio careers”

IGCs are failing.

For too many IGC board members, the diurnal tedium of later life is alleviated by days out at insurance company expense, IGC boards are full of the wrong people – people who are too old, too male and too steeped in the failings of the past to understand the opportunities of the future,

After blogging a complaint about the ineffectiveness of the L&G IGC, I was called into L&G’s office to have it explained to me (by senior executives) the factual inaccuracies that underpinned my criticisms. Neither or the supposed inaccuracies resulted in me changing my mind or my blog, I maintain I was right.

At the end of the meeting (lecture), I mentioned that under the terms of my contract, I was now free to be an IGC member. The L&G execs thought I was joking  – I wasn’t.

The fact is that people who are genuinely interested in transparency are not getting onto IGC boards. Instead IGCs are being packed with “trophy” members who appeal to the vanity of the insurance boards, but who have neither the energy or the motivation to genuinely shake the tree.

It would appear that the open place at the L&G IGC will be filled by a “big-hitter” – or so the executives would have me believe. I thought “more trophy”.  I expect L&G are spending a lot of money getting big hitters to the IGC board, but the recent output – in terms of effective governance – has been poor.

By comparison, an IGC with a relatively small budget , like that of Phoenix, seems to be consistently punching above its weight. It strikes me that the Chairs of IGC boards are critical to their success and that many boards have chairs who are not up to the job.

On the effectiveness of individual IGCs

Each year I read (at least once) around 20 IGC reports and a further 10 or so GAA reports. Some of the GAA reports are very important (that of St James’ Place in particular-why a pension provider with £90bn under advice doesn’t have an IGC is a mystery).

Each year I mark the reports and publish the scoring. I blog my reasoning and I know that many of the IGCs read these blogs. In the absence of much feedback elsewhere, my blog has become a part of the reporting season. Here is the table of the reports I have done since the inception of IGC reports in 2015-16.

IGC review 2018 full

If you’d like the live  spreadsheet – of which this is a picture – mail

There are IGCs which are effectively reporting. Probably the most effective – consistently – is the Prudential’s. Some IGCs are getting more effective (Royal London) and some are slipping back (L&G). Some are consistently average (Fidelity) and some are consistently poor (Black Rock).

As we consumers have no other way of assessing the IGCs than reading their reports, we must take the reports as a proxy for the IGC’s performance.

IGCs are invisible to the people they serve

I don’t know if the FCA do polling on IGCs, but I’d be surprised if much more than 1% of those in workplace pensions know what an Independent Governance Committee governs.

In its recent inquiry into pension freedoms, the Committee chair had the chance to look at how the British Steel pension management and trustees related to their members. He concluded that the two were in different countries. I suspect that the pension management assumed this to mean that being Scottish, they were too distant from the steelworkers in Wales. I took this to mean that the members of BSPS were sorting out their issues on Facebook – while the management and trustees were devising a paper based communication plan.

The same can be said of IGCs, they are in a different country from their members. Members are spending their time getting information from Facebook and Instagram. Younger members get news from Snapchat or Buzzfeed. Static websites are seldom if ever visited. The work of the IGCs goes un-noticed by all but a handful of policyholders.

The efforts of the IGCs to talk to members are pretty well non-existent. In 2015, L&G decided to run a member’s forum, but the only people who show up are advisers and industry commentators. Some (like me) happen to be L&G policyholders but this is incidental, ordinary members are not going to go to the City of London in the middle of a working day to be lectured about the value of their workplace pension.

If IGCs want to enter into a dialogue with members , they should be looking to create digital forums like the Facebook pages of the British Steel Pension Scheme. They could do this by working with large employers to create employer specific forums and with smaller employers to create multi-employer forums. IGCs will become relevant – when they become visible – right now they are invisible which suits insurers very well.

IGCs can remain low profile – so long as they understand the issues.

My recent complaint against L&G’s IGC, was that it turned a forum into a lecture. those people who had turned up , came clutching questions and the meeting had 10 minutes out of 120 for Q&A.

IGCs have not yet established mechanisms to hear first hand from either members or their employers. When it comes to the nuts and bolts of  auto-enrolment and workplace pension saving, the IGCs therefore have to guess at the issues, or be guided by large employers – who have available resource to have individual meetings with the IGCs.

In Britain today, we have over 1m participating employers in auto-enrolment, but all but a handful are excluded from the IGCs knowledge and understanding.

Do IGCs understand Value for Money?

The import of the IGCs failure to engage with the policyholders and employers they represent, is that they have no real authority. Unlike Unions who speak for their membership, IGCs can speak only for themselves.

Unless they have clear evidence of what their members want, their lobbying for change will be seen by shareholders as spurious.

As for their task of telling members whether the members are getting value for money, I can see no evidence that the IGCs have any consistent measure for what value for money is.

The Prudential use an outcomes based measure that looks at fund performance against an inflation related benchmark. Others appear to be using performance aligned to the costs members are incurring and others use less quantitative measures, relying on independently managed surveys carried out by marketing companies.

In three years – only one IGC – has told its insurer that it is not giving its members value for money (or at least has committed this to an IGC report). That IGC was that of Virgin Money in 2017-18. By and large, the reports conclude with the Chair affirming that in the Committee’s opinion “xyz” has delivered value for money.

What kind of benchmark is being used is not clear. It is like the a football club chairman saying that in his opinion his club was worthy of promotion.

Until some proper system of benchmarking is in place, insurers will (as old Mr Grace would say) – “all do very well”.

Do IGCs deliver value for money?

Charged as they were by the FCA , with implementing a cap of 1% on exit charges from workplace pensions , the IGCs can take some credit as enforcement agents. Incidentally the Virgin Money report was focussed on the failure of VM to deal effectively with this issue.

But in terms of measuring value for money on default funds of workplace pensions, the primary duty of IGCs, they are failing. Many have yet to understand how much the defaults are actually costing members, not having been granted the means of testing hidden costs and charges by the insurers they are paid by.

If this persists into the 2019 reporting, then I hope that those IGCs who still (after five years of trying) , have yet to have this basic data, will report their insurers to the FCA as Virgin Money’s did.

As regards “value”, IGCs who persist in confusing “member experience” with “member outcomes” should be reported to the FCA for dereliction of duty.

It is all too easy for the marketing departments of insurers to pull the wool over IGCs eyes with talk of “portals” and “member journeys”, “modellers” and “Gamification”, but this is all cheap to deliver smokescreen.

It is time that the policyholder is given a clear value for money score on their workplace pension as a whole, with evaluation of the plan’s capacity to deliver “to and through” retirement and an assessment of the risk adjusted performance of the plan in one holistic number. Anything more complex will simply not make sense to members.

By reporting simply and holistically against clear measures, we may be able to start comparing one workplace pension’s VFM against another.

IGCs cannot in themselves – improve the member’s VFM. But they can put pressure on insurers to lower charges, improve funds and make it easier for policyholders to save and spend their money.

In order for them to do this they need to demonstrate they represent the authentic voice of the policyholders, they have a proper view of what they consider value for money and that their assessment is based in quantitative fact and not in the eye of the insurance company’s marketing department.





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How can savers be encouraged to engage with their savings?


pension bee trust pilot

Engagement engendered by trust

This is the 4th of eight blogs considering the questions put to us by the Work and Pensions Select Committee.

WPC questions

Today’s exam question…

How can savers be encouraged to engage with their savings?

Quick answer; either we can convince people to engage directly with their investment, or we can get people to engage with  stewards or we can offer digital engagement. But we should be wary of ever expecting most people to pay much attention to their pension, most people just want to “know where to sign”.

  1. Direct ownership

People like owning possessions, but how many people would count their pension fund as their possession?

There are real problems with agency here. In practice very few people choose the assets into which their pensions invest, the complex array of intermediaries within a modern day SIPP, show just how far from the asset, the beneficial owner of the SIPP has drifted.


Source – FCA

“SIPP” stands for self-invested personal pension but in practice there is are at least five intermediaries between the investor and his/her money.

This perplexing complexity is the result of competing claims from each intermediary for hegemony in the client relationship. But in practice it is only the financial advisor who directly communicates with the investor.

If we are to get people back in touch with their savings, we are going to have to do something about these multiple agents. We need to get back to owning our pensions and that means having clear visibility about where money is invested.

People want to invest well

At a recent meeting of the Defined Contribution Investors Forum, Ignition, a communications company, demonstrated the frustration ordinary savers had , when wrestling with where their money was invested. A common thread to interviews was that people assumed their money would be invested responsibly. When they found that this was an “optional extra” they became agitated and even angry.

People do not expect to have their money invested in arms , or with polluters or in organisations that don’t behave responsibly to their staff, customers or shareholders.

In contrast , when investors were shown that they were invested in projects with a strong social purpose, they were proud, wanting to explore their ownership, eager to do more of the same.

Share Action have been making this point for many years. If we want to engage savers, especially younger savers, we need to get them involved in the story of their investments. We need them to be able to explain what they are doing to themselves and others.

But the problems of agency too often prevent this.

Share action report

The alternative way

Over the past four years I have been investing with Legal and General and am proud that I am now investing my workplace pension in a fund called Future World,  I am an evangelist for this fund which was created for HSBC’s staff pension scheme by people I know and trust. I am a fortunate person in that I have a clear understanding of the who, how and why my money is invested.

Not only am I invested in it, but my 20 year old son is also investing his meagre earnings in this fund, so are many of my friends. I was really delighted when Pension Bee, who offer a simple SIPP, offered this fund to their investors. I’m proud that one of our clients, RSPB, now offers this fund as part of its default for workplace pensions.

The  fund does good things with my money and I am really keen to see how my future contributions are invested. It is fair to say that a really well invested fund, has excited me to save more.

Seeing what is going on

They haven’t done it yet, despite promising me they would. Nigel Wilson and John Godfrey – who are two of the bosses at L&G want to put the investments of L&G on google maps so that as I travel around Britain, they can spring out at me and remind me of what I own.

This – in extreme form – is what I want. Everyone I tell about this get’s excited by the idea.  So why hasn’t it happened yet?

I reckon it’s because companies have become terrified of their customers. Legal and General regularly tell me how I – as an adviser – can have access to all kinds of information that adds value to my relationship with my clients, but when it comes to my own investments, I am constantly confronted with warnings that I am not a professional investor and that I should talk with a financial adviser before making any decisions.

I found this problem when I was in Port Talbot. Many of the steel men I spoke to told me that they had workplace pensions with Aviva (Tata’s auto-enrolment supplier). When I asked them why they didn’t use their workplace pension for the investment of the transfer they were taking from their DB plan, they looked perplexed. Not one of them had had this option discussed with them by their financial adviser. Instead they had ended up in SIPPs of the type advised above.

Once again we are allowing the complexities of intermediation to get between us and our savings. Had these steel men invested in the GPP, most would have paying well under 10% in terms of charging, and they would have had direct access to information on the funds into which they invested.

I am coming to the conclusion that nobody, not the intermediaries, the regulator or even the employer is particularly interested  in direct investment. When I asked Aviva why the website they had put up for Tata staff, had not been advertised as part of the “Time to Choose” communication program, I was told that neither Tata or Aviva were wanting to promote what would have been seen to be a “non-advised solution”.

direct investment

The site the steelworkers didn’t see

How do we dis-intermediate and find our way back to our savings?

If my contention is correct , then I think it is time we started investing, not on the basis of abstract concepts such as “anticipated returns”, “attitude to risk” and “risk models” , but into things we understand.

2.  Trusted stewards

The direct ownership model – outlined above – represents  ideal engagement. But as mentioned immediately above, it is unlikely that most people will want to pay sufficient attention to their investments. For most of us, it is enough to know that we have stewards looking after our assets, ensuring we get value for money and that our assets are invested responsibly.

When acting responsibly, as happens in many occupational trusts, the trustees are known to members and respected as their representatives in everything from funding negotiations (even in DC) to the choices of investment managers and products.

Similarly, some IGCs have created forums for employers and employees and are liaising with their product provider (insurer of SIPP provider) on member’s behalf. IGCs and Trustees are our stewards and can – in time – become as trusted as DB trustees have been.

For stewards- whether IGCs or Trustees, to be trusted, they must be visible and they must engender trust through their actions. Sadly – too many of our stewards are not up to the mark, we need younger, more diverse and more enthusiastic stewards than we have today.

They need to be familiar with how member’s money is invested and act as our agents where we cannot act ourselves. This might include, for instance, exercising influence on managers in using voting rights and reporting on their activities through Chair Statements and IGC reports in a way that genuinely engages members in their pension funds.

Similarly, IGCs and Trustees should be the independent arbiters of the value for money that members are getting from the products they are offered by providers. Presenting the performance and costs of funds (for instance) in a meaningful way – allowing people to compare funds and platforms in a simple way, meets member needs. The DWP get this, their latest consultation on value for money specifically calls for value for money measures to be published online by occupational trustees. The FCA are expected to follow with instructions to IGCs.

In short, Trustees and IGCs could and should have a vital role in helping members to get to know their pension, but we are a very long way from this position at the moment.

The  culture that allows the positions on IGCs and Trustee boards to be dished out as sinecures, must cease and instead we need new blood.

3. Digital engagement

Much has been made of the power of a single platform run by the Government which allows people to see all their pensions in one place. Over 100,000 people are reported to have requested the DWP to offer such a “pension dashboard”.

There is clearly demand for such a service, though the DWP are understandably reticent about committing to it. I have written at length about the rights and wrongs of who provides the dashboard, but fundamentally we need at least one – and probably multiple dashboards.

The advent of “open banking” has exposed the lack of digital innovation in pensions. People expect to see not just what they’ve got , but what it’s worth and even whether it’s any good.

Technology now allows us to set up secure systems to scrape data from a variety of sources to provide real time information to people looking to know what their pensions pots are worth and what to do with them.

The development of means – not just to show their money – but to enable people to do things with their money, is not far away.

This is particularly the case with older people. We hear this week that 40% of the over 65s now shop on line (four times up on 5 years ago). It is surprising that there is no pension aisle in the moneysupermarket, no way to Go Compare pensions.

If pensions are to be accessible through dashboards, the comparison sites – including Comparethemarket, would be a good place to start.

Instead of excluding pensions from the digital revolution, the pension industry and Government should be working with the digital comparison sites to bring pensions to the people.


This long blog has explored the three best ways to get pensions to the mass of us who don’t do pensions. In truth, even if we got all three ideas working properly, there would still be a majority of us who would not pay attention to our pension.

We should not rely on “engagement” as a panacea to under-investment in our futures. The tough truth is that to have more in retirement, we need to save more, and the engine room for saving is the nudge mechanism we call auto-enrolment.

Like it or not, nudge works. The various “nudge” ideas being touted about – such as the “sidecar”, depend to work on people not being engaged, but saving on auto-pilot.

For most of us, “engagement” will happen when people have got sufficient savings to make them worth engaging with. We need to make it easier for people – when they want to engage – to engage- but we should not try to coerce people into engaging with pensions if they see no need. Such people need to be nudged to save – they can engage later!







Posted in auto-enrolment, pensions, WPC | Tagged , , , , , , , , | 7 Comments

Higher costs – lower pay-outs? Fact or fiction.


Shedding light on financial markets

This is the first of seven blogs I will write, that will by September 3rd, form my submission to the Work and Pension Select Committee’s inquiry into pension transparency.

Today’s exam question is;

Do higher-cost providers deliver higher performance, or simply eat into clients’ savings?


My Simple answer;

So long as we have the right data and the means to analyse it, we can answer that question “fund by fund”, “product by product”.  The aggregate of all the answers will eventually enable us to generalise.

There is no short cut – the task is massive but it is one that is within the compass of data scientists and one that the pensions industry could and should undertake

We may start with a prejudice – we should end with clear evidence.

Consumers start with a prejudice, that prejudice is that we are being ripped off.

Robin Powell, the evidenced based investor, has written extensively on this topic, showing time after time examples where the money we’ve paid for “intermediation” simply hasn’t delivered value.

Not only is the “net of fees” position,  usually worse for the expensive investment option , but the gross performance – based on the net asset value of a fund from one point to another, is often demonstrably worse – the more meddling is done.

I deliberately use the word “meddling”, it’s not one you’ll hear in fund management circling, but that’s the kind of down to earth language needed, if ordinary people are to be part of the conversation.

Robin is probably right and his body or work has got us to a point where a Government Committee is asking the question. But we need to go beyond prejudice – there are no easy answers. Answers come from evidence.

Too much meddling.

The cost of “meddling” – buying and selling stock, purchasing derivatives to offer hedging, gearing, capping and collaring is met by the funds beneficial owners. Sometimes these costs are upfront and acceptable. Anyone who’s considered paying  a fee to fix their mortgage will be familiar with the trade offs. But whereas the banking instruments that provide certainty of outcomes when we borrow money are transparent, those that we buy to protect our savings (especially to provide protected growth) aren’t.

“Meddling” is almost always in the interests of the intermediaries who win whatever the outcome, but it is considerably  harder to see the benefit to the ultimate beneficiary. The nature of long-term saving leaves those who sold the product unaccountable for the outcome, while those there at the end of the investment can talk to the future, without reference to the past. You could call this the “asymmetry of accountability”!

Not enough accountability

Since most management teams within investment houses , move on regularly, the concept of ownership of “other people’s money” is low in priority. Sales targets are rather more common than “claims targets”. Unsurprisingly, there is little accountability for outcomes within the banks and fund management houses that create the products that we buy.

Nor transparency

The impact of the various instruments within the products we buy – on the returns we get, has seldom been analysed. But this is changing. The point of “transparency” in financial services is not just to shine a light on what is coming out, but to ensure that there is accountability for these costs (if only at the point of sale).

Fidelity has this month, launched in America, two funds with “zero pricing”. These funds generate revenues for Fidelity – purely from the lending of stock within the funds, to third parties (revenue kept by Fidelity rather than passed on to the investor). This transparent approach to revenue sharing is in sharp contrast to general practice. How many of us know whether stock lending is going on within our fund, who benefits from it and the risks attached? If it is possible to run a fund on stock-lending revenues alone, why do we pay so much for funds that are doing nothing more than the Fidelity zero priced funds? What are we paying our annual management charges for?

The lack of transparency among banks and investment managers around these questions, has led to a lot of head scratching not just among consumers. It’s also excited Regulators. Last year, the FCA decided to do something practical to improved transparency at an “institutional level”. By “institutional”, they meant  “business to business” . It was felt that if professional purchasers of fund management (including pension fund trustees), could find out what the real cost of all this “meddling” was, then the end consumer would follow.

The result was the Institutional Disclosures Working Group whose task was to create a template that allows buyers to see what they’ve purchased and to monitor the money and the value of the fund management they are getting. This , alongside other regulatory measures (MIFID II, PRIIPS) will – it’s hope- mean that the asymmetries of “information” and “accountability” will be redressed. Consumers -whether institutional or retail – will have a way to address the WPC’s exam question.

We can answer the question using “value for money” as our measure.

The only way for us to know whether higher cost providers are giving us value for our money is through data. Many providers will talk of “engagement” as an end in itself and will point to fancy portals, dashboards and other gimmicks. These is really nothing but marketing , a way to throw the bloodhounds off the scent.

We answer the question by looking at the Net Asset Values of a fund from point A to point B and then compare it with the gross performance of the fund and the difference in terms of fund performance is the “money” we have spent on intermediation – on management.

We then compare the performance achieved on a “net to net” basis, with the promise made by the fund, that is the value. And once we can get the value and the money, we can get the value for the money.

If we want to compare the value for money of Fidelity’s zero priced fund with the equivalent VFM for the BlackRock, Legal and General or Vanguard equivalent, we can do. It may be, once we’ve assessed the risks of stock lending or the impact of reinvesting stock lending revenues in the fund, that Fidelity’s offer doesn’t seem so good after all.

Similarly, if we want to compare a complex structured product like a pooled LDI fund, we can use the same method – the same template and data capture, the same rigorous analysis of the resulting information. Nothing should be beyond the scope of data analytics, provide that the right data is captured.

If you do not supply the data, we must assume the worst

If a high or low charging provider will not produce the data needed to capture value for money, we must assume that they have something to hide. If we do that, then all kinds of red flags should be thrown and investors should look to leave in droves. Of course mass desertion from a fund causes its own problems, but it is the only sanction that us consumers have.

It is unsurprising that the trade bodies of the fund providers (ABI and IA) have fought tooth and nail against disclosures of net and gross fund performance and the breakdown of costs within their funds. The asymmetries described have kept them in clover for generations.

However, we are experiencing a revolution – a digital revolution – that means that collecting – analysing and publishing analysis is now cheap, easy and fun. I use that last word  with tongue in cheek!.

The illustration below, shows how I would like to see value for money scoring displayed. I would like to see my personal pension with Legal and General , compared with those of the alternative providers and I’d like to see the score displayed as simply as it appears on this mock-up below (all numbers fictional).

age wage simple

If we can see behind these numbers, the working that goes into these numbers, then we can answer the question set by the WPC.

But that task will be massive, it will involve analysing the funds of thousands of providers (both unit-linked and non-insured), it will involve analysing the contract and trustee charges of thousands of providers and schemes. In short it will involve “mapping the pension genome”, something that will be as important for our financial health as the mapping of the human genome was for our physical and mental well-being!


This and the following eight blogs will be submitted in their native form and that will include comments. If you want to contribute, either anonymously or using your real name, post a comment.

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

How a policeman may have changed pensions for good!

northumbria police

Mr N has just been awarded reinstatement to the Police Pension Scheme at a cost of £135,000. It’s a done deal, the cost is to the Northumbria Police , to the tax-payer – and may be partially offset by the remainder of any money he transferred out (via a CETV) in 2013 into a scheme that’s since failed.

Mr N is a policeman, I am not using his real name so as not to prejudice impending criminal proceedings that are being taken against those who engineered the sorry transfer.

You can read the history of this case in the “decision” of the Pensions Ombudsman (PO-12763) published here. It was published on Tuesday, the day that Mr N found himself back in the pension scheme he left 4 years before.

The story’s made BBC news – but it’s implications have yet to be understood in the pension world. When they are, Mr N may become as important as ” Mr Barber”.

Why this is so important

There are thousands of similar complaints to that of Mr N.  They follow the same path.

  • Financially vulnerable person approached by lead generator for “pension review”.
  • Qualified lead passed to financial adviser with a Pension Transfer Specialist
  • Vulnerable person sold an attractive investment option (without any real idea what he/she is buying
  • Trustees sign-off transfer on basis that a Pension Transfer Specialist is in place
  • Scheme goes tits up
  • Vulnerable member suffers agonies of remorse when he/she realises what’s happened.

But Mr N’s story is different, because Mr N was very brave and very determined and he beat the system that was set against him. Mr N hired help and with that help he won back his pension rights to the Police Pension Scheme. Mr N is now facing a legal bill of £25,000 because he didn’t get costs.

Why Mr N is a hero

I don’t use the word “hero” lightly, I used it in my conversation with Mr N yesterday and I want to explain why I admire him here.

The system likes to quote phrases like “caveat emptor” at people like Mr N. “It was his own stupid fault”. Mr N heard a lot of comments like this. Like one of the steel men  we heard from at Port Talbot, this made him very sad, depressed and it damaged his self-worth.

In the four years, Mr N has suffered anxiety and  depression and the impact of the scam on him and his family was nearly disastrous.

But Mr N pulled through. He instructed his own lawyer and (despite incurring £25k of legal fees which he is liable for), he took his case to pensions ombudsman. The tale he has to tell of the support (or lack of it), he had along the way from the people he put his trust in (his pension adminisrator, his independent financial adviser and the pension fund he transferred into), is barely credible. All were intent on labelling him the architect of his own demise. If you don’t believe me – read Anthony Arter’s “decision”.

Even when the Pensions Ombudsman made his preliminary decision earlier this year, this pressure did not relent. As Mr N told me from his come in north Newcastle yesterday, it was only on Tuesday evening that he could relax with his wife and drink a glass of wine in celebration.

He still has the £25,000 bill to pay.

Mr N is a hero because he fought a system that was shamefully set against him and he won.

He was not entirely alone, Angie Brooks helped him, if you want to read the full story- follow the link. She admits that she couldn’t help him much but she helped him find the right lawyer and made sure Mr N knew he was not alone. Mr N was also supported by Jon Douglas, a journalist who lives near Mr N and has produced a news article for the BBC’s You and Yours program, you can listen to the episode here, the pensions article is at 26 minutes 30 seconds.

Mr N was listened to by the Pensions Ombudsman- Anthony Arter – who took the time and trouble to understand – produce a decision and stand up for Mr N. I am very proud we live in a country where people like Mr N can get such justice, Mr N has not just got Mr Arter (pictured above) to thank, he has the Pensions Ombudsman’s office.

What the judgement means

Each case taken to the Pensions Ombudsman  is dealt with on its merits and we should be careful not to suggest that this case is a PPI style bonanza for anyone who has lost money through a pensions transfer.

But this judgment means that there is now an avenue for redress, for people who since the rules changed in 2013, have been clearly scammed.

The judgement gives those who feel that those who administered their occupational pension scheme did not conduct “due diligence” on where the money being transferred went, can be held liable – if it went to a scheme which was clearly a scam. In the Pensions Ombudsman’s view, Mr N’s scheme  was clearly a scam.

Of course the Northumbria Police  are able to have first call on any money left in London Quantum – hypothecated for Mr N, but as he wrote  in a mail earlier in the year,

I’m sure (the trustees) are trying to succeed and do a good job but due to red tape etc just spend spend spend without result

There is unlikely to be much for the Trustees to recover from the scheme Mr N transferred to, despite there being a bull market since 2014.

The net result of the judgment is that the Northumbria Police will have to fund the cost of reinstating Mr N themselves (as well as paying Mr N a small amount of damages).

The wider impact on pension schemes

If you are the trustee or sponsor or administrator of an occupational pension scheme, whether DB and DC – you should shudder.

The Pensions Ombudsman’s judgement is explicit

Having considered all the available evidence, I am satisfied, on the balance of probabilities, that but for the Authority’s maladministration Mr N would not have proceeded with this transfer and suffered a loss.

To put matters right, the Authority shall reinstate Mr N’s accrued benefits in the Scheme, or provide equivalent benefits, adjusting for any revaluation that has arisen since the transfer


The papers the Authority failed to deliver



The Pensions Ombudsman found against the Northumbria Police  because it failed:

  • to conduct adequate checks and enquiries in relation to Mr N’s new pension scheme; to send Mr N the Pensions Regulator’s transfer fraud warning leaflet; and.

  • to engage directly with Mr N regarding the concerns it should have had with his transfer request, had it properly assessed it.

The impact on Pension Scheme Administration

Most pension administration is outsourced by trustees to professional administrators known as Third Party Administrators (TPAs).

TPAs have generally considered, till now – that they are not liable for the destination of the money, provided they comply with the Law.

1.under section 48(1) of the Pension Schemes Act 2015, scheme trustees must carry out a check on whether members have received appropriate independent advice before permitting a transfer of safeguarded benefits;

2.under sections 98(2) and 99(2A) of the Pension Schemes Act 1993, a member loses the right to a cash equivalent if the scheme trustees carry out this check but the check does not confirm that the member has received appropriate independent advice; and

3.appropriate independent advice is defined in section 48(8) of the Pensions Schemes Act 2015 as “advice that (a) is given by an authorised independent adviser, and (b) meets any other requirements specified in regulations made by the Secretary of State”.

But the Pensions Ombudsman goes well beyond that level of due diligence

96.Turning to the Authority’s comments in respect of being entitled to rely on the relevant statutory discharge, I have found that the Authority failed to carry out reasonable checks before transferring Mr N’s pension and for this reason I do not find that it can rely on section 99(1) Pension Schemes Act 1993. It did not do “what is needed to carry out what the member requires”.

“What is needed” includes appropriate review of the transfer application, taking into account the law and regulatory guidance. “What the member requires” could only be established by ensuring that the appropriate due diligence was carried out, any warnings or concerns identified and brought to the attention of the member, and that the member then went ahead with the transfer, on a fully informed basis.

Although the Authority says it would not have been able to prevent Mr N from transferring out, I have found that Mr N would have acted differently had he received the appropriate warning from the Authority. On the balance of probabilities, I have found that he would have withdrawn his request.

I could summarise this by saying that the Pensions Ombudsman found that the Authority and its administrator’s did not exercise its duty of care to Mr N and is paying a high price for it.

Where does this end?

There is already a long queue at the Pensions Ombudsman’s door, it includes a number of former clients of Active Wealth Management and other firms who advised steelworkers to get out of BSPS. It will now get longer as other former members of occupational pension schemes, seek to get back on board rather than rely on depleted pension funds investing in everything from Cape Verde property to the Strand Capital fund.

Were these claims all to succeed, the liabilities currently expected to fall on FSCS , could fall on trustees – or their TPAs or their TPA’s professional indemnity insurers.

So the Determination will be being read with some interest by all these parties.


Mr N is a hero – but I can see him being cast as a villain

I will say this now, and hope that I am proved wrong. Mr N is likely to be considered not as I have described him, but as a troublemaker who costs shareholders and pension managers and administrators and trustees and sponsors and insurers money.

I expect to see the Pensions Ombudsman’s decision being challenged. It may be that legal arguments will prevent others being restored to their schemes.

Mr N took the pain of the past four years, perhaps advantaged by his being a serving policeman who was familiar with the workings of the courts.

But the strain that doing so put on him and his family was severe and it’s hard to underestimate his bravery. The criminal proceedings are still to come and I don’t want to prejudice them by publicising this Determination in an irresponsible way.

But  I will finish, by commending the Pensions Ombudsman’s Determination to anyone who is interested in justice for those like Sue Flood (a pre 2014 victim) whose losses and sufferings are just as great, but who risk being forgotten.

We do a great thing in running pension schemes for people and we should be aware that sharks live in the waters that surround them. £36.8bn was transferred out of our schemes last year and not all of it went to good homes.  This Determination gives those championing the Pensions Regulator’s Statutory Objective “to Protect Members” , will welcome this judgement.

Mr N is a hero!

mr N.png

He is no villain – nor are other pension fraud victims

scamproof scorpion

Posted in pensions | 7 Comments

Reach out and touch – success is a state of mind!


Yesterday the FT published an article with a headline many predicted we’d never read again.

“FTSE 100-backed pension schemes move from shortfall to surplus”

About the time the article was published I received a mail from someone who turned out to be the chair of trustees of one of these FTSE 100 schemes. Ostensibly this was about catching up with a mutual contact but it soon turned out that said trustee wanted a chat about his frustrations.

He was fed up with demanding money from his sponsor to plug what he considered a spurious pension scheme deficit, fed up with artificial funding targets that set the solvency bar ever higher and fed up with investing money into bonds at the wrong time.

I am not an expert in funding, but I know enough to sympathise. Apparantly he’d read one of my blogs (probably a FABI one) and felt like I’d provide a shoulder to cry on.

Need a shoulder to cry on?

First Actuarial provides a shoulder for frustrated trustees to cry on if you are

  1. An actuary fed up with working on “project fear”
  2. A trustee fed up with demanding money from sponsors, only to pour it down the drain
  3. A sponsor trying to run a business but being constantly harassed by actuaries and trustees.

We also provide shoulders to Financial Economists who have seen the error of their ways, Pension Regulators (ditto) and to the investment consultants struggling to come to terms with being regulated by the FCA.

Need a port in the twitter-storm?

If you find your timeline intruded by Financial Economists or their Bots, then tweet to @firstactuarial or @henryhtapper using #FABI.

We’ll calm the raging waters created by gilt plus valuations by smoothing your funding position using the ideas behind the First Actuarial Best Estimates Index ( #FABI).

We’ll call you and provide you with the love you need and deserve  – explaining how to avoid Financial Economists and their pernicious dictats!

We’ll speak with you with the tenderness that you need , having been brutalised by pensions these past ten years.

Reach out and touch!

You know that nothing worthwhile is ever achieved without taking on good risk. Reach out and touch the spirit of First Actuarial, a spirit of endeavour that sees “going for it” as good and “risk free” as a luxury your scheme and sponsor can probably not afford.

We’re entrepreneurs, we’re still in start up mode (though 300 strong with a £20m turnover). We disrupt Neanderthal thinking and encourage our people to think for themselves.

So if you are the Chairman of a FTSE 100 backed pension scheme or the humblest workplace pension scheme – reach out! We’re here to make pensions work and restore people’s confidence in their retirement planning!

Posted in advice gap, First Actuarial, pensions | Tagged , , | 1 Comment

Boomers struck down by Financial Constipation


Ok- so it’s American – but you get the picture!

I have four points to make about the figures published by HMRC on taxable drawdown yesterday

  1. The amount being drawn down is a dribble
  2. The drawdown is consistent over time – people are drawing down on average £30k pa
  3. These are the taxable figures- we can assume that 25% is being skimmed for tax free cash (which could be added into the totals to suggest total cash out)
  4. Boomers aresuffering a bout of financial constipation

But first – here are the numbers!

HMRC drawdown

The amounts being drawn down are a dribble

Here’s John Lawson’s perspective (which I share)


Not only is the amount coming out , puny, compared with the amount going in , but it’s puny compared with the pensions being paid from occupational pensions (four times as much). Perhaps more worryingly – the amount being drawn down is – in total- less than a quarter what was transferred out of DB schemes via CETVs. By any measure, drawdown is a half-opened tap .

The drawdown is consistent over time at £30k pa+

If you compare the growth in drawdown over time , you see a fairly consistent picture in terms of growth.payments hmrc

What appears to be going on is that people are drawing down more in the early part of the year and easing off in Q3 and Q4, even so – the typical annual drawdown is over £30k.

Since we know that on average , people have just over £30k  in their pension pots, this either suggests that drawdown is happening from the “rich person’s pots” or people are fully cashing in.

My suspicion is that it is mostly the former , but if we follow the 4% rule (where you only drawdown 1/25th of your pot value, this suggests that average drawdown pots are £750k + . If you add back in the tax -free cash, not shown in these numbers, then you’d expect drawdown to be a sport for pension millionaires.

The numbers are of course diluted by those with small pots taking all their money at once (which may be tax-efficient) and the odd Pension Muppet, taking all his/her money at once – making HMRC’s day. I know that someone will comment that there are the odd time when it is worth pension busting and paying 45% on most of it – but we are talking here of “mainstream”.

The alternative reading is that some people aren’t drawing down at the 4% rate , but burning cash at much higher rate – with heroic assumptions on mortality/inflation and investment growth.

Whatever way, these numbers do not suggest that people in drawdown are typical of the nation as a whole! I would characterise drawdown currently as a financial freak show.

These drawdown numbers may be undercooked but…

What we are being shown is what HMRC get via Real Time Information as the taxable element of money withdrawn. Up to 25% of all “crystallised” pots can be taken tax-free and probably has been, suggesting that the £17.5bn  drawdown since April 2015 probably needs to be inflated to something closer to £25bn.

Even so, this is a tiny amount of money relative to the amount paid from annuities, occupational pension schemes and of course the state pension!

The pension freedoms are in no way the universal payment system for the UK’s elderly population. Drawdown is a sideshow- a financial freak show. If the FCA considers that the exercise of pension freedoms is the critical success factor for retirement outcomes, they are ignoring the data.

So what is happening to all the money?

The official line (in the absence of comment from our Pensions Minister) comes from a former Pensions Minister – Steve Webb

These figures show the continuing popularity of pension freedoms. In the latest three months over a quarter of a million people took the opportunity to make flexible withdrawals from their pension, and withdrawals were at a record level. The key challenge is to make sure that more people take advice and guidance when deciding how to access their pension savings so that they do so in a sustainable way that meets their objectives’.

Well 94% of us are not taking advice Steve.  The 6% of us that are – may be drawing down advisedly – but pension freedoms, like financial advice, seems to be a minority sport!

So where is the money going – I suggest our pension savings are currently going nowhere. As John Lawson’s tweet suggests and the ONS MQ5 tables confirm, money is going in but it’s not coming out. We are hoarding our pensions – or perhaps suffering from FINANCIAL CONSTIPATION.

Perhaps this is because, finding a way to spend our retirement pots is – as William Sharpe puts it – “the nastiest, hardest problem in finance” . That comment comes from the man who figured out how to price portfolios via the capital-asset-pricing model, and how to measure risk via the “reward to variability ratio,” or what has come to be known as the Sharpe ratio.

If William Sharpe can’t solve the drawdown dilemma, is it any surprise that neither can the 94% of us who don’t have brilliant advisers – who can!

The obvious conclusion to all this, is that we need a new way to spend our savings – and we all know where I am going on that.


Posted in advice gap, Blogging, Fungible, pensions | 3 Comments

Pension Bee ask “who’s Robin who?”


Pension Bee Robin HoodPension Bee don’t play by the rules. They are a pension provider that isn’t run by actuaries. They give support to their customers through enthusiastic bee-keepers.

bee keeper

They run an efficient pension savings plan that offers everyone access to quality funds with a minimum of fuss (and cost).

They have the tools to help us bring our pensions together and best of all, you leave their website and app feeling brighter and more confident about your financial future, than when you landed there.

Pension Bee are also campaigners for better retirement savings. They run the Robin Hood index which benchmarks the pension villains against the pension heroes.

Published this morning. Here are headlines from this their third Robin Hood Index.

Pension BEE 3

Research reveals the best and worst of the pensions industry

  • Slowest provider takes almost two months to transfer a pension on average
  • Quickest provider takes less than two weeks
  • One provider charging customers an average annual charge of 62.1%, while another goes as low as 0.3%
  •  Savers still facing extortionate exit fees to move their pension from a handful of providers

PensionBee has analysed the transfer times, average annual charges, and exit fees imposed by 35 of Britain’s biggest pension providers.

Xafinity transfers taking an infinity

The online pension manager analysed a sample of 7,292 transfers to their platform, and discovered that the firm responsible for the slowest average transfer time is Xafinity at 52 days. This is seven days longer than the second slowest company, Now: Pensions, with Mercer, Towers Watson and Aon Hewitt also proving similarly sluggish.

5 slowest transfer times Position Provider Average transfer time
1 Xafinity 52 days
2 Now: Pensions 45 days
3 Mercer 44 days
4 Towers Watson 41 days
5 Aon Hewitt 41 days

Source: PensionBee.

Total sample size of 7,292 from January 01, 2018. Each individual provider has a sample of at least 5 transfers

However, while these providers are still putting up barriers to transfer there’s evidence others are taking a more positive approach, as reflected by the transfer times of Aviva, Scottish Widows, B&CE, Canada Life and Phoenix Life, who all manage to transfer a pension in under two weeks on average.

Now: Pensions are the most expensive annually

In addition to examining transfer times PensionBee also analysed a sample of 1,056 pensions. It found an average annual charge of 62.1% imposed by Now: Pensions – by far the biggest in the study.

PensionBee calculated the charge by adding up all fees, including fund fees, fixed £-based fees and any other policy fees that may apply. In the case of Now: Pensions, a £-based fee of £18 (in addition to a %-based fee of 0.3%) is applied to fairly small pension values (approximately 40% of the pensions in the sample of 91 were below £100).

The result is a high charge as a proportion of the pension pot. Currently these charges are permitted by the Department of Work and Pension’s charge cap legislation.

5 worst providers by average annual charge Position Provider Average annual charge
1 Now: Pensions 62.1%
2 Zurich* 5.9%
3 Aegon 1.1%
4 Phoenix 1.0%
5 Nest 1.0%

* predominantly personal pensions

Source: PensionBee. Based on a total 1,056 annual charges found between June 2017 and March 2018. Each individual provider has a sample of at least 20 observations.

No Robin here

Largely though, a number of providers appear to be operating a fairer fee structure. Legal & General charge the lowest average annual charge at 0.3%, with Fidelity and B&CE following closely with fees of 0.4% and 0.5% respectively.

5 best providers by average annual charge Position Provider Average annual charge
1 Legal & General 0.3%
2 Fidelity 0.4%
3 B&CE 0.5%
4 Standard Life 0.8%
5 Aviva 0.8%

Source: PensionBee.

Based on a total 1,056 annual charges found between June 2017 and March 2018. Each individual provider has a sample of at least 20 observations.

Phoenix Life enforcing the biggest exit fees

As part of their analysis PensionBee also examined exit fees across 5,431 pensions, with their research revealing that 305 had exit fees present. Staggeringly, the biggest was a £12,245 charge from Phoenix Life – who are entirely responsible for the top five exit fees in the study.

5 biggest exit fees Position Provider Exit fee (£)
1 Phoenix Life 12,245
2 Phoenix Life 10,543
3 Phoenix Life 9,413
4 Phoenix Life 9,206
5 Phoenix Life 7,239

Source: PensionBee. 5,431 from June 2017 to April 2018, of which 305 had exit fees.

The research further indicated that the highest exit fees are on with-profits pensions termed ‘market value reductions’, meaning they escape the FCA’s focus and rules for now.

Staggeringly, one Phoenix Life exit fee would eat up 96% of one unlucky saver’s pension – the biggest percentage in the study – with Abbey Life and ReAssure imposing similarly excessive exit fees.

5 biggest exit fees as a proportion of a pension Position Provider Exit fee as a percentage
1 Phoenix Life 96%
2 Abbey Life 69%
3 ReAssure 56%
4 Abbey Life 47%
5 Phoenix Life 45%

Source: PensionBee. 5,431 from June 2017 to April 2018, of which 305 had exit fees.

What’s the big message for the Pension Plowman?

People have no way of knowing where they are incurring costs and how their costs compare.

Of course the Robin Hood Index is only comparing one side of the value for money equation and people need to understand what value they’ve been getting from their pension.

Unfortunately it’s even harder to work out “value” than “money”.

The numbers published in the  Robin Hood Index are PensionBee’s and so are the comments. A more in depth analysis of what you are actually paying might include some hidden fees from transition costs. The value of a retirement savings scheme has to be found from a careful analysis of past performance – and its drivers. There need to be a separation of luck from judgement by looking at both the reward from the fund and the risk taken to get that reward.

The work started by Pension Bee, needs to be picked up by others. People need to be able to look at their pension pot and consider whether to keep it or transfer it to a better pot. People need to know when not to transfer too, which is why the analysis of exit penalties is important. A lot of the high exit penalties shown here, apply only to certain people. The over 55’s for instance, often get an exit-fee amnesty (as a result of Government intervention).

I stop short of saying we need an adviser to help us do this. 94% of us don’t use advisers and – as there aren’t enough IFAs to go round, a rush to advice could swamp them.

The long-term answer is for the kind of analysis started here, to continue across the whole pension genome so people can compare apples with pears without bothering advisers.

And finally!

After that little lecture, here is the PensionBee video, which is well worth watching!

You can find out more about the Robin Hood Index by reading the full report here

You can read the Beekeeper’s own thoughts here

romi savova

Queen Bee – Romi Savova!


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

Bill Galvin – on accountability at #USS

Bill Galvin

Bill Galvin

If Jo Cumbo hadn’t mentioned it I’d have missed it. Bill Galvin- erstwhile CEO of the Pensions Regulator and now boss of the University Superannuation Scheme wrote a thought piece on the USS blog – it’s here.

It’s a meditation on accountability.

It’s called  “What should our members think about USS”, which suggests that there’s a right and wrong answer. I’d have thought a more pertinent question would have been “what do our members think about USS?”. In footballing terms, the members are the dressing room and the Bill is the manager.

We all know that there are two sides to the debate and most readers of this blog knows who is on whose side. The management of USS and the Trustee Board are supposed to be about making sure pensions get paid and that means they have to appease both the employers – who sponsor and the members who also sponsor – but benefit from the fund.

Bill sums up his dilemma in very simple and human terms

it is quite clear that the cost of insuring the future is even more expensive than it was at the last valuation, and the risk associated with going against the general consensus on future returns is higher, and so potentially more catastrophic if proved wrong

Though he doesn’t say so explicitly, the “general consensus” almost certainly means a strategic shift to bonds from more volatile growth assets. No manager wants to be out of step with the consensus, unless it is clear that he is the “special one”. Bill does not strike me as wanting to be considered a “Mourinho”.

But nor does he want to be reviled on the terraces. It must be daunting going to work with social media buzzing in your ears. Back in the day, managers were not accountable as members had no voice. University lecturers (the bulk of the USS members) are both vocal and articulate. Their students have been vocal and so have the parents of those students, these are the ultimate sponsors of Universities.

It is normally considered a good thing for stakeholders to participate in  governance. But the debate over the future of the USS has alarmed its management.

It has been alarming, therefore, to see the confusion, concern and distrust that some of the commentary has generated amongst our members

There was a time, when decisions on pension schemes were left to employers and trustees and regulators. There is a hint of nostalgia for this time in Bill’s admission that

Whatever the contributions of others might have been in that outcome, we clearly failed to communicate simply enough, convincingly enough, or from a basis of sufficient trust, to make the key messages clear

What “should”  the members think?

In the phrase “key messages”, I suspect Bill implies “the truth”. USS failed to properly communicate the truth and allowed the commentary to get in the way.

It must be frustrating for USS, who have been candid throughout, to be cast as obscuring the truth. I haven’t read all their communications , but what I’ve read from USS has offered insights into the competing pressures on the scheme.

The frustration must be borne from powerlessness. Ultimately Mourinho is accountable both to the Shed (or the Stretford End) and the oligarchs and may end up pleasing neither.

But I think Bill Galvin misses the point in blaming himself for poor communication. USS has communicated well – factually and for the most part without bias. What he is facing are two completely different paradigms of thought. On the one hand there are people who see USS as impairing the ability of our Universities to function and on the other people who see it as essential to maintaining the support of their greatest asset the teachers. Both views can use the information coming from USS to support their positions- and both do.

It is not the fault of USS’ communications that “commentators” take positions.

Bill Galvin has something of the Gareth Southgate about him. Amid all the noise that is going on around him, he continues to run USS – and run it very well. He will, so long as he pursues this path, have done his job. It is not his job to manage industrial relations or indeed to control social media. His authority, comes from his focus on getting the scheme to work properly. Like Southgate, he can keep smiling whatever the members and employers do. The members “should” thank him for that.

What do the members think?

The University Lecturers think a lot, and they talk amongst themselves on and off social media. They are well organised and have thought leaders of their own – some have written on this blog.

Their views will be expressed not just through words but through actions. Having a son about to start his third year at college who lost a large part of his second year’s teaching, I hope that they will not strike again. But I respect their right to strike on a matter as important to them as how it is they get paid.

What do the sponsors think?

I suspect that those who run universities have been surprised by the depth of feeling among members about keeping their DB scheme open.

As Bill Galvin writes in his piece

Ultimately, our task has been to make assumptions about how the world will turn at a time of significant uncertainty. These conditions have seen the number of private defined benefit pension schemes in the UK that are still open to new members fall from circa 3,500 in 2006 to around 700 today.

Most employers have given up in the face of these challenges.

That UUK has not “given up” is because the members have not let them. UUK is learning from the conversation that is going on. They are reacting not to what members “should think” but what they “do think”.

“A time of significant uncertainty”

It is easy to get lost in the madness of Brexit and the 2008 market crash and consider the last ten years as a “time of significant uncertainty”.

But the fundamentals of Universities remain unchanged, they teach and research and provide the nation with an underpin of learning which is part of the nation’s fabric. There is no reason to think of the uncertainties as being of great importance in that context.

The certainty of reward provided by a Defined Benefit Scheme is in line with the greater certainties that Universities bring us. Ultimately, I think Bill Galvin gets this.

As he concludes

We do not believe that providing defined benefit pensions is impossible, but it must be done in a framework that allows adjustments to be made that ensures the scheme can avoid the worst future outcomes, and sometimes these can involve challenges for certain cohorts of members.

Having read Bill’s blog three times, I am heartened that he will continue to run an excellent scheme, whatever anyone else should or does think!

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

Isn’t it time we thought of pensions as insurance (again)?



Yesterday, I wrote of the positive future that I saw for collective schemes, if they could rid themselves of the pernicious effects of financial economics. I based my arguments on my perceptions of the impact of mark to market measurement of scheme assets and liabilities.

In this blog, I want to step off-stage and look at some of the behind the scenes changes in the way we manage and consider pensions, comparing the financial environment when I started work (early eighties) to today.

The way things were

One of the first things I learned in my training as an insurance salesman was that there were three insurables; people could insure against dying too soon, getting sick and living too long. Occupational pension schemes paid to survivors on death in service, paid ill health pensions and offered early retirement and to those who made it to retirement, they paid a pension which lasted so long as the pensioner and spouse did.

When I sold personal pensions, we were told to offer and often insist that individual life cover and waiver of premium were included in the product. It was taught to us that this is what company pensions did and they did it for good reason. It was the concept of insurance that prevailed.

The way things are

Nowadays, advisers tend not to engage people with the insurables. Most people are in workplace pensions which use “nudge” rather than advice to get people saving. the concepts of integrated health, life and pension cover within an occupational scheme survives only in a few mighty pension schemes which self-insure. For the most part, PMI, PHI. CI and DIS are components of “employee benefit packages”.

The link between your pension and your life and health cover has been broken as has been the link between member and trustee. Very few people think of death in service cover as part of their pension (even if technically it forms part of a pension arrangement). People know that the contract is between them and an insurer – the employer is doing no more than paying a premium.

More importantly, the concept of the employer being financially  responsible for the longevity of staff- has disappeared. One of the things I heard from older members of the British Steel Pension Scheme was the complaint that the company no longer wanted to look after them (as it had their fathers and grandfathers).

Nowadays, many pensioners find themselves being paid not by their employer’s trustees but by organisations they have never worked for- PIC, Paternoster, a range of insurers and the PPF. This is the sad consequence of buy-out or employer failure – either voluntarily or due to corporate failure, the idea of the employer as insurer against old age, has all but gone.

The new contracts – financially engineered.

The concept of insurance as a contract between two parties hasn’t just gone from company pensions , it has gone full stop. Little risk is taken directly by insurers, most is laid off to other (re) insurers or the capital market. Banks now use contracts for difference to take risk on all the promises that used to be made by pension schemes.

It is not the “tail risks” (the exceptions such as those living beyond 100) whose risks are being passed on to banks, the fundamental investment of the pension fund is now supported by a range of derivative products provided by the capital markets, designed to meet the demands of financial economics. The most common Financial Economics strategy is Liability Driven Investment which is a way for companies to invest more than they’ve got to get more bonds. But almost every new idea that is touted by the investment consultants contains some exposure to “structured products” – artificial constructs designed to protect trustees from perceived risks.

This movement away from directly invested assets into structured (or artificial) products, puts still more distance between the employer and staff. It is now the trustee who is responsible for investment decisions (though most trustees struggle to explain what decisions they have taken).

The struggle to understand

I have sat in trustee meetings of some great pension schemes, in which all but a handful of the people in the room have any idea what is being decided upon. The few who know are typically on the sales side and this asymmetry of information is deeply worrying.

It may be that a bank may be offering fair value on a longevity swap, but if there is no understanding of what fair value looks like, how can any of the buyers be sure. This worry was shared last week by the Competition and Markets Authority who showed how Fiduciary Managers are almost totally unaccountable for what they do, partly because they have outsourced the skillset that trustees had, to know what was going on.

The same phenomenon is going on in personal finance where, having abandoned pensions for wealth management, insurance for investment and products for platforms, people are now further away than ever from the fundamental reasons they invested their money.

It is all too easy for us to consider pension freedoms as the freedom not to consider pensions and we are easily beguiled by the wealth management into considering our pension pots as a tax-advantaged means to create and maintain wealth, rather than as an insurance against old age.

Into this world of mysterious tax-planning arrive the banks with various structured notes that – as with company pensions – create artificial solutions to problems we might never have thought we had.

The more complex the better – for some advisers – who find such structured products ideally suited for them getting paid.

Everywhere we look , we find financial economics being used as an excuse for those with a little knowledge to sell expensive and incomprehensible products to people who have lost confidence to take decisions for themselves. It is difficult not to conclude that this was the point of adopting financial economics in the first place. It puts a small group of experts in charge of a large amount of our money and it gives them the keys to the fee-extraction machine.

Transparency is key

I am constantly being requested by the Financial Economists to read long and complicated books to understand what they are about. I resist doing so partly because I am not good at maths, partly because I am time poor but mostly because  I don’t see why I need to become an expert in something that is trying to replace something that works perfectly well.

The basic principles of an occupational pension scheme are understandable – even to a non-actuary like me! The concepts of prudence, asset matching, liability management and discounting are not beyond even my poor mathematical brain.

I can understand why it is sensible, efficient and safe to keep collective pensions open and why closing them is not good news. I understand why collectives can provide insurance again insurables in a way that individuals can’t and I thoroughly get economies of scale created by employers pooling assets and risk under the oversight of trustees.

Why can’t we go back to the good old days when we could see what was going on, accept risks for what they are and use our best endeavours to insure each other against living dying too soon, getting too sick and living too long?

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

Ros Altmann’s right about dashboards.

Ros new

It’s good to see Ros Altmann contributing to the debate on the pension dashboard – it’s particularly good that she chose to do so on this blog. (comments). For those who don’t press links – here’s what she has to say

Dear Henry

I do agree that it was never realistic to expect the Government itself to fund Pensions Dashboard.

However, I do believe it should funded – by the pension providers who should be required to enable customers to see all their pension savings in a standard format, in one place.

That will involve plenty of work of course, but what seems to have been forgotten too often in this debate is that pension providers receive billions of pounds a year in both tax relief and pension contributions, courtesy of the taxpayer.

Having received so much money over so many years, surely it is not unreasonable to ask them to invest in serving their customers better, ensuring their pension data is reliable and secure and funding a dashboard.

Expecting the Government to pay for this seems unreasonable – but Government should and could facilitate it. Requirements for providers to upload data, for example, would help. I can’t see DB getting on a dashboard any time soon, but DC auto-enrolment pensions should be on there at the very least.

Pensionsync could actually develop an independent dashboard, but it needs funding.

You are doing great work Henry, helping to explain pensions to people.

Thank you.

As it happens, I helped the Sun set up its super non-digital pension dashboard yesterday, helping Dan Jones and Harriet Cooke to explain pensions to millions of people who read that paper.

Paul Lewis had a bit of fun at my expense


Well he has around 15 times more followers than me so the “Lewis empire” not to mention the “Altmann” empire are what really matter

Pensions need to be explained for what they are and the Lewis’ and Altmanns are there to do it!

And they could do worse than cut out and keep the Sun’s simple

“eight point plan to show what your retirement pot is”

the sun.jpg

Not for the first time – Ros is right

Although I am always disagreeing with Ros, we agree on the main things, which is that older people need pensions to replace their income lost when they get too tired to work and set off on the longest holiday of their lives.

That they do so without a dashboard, a steering wheel -let alone some financial satnav – is a scandal.

The pension industry has the money to build the links and organisations like pensionsync have the capacity to deliver the kind of information that the readers of the Sun need to manage their money through their later years.

I suspect that most of these people will have access within a decade to collective schemes which can give them a wage for life by pooling their savings and providing them with an insurance against them living too long.

Those who prefer to have a huge capital reservoir from which they can drawdown, will be able to do so from a single well managed pot – provided we can get “Go Compare” into pensions. We need a pension aisle in the “Money Supermarket” so we can compare the pensions market as we do those for other insurances.

We need to protect the vulnerable (that’s most of us!)

The financial services industry does a good job of looking after the 6% of us who take financial advice but little for the 94% who don’t.

The story of Peter Lord in the Times this weekend, echoes those of decent people in Port Talbot and round the country whose trust has been abused by a handful of advisers.

Those advisers are the product of a system that does not do enough to help ordinary financially vulnerable people from being scammed. I am not talking here about making people financial economists, but of giving people the basic tools to make good decisions for themselves.

Digital dashboards that take people along the journey laid out by the Sun’s Mr Money, are what’s needed. We don’t need to wait for a big puff of smoke from the DWP to do this kind of work, we can get on with it right now.

Protecting the 94% of us who don’t have financial advisers from making bad decisions is more important than worrying about who does what. The 10m new pension savers who auto-enrolled and are seeing their pots swell as contributions increase, want more than they are getting.

So Ros Altmann is bang on the money in joining PensionSync. That’s precisely the kind of organisation that can put us back in touch with – and control of – our savings.


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What have we to lose from CDC?

This article was first published in Professional Pensions.


Machiavelli’s commented thatthere is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things”.

For the DWP to enable Royal Mail to offer its 141,000 workforce a DC pension that pays a wage for life undoubtedly falls into the “new order of things” category and is confirming the dictum.

The criticisms of CDC range from IFAs who call it “with-profits in disguise”, through policy makers worried it carries with it risks of inter-generational unfairness. Add to this worries about nuts-and-bolts issues on scheme communication and it’s not hard to see why regulatory progress since Pensions Act 2015 has been so slow.

These are valid challenges to CDC. If CDC cannot demonstrate that it can be more transparent than with-profits, that it insures across rather than between generations and that it has proper nuts and bolts– it will fail. The next 18 months will determine whether the abstract arguments for CDC can be turned to practical application.

That the Work and Pensions Committee announced an inquiry into CDC while Royal Mail and CWU were finalizing their Four Pillars agreement is unlikely to be a coincidence. As their final report puts it, the agreement

As well as being a model of constructive industrial relations… opens the door for CDC to move from abstract idea to practical reality. This could transform the UK private pensions landscape”

The Committee calls on Government to open the door not just to Royal Mail but to “accommodate mutual, multi-employer and standalone schemes”. The Committee hints at a broader vision where CDC pensions become a default investment pathway for people transferring-in DC pots. It specifically talks of CDC as a means for the self-employed to provide themselves with a replacement income in later life.

This is precisely the innovation that the FCA has been calling for in its retirement outcomes review and it is unfortunate that the Committee’s report was not published prior to the FCA’s review’s findings.

The FCA will no doubt be looking with interest at the Royal Mail solution in the light of its finding that 94% of us are not taking financial advice on retirement affairs. The simple choices for members around CDC (to join or not to join), make such schemes attractive to the silent majority who are showing no aptitude for or interest in engaging in pension matters.

The advantages of open collective schemes are also evident in investment strategy. Since CDC schemes would remain open across generations, they could invest in patient capital projects with commensurate benefits in terms of investment performance.

The long investment horizons encourage the kind of investment strategies that characterised the early days of Defined benefit investing when the emphasis was on buy and hold growth strategies rather than liability matching. The implications for our wider economy of collective schemes returning to these principles appear entirely beneficial.

Finally, and most intuitively, CDC makes sense as a means of solving one of the most intractable of economic problems, the money to set aside to provide yourself a wage for life. Pooling longevity risk creates a mutual settlement that eschews both “boring” annuities and “scary” drawdown

All of which, begs the question, just why is this “new order of things” getting such a lousy reception?

Is it, as Machiavelli supposes, that

“the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order; this lukewarmness arising partly from the incredulity of mankind who does not truly believe in anything new until they actually have experience of it”.

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CMA investment probe shock; the big three breathe again!

icarus 2

The fallen Icarus – wings clipped when he flew too close to the sun

It shows the distance between the consumer and the investment consultant that all but a handful of readers will know what this headline refers to. To the general public, the Competition and Markets Authority’s probe into the opaque world of investment consultancy is an irrelevance. Fiduciary Management – quoi?

But of course the CMA referral of investment consultants  by the FCA was and remains massively important. It trims the wings of a small coterie which had lost accountability, assumed invulnerability and were pretty well unsupervised.

The 300 page report into the matter, published yesterday, is considered a major event by the coterie, though it’s a bit of a yawn for the rest of us.

The High and Mighty got off lightly

The headline sanction (remedy) was to have been the break up of the oligarchies at Aon, Mercer and WTW so that the consulting and investment management businesses operated independently of each other. The CMA thought better of this, no doubt under considerable pressure from the various lobbies within this arcane world.

I’m not overly fussed, so long as these businesses recognise that pension schemes are customers and not cannon-fodder, the CMA will have done its job.

The sanctions (remedies) that they are recommending include some tough asks. Investment Consultants will not find the FCA an easy organisation to be members of , they ask awkward questions and have a habit of closing you down if you don’t do what you should.

I’m less impressed by the sanctions (remedies) on the buy-side. At the heart of the problem, is that consultants have trustees in their pockets. This is no longer as overt as it was (not so long ago – corporate hospitality had choked any separation like Japanese knotweed). Nowadays, the thraldom is more subtle (though no less insidious). One consultancy has set up a social media website for trustees which gives them the opportunity to go to “university” to discover the complex products provided by investment manages over a posh meal.

The implication that such products need a university education is flattering to trustees who can – at least for the five courses- believe themselves part of the elite with whom they dine. But do we really need a degree in astro-physics to design and operate an investment strategy for pension scheme members?

The CMA should also be looking at pension trustees and helping them to raise their game. The investment consultants didn’t get where they are today without their being real problems on the buy-side (NB -tPR).

Hubris and how to avoid it!

My view is that investment consultants have elevated their profession to a level that it has assumed Olympian powers of intelligence . The reality is different and the CMA have chosen to treat investment consultants, not as numeric Gods, but as mere mortals.

Perhaps this is for the best. Some of the people at the top of the investment consultancies are really good blokes, reading the report, I get the impression that during the investigation, some pennies dropped. I suspect that the best work of the CMA was in helping the good guys down off the pedestals they never really wanted to stand on!

Vertical disintegration

One of the central themes of the investigation was the conflict created by consultants who considered they could be rewarded from the funds they managed. This practice is well known to lesser mortals (IFAs) who have been struggling to get paid in much the same way. IFAs can still be rewarded from the funds they manage through a process they call “virtual integration” and they justify this by claiming their interests are aligned with their clients. If funds went up and down because of the influence of advisers, then I’d accept this argument, when the funds are tracking markets, this makes less sense.

So with investment consultants. Their seems little accountability for the influence the strategies they recommend (or implement) in the reward they receive. Where consultants are paid on an ad-valorem fee from the fund, the quantum of the fee is set high enough that a reasonable profit can be assured in a bad time and when times are good – the investment consultants are in clover. While investment consultants are keen to explore “risk-sharing”, it is very rarely they who share the risk!

Breathing again

It could have been so much worse for the big investment consultancies and they know it. The FCA may be feeling that they may have rather over-estimated the size of the problem. Take for instance the FCA’s dismissal of consultancy master trusts

I would agree with the CMA and probably with most of the public. The activities of investment consultants just aren’t as important as investment consultants think they are!

Perhaps this is a lesson learned. For once, the investment consultants have not been puffing themselves up but breathing in. Instead of exalting their  intellects, they have been reminded of the fate of Icarus, who – flying too close to the sun, found his wings melting and him falling fast to his death.

The moral of Breughel’s great painting is that while this matter of Olympian importance was going on, everybody else carried on their business as usual.

Maybe the most important thing for investment consultants to learn from this report, is that they’re really no different from anybody else.

icarus 3

Icarus falling – business as usual?

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The loneliness of the long-distance saver


My heart goes out to Jo Cumbo as she pours over her provider statement. Jo is on the employer governance committee for the FT’s own workplace pension (I won’t mention the contract provider but it’s a household name).

Here she is on a Saturday afternoon, fulminating

Jo 4

Her frustration leads to her questioning what she’s in this contract for

jo 3

She considers the user journey for customers like her and calls it a “faff”

jo 2

and she concludes that workplace pension providers have a long way to go to offer a happy experience for long term savers.

jo 1

Let’s be clear, Jo is in a group personal pension offered to one of the most prestigious employers in the land by a provider selected with due diligence. But she is left to deal with her pension issues with minimal help.

There is a problem here , let’s call it the “loneliness of the long distance saver“.

Bots are not enough

I have not drunk the techno Kool-aid and I do not think that putting rubbish information on an app will turn this around. I don’t think that offering a “bot” with a friendly name, will cure the loneliness of the long distance saver.

But it is a start. If pension providers cannot – by now – present information from their systems on somebody’s phone, I will. I’ll be your bot!


And if anyone is interested enough to view the full list mentioned at the bottom of this screen, I’ll allow them to compare one workplace pension with another

number 2And if anyone asks what those numbers in circles are doing, I will explain. They are created using an algorithm that compares the value being given  with the money you are paying for the fund and contract. It’s not hard to understand that.

Why so lonely?

Jo is not alone, there are 24.9m people who went to the Money Supermarket, only to find there is no pension aisle there!

There’s no Go Compare Pensions or Compare the Pensions Market either. If Jo currently wants to compare her workplace pension with everybody else’s , she’ll probably have to commission a piece of work from her firm’s employee benefits adviser.

Why are we making it so hard for people to find out the value they are getting for the money we are paying?

The IDWG has sent its report to the FCA, the FCA are ruminating on a template that will tell us how much we are paying for our fund management. A similar template is needed to work out how much we are paying for our pension contract (the platform on which funds sit).

It’s been a long time coming- but change is going to come. At some point in the future, what is now available to institutions, will become available to Jo and the millions like her.

I intend that that future is sooner rather than later!

The long distance saver

It is a long race till you get to your tipping point when you start spending the money you’ve been saving over the years. As a 56 year old, I can tell you that the closer you get to that point, the more you care about your money. Two reasons for me-

  • there’s more of it
  • I  can spend it as I want

But as Jo’s second tweet properly puts it,

“if customers too stupid to understand fund performance, why is this company flogging drawdown to them?”.

The long distance saver is not only ill-served through the saving period, but they’re given no help in preparing for “spending”.

Hundreds of thousands of people reach 55 each year, clutching the pieces of paper that Jo has to work on. They may have ten or more setts of papers, all of which will talk at length but say very little. As Laura puts it…



People like Laura and Jo deserve better, they deserve an independent evaluation system that is the pension aisle in the Money Supermarket, they deserve to have the pension genome mapped with the same rigour as we mapped the human genome. Pension DNA should be analysed and from our understanding of it, we – the industry – should be able to produce a single number for everything  that tells us what we need to know about value , money, engagement and the exit costs if people have had enough.

It really is time we got some movement on this! I look forward to giving regular updates on how I’m doing. It won’t happen overnight – it will still be a long time coming – but change is going to come!


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When we “de-risk” – where does the risk go?


When you do the washing up, you leave your plates clean, the dirt gets washed down the sink. The same when you change the oil in your car or when you go to the toilet.

What happens is that all the waste flows into sewers and is either recycled or pollutes.

We have got used to the idea that we can flush away our problems because we are confident that we have infrastructure which is coping with the environmental stress we cause by throwing things away.

In financial circles, this is called “de-risking”.

Most of us are familiar with the term “de-risking”. It is (for instance) what a pension scheme does to remain viable. There are many sources of risk in a pension scheme, but when you get rid of one risk, it tends to pop up elsewhere. That’s why the Pensions Regulator talks of an “integrated risk management framework” (IRM).

There is no talk in the IRM of where the risks go – when they are managed out of the framework. The Pensions Regulator has a statutory objective to protect the members, so there is little in the IRM document to suggest that it is the members who are being asked to accept future and present risk.

For IRM to be effective, there must be less aggregate risk in schemes, for that to happen – there must be risk transfer. If has been assumed that risk transfer will occur, but that it will be through insurance companies buying the risk out at the full buy-out cost.

There is one way a pension scheme can get rid of risk for good, and that is to transfer it out. The IRM assumes this is through buy-out – or through the PPF.

But in practice it has typically been  the  member, who takes that risk away for good. So long as the member takes away his or her own risks voluntarily and is properly rewarded, there is no problem with this. The cost of an executed CETV to a scheme (and so to the employer is considerably less than the cost of buying out the benefits.

Schemes really benefit from CETV transfers – at least when a CETV transfer is properly executed. Latest figures from the ONS (see below) suggest that three times as much risk was transferred out of pension schemes last year through CETVs – than through organised buy-out. This has been a rare windfall for the IRM Framework.

There is however a snag.

Last year, the FCA noted that these transfers were not being properly executed, in one sample they reckoned that 53% of the transfers executed were problematic. In another survey this year , they said 30% of the transfers they looked at – shouldn’t have happened.

This week, we learned that the total transferred out of Defined Benefit private pensions was considerably higher than even the ONS’s provisional estimates at the end of 2017.

ONS Q1 2018

ONS MQ5 updated June 21st 2018 (table 4.3)


That’s an almost sevenfold increase since 2014 and £2.5m higher than the previous 2017 numbers.

The amount of de-risking to individuals is even more remarkable when you look at the quarterly breakdowns.

ONS transfers Q1 2018 2

ONS MQ5 updated June 21st 2018 (table 4.3)

Quarterly transfers have risen every quarter since the start of 2016 and in the first quarter of 2018 reached an astonishing £10.62bn -more than four times the 2016 equivalent!


So where has all the dirty water gone?

The dirty water (aka risk) has left the engine/sink/sump/toilet and the risk (good and bad) is now with the members of the pension schemes.

We don’t have accurate data scheme by scheme. I was told by a Government official on Wednesday that 8.500 members of the BSPS scheme had left the scheme, Jo Cumbo reported 7.500-8,000 yesterday and the last time I spoke with BSPS Trustee, the number was around 5,000. Until recently BSPS were reporting the aggregate transfer as up to £2bn, with average transfers over £350,000, we can suppose the amount transferred over £3bn. At least 20% of the membership with transfers chose to transfer and to take on the risks previously managed by BSPS Trustees.

That risk is now with members and is being managed in SIPPs by IFAs. Some may be being spent, but IFS stats would suggest that there is greater risk of hoarding than over-spending. People have taken on the risk not just of how to invest the money, but how to spend it – without spending too much or too little. Which is fine – so long as they know that these risks are for them “good risks”.

John Ralfe has queried the concept of a “good risk”. I would say that you would take the risk of managing your own pension if you had a different plan to consume the transfer than to replicate the CPI pension +spouse, offered by the scheme. If you wanted to spend it faster, or not to spend it al all, then you are in control of the money and can manage the risks yourself. The risk is a “good risk” to take.

No IFA who advises on transfers would ever say his or her client took anything but “good risk” when transferring. Yet the FCA remain unconvinced and so do the PI insurers.

The dirty water – good risk and bad, has been taken on by members and only time will tell how much of that risk was “good” and how much “bad”,

An update on what is going on to counter the transfer of bad risk

In the meantime, the TUC continue to report of “factory gating” by IFAs (Tideway and SJP named), the Pensions Regulator’s CEO accepts that members may not have been properly protected under the IRM and now the FT can reveal that it both the Pensions Regulator and the FCA are providing support to at least 8 large occupational  schemes whose members  under pressure from “rogue advisers. Being the partner of the Group Pensions Director of one of those eight, I can testify to the story’s validity!

Neither the Pensions Regulator , nor the FCA appear to be convinced that members are being properly protected. Yesterday morning I sat in a room with Lesley Titcomb and Margaret Snowden and Michelle Cracknell, all of whom spoke effectively and passionately about how to protect members going forward – from pension scams.

The output under discussion was the updated “Combating Pension Scams – a code of good practice”– published by Margaret’s Pension Scams Industry Group (PSIG). I am going to do my best to make sure this is on the desk of every pension manager and pension administrator. It can be downloaded from

The risk doesn’t go away – it just gets re-allocated

In the IRM, the idea is that risk is transferred to the PPF or insurance companies.

But in practice most of it gets transferred to ordinary people , many of whom would be regarded as financially vulnerable and not able to understand the risk they are taking on.

This is happening at an ever increasing rate and everyone is agreed that members are not being properly protected.

Organisations such as tPR, FCA and PSIG are doing their best to combat the unacceptable face of transfers – SCAMS.

But the root problem is not being addressed and will not till we have proper regulatory action.

We must stem this devastating risk transfer by banning contingent pricing and implementing other recommendations in FCA 18/7.

Trustees must be more aware of what is happening with their members and work with tPR and FCA as is happening with the eight schemes mentioned by Jo Cumbo.

Scheme administrators must must adopt the must adopt the good practice laid out in Combating Pension Scams; a code of good practice (v2 -22/06/18).

Finally, we must find a way for IFAs and trustees to work more effectively together. I would urge anyone interested in how this can be done to join me and Al Rush at the Aberavon Beach Hotel on July 10/11 for the Great  Pension  Debate (2),

Tickets to this event are free, and can be obtained here.

pension debate

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Is calling a CDC pension a “wage in retirement” dishonest?

Royal Mail 4

I got home from a fine evening with David Byrne at the Apollo, to a surprising assault from John Ralfe. It’s not surprising to be verbally assaulted by John on Twitter, but it was surprising that John, who had been watching England thrash Australia had initiated hostilities so late into the evening. Here’s the challenge he laid down.

I am not sure why I am to be held responsible for the “wage in retirement” label, but I think John and Sam Pickford have got this wrong. I have been at various events where the CWU and Royal Mail have explained what they mean by “wage for life” and it has always been made clear to postal workers and everyone else that a CDC pension is not guaranteed in the way a DB pension is.


I have spoken to a number of postal workers and – without exception – they are clear that what they will be getting will not have the guarantees of a DB pension. But there is an expectation that 100% of whatever is distributable, after expenses , will be paid to members and an understanding that this is a risk sharing arrangement where postal workers can do well in a positive market and not so well when investment conditions are bad. Indeed , certain underlying assumptions in a CDC scheme – such as the mortality of members as a whole can change , leading to lower or higher outcomes than predicted.

If John and Sam don’t think that this has been spelled out to members, they are wrong. They should be careful accusing the CWU , Royal Mail or anyone else of dishonesty.

Lack of Transparency?

The debate on CDC is being conducted in a most transparent way. The Friends of CDC have a linked in group for people who want to see regular updates on the progress of CDC regulations and discuss (as Kevin Wesbroom and Con Keating do in yesterday’s articles) aspects of CDC which are causing confusion.

We (collectively), are trying to help the discussion along and are happy to be challenged by John, Sam and anyone else.

I can’t think of any other debate on a major pension policy debate, that has been so rehearsed in public than this one.

It is very odd to be accused of not supplying nuts and bolts, when Aon has made its modelling public, First Actuarial has published numerous documents on the CDC model and the Royal Mail, DWP, WTW and CWU have accepted every opportunity to speak about how the scheme will be run.

There is a limit to how much detail people can go into, since nobody but the DWP can decide on the regulations needed to make CDC happen for Royal Mail and it is not sensible for the Friends of CDC to second guess what DWP come up with. In terms of nuts and bolts, we have to remain at the stage of the structural architecture , until we have the floor plans delivered to us.

I have many calls by John Ralfe, to deliver a two or three page document, outlining what CDC will mean for members; clearly such a plan would be speculative and it could lead to members being misled. I do not speak for DWP, nor does the Friends of CDC, nor Kevin Wesbroom. We cannot be transparent about the rules until the rules are published.

“A wage in retirement”

Royal Mail and CWU have agreed to call the new CDC scheme “wage in retirement”. It is a precise wording that relates to postal workers.

There is a difference between a wage and a salary, a salary is paid whatever the conditions, wages are dependent on the input and a reward for time spent. The wage a postal worker will get will be linked to service and the wages he or she earns prior to retirement.

Wiki contrasts wages and salary like this

Payment by wage contrasts with salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked

The idea of a pension as deferred wages or a “wage in retirement” is generations old. Generations of postal workers have worked on the assumption that a lifetime of service would lead to a retirement wage based on a formula.

This construct has been challenged in most workforces, but not at Royal Mail nor in the public sector nor for many university employees.

To call such a construct dishonest, is to belittle the contract between workers, management, shareholder and taxpayer that has withstood many changes in politics and economics.

It is also to belittle the three pillars agreement reached between unions, Royal Mail and workers in which 90% of CWU members voted for a Wage in Retirement.

It is a great insult to the CWU and Royal Mail as it suggests that they have been dishonest in the representation of the CDC arrangement. This is not how Frank Field and the Work and Pensions Select Committee saw the evidence given by Royal Mail or CWU, nor is it how the Pensions Minister now talks of it, nor how the DWP talk of it, nor how the market sees the agreement.

Royal Mail’s share price has recovered subsequent to the Three Pillars agreement, recovering to the tune of £200m, Royal Mail is returning to the leading group of UK employers and the market continues to see the negotiated settlement as a positive.

In short, if Royal Mail and CWU are pulling the wool over people’s eyes, then they are fooling a lot of very bright and experienced people.

There is nothing dishonest about a “wage in retirement”.

The promise that is being made to Royal Mail workers is of an open collective scheme which is sustainable. The alternatives – an unsustainable DB plan or an unsatisfactory DC plan were not sustainable.

The CDC plan’s sustainability is based on assumptions agreed by Royal Mail and CWU but also by their advisers, First Actuarial, Aon and WTW. Considerable modelling has been done and continues to be done to ensure the structure of the scheme is as fair as it can be.

Any collective scheme , covering 145,000 workers, is likely to get it wrong some time. The trick is to minimise these occasions and maximise the advantages.

While all this is going on, the rest of the British workforce struggles on with the stark choices of drawdown (typically unadvised) or annuity (typically unloved) or of cash in a bank account (typically dissipated). All the noises are that people are having difficulty converting the cash sums they receive from their retirement savings plans, into a wage for life.

This process of converting a cash sum into a wage for life has been called the hardest, nastiest problem in finance. It is a problem we are presenting to hundreds of thousands of people reaching 55 , each year. We are giving them precious little help. It could be called dishonest to call this “pension freedom”.

I don’t call it dishonest, because the people struggling to find solutions to this – are doing so honestly. One way of sorting this problem out is the way that Royal Mail has chosen, to do things collectively.

I think that John Ralfe and Sam Pickford are doing Royal Mail and CWU a great dis-service in their comments and I think they are insulting the 90% of CWU members who voted to have a Wage in Retirement. John seems to be delivering the responsibility for all this at the doors of myself and the Friends of CDC, which is quite wrong.

The abuse of a soapbox

John has a number of outlets for his views, most notably the Times. He has done great work providing technical help to British Steel workers and commentary on a number of recent pension problems.

He has a deep understanding of his area of economics.

But he is abusing his soapbox by calling us dishonest. John has called me and First Actuarial dishonest so many times, he may think he has precedent to do it many times more. He does not.

Simply repeating a falsehood, does not turn a falsehood into a truth.

The use of a wage in retirement

The phrase “wage in retirement” is now in common parlance, and not just among Royal Mail postal workers. It resonates with ordinary people who have always talked about their pay as “wages” and it resonates with ordinary people who have looked forward to stopping working and having a “retirement”.

There may be another type of people who don’t see the need to stop working (they may not have lugged around sacks of post for decades) and these people may regard their way of getting paid as “salary” or “total reward” or something like that.

But “wage in retirement” is a phrase that explains a CDC pension well to postal workers. To call it dishonest is a nonsense, and very insulting.

There is more that unites than divides us

like cricket!

JR Cricket


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Why pensions are turning green


In an important consultation paper, the DWP has reversed its previous decision not to legislate to force pension scheme trustees to “go green”.

Rather than rely on the Pension Regulator’s guidance, the Government now intends to require the trustees of pension schemes to take account of financially material risks of the Environmental, Social and Governance kind in their investment strategy.100

If this sounds a little wishy-washy, the DWP makes it clear that for  schemes with more than 100 members, Trustees will be required to have a stated policy on stewardship (the exercise of voting rights and influence on the management of investments). What’s more DC Trusts (where the member’s are taking the risk) will need to publish their Statement of Investment Principles (SIP), alongside their statement on the costs and charges of a scheme, on a website. The SIP will need to be accompanied by an implementation report that tells members how the trustees got on with doing what they said on the packet.


The Law Commission recommended in its 2014 report that pension schemes adopt ESG but the Pension Regulator’s guidance has led to “confusion and misapprehension” among trustees. It would seem that – left to their own devices, trustees ended  up doing nothing at all.

So the stick is now being brought to bear, rather than the carrot. The Law Commission had established two principles

  1. That trustees should be prompted to action by concerns of members
  2. That their actions implementing ESG should not cause financial detriment to members

The “confusion and misapprehension” was around both principles. Trustees didn’t know what members thought and did nothing. Trustees did not understand the consequences of intervening on ESG, so  did nothing.

In discussing why the Government thinks these new measures will help in solving this confusion, the consultation points to considerable research (including the recent DCIF research from Ignite published on this blog)  that points to considerable public awareness of the importance of ESG (or responsible investing as I’d prefer to call it).

Infact 61% of the people interviewed by Ignite assumed that responsible investment was part and parcel of what a pension scheme did.

It would appear that most members are clearer about what they think the trustees should be doing, than the trustees!

Which is why the Government are effectively telling trustees to get on with it. I agree with the Government, I just wish we’d taken this stance four years ago (most of these measures will not be up and running until the next decade, but relative to the implementation of the new AE regs, this is lightening quick!

Does this go far enough?

Much of the paper discusses the balance to be achieved between driving “ethical” behaviour and financially responsible behaviour. The DWP conclude that they do not have the right to decide what is ethically right and impose this on trustees. For instance the new rules would short of requiring trustees to have a policy on positive social impact,  this leading to confusion and disputes that could get – well – political!

However, where there is clear evidence that poor environment, anti-social or weak governance is causing financial loss to members, the trustees will – in future – be required not just to state they will reduce the risk of loss  but also to report on how they got on in implementation reports.

Much as I would like to impose my ethics on everyone else, I recognise that this is not my job nor the Government’s job for that matter. I think that the Government has got this right and though I’d like to see trustees responding to pressure from members to push boundaries on things like social impact, I don’t think that ethical policies can be delivered top down. Not without some fair criticism of trustees for paddling their own canoes.

What is the financial justification for introducing ESG?

The paper is clear that there are occasions where there will not be an onus on trustees to implement an ESG approach

  1. Where the scheme is smaller than 100 members and can’t find resources or the clout to make a difference
  2. Where a scheme is winding up, and the short time horizons mean that the cost of implementing change can’t be justified by the positive impact of ESG over time

But for the majority of Pension Schemes – especially DC schemes, the new rules can be justified because they reduce the wrong kinds of  financial risks being taken by members.

Here we come to the philosophical heart of the paper and that part that I find most interesting. If trustees are exercising their duty to protect members (one of the Pensions Regulator’s Statutory Objectives for them, then they should be protecting them from the financial risks surrounding ESG.

This begs the question -what risks? There is an increasing body of  evidence that shows that pension schemes can reduce volatility and increase returns for DC members by adopting ESG principles.

However, trustees can choose to ignore this research and decide that ESG factors are not for them. To do so, they are going to have to say why in their statement of investment principles and revisit those principles year on year to prove they are still right.

This will be very difficult for trustees to do. They will have to justify this stance not just to the member, but to the Pensions Regulator and finally to themselves.

Ultimately , the risk of not implementing an ESG policy and stating what it is to members in a public way, will outweigh the risk of doing it.

This is what this consultation is saying and I would be very surprised if many trustees contested it.

What is the political justification for this intervention?

Government has signed up to the Paris Accord. Britain is committed to lower emissions and the prevention of harmful climate change. Like governments should, it is interested in good governance and of course it encourages positive societal change.

Pension funds are long-term investors in the assets and organisations that influence our capacity to improve behaviours. It would be great if our trustees were able to adopt and encourage these behaviours themselves, but attempts so far have ended in “confusion and misapprehension”.

This consultation is about resolving confusion and making it clear what trustees should be doing. It could go further, but I suspect it would not take trustees with it. As it is, I think it is what is needed, when it’s needed and I’m very glad it has been published.

I hope that the FCA read it properly – and indeed their IGCs.



green 3

Good article on this in this morning’s Guardian (no paywall)

Posted in advice gap, IGC, pensions | 4 Comments

AE Pots must follow workers (Hargreaves Lansdown’s right)

HL Workplace solutiosn

I have just read a policy paper in my hand from Hargreaves Lansdown;  “Putting Individuals at the Heart of the Pension System”.

After some pretty dire submissions to the Work and Pensions Committee on CDC, I hadn’t thought to agree with HL on much, but I do like this paper.

I would link it to the blog  but it doesn’t appear to be linked to its website and it’s too long for me to post. I have a PDF yours – if you mail


New technology – new ideas

Hargreaves Lansdown has, for some time, been looking to adopt new technology to put the individual in charge of their money (and prevent “pot proliferation. In November, they announced they were working with Tex and Criterion to help people move money around the system.

Now they are calling for the adoption of this new technology to allow employers to clear contributions to the workplace pension of the member’s choice – rather than the employer’s choice.

As Hargreaves Lansdown put it

If we forced employees to change their bank every time they changed jobs, there would be an outcry, yet this is what auto-enrolment does with their pensions.

Their’s is a good idea. Employers – especially small employers – are showing little appetite for governing their workplace pensions and are simply sticking to the compliance code laid down by tPR – ensuring they get the right contributions to the workplace pension in a timely fashion.

The Pensions Regulator is showing little appetite to educate employers that not all workplace pension are the same and has – consistently since 2012 – adopted a neutral stance to workplace pensions. Not all workplace pensions are the same, some are better than others and some suit some members better than others. For instance, Hargreaves Lansdown’s workplace pension is as different from NEST’s as chalk is from cheese.

Since the members get the workplace pension they are given, they have to make the best of it. But if they find they are in one they like – they can only rely on employer sponsorship as long as they stay in the current job. Once they join a new employer, they are into a new workplace pension – and it may not be to their taste.

This is hardly optimal. If we want members to “get to know their workplace pension”, why can’t we allow them to take it with them to their next employer?

workie 4

What Hargreaves Lansdown is actually saying…

Hargreaves Lansdown proposes the existing auto-enrolment system should be preserved as it is, with employers selecting a default scheme, enrolling members and making contributions on their behalf. All the current defaults would remain in place. Nothing would change or be taken away from the existing system.

For disengaged members and those without an existing pension, the system would continue exactly as it does at present.

However, an individual who has an existing auto-enrolment pension from a previous employment or who wishes to make an active choice regarding their pension provider, would have a right to choose that arrangement in preference to being forced to join their new employer’s scheme. They would have the right to have their new employer’s contributions paid into the pension of their choice, along with any of their own contributions deducted from their salary. (HL Policy Paper May 18)

There are of course barriers to managing this. Payroll has struggled to come to terms with the new employer duties for auto-enrolment. Despite most employers complying, we know there are areas of non-compliance.

The Pensions Regulator will warn Government that introducing the increased complexity inherent in HL’s proposal, risks some payrolls falling over with the extra burden of administrative complexity. What I and Tom McPhail might argue for at a pension policy level, payroll and tPR might argue against, from the employer’s perspective.

Most payolls are progressive

Talk to Sage about Sage DX and they will tell you that they can already clear – using APIs – to most of the major Auto Enrolment workplace pensions.

Other payrolls such as Star, QTAC and Xero use the pensionsync system, which is effectively a means for smaller payrolls to adopt clearing through a third party.

There may be resistance among other payrolls for whom API data clearance is harder and less readily adopted, but BASDA could take up Hargreaves Lansdown’s policy paper and respond to the challenge..

In my view, we are not far from being to implement clearance, especially if clearance was restricted to providers who committed to common data standards

Sorting tomorrow’s problems now – not later

In the early years of auto-enrolment, when the fear was that the data transfer system employed by most providers was clunky, insecure and prone to error, common data standards could be introduced that made payroll uploads to workplace pensions as simple as RTI.

PAPDIS was an industry initiative designed to provide a common data standard to enable this to happen. Some software has adopted PAPDIS but sadly, it is little used. The idea was a good one, but it came too late. NEST had already a data standard in place and was not going to re-engineer its service. BASDA was behind PAPDIS, but it was also behind the times.

It seems to me that a new data standard for clearing contributions according to member’s wishes, could be established, tested and implemented in a safe environment before the demand for clearing became a commercial and regulatory imperative.

What is needed is some forward thinking. We need (this time) to be getting technology prepared before – rather than after, the problem has arisen. Right now, most people’s pots are small enough for their being invested sub-optimally – to be a small problem. But this will not always be the case.

The DWP estimate that unless we get some way for pots to follow members in place soon, there will be 50m unloved pots by 2050 – resulting from auto-enrolment. This is in nobody’s interest. The time to get this problem sorted is now – not three decades hence!



get to know 2

Do these really include employers understanding pensions ?

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We need to simplify our pension affairs

  • We are told that pensions are complex.
  • We are told that we need advice to manage our retirement finances.
  • We are warned hat we could be scammed if we don’t.
  • Is it any wonder that people look at their retirement with financial foreboding?

Self-perpetuating complexity



But pensions do not have to be complicated. Ask a postman and he’ll tell you that a pension is no more than a wage for life, provided for him or her by an employer who organises pre-funding, investment and the payment of the pension.

This simple way of looking at things has met with vitriol. When I explained this to a crowd of Scottish Accountants last week, Maggie Craig, head of the Scottish FCA claimed that I was not “living in the real world”. I don’t know if she thinks that 145,000 postal workers aren’t living in the real world either.

A savings account geared to paying a wage for life should not be complicated. The account itself is simply an invested version of a bank account with an aim of providing more money than could be achieved by saving the money in a piggy-bank.

All the complexities surrounding tax arise from decades of attempts by the rich to avoid paying tax by subverting the simplicity of pension saving. Pensions are now regarded as a means to avoid inheritance tax (non-drawdown), avoiding capital taxes on a business (SSAS) and of hiding company profits (occupational pension schemes). Of course not all pensions are being used for tax-avoidance, but enough have been for HMRC to have built in the labyrinth of rules that prevent the public finances being abused.

It is not the pension that it complicated, it is the abuse of pension saving by the wealthy and their advisers.

Most pensions are paid very simply

Most people get caught up in this complexity for no good reason. The number of people I have met who tell me they want their pension to survive them is very few.  People know what inheritable assets are – houses, businesses, chattels etc. – and they know what dies with them.

I have never heard anyone complain that the state pension dies with them. It would seem absurd to us , that the state would pay a pension to our children, just because we have died.

The problem is that we have (and this is partly as a result of the pension freedoms) , started thinking of pensions as “wealth” and not a “wage for life”.

So it is that ICAS could have a two hour discussion on the supposed “crisis in pensions” without mentioning that the vast majority of pension payments are met by the taxpayer on behalf of other taxpayers.

Instead we had to agonise about how we could get engagement with our pension saving, as if that failing to do so, would result in a failing of the system.

Financial gravity will do the trick

If people were not to be bamboozled by the complexities introduced by tax consultants, pension experts and the wealth management “industry”, they would see that managing their pension affairs could be very easy.

If people had easy access to the information surrounding their various pension pots and a simple way of assessing what was good, what was bad and what was indifferent- they could employ “financial gravity”.

Financial gravity is my phrase for thinking about bringing lots of small pots into one big pot. Financial gravity is the process by which the money in the less useful pots is poured into the most useful pot and used to pay a pension. Some call this “aggregation”.

For financial gravity to work, people need to see which pot to pour into which pot.

ppp screen 2

There are many people who regard this simple idea with the same distaste as they have for a “wage for life” pension. It is offensive to people because it challenges their firmly held belief – not just that pensions are too complex, but that they should remain too complex.

Because these people are obsessed by the idea that they can create value for themselves from that complexity. If things were so simple that people could pay themselves a wage for life by transferring into a CDC scheme, or aggregate all their pots into one big pot, then we would not have the need for the pension industry at all – and that includes a lot of regulators!

Financial gravity tends to simplify over time. Over time, the complexity of our pension system, with its lock-ins and its guarantees and its tax-penalties will be washed away.

This is because, as we get into the later stages of life, all that matters is the rest of your life. Old people closing in on death should not be worrying about death taxes and the exhaustion of their savings or about stock-market volatility, they should be allowed to live their lives to the full -for the remainder of their days. Financial gravity should drain away the complexity and leave them to enjoy what is left.

The utility of simplicity

We all need to simplify our pension affairs over time, because- quite literally – life’s too short.

For the vast majority of people, pensions are way too complex and could do with a spring-clean. Creating simple structures like CDC schemes or even defaults for spending, simplifies matters greatly.

Creating a way to aggregate pots through dashboards and simple metrics that help financial gravity, is within our scope.

By using many of the great platforms and funds already in place, we can do much to get there; what remains to be done, is within our grasp. I feel confident that we will be able to make pensions simpler and easier and therefore more popular and better funded.

If you would like to join with me in this, keep reading these blogs, and I’ll keep writing them.


the lonely Platonist in his tower

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Why we should not be shut up about pensioner poverty – it exists and it shouldn’t.

unite uc.png

If you’d been at the ICAS “how to avert the pension crisis” debate on Tuesday, you’ll remember that part of the conversation when we discussed the Institute of Fiscal studies’ contention that we were having difficulty spending our retirement savings. I mentioned in my blog earlier in the week – that this did not seem a crisis to me. 

Since then Miriam Somerset-Webb has picked up on the IFS’ research in a blog at the FT. It’s a very good blog but you need to get past the paywall to read it. Miriam picks up on Clare Reilly (Pension Bee’s) comments, that it would be a lot easier to spend your pot, if you had proper technology that responded to your wish to have your money back when and where you wanted it. Clare’s is a good point but it is based on there being wealth to drawdown.

For a very substantial number of people in Britain today, there is no such wealth.

Damian Stancombe, pension guru at Punter Southall, called me on this and reminded me of work carried out by the Joseph Rowntree Foundation (published Nov 2017).

For the avoidance of doubt, the report offers data that shows how  the public policy decisions of recent years mean more money in the pockets of some families, while others are hit hard

It also published this excellent set of slides,

Joseph Rowntree Foundation’s work showed that for a significant proportion of the population, retirement was a time when every penny counted. For those dependent on benefits in retirement, the world has got a bleaker place in the last ten years. For it is our poorest who have suffered the most from the austerity imposed since the financial crash.

I mentioned in Edinburgh (ICAS) that if we had a crisis, it was a crisis not about pensions but about the lack of them; more particularly, we now have a crisis in benefits.

Unfortunately this was deemed “off topic” and we spent much of the debate talking about how to engage the “haves”, rather than what to do with the “have nots”.

To redress matters, I’m thinking about the “have nots” and hope that someone in the DWP will pick up on the matters raised by that presentation

The Joseph Rowntree Foundation made three recommendations in its report


  • As the cost of achieving a minimum standard of living increases with inflation, the Government must ensure that Universal Credit and other support for families is uprated at least in line with prices, ending the benefits freeze.
  • The Government must allow families receiving in-work benefits to keep more of what they earn, so that increases in the National Living Wage are not clawed back through reductions in Universal Credit and other support.
  • As pensioner costs also increase, pensioner benefits should continue to be uprated at least in line with prices, and should continue to keep pace with increases in earnings over the long term.


While I am not proud that our poorest citizens continue to fall behind due to the freezing of benefits, I am proud that we are upgrading the state pension  by the triple lock.

But it’s worth pointing out that it costs a lot less to triple lock Universal Credit, paid to the few, rather than the single state pension -paid to everyone.


The National Audit Office reports DWP in denial.

As Damian did, so the NAO have pricked my conscience on this matter this morning.

Though I didn’t then have a link to the NAO’s report, the edited highlights given us by the BBC’s Hannah Richardson, told me what I needed to know. That Universal Credit, through its flawed roll-out and fundamental inconsistencies, is leaving large numbers of people in genuine crisis.

I now have the link to the NAO press release, which links to the full report – you can find both here.

There are numerous case studies in the report . They cannot be swept under the carpet as “off -topic”. This is from the BBC article..

And yet the Department for Work and Pensions does not accept that UC has caused hardship among claimants, the (NAO) report says.

The report points to a recent internal departmental report showing 40% of claimants are experiencing financial difficulties.

I hope that somebody in the DWP is reading that. The criticism that the fate of our poorest is being swept under the carpet is coming not just from the Joseph Rowntree Foundation but from the National Audit Office.

Whatever happened to social justice?

I’m supposed to be a Tory, I carry their card. I was speaking at a conference of the Institute of Chartered Accountants of Scotland about a pension crisis. I wear a suit, I have a degree from the right kind of University, I am white, male and by any standards, part of the establishment.

And yet, when I introduced the concept of pensioner poverty into a debate about pensions in crisis as one of the panellists, I was told to shut up.

What chance for anyone who has not got all my privileges –  to get heard? Small wonder that the Grenfell march is a silent protest.

We should not be living in a society which shuts the door on such debate. We should allow a debate on pensions crisis to include the impact of public policy on all citizens, not just the affluent.

It is time that more people like JRF, the NAO, Unite and Damian Stancombe, got listened to.





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Can we map the pension genome?

genomeI don’t think I’ve ever heard mention of the “pension genome” , which may suggest it is a concept before its time.

To me it means the entire complex of products and funds from on which our rights to money in retirement depends.

Other than the state pensions, we could call it the product of that clichéd phrase – “the pensions industry”, though “industry” seems entirely the wrong word to describe much of what calls itself “pension expertise”.

Mapping the genome

In biological terms, ” the human genome project” means identifying and mapping all of the genes of the human genome from both a physical and a functional standpoint.

In financial terms, “the pension genome project” means identifying and mapping all the investable products and funds from both a “value” and “money”  standpoint.

The attached presentation, I’ll be giving to some actuaries in Birmingham on Tuesday, explains what a pension genome project could bring to ordinary people.

Whether such a project can be carried out by a single organisation, remains to be seen. I have some hope that it can

  1. The desire for greater transparency, driven from the general public and some parts of the “industry”.
  2. The capacity to understand what we are buying through the work of groups such as Chris Sier’s IDWG
  3. The arrival of workplace pensions, bringing new standards of disclosure and re-defining value for money.
  4. The willingness of DWP, Treasury, FCA and tPR to come together to empower consumers to get better information
  5. The emergence of new technology (APIs) capable of centralising data in real time in dashboard style.

Nonetheless, a project so ambitious as to put a score against every pension product, every fund and every combination of the two, cannot be brought to fulfilment without great endeavour.


Mapping the pension genome

To me, the research on value for money that is going on, has the potential to restore confidence in pensions. If it is matched by the endeavour of Government to ensure that all of us can see all our pensions in one place, it gives a means to aggregate pots into one big pot , from which each person can organise their finances in later life.

It may be that we need the help of the financial researchers who sit within our great universities, to help with the project.

It may be we need big Government to kick down a few doors, where data is locked behind.

It will certainly mean accepting that some of the assumptions with regards embedded value within life companies, SIPP and even  fund managers need reviewing.

But we can only properly move forward, if we can accept that all in the UK is not perfect and that there are better ways of doing things, than the way we do them today.





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Who gave this windfall to the rich?

Xafinity transfer value index

I’ve talked about the impact of higher transfer values on people living in Port Talbot and Redcar, and in the British Steel Pension Scheme. Around March last year, those transfer values in some cases doubled. Why?

There were two reasons.

  1. The scheme moved to a single discount rate for all members
  2. The scheme started de-risking – moving from a growth based strategy to a “lower-risk”, bond based investment approach.

What this did was to lower the discount rate applied to transfers , increasing transfer values, especially for the younger members (who had previously seen transfer values depressed by higher discount rates).

Apart from the small kicker to transfer values brought about by a cash injection into the scheme in the summer (bringing the reduction from the insufficiency report from 7% to 5%), these two reasons were perhaps the biggest contributors to the run on the scheme that happened in the autumn.

The perverse impact of de-risking

What a sudden shift from growth to defensive investment strategy creates is a big hike in the transfer values for the benefits of deferred members. This is – as far as I can see , ignored in the Pensions Regulator’s guidance on funding but shouldn’t be.

As CETVs are only available to a proportion of DB scheme members, the uplift in transfer values is a perk just to those who are not drawing their pension. It’s paid for primarily by the employer (through the special contributions needed when growth is taken out of the actuarial assumptions – the scheme discount rate).

This creates all kinds of conflicts within the scheme, especially where those driving the shift to bonds stand to benefit by high transfer values. It is one of the few areas of remuneration not covered by modern governance, but Directors of large companies with DB schemes, can profit from de-risking with no declaration that they have been both author of and beneficiary of , the improvements in transfer values. They can do so – simply by taking their transfer value.

It also creates a feeding frenzy for advisers and the long-tail of lead generators on one hand and fund management flunkies on the other – all of whom share in the financial orgies  we have seen in Port Talbot, Dagenham (Ford) and the Leeds conurbation (HBOS) – to give but three examples.

These conflicts – between the interests of members (in terms of more secure funding) and the interests of members (in terms of higher transfer values) have not been properly thought through by policy makers.

The perverse impact of de-risking a scheme’s investment strategy, is that it rewards deferred members at the expense of pensioners and it requires trustees to pay out their hard-fought prudence to people who have no interest in being ongoing beneficiaries of the scheme.

The absurdity of regarding these transfers as “de-risking”.

I have heard it argued, in learned actuarial circles, that because CETVs are calculated on “best estimate” terms and the scheme’s accounting position calculated on a formula closer to “buy-out”, that every transfer paid – is a step closer to scheme solvency.

This is nuts, it is a step closer to “buy-out” with an insurance company, but it is step further from doing what the scheme set out to do – pay a wage to life for its members.

It is only in the febrile world of “de-risking” , that an understanding of the wood could be so lost by the view of individual trees.

The best DB scheme is a scheme that stays open. Encouraging the taking of transfer values by enhancing or even promoting transfer values risks giving away the prudence in the scheme’s investment profile to those few members with the transfer opportunity.

Democratising the opportunity to transfer is not the answerXafinity 2

The current madness is about making it easy for all deferred members to share in the spoils of DB schemes. This is the argument being used for maintaining contingent charging. It argues that members without the financial capacity to pay for the advice on whether to transfer, should be able to do (in a tax-advantaged way) after the transfer has been paid. There is no logic in this argument – if you consider that most people shouldn’t transfer.

Of course, the richest members can pay the “exit penalty” which is what transfer advice is currently seen as. If a member can see they are benefiting from the overdose of prudence – (a simple calculation dividing the pension forsaken into the CETV), then the advice simply becomes a compliance ritual on the way to the payment of the transfer.

A friend last week asked me what his wife should do. She has just discovered her CETV is worth more than £2m. I was forced to explain to him her options. He was both appalled and delighted; appalled that she could be given such a grant without any public financial declarations and delighted that it allowed them both  – a windfall payment that could fund their future business.

He understood the conflicts , but legally neither he nor she has to declare them. Why should they. The CETV will remain their guilty secret. So it goes for tens of thousands of our new pension millionaires.

And yet…

With equity markets at all time highs, with a world economy looking in fine shape and a UK economy seemingly impervious to BREXIT, what could possibly go wrong with managing your own pot?

UK Defined Benefit Schemes, with the benefit of crippling special contributions, have finally worked their way into the black.

But they have done this while giving away much of the family silver (£34.25bn in 2017 alone). Rather than paying out that amount as pensions – as originally intended by HMRC and those who set up these schemes, trustees have paid this amount out – mainly to the richer deferred members, to fund wealth management programs.

Each of these programs is now taking on the burden of funding individual retirements (though we have seen in recent blogs that some are simply being used for IHT mitigation).

The perverse windfall to the rich

I am not a conspiracy theorist. I don’t think that CETVs is a plot hatched by advisers and trustees for the benefit of cronies with large deferred pensions. I am not saying that the Pensions Regulator was complicit.

I am saying that this is the perverse consequence of the drive to de-risking, the mania for self-sufficiency, the blue funk that is called the “glide – path to buy-out”.

It is only one of the consequences, but it is a major issue for schemes big and small. Small schemes can see huge slices of their assets and liabilities walk out of the door in one transfer. Big schemes can see multiple transfers which add up to the same thing (Barclays lost  over 15% of its scheme in one year to CETVs).

Nothing much will be said about this, unless I say it, because nobody who understands it , doesn’t have some skin in the game. Even the Pensions Regulator – is to a degree – compromised by insisting on “prudent” investment programs.

It’s time we came clean on this issue and recognised that one of the reasons for the glut of transfers – is because of the value of transfers. Transfer values are so high, because schemes are de-risking, schemes are de-risking because advisers and Regulators tell them to de-risk.

What does  not seem right, is the ease with which the prudence earned by schemes through special contributions from employers can be dispersed to the senior employers of the companies sponsoring the schemes.

What does not seem right is that many members in these schemes (or all financial make-ups)  are taking CETVs with little understanding of where the money is going and what the cash-flow consequences for them or their families might be.

These seem very real problems for the Pensions Regulator today and tomorrow.

xafinity 3


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University pensions! – Stay collective! Stay open!


The Babbage Lecture Theatre – Cambridge

Another good day for pensions!

Yesterday was a good day for the collective pension scheme in Britain. I had breakfast at Cicero’s offices in the Old Bailey (not the courts). I was able to hear our Pensions Regulator talk openly about the regulation of CDC schemes (Chatham House prevents more- but take it as positive).

As I took the train up to Cambridge, I talked with those close to Royal Mail who are enthusiastic at the progress made with DWP in establishing a way forward for their (and other) CDC schemes. This was what John Ralfe would call – “nuts and bolts” stuff.

When I got to my Alma Mater, I was amazed to discover 200 dons had turned out to a pensions meeting organised by Cambridge UCU to look at alternative ways of keeping their pension collective and open.

If you want to see what was discussed, I understand the event was filmed and that we’ll soon be able to watch. For the meantime, here are the my First Actuarial slides – easily downloadable for those deprived of sleep!

Wanting the best.

I hope I managed to avoid the trap of enthusing about CDC to the dons. My reason for being at the meeting was to stress the importance of keeping collective schemes open, whether they offer pension guarantees (DB) or simply pensions (CDC).

Obviously, given the choice, we would prefer our pensions guaranteed, and here there is a question of affordability. Much of the protracted question time that followed yesterday’s presentations, concerned the quality of the covenant offered by the educational system.

Can you compare USS – designed to provide deferred pay to university lecturers, to schemes for employers like Carillion or British Telecom?

Is a better comparison, a public service scheme or should we consider the total reward offered to UK academics uniquely geared to balancing immediate and deferred pay?

The best for the best

For me, and I got passionate about this, the success of the British University system (and we have around 15 of the top 50 universities in the world) is down to the quality of teaching. In the audience yesterday I heard American, European and Far Eastern voices. People want to teach in our seats of learning because the gold gathers the light about it.

Supposing that we should be benchmarking success with failure seems wrong. Carillion, BHS and to a lesser extent BT and the Coal industry, are business failures that led to pension failures. The businesses failed to meet the targets they set and had to close their DB schemes. BHS sits as a zombie scheme, BT’s pension scheme is an albatross around its sponsors neck and the Coal Industry Pension Scheme is saved from insolvency largely due to the physical damage mining did on its staff’s long-term health. None of these schemes have stayed open, all have been closed because (for whatever reason) the business failed.

This is the critical point for UUK (the employer federation of our Universities). You are not presiding over failure and the reason for your success is not your management policies but the people you employ. Part of your covenant to your brilliant workforce is a pension promise that lasts as long as they do. By “they” I do not just mean the people listening to us yesterday, but those subsequent generations of academics coming through schools and colleges today and the great academics of the 22nd and 23rd centuries who have yet to be born.

If you are a Vice Chancellor, you think two or three years ahead, if you are looking at our educational system, you should think two or three generations ahead.

CDC or DB – the show must go on.

Whether the system that pays deferred wages in retirement is guaranteed (DB) or simply pensions (CDC), the schemes must stay open. Closing schemes like USS is financial vandalism. The architecture of university pensions must stay the same , though the apparatus by which pensions are delivered may be adjusted to meet changing times.

As I came back yesterday afternoon with Con Keating, remarking from my bus to the station how little things had changed since when I “went down” in 1983. The buildings have changed (a little), but the people are still the same. University towns are special and different but that’s because they absorb a different type of person. Our academics are of immense cultural and commercial importance to Britain and we rightly cherish our university towns as the hot-beds of fresh thought. They have delivered, are delivering and – given a following wind – will continue to do so.

So this ridiculous struggle by the Universities to pretend that University lecturers can be likened to those in the commercial sector is wrong. If you open the presentation above, the first page will show those dons who made a difference to me. Some are still to retire, some are drawing their USS pension and some are dead  (some with surviving spouses still being paid). Why I got emotional, was that I was overwhelmed with gratitude for having the university system that supported and continues to support them and their teaching.

I work in the City. I have no links to Universities (other than my son at Girton Cambridge), but the thought of Britain losing its academic predominance as our top lecturers become devalued and disillusioned , is one I’m not prepared to entertain.

Any more than I’m prepared to see postal workers, who work a lifetime for Royal Mail, not get their wage for life.

It happens that my employer, First Actuarial, is fighting for the pensions of both groups , through UCU and CWU respectively.

Some proper thanks

I’m very proud that I’m a part of their work (albeit not the maker of the nuts and bolts).

I’m very grateful to Cambridge UCU for the chance to speak yesterday and for the dons for listening (and for the messages of support after). I’d also like to thank those from the University (Andrew Aldridge (Head of Internal Comms) and  Anthony Odgers (CFO) ). They listened to my  and other’s comments with patience and good humour.

Events like this enable the two sides in this long and bitter dispute to come closer together. I hope the Joint Expert Panel is a success and that we can move beyond 76.4 into the next decade with a lasting open pension scheme – whatever the acronym.

Cambridge colleges

and Rosencrantz and Guildenstern




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

Aviva (unlike tPR) get it right on transfers.

andy briggs

Andy Briggs, CEO of Aviva (UK) and Chair of ABI



Well done Andy Briggs for saying what a responsible life company CEO should say .

Aviva backs ban on transfer advice charges“.

Let’s be clear Aviva are not calling for a ban on defined benefit transfers, they are saying that the practice of contingent charging- must stop.

What contingent charging does.

Contingent charging allows an adviser to charge for advice out of the proceeds of the transfer. If the transfer does not go ahead, the charge cannot be levied. The adviser can still charge a fee if the advice is “don’t transfer” but his/her recovery rate on such invoices is likely to be low – most people use IFAs to transfer and aren’t prepare to fork out to be told to stay put.

The impact of contingent charging

So contingent charging comes with an in-built bias. The ONS statistics show that since contingent charging caught on (really from 2014) the transfer of money out of DB schemes has risen seven fold; since in became the norm (from 2016) transfers have increased three fold in a year.

ONS funds

ONS MQ5 (£ bns)


Since the 2017 number is three times the amount of organised buy-out/buy-in and transfers, you’d imagine the Pensions Regulator would have some pretty good Management Information about the scale of the transfers. They are in fact making a material difference to the solvency of schemes it is regulating.

But this does not appear to be the case. The Pensions Regulator reckon that 100,000 people took DB transfers last year but that only £14.3bn was transferred. A gilt-plus discount rate now produces a multiplier of 40x. Most schemes use this discount rate, most schemes use a 40x multiplier on CETVs.

Simple maths tells you that the tPR’s estimate of an average CETV is £143,000- using a 40x multiplier , that makes the average pension foregone around £3,500pa.

The average transfer value for BSPS was around £400,000, Barclays and Lloyds report £500,000. Most IFAs will not touch CETVs less than £300,000 (for reasons I will explain in a moment). Where are all these small transfers?

Barclays  alone reported £4.2bn transferred out of its staff scheme, LBG £3bn, BSPS £3bn. These three schemes alone transferred out over £10bn last year. I think the average CETV paid last year was c£400,000 and that means that both the numbers of  ONS (slightly) and the Pension Regulator (massively) should be revised upwards.

The ONS £34.2bn is provisional, I suspect that the true number is north of £40bn.

The ONS confirmed number for 2016 was £12.8bn and if we continue to see the trajectory of transfers, demonstrated by the table above, we could lose over £100bn this year.

Thankfully this is unlikely to happen, but no thanks to the regulators and their dodgy sums.

What will put the lid on transfers?

There is only one way to stop transfer activity and that is to stop insuring the advice. Transfer advice is insured by Professional Indemnity teams and reinsured around the world. Lloyds of London is the primary centre for spreading the risk. The word I get from the insurance markets is that the game is up and that insurers have quite enough risk on their hands from last year’s bonanza, to be going on with.

They are insisting on quotas for the numbers of transfers (meaning IFAs get more picky and push average transfers higher still (my £400k estimate already accounts for some quota pressure).

Many IFAs are finding they can’t get transfer advice insurance at all.

The FCA may be able to put a heavy hand on the lid – by banning contingent charging- but I suspect that by the time they do, the PI insurers will have done that for them.

DB pension managers are already seeing a slow-down in transfers.

Andy Briggs is not just honest , he’s smart. By coming out now, he is adopting a position that won’t hurt his business in terms of revenues (the party’s nearly over) and it can only put him on the right side or the regulatory argument.

Even if we take this slightly cynical view, Andy Briggs is still doing the right thing. The hapless Adrian  Grace of Aegon, once again shows he has neither the moral backbone or the commercial nouse to be running a life company. Here he Grace in the FT

“Advisers and their clients should have a range of options for paying for advice,”

and again

“Surely between the regulator and the industry with its compliance departments and pension transfer specialists we can find ways of managing conflicts of interest. Failing to do so will inevitably widen the advice gap when we should be doing whatever we can to reduce it”.

Insurers have been part of the bonanza, they have sat for the past five years with their aprons held in front of them , while CETVs have poured in. They have paid advisor fees from the SIPPs and personal pensions they offer and have given advisers the right to take annual income from these products through their DFMs. The result has been a massive hike in advisory fees and no great fall in the cost of platforms and fund management. Witness these recent numbers published by Citywire.

NMA charges

Survey numbers from New Model Adviser.


Meanwhile , these same insurers are offering pretty well the same products as workplace pensions, without advisory fees and at massively discounted platform and fund management fees. Most Aegon and Aviva workplace pensions have charges around 0.50%, 1/4 the cost of the average SIPP.

Why not use the cheaper alternative ?

The answer can be found in one of the comments on the FT piece quoted above. This from “Matt”

 We are a very cautious, very ethical, IFA firm offering contingent advice on DB transfers. We advise against a transfer in 90% of cases (and that is 90% of cases that get past the initial sense-check screen), and we do not proceed to arrange a transfer that we advise against. We have given most of our business to Aviva up until now, but I guess they don’t want any more of it, so we will use AJ Bell or Alliance Trust for our clients from now on

The simple answer is that it hasn’t crossed Matt’s mind to recommend a product that he cannot derive an income from. I would bet a very large amount that Matt is now referring to the Aviva workplace pension – but to the Aviva SIPP (with the full “suite” of adviser charging options).

Both Adrian Grace and Matt are in the same boat. They both support contingent charging, they both promote products that pay advisers upfront and regular fees and they both ignore the fact that there are legitimate, cheaper product on their shelves that are not considered.

Andy Briggs – a straight man in a “bent” market.

I know I should use a word like “asymmetric”, but I’ll use “bent” instead – as it’s one that ordinary people will understand.

The advice market is bent by contingent charging and the provider market is bent by providers bending over to support IFAs distribute their products.

Aviva have called time on this and thank goodness there is some support for good IFAs who don’t use contingent charging.

Hopefully, this will help the FCA see the problem of contingent charging for what it is, a bending of advice and product to the benefit of financial services and to the long-term detriment of people in defined benefit pension schemes.

In all this, Andy Briggs is showing himself (albeit late in the day) to be “straight”. For which we have to thank him. He deserves my apologies for misspelling him Biggs (Andy Briggs is innocent ok?)

He won’t be thanked  by IFAs like Matt and he won’t be friends with Adrian Grace and others – down at the ABI,  but he’s done the right thing.

After thought

I am not a mathematician and I may be wrong on those numbers, anyone who wants to challenge my thinking (especially at tPR) please do so – either in the comments box or directly to me at .



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

Is there a “true and fair” way to value advice?


Alan and Gina Miller


Yesterday , I wrote a blog about “ownership” and how we cede ownership of our retirement savings – often to ill-effect. You can read that blog here.

This follows up on that thinking and looks at a specific issue that arises when you give up the management of your pension . I’m talking about how you measure if you are getting value for money from your agents.

This series of blogs is inspired by a meeting with Alan and Gina Miller last week. They are mentioned several times in this blog, but I should say at outset that their work on “True and Fair” value and money assessments , has excited and driven my interest in VFM from 2013. They have been campaigning for good for a lot longer (and more effectively) than I have!



Why is the supply chain so complicated?

If you look at this diagram (by the FCA), you can see how agents were employed pre RDR to manage our personal pension.

Sipp 1

And here is how things are today


As you can see, just looking at the number of boxes, the RDR has made it harder for us to analyse value for money by disaggregating the bundled service provided by the Provider (including the reward of the adviser by commission). In the lower box, you can see that in an attempt to move people to “self investment”, we have introduced a variety of new players into the value chain.

This has allowed what I refer to elsewhere as “fractional scamming”, where each participant takes what in isolation might seem a reasonable fee, but collectively – is an unreasonable fee. The obvious example is the famous one used by Active Wealth Management in Port Talbot which involved Celtic introducing to them, and they introducing Vega, Newscape, Gallium and a range of underlying managers introduced by Vega (the DFM).

Each of the participants featured in the second diagram fully disclosed their costs and charges, but the true cost of the asset management will depend on understanding the costs of investment within the DFM. These costs include not just the underlying transactional costs of each manager employed by Vega, but the costs incurred  by Vega in moving money between managers. As a DFM, Vega should be disclosing these costs (since Jan 3rd) as part of MIFID II.

How can we tell whether we’re getting value for money?

I mentioned yesterday that the key to everything , in the transfer of ownership to an agent, is trust.

true and fair

This is not trust


Where is the trusted party in this value chain – who is the principal agent on whom the investor can rely?

The obvious candidate is the advisor, who can tell you (the policyholder) to move away from one agent to another if he/she feels VFM is not forthcoming. If you have an adviser who is trustworthy, then he should be able to give a VFM assessment on all parts of the chain and you should be able to judge the VFM you are getting from the adviser on the quality of this assessment.

There are a number of reasons why this is very difficult

  1. Many advisers are vertically integrated with other parts of the supply chain. They may also be discretionary fund managers and could be being paid by a number of participants in the value chain. Clearly this gives rise to a conflict of interest, how can you give a bad score to yourself, or to someone who is paying you?
  2. Since the value chain is so complex, it is likely that the adviser will not be on top of all the costs and performance numbers of parts he is not directly involved in, he himself will have to take it on trust that what he is being fed is accurate
  3. There being so little supervision of the reporting (especially when we get to the granularity of MIFID II) that it’s quite possible the numbers that do feed through are total junk.
  4. So far, reporting has been to the standards of disclosure seen fit by the providers (though this is changing). This has been particularly frustrating to advisers trying to compare one service with another.

All this adds up to one big fat problem, which is that there is no way that a consumer can really see if they have value for money or not.

It also adds up to good advisers, good DFM managers and good asset managers being abused by bad ones. Some DFMs appear to be bypassing MIFID II altogether, some are reporting selectively, we have some evidence that reporting is being done in different ways- sometimes to hilarious results.

Speaking with Alan and Gina Miller last week, they told me that one of their bond managers was reporting 200 bps of transaction costs on one fund. After lengthy education on how to report “slippage”, this turned out to be around 50bps (still a very high figure). What was so outrageous was that this internationally famous fund manager, didn’t know what it was doing – AND NEITHER DID ANY OTHER INVESTOR.

The reporting of Alan and Gina is world renowned. Their “true and fair” campaign has nudged along Government to ensure MIFID II, Priips and latterly the IDWG, provide fund and asset managers with a way to report consistently. Is it any wonder that both are incandescent with rage that MIFID II is being ignored,  bungled,  or sabotaged (depending on the depth of your conspiracy theory)!

Until we have a way of ensuring the numbers are accurate and fully disclosed , we have no way of measuring value for money – and that goes for accurate performance reporting as much as cost and  charge reporting.

Can advisers be trusted?

Most can – all should be! However there is no easy way to assess the competence of your adviser unless there is an external correlative. If an adviser chooses to charge a lot to provide advice on your investments  – this is not in itself a problem. I recently paid a huge amount to sit on the Orient Express when I could have flown from Venice to London for less than 10%. I consider the Orient Express value for my money and paying 1% + of your assets for advice might equally be Vfm.

But – and this is why the Millers are right to be angry – where the adviser is failing to pick up on something as simple as accounting errors  in cost reporting – and obviously many have – then there should be censure and disclosure.

It is not just from the Millers, everyone I meet responsible for analysing MIFID II reporting has tales to tell. While the world is falling over itself to be GDPR compliant, MIFID II reporting is being ignored.

This is why I am keen to establish a single way of reporting Vfm on all funds, whether retail or institutional and to continue that analysis to the platform costs and indeed all the contract charges that surround the delivery of the investment outcome.

At present I have no plans to provide a VFM score on the advice , but I do believe that an external correlative (of the kind I hope Pension PlayPen will provide), will allow people to make that judgement.

For that to happen , there needs to be an integrity in the scoring system that we can only aspire to at present.

But I do believe that with regulatory tailwinds and with the adoption of new technology, it will be possible to get the right number on most products. Where it is not possible, I suspect that this will be identified as a deficiency in the product – and a marketing problem for the provider.

Ironically, the provision of factual information is not deemed advice. Provided VFM scoring is restricted to quantitative assessment, it can provide the external correlative on funds , platforms and policies that is needed to check the validity of your adviser’s advice.

Should advisers welcome this new level of scrutiny?

Independent Financial Advisers are now earning on average £93,000 pa. They are as a class of professionals, highly paid. They need to be assessed by professional standards and the scrutiny must itself have professional integrity,

The least satisfactory aspect of working with an IFA, is that the IFA is simply not subject to this scrutiny. We have to make blind assessments which are too often based on factors we know to be weak (personal bias’). While I am prepared to pay huge amounts for a once in a lifetime train journey, I won’t be commuting on the Orient Express. Similarly, an IFA who is retained for life must show cost-effectiveness in a different way to one off “project” value.

Alan and Gina are pioneering a standard of disclosure that must be adopted if we are able to judge funds and platforms and contracts. As DFM managers they are also advisers and I am able to judge them on an equivalent basis. They practice what they preach .

If IFAs want to be seen by me in the same way I see the Millers, let them show the same standards of care. The Millers set the benchmark – may others follow.

true and fair3

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RBS remains a national disgrace. It will reach a “milestone” when it shows itself sorry.


There has been some good banter on linked off the back of my blog on hand-outs to kids. The Resolution Foundation’s proposals to up taxes for those working longer and hand-out a tidy wedge to kids (to get them owning property) has the merit of drawing opinion – but little merit else.

Listening to Wake up to Money, I was struck by a woman from the City, cooing over the RBS’ lucky escape (only £3.1bn in US fines) and how we could now expect business as usual at the bank. Let’s remind ourselves that this bank was responsible, not just for screwing up the American housing market, but a host of small businesses in the UK. The money that the UK tax-payer has poured into it , to keep it afloat, is money that has not been spent keeping hospitals properly staffed, libraries open and vulnerable people protected.

Q. What do RBS and millennials have in common? – 

A. a sense of entitlement to my money!

An alternative way from Julian Richer

The other person on Wake up to Money was Julian Richer, who sounded like Richard Branson’s kid brother and made a lot more sense. He talked about the responsibilities of his shareholders to keep his business honest, outlined what he considered responsible capitalism and talked about the social good that a good business can do. He also talked of the financial and behavioural benefit to him, of being a good boss.

Seething with anger as I am about the moral decrepitude displayed by RBS, I am heartened that Julian Richer and Micky Clarke, took the opportunity to distinguish between businesses that run their strategy with reference to the numbers on the balance sheet, and businesses that are concerned about what they produce and how it’s delivered . (Way too long a sentence – born out of the passion of the moment!).

Should RBS be brought back into the fold?

RBS has never properly said sorry to the tax-payer. Those who were the architects of its demise in 2008, sloped off with their pensions and their bonuses. They may not have got much from their share options, but they are not languishing in prison, as they undoubtedly would be were they in other jurisdictions. Fred and his lackeys got off pretty lightly.

Since 2008, RBS has lurched from one disaster to another, rotten to the core, it has spent its time repairing its balance sheet but it has done little to repair its reputation. Despite its excruciating ads, conning us into believing it is a caring institution RBS (Nat West)  is still a national disgrace. I see no good argument for the Government holding on to its shares, let’s get shot of them and use the money for social good.

If RBS wants to convince me that it is worth my money (and it has some by dint of my investments in trackers), then I would like to see atonement. The paying of a fine in the US – and the talk of “milestones” from the CEO – is not atonement. RBS will reach a milestone when it says sorry and shows it means it.

Society needs Julian Richer not RBS.

Today, I have a number of meetings with people I have a great deal of time with. I’m going to a sustainable finance meeting at breakfast in the City, I’m meeting Gina Miller this morning, having lunch with Jeremy Olsen, tea with Olly Payne of Ford and finishing with drinks with Jenny Davidson of Three. All of these business people will be wanting to talk with me about the purpose of what they are doing and how it works for good.

I wish I knew Julian Richer, he sounds my kind of businessman. Society needs guys like him, women like Gina and Jenny, actuaries like Olly, consultants like Jeremy. In the gloom the gold gathers the light to it.

The world envisioned by the Resolution Foundation, is one where the endeavour of the aforementioned is ironed out – flattened – and money is dished out to millennials so that their entitlement to own a property, run a business or have a well-funded pension can be met.

But there is no such entitlement. The entitlement is to those who are vulnerable, the physically and mentally sick, those who have suffered catastrophic loss and those who for whatever reason, cannot otherwise escape poverty. Society should be focussing on supporting those who otherwise should not be supported.

No bail out for the millennials either

It should not be bailing out whingeing millennials who would be better employed getting their heads down and working their way to what they want. This is a country of great opportunity, as any immigrant knows. This is not a nation that takes money from those who are working and old and dishes it out to those who are young – to meet some pseudo-Thatcherite notion of “property for all”.

Nor is it a nation that should tolerate organisations like RBS, who put balance sheet before people. It is a nation with a strong moral compass, a nation that knows what it wants and how we want to be Governed.

My personal politics side with Julian Richer in condemning zero hour contracts, ensuring that people have the opportunity to rent reasonable property at reasonable prices and I want to see a well funded NHS and proper wages in retirement. I believe that achieving things is within the scope of our national wealth.

I am not compassionate about RBS or any of the other institutions that took our national finances to the brink, ten years ago. I am not celebrating their milestone fine and I hope that we take this opportunity to ensure that the businesses we invest in in the next ten years operate on the basis outlined by Julian Richer (and the CSFI sustainable finance group).

As for the millennials, you should look out for each other – I will look out for you. But you’re not getting my money, unless I choose to give it you.

I wish I could say the same for RBS.



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Hey Willetts, leave those kids alone

leave alone 2

The Resolution Foundation have today published a paper which has as its central thesis

A policy shift is needed to mitigate risks and promote asset accumulation for all

It calls on Government to intervene to make society fairer, at least in terms of wealth distribution.

  • From 2030, citizen’s inheritances of £10,000 should be available from the age of 25 to all British nationals or people born in Britain as restricted-use cash grants, at a cost of £7 billion per year.

  • To reflect the experiences of those who entered the labour market during and since the financial crisis, and to minimise cliff edges between recipients and non-recipients, the introduction of citizen’s inheritances should be phased in, starting with 34 and 35 year olds receiving £1,000 in 2020. Each subsequent year, citizen’s inheritance amounts should then rise and be paid to younger groups, until the policy reaches a steady-state in 2030 when it is paid to 25 year olds only from then on.

  • The citizen’s inheritance should have four permitted uses: funding education and training or paying off tuition fee debt; deposits for rental or home purchase; investment in pensions; and start-up costs for new businesses that are also being supported through recognised entrepreneurship schemes.

  • The citizen’s inheritance should be funded principally by the new lifetime receipts tax, with additional revenues from terminating existing matched savings schemes – the Help to Buy and Lifetime ISAs.

“Lord” David Willetts, who is promoting these ideas, is liberal with his knowledge. At Gregg McClymont’ recent book launch he announced that BT were considering “going CDC”. An indignant BT Pension Director, suggested that I corrected this information (BT aren’t). I guess when you’re a Lord – anything goes.

“Lord” David Willetts is also the architect of DB pension transfers. Why not allow the DB system to be dismantled in favour of capital invested by wealth managers?

I was taught back in those days (1987) that my job as a financial adviser was to put the right money in the right hands at the right time. Financial Planning (then) depended on people deferring gratification and saving. Financial Planning has now been dispensed with – in favour of tax mitigation and wealth preservation schemes.

In short, we have moved from an income based system to a capital based system, largely thanks to “Lord” David Willetts. I put these “Lords” in inverted comments because Willetts really does Lord it. His view, which is now, received wisdom, is that by dumping money at strategic points in people’s lives, Government can do the job that I was told to do – right people, right place, right time.

It’s social engineering gone mad. It’s think-tank madness. It’s Lordly largesse with a big fat lollipop hanging out of the side of its mouth.

Fostering insecurity

It is true that there is less financial confidence among the young than the old. It is also true that the young don’t have to think about death so much, nor the impact of bodies falling apart, nor indeed the responsibilities of having money.

If young people had what old people have – wealth – then they can have our insecurities too!

Actually, one of the challenges of being young, is balancing the urges of short term gratification with the need to be prudent.  The progressive view of the Resolution Foundation is that each generation should benefit from more wealth as they profit both from what they make- and what their parents pass down to them.

So – when the Resolution Foundation find that

Beyond the weak earnings and incomes performance of young adults today, the Intergenerational Commission has identified two major trends which barely featured in political debate for much of the 20th century. The first is that risk is being transferred from firms and government to families and individuals, in their jobs, their pensions and the houses they live in.

In short, the baby boomers are suffering the insecurity of ownership.

The second is that assets are growing in importance as a determinant of people’s living standards, and asset ownership is becoming concentrated within older generations – on average only those born before 1960 have benefited from Britain’s wealth boom to the extent that they have been able to improve on the asset accumulationof their predecessors.

Both trends risk weakening the social contract between the generations that the state has a duty to uphold, as well as undermining the notion that individuals have a fair opportunity to acquire wealth by their own efforts during their working lives.

Actually, “generation rent” – which comprises most people under 35 who aren’t getting a leg up from the Bank of Mum and Dad, have both the insecurity of not being wealthy and the freedom of not being tied down by ownership.

The social contract of which the report makes so much, is based on the Thatcherite premise of ownership, which is actually under threat.

Homes and pensions do not need to be owned as equity, they can be rented and paid from landlords and pension funds.

I see a group of young people (my son being typical) who do not aspire to own anything . They have no record collection (they have Spotify), no car (Zipcar and Uber), no house , no savings – no responsibilities. They have fun and lots of it.

An irresponsible world of youth?

Actually, the millennials don’t seem to be bothered about wealth- or that bothered about debt, they seem reasonably confident in their capacity to cut it in a world where they own the technology, they have the health and the energy to make things happen.

Willetts and co reckon they should be given a dollop of wealth to get them back into the capital owning class that they belong to. But do young people want to be the recipients of hand-outs? I see nothing in this report to suggest that the Resolution Foundation know.

The report suggests that young people are like old people; that they want capital in the form of houses, cars and wealth management.

I see no signs of this being the case. Of course there are entrepreneurs who make their first million by the age of 17 but they do not make for a social norm. The millennial norm is doing fine, having fun, not worrying about being rich or getting angry that they’re not as rich as their parents. They are fine.

Leave those kids alone

The Resolution Foundation has a firm belief in what makes a good citizen and they seem determined to force the mould on generation X, Y and Z.

Meanwhile our kids get on with their lives with little or no interest in what our generation want them to be. It seems this is always the case.

Our progressive view that our kids should be brighter, happier and more fulfilled than ever before, seems to be measured on our terms – not on theirs.

Left to their own devices, young people will reinvent youth their way – ever thus – and no doubt when my son is in his fifties and sixties he will be trying to impose his standards on the generations born twenty years hence.


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Johnson misses the point; CDC is for the common man

cdc pic 2


I don’t know whether Michael Johnson is being obtuse or obstructive, but either way, his letter to the Financial Times, misses the point.


 A small cabal of consultants to the pensions industry has been banging the collective defined contribution (CDC) pensions scheme (“ Royal Mail eyes Canadian-style pension model ”, May 2) drum for some time.

Without a client cause, success has eluded them: there is next to no demand for CDC from corporate sponsors of pension schemes.

Having transitioned from providing defined benefit (DB) to pure DC pensions, employers have no intention of entering what would be a very complex, untested, arena.

But the opportunity to play a role in settling the Royal Mail’s pensions travails has been gleefully leapt upon. The consultants’ have attached their CDC cause to settling what is ultimately a labour dispute. This renders the CDC debate primarily political, rather than being driven by any performance merits.

This is not a sound basis for the formation of pensions policy.

Michael Johnson -Research Fellow,Centre for Policy Studies,London NW5, UK

CDC will do very little for employers (at least in the short-term). Johnson is right to point out that Royal Mail came to CDC as a means of resolving a labour dispute. There are other potential disputes out there, quite apart from the recent dispute among University Lecturers and CDC may again be used as a compromise solution – but it is not of the least importance to small employers and not to most big ones either.

CDC is important to staff, or at least it will become so, as more staff find out that pension freedoms don’t equate to proper pensions.

As one of the small cabal of pension consultants named (indeed the pension consultant who invited Johnson to the meeting of Friends of CDC to which this letter refers), I am pleased to be recognised for banging the CDC drum.

The alternative would be to allow the UK insurers to press ahead with drawdown for the masses with a fall-back position of annuitisation. Both of these solutions work for insurers but don’t work too well for the UK consumer. If Michael Johnson wants to hand the trillion of so that will be in UK DC by 2030 to a small cabal of life insurers, he should continue along this way.

But knowing him, I do not think he wants this, I think he is a libertarian who generally wants people to choose or at least have the choice of, good ways to finance their retirement, not least to reduce the burden of their maturities on subsequent generations.

It is not the job of small employers to insure against their retired staff’s super-longevity, but employers are quite comfortable to operate workplace pensions (as proven by the successful staging of auto-enrolment).

If an employer was given the choice of a standard DC scheme or an upgraded DC scheme (which enabled staff to have the equivalent of a scheme pension) then few employers would begrudge the upgrade – PROVIDED they were ring-fenced from any liability for the payment of the pension.

If an employer has any residual concern about the potential liability of participating in a CDC scheme, they should not enter into such a scheme. Employees should be free to transfer their DC pot into a CDC “general purpose” scheme.

Johnson seems unimpressed by the arguments put forward by people like me that CDC will produce pound for pound better results than IDC/drawdown or IDC/annuity and he is unlikely to transfer his pot into a CDC plan or run a company that participated in a multi-employer CDC scheme. But his libertarian principles should include a recognition that he does not speak for everyman. Others may hold different view than his.

As for his contention that pension policy should be based on performance rather than policy, I agree.  Royal Mail’s potential settlement has added £2bn to its share price, should a “wage for life” solutions not be delivered, then the performance of Royal Mail’s shares will not be sustained.

That £2bn is of course based on what the CWU’s membership has voted for (91%). Michael may agree with other pension experts that over 100,000 postal workers have been mis-sold the deal by their union, but that is in itself a political opinion.

If we consider workplace pensions as deferred pay ( and we have done for many generations) , then any pension dispute is a labour dispute. By breaking the link between contributions and pensions (firstly by moving from DB to DC and latterly by taking away the need to annuitize), the Government has created a problem for itself.

That problem goes beyond Royal Mail’s current “labour dispute”, it is a problem to do with the adequacy of retirement incomes in later lives.

The Government, which sponsors workplace pensions with generous tax incentives, is perfectly entitled to facilitate innovation in private pensions. This was precisely what the Defined Ambition of PA2015 was designed to do and what the FCA’s Retirement Outcomes paper is calling for.

The Government should see Royal Mail’s request for secondary CDC legislation, not as a burden, but as a policy windfall. If anyone should be gleefully jumping to Royal Mail’s aid, it should be the DWP and the Treasury.

Michael Johnson should remember that the meeting he attended in January had 69 attendees, I have the list and can count only 6 consultants on it. He is as wrong in his memory as he is in his analysis. CDC is for the people , not for consultants and not for employers.

cdc pic



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“Pension experts” are most of the problem.

pension expert 2

Some time has passed since the publication of the Joint Expert panel report on the funding of the University Superannuation Scheme. I haven’t commented and won’t comment while negotiations are going on.

The thread from Jo Cumbo that is published below on twitter is interesting (at least to me)

I’d like to see the JEP report as part of a wider debate about how we view collective schemes. This debate necessarily includes the new CDC arrangements , starting with Royal Mail and continuing (hopefully) with opportunities for smaller employers and even individuals with DC pots.

To create the space for the USS to have its debate, or Royal Mail for that matter, there has had to be intermediation by the unions – UCU and CWU respectively. As most people know, First Actuarial – my firm – are advising both unions. This is one of the reasons I don’t want to bugger up negotiations by sticking my oar in!

That the unions have been so effective, is partly due to the advice given, and my colleagues deserve praise (which they’re getting). But it’s much more down to the membership of the unions and the leadership of the unions.

They have created the space for the debate to happen. All this from people who are anything but “pension experts”.

Taking pensions away from pension experts

For too long, people have been told that their pensions are unaffordable. Only today i read a report telling us that those in good quality Defined Benefit pension schemes are getting three times the benefits of those getting a defined contribution. In a world the right way up, those with DC schemes should be demanding defined benefits.

But we live in a world of pension experts who believe that the way to sort out the problem is to take benefits away from those who enjoy them and dumb them down  to the lowest common denominator. We are told that we must de-risk because we cannot afford people to retire on the right amount. In a world the right way up , we would re- prioritise the use of corporate profits to ensure that people retired on the right amount – that’s what pensions governance should be about.

Royal Mail and USS are disputes over pay. Both are primarily about deferred pay. In a world the right way up, the agreements reached by Royal Mail and (hopefully) at the Universities, will see hundreds of thousands of people continue to accrue good pensions.

Instead of celebrating this as “good news”, the pension experts throw up their arms in horror. We need to take pensions away from pension experts and give them back to ordinary people.

Let’s recognise the true experts.

We have an extraordinary pension system which is underpinned by the Pension Protection Fund. This week we heard of two Regulatory Apportionment Arrangements that have gone wrong, because they avoided the PPF.

The first is Kodak, which after spending £15m in advisory fees to stay out of the PPF is tipping back members into the PPF because Alaris (the remains of Kodak in the UK isn’t working well enough. The question the Work and Pensions Select Committee is asking, is was the cost of keeping Kodak out of the PPF worth it?

The second is BSPS, where things are rather different. Tata is thriving in a way that Alraris never did, but we now know that 8100 people left BSPS and “New BSPS” since their RAA was announced.

The experts who devise the RAAs create side-effects that aren’t welcome. I wonder whether Alaris might not be a lot stronger if Kodak had put its scheme into the PPF. I wonder if most of those 8100 cash-rich former BSPS members, might not have been better off having pensions paid from the PPF.

We have unwittingly re-branded the PPF as a monster – to be avoided at all costs. But nothing could be further from the truth. The PPF is a great thing – a fund that is moving fast to self-sufficiency. Sadly, the people who set up and run the PPF are not counted as experts. Not for the first time, I am with John Ralfe, in thinking that the super-complex RAAs are more trouble than they are worth.

I am no pensions expert

Today , I am quoted as a pensions expert in the Times. I am no such thing.  I am quoted saying this to a couple who are thinking of selling their rights to a really good pension for life for a mess of pottage (well £260,000).  You don’t have to be an expert to work out where I’m coming from.

The experts

Henry Tapper of First Actuarial, a pension company
“Mr Hayden should think about the Hewlett-Packard benefit that he’s giving up. If he had £260,000 today and wanted to buy a guaranteed pension, Aviva would quote him a level pension of £10,316. But if he wanted that pension to be paid to his wife and for the income to be linked to inflation, the Aviva pension would fall to £5,270. Occupational pensions protect you and your spouse from running out of pension if you live longer than anticipated and they give you protection against inflation.

“He would be giving up more than a £13,000 pension at 60, he would be giving up protection that may be worth as much again.

“Mr Hayden works in a low-risk job. He and his wife should be living for 30 years or more in retirement. So that £260,000 isn’t such great compensation for what he’d give up if he took the money. What’s more, to take the transfer he’ll have to find an independent financial adviser. This kind of advice isn’t cheap. Mr Hayden should expect to pay 2 per cent of the transferred amount [more than £5,000] for the work. All in all, taking the transfer looks a lot more risky from where I’m sitting than it may do to Mr Hayden.”

I’m glad to say that the other “experts” (including Steve Webb) agree.

Pensions Experts are the ruin of pensions. They believe that everything should be cashed-out, de-risked – all liabilities shifted to the people who are least able to manage them.

experts 3.jpg

Motto for pension experts





Posted in pensions | 1 Comment

Auto-enrolment; a national exercise in trust.

I like to tease Jo Cumbo that she can trust no-one because of her heritage! This blatantly xenophobic comment is based on a British prejudice that Australians find compulsion acceptable as compliance is in the blood. A second prejudice, that the British can trust one another – is as ridiculous as the phrase “it’s just not cricket”. Neither cricketers or Brits can be trusted not to cheat and Australians are not just a bunch of third generation criminals.

And yet…..

The Australian Superannuation system compels savings behaviours and demonstrates gross inefficiencies while the British auto-enrolment system, relies on nudge and honesty – and appears to be working very well indeed. Could we cope with a mandatory system – I suspect  the answer is “no”, would the Aussies cope with auto-enrolment – I don’t know. My innate xenophobia prevents me proceeding down that track!

Auto-enrolment compliance relies on trust!

Jo Cumbo has read the Pensions Regulator’s latest data-pack on AE compliance (I have not) and she has tweeted highlights.

  1. At the end of March 2018, more than 9.5 million workers had been automatically enrolled into a 1.1 million employers had completed their declarations of compliance.
    Only a year earlier it was half a million employers.
  2. The proportion of UK staff in a is 84%, up from 77% last year Total amount saved in workplace pensions in 2017 was £90.3 billion, up from £86bn last year.
  3. In 2017, the Regulator received 90 whistleblowing reports alleging an employer was trying to induce a worker to opt out of the . Of those, 53 resulted in cases
  4. The number of cases opened by the Regulator to investigate possible breaches of AE rules by employers more than doubled to 4000 in 2017. being created for further investigation.
  5. Between April 2017 and March 2018, the Regulator used its formal powers on 102,497 occasions, a 52,429 increase in the use of our powers from 2017. The number of compliance notices issued rose from nearly 34,000 last year to nearly 61,000 this year
  6. The number of £400 Fixed Penalty Notices issued when an employer fails to comply with a statutory notice for failing to meet its AE duties doubled to 28,864 in 2017/18 from 12,181 the year before.
  7. The Regulator said initial data indicates that employer compliance with the first increase in contributions (2% to 5%) has been “very high”.

    Here is the link to the full Report

Jo concludes her string of tweets with the following conclusion.

We are left to draw our own conclusions as to whether the Pension Regulator’s approach is fit for purpose.

Is Auto-Enrolment compliance sufficiently resourced?

Jo’s bottom tweet suggests that it mightn’t be. Recent research from PensionSync, documented on this blog, suggests that large amounts of the data recorded is recorded wrong and that some mis-collection of funds and even mis-claiming of double tax-relief is going on.

Certainly we know that there is systemic non-claiming of HMRC incentives for those on low-earnings who are auto-enrolled into net-pay schemes and get no incentive (despite it being part of the deal).

I would divide non-compliance into the categories of the confessions


Some employers and payroll officers aren’t very good and many providers assume they are.


It is easy to allow bad practice to persist , for fear that exposing it – will lead to trouble, both to the whistle blower and the employer

Own deliberate fault

There is a steady stream of employers who deliberately lie about auto-enrolment and set out to keep money in the company, rather than in their employee’s pension pots.

TPR’s regulation is – to me – proportionate to my perception of the problem. Most non-compliance is through ignorance and incompetence, some is through weakness and should be whistle-blown and a small part is deliberate.

Any sensible strategy from the AE enforcement team ought to aim at educating the ignorant, empowering the whistle-blowers and coming down with an iron fist on employers who steal from staff.

In my opinion, this is what TPR are trying to do. The numbers of people they are finding in these categories is small, the issue is not in their method, but as to whether sufficient resource is being allocated to dealing with these three issues.

How much is enough?

We yearn for perfection. Actuaries, pension administrators and regulators have yearned for GMPs to be reconciled and equalised for decades. We know that had everyone levelled up initially, the cost of putting things to a median state today, would never have been incurred. It is cheaper to do things right first time, and in the case of GMPs – it would have been cheaper to have produced a simple system that gave everyone full shares.

No doubt we will look back at the initial stage of auto-enrolment with its various contribution basis’, phasing and self-certification of compliance as equally over-complex. And yet, most payrolls see AE as BAU and most employers now count pension costs as part of their financial model.

Were we to seek perfection, we would look at all the consultants we have employed and agonise over whether we should have included them. We could look again at our pro-rata allocations against AE periods and we could try to unravel the complex contribution histories to ensure that there were no winners or losers – but absolute compliance.

TPR could audit on this basis. The cost of regulation could outweigh the benefit of increased compliance and the cost of increased compliance could prevent employers ever contributing beyond the AE minima to staff.

Regulator’s talk of proportionate regulation; they know that resources are finite. There is an efficient frontier out there between enforcement and engagement. The more that TPR can encourage engagement, the more efficient that frontier becomes.

The philosophy of compliance

To my mind , natural compliance (engagement) beats enforced compliance every time.

We have in auto-enrolment, something of a success story, even with the employers for whom pensions has become a compulsory part of business life for the first time.

There is a natural link between work and pensions, it’s in the title of the department and it’s in one of my favourite synergies “work is boring, pensions are boring”.

But boring is good, just like exercise and not smoking weed or tobacco. Boring is good because it leads to exciting later. Deferred gratification is something we all think is good, especially when we know that getting old is tough!

I will continue to applaud the Pensions Regulator, as I think Jo Cumbo is doing. We could treble the compliance teams in Brighton, but would we cut breaches by 2/3 – or make auto-enrolment more of a success – I doubt it.

The Pensions Regulator is in a good place on auto-enrolment; it’s good – not perfect. Philosophically – I think it’s good enough for now! Practically, I think it’s good enough for now.

We are learning to trust auto-enrolment and that is the first step for 10m of us – for whom pensions have been – till now – a rich person’s play thing. To fulfil on auto-enrolment stick, the workplace pensions have to deliver; that will require a new level of compliance and a new order of trust.


making 2





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

Managing and enjoying our linked in groups

went wrong.PNG

Something is going wrong

Linked in groups have for over a decade provided ordinary people to do extraordinary things.

For me, Pension Play Pen has allowed me to speak to a small circle of friends that has grown to nearly 10,000 people by word of mouth and by invitations that I have made to my contacts.

Over the years – we have organised trips to the theatre, to the racing , to football and on boating outings on the river Thames.

The group organises lunches (over 500 and counting) on the first Monday of every month. We have regular parties and we organise debates. These are the off-line activities.

On-line there are about 40 regular posters, we never get less than one new conversation a day.

But over the years, it has become harder to manage the group. Not just because it is bigger, but because Linked in has made the group more and more inaccessible. Time was that you could access your groups directly from the Linked in Toolbar, groups are now find via a button few press, discouragingly called “work”. It’s “hard work” to find your group.

It became even harder last week when Linked in changed the formatting of groups. Pension PlayPen, which used to appear at the top of my group list, slipped to 57th!

Without consultation with group owners, Linked in appear to have turned off the capacity of group owners to speak to members (a weekly announcement mail). They have turned off the capacity of group owners to promote certain posts (meaning that advertising posts have the same prominence as genuinely educational content).

And when you try to invite someone to the group – which I have done every day since I founded the group, you get an unhelpful note – day after day – saying that “something went wrong”.

Something has gone wrong. Linked in , either through ignorance, weakness or its own deliberate fault, has made group management – pretty well impossible. At the moment, I am seeing no new joiners, we are getting very few casual visitors and the people who are used to hearing from me – aren’t.

The Linked in organisation ought to reconsider its group policy. I expect that supporting groups is not expensive, but nor is it lucrative. Linked in should not forget that – despite its primary purpose – to help people find jobs – it is a fabulous database – a way for people to stay in touch and the provider of online communities.

The online communities of linked in are – and have been for over a decade – linked in groups. We should ask Linked in – collectively – to save our groups and not let the thousands of hours of hard work from group owners and managers – come to nought.

On the plus side

Linked in promise us a new look groups service – though the timeline for this is unclear. You can read what they are promising here.

Just how confusing the current messaging is – can be summed up by this paragraph of a recent message from linked in help.

With new version of Groups, all admin and auto-generated emails, including digests, automated templates, and announcements, featured post will be unavailable. We’re investing in building better and more robust notification and communication channels.Once the groups have been revamped completely you will be able to use it like before.

Below – text of the linked in promise (complete with groovy GIF) – take with a swig of sceptacism

We’ve heard from all of you about how important LinkedIn Groups are to helping you build your professional communities. You’ve told us how valuable it is to have a shared space where you can talk to other professionals about trends in your industry, stay connected with fellow alumni, come together to plan networking events, and discuss the many topics you care about. We’re excited to introduce the new LinkedIn Groups experience today!

With your feedback in mind, we’ve rebuilt Groups from the ground up, making them available right in the main LinkedIn website and app. Why does this matter? Over the past year we’ve focused on bringing conversations to the forefront on LinkedIn, adding new features to make it easy for you to talk to your professional communities – things like being able to record and share videos, messaging from anywhere on the site, and seeing when your connections are online. The new Groups experience helps you take advantage of all these conversations tools with a seamless, faster experience so you can easily participate in your groups alongside all of the things you already love to do on LinkedIn.

Here’s what you can look forward to in the new experience:

  • More engaging conversations: To give you richer ways to participate in your groups, you’ll now be able to post original videos, multiple images, and other rich embedded media. You’re also able to reply to comments and edit your posts and comments.
  • Always stay up-to-date: We’ve heard from you that you want better ways to keep up with the conversations and activity happening in your groups so we’ve added these notifications on LinkedIn. For example, you’ll be updated when someone comments on one of your posts in the group, or when new people request to join a group you manage.
  • Access anytime, anywhere: Easily get involved in your groups on-the-go from the LinkedIn iOS and Android app. Admins will also be able to take all group management actions from mobile, such as messaging group members, accepting requests to join, or removing any posts that break group rules.

Coming soon, you’ll also be able to:

  • Navigate to your groups more easily: You’ll be able to quickly find and get to your groups right a navigation panel on the LinkedIn home page.
  • Keep the conversation going from your LinkedIn Feed: Soon you’ll be able to start and join conversations in your groups right from your main feed. You’ll be able to reply to comments or share an interesting article without having to navigate to your group.
  • Easily discover new groups that match your interests: Looking for new groups you may want to join? You’ll be able to discover recommended groups based on your network and interests from the My Network tab on desktop.
  • New Groups Gif

All groups are being migrated automatically to the new experience, which is rolling out now on desktop and mobile. More questions? Check out the LinkedIn Help Center for additional details.

This is just the beginning of the new