The Steelworkers submission to parliament


1. Social Media

Rich Caddy created the British Steel Pension Members Facebook Group in April 2016 when Tata made their announcement about the future of Tata Steel UK (TSUK) Ltd and the potential impact on the British Steel Pension Scheme.

The purpose of the group was to provide members with a platform to discuss issues facing the BSPS.  A second group was created in September 2017 to focus on Deferred Members and the additional concerns of members considering transferring out.

In May 2016, Stefan Zaitschenko joined to offer help and support as he had been following the potential changes to BSPS.  He created the British Steel Pensions Members – Information & FAQs page to provide easy access to the queries raised regularly by new members.

David Neilly joined in December 16 as is an administrator providing support in the Port Talbot area.

There are a total of 25 admins and moderators from all parts of the UK and all British Steel communities.

The main group currently has over 5,100 members.   Any member can post on the group, email our confidential email address or private message any of the other members.  Hundreds of members have used private messaging to get one-to-one support.  Thousands have viewed the FAQ pages and asked additional questions.  Response time is usually within minutes to any query and this has been one of the major benefit from this social media platform.

There is a Twitter account @bspsmembers which is followed by members of the pensions industry and media.

Telephone support has also been given to assist members who at times just want a ‘sounding board’ to listen to their concerns and give ‘counselling’.

One post that sums up many of the views expressed:

“I wonder what the total amount of hours of lost sleep will be for all members struggling to make a decision on their options without the benefit of a crystal ball.  Even after the decision has been made I guess there will be many members still worrying in case they have made the wrong decision.

It is shameful that this is the outcome for workers who have given so much of their life to steel making. So many people thought the daily grind and the unsocial hours would be worth it to have a comfortable and relaxing retirement with a multi award winning pension scheme. Just so unfair.”

2. Background

Tata acquired Corus, now Tata Steel Europe, in April 2007. The European behemoth was formed by a merger of British Steel and Dutch firm Koninklijke Hoogovens in 1999. Tata Steel Europe became the 2nd biggest steelmaker in Europe behind Accelor-Mittal.

Tata Steel employees were given with free shares in the new company and informed that we had all become shareholders and that our future pensions and those of the existing pensioners were safe.  Within a few years, pension benefits were eroded steadily with the loss of, for example, ‘1 in 7’ additional years, change of accrual rates and ultimately scheme closure to new accruals.

BSPS Members Communications

The first statement to scheme members came in a letter in May 2016 which advised of a government consultation on ‘potential changes to the law’ and led with a statement which caused many to not read further.

“You do not have to take any action as a result of this letter but you may wish to participate in the consultation and will find details attached on how to do so.”

The consultation spoke of deficits, accruals, section 67 and changes in law to allow the Trustee to reduce benefits without member consent.  Many respondents opposed such changes and after several months, the consultation faded into the background without a conclusion.

Tata Steel UK/BSPS Trustee entered negotiations with the Pensions Regulator and Pension Protection Fund which would ultimately lead to the same outcome they had proposed in 2016 without a change in legislation.

In January 2017, scheme members received a second letter which led with the statement,

“This letter is to update you on recent developments in connection with the British Steel Pension Scheme. It is intended for information only and you do not have to take any action.”

This mailshot informed us of termination of benefit accrual, PPF compensation levels and a release of the guarantees and security provided to the BSPS by other Tata Steel companies, words which meant little to any but those having a background in pensions law.  It mentioned a Regulated Apportionment Arrangement and the efforts the Trustees were making to ensure better benefits for members.  In this letter, we were also told that there would shortly be the actuarial valuation in March 2017 and a recalculation of the funding level which was expected to show a modest deficit.  This reflected a statement made previously:

“A report on the Funding position as at 31 October 2016 on both a Technical Provisions basis and a Modified benefits low risk basis was reviewed by the Trustee. The Actuary reported that a modified Scheme with a low risk investment strategy would have had a funding ratio of 116% at that date and a buffer of over £2 billion to cover residual risks.”

This gave members a belief that the fund was on target to be in a strong position and to have recovered from the problems identified in previous letters.

However, speculation in the press continued and on 11 August, TSUK/TPR/PPF announced that they had negotiated the terms for TSUK separation from the BSPS fund. ]

“As a result, following lengthy discussions between the Trustee, TSUK, the Pensions Regulator and the Pension Protection Fund (PPF), it has been agreed that TSUK will make a final one-off contribution to the current scheme of £550 million and will then be free from any obligations to the current scheme.”

Members were informed that by the August newsletter that “Your pension is changing” and “It’s time to start thinking about what’s right for you”.

This 8 page newsletter contained a great deal of information including the headline that all members will have two options:

  • • Move with the current scheme into the Pension Protection Fund
    • Switch to the New British Steel Pensions Scheme

It also reminded non-pensioners who were more than a year away from retirement age that they could choose to transfer out of the current scheme.
The newsletter included a commitment to provide personal information by October to help make our choice and that we would have until December to choose.  A free and impartial helpline would be available so that we could speak to a pensions expert.
For most members this was the beginning of a period of anxiety, stress and concern as this document included phrases such as:

  • • lower benefits than in the current scheme
    • future increases will be lower

We immediately saw a huge increase in traffic on our Facebook Group as members wanted to know what it meant to them individually.   It was very clear that this was a wake-up call.  I told them that the pension that they believed was rock solid and would provide for them and their spouse through their remaining years was about to change.

The major emotions were:

  • • Anger – that the promise made to them when they signed as young steelworkers was being broken
    • Anxiety – that they didn’t know how this would affect them
    • Despair, pessimism and uncertainty

Through social media we were able to help by explaining the two choices and in general terms how the proposed changes in benefits would impact their pensions.  No additional information on the impact to them personally would be seen prior to their Time To Choose booklet being sent out later in the year.  So we were only able to illustrate how the choice of PPF or BSPS2 could affect them in the most general way.

3. Option Packs

From mid-September onwards, members were concerned that they had not seen their individual Time To Choose option packs that were due to arrive by October.  The first packs started to arrive w/c 8 October and included details of the two dedicated helplines; for pensioners and for deferred pensioners.

The packs were received in batches until the end of November and we are still aware of members who have received no information.  The helplines provided a professional service and answered many of the straightforward questions posed by the majority of members.  However, many packs arrived with little or no personalised information.  When called, the helplines directed the members to the Pensions Office for any additional information not available on their systems.

Members were told at the roadshows that, even without the figures that other members had received, they should have sufficient information in their annual pensions benefit statements and the generic examples to make their choice of the new scheme or PPF.

This is the post on the TTC website:

“We won’t be sending you any more figures on top of what is in your option pack, because it’s not possible to do that in the time available. If you’re a non-pensioner and your option pack has no personal figures, you can find information about your deferred benefits in your latest deferred benefits statement. If you can’t find this statement, please phone the helpline and ask for a replacement.”

“We know that the lack of figures in your option pack could make it harder to choose your option, particularly if you are thinking about transferring your benefits to another pension arrangement. If you are thinking of doing that, you or your financial adviser can get a fact sheet here. This sets out in more detail how pension increases in the new scheme will be calculated. This will help your adviser carry out the analysis they need to advise you.”

Many members and their IFA’s found that they did require additional information and tried to obtain this from the Pensions Office but the volume of calls and emails overwhelmed the available resources handling telephone and email queries.

The helplines provided for assisting members with clarification of the information in their packs were responsive and it was worthwhile in helping members interpret the data available.  Whilst they could answer a set of queries affecting those with a relatively straightforward choice, they could not provide any additional information beyond what was in the packs.  Members lacking figures or with more complex queries were referred to the pensions office.

Most complaints we have seen about the Consent Exercise have focussed on the inability to contact the pensions office in a timely manner.  Most calls are met with automatic disconnection due to the volume of traffic.  Emails are met with the automated response.  (see attached).

“Has anybody out there in this world of pension madness got an alternative number to 03304400844 to get in touch with the pension office. No one wants to answer on that number. I’ve emailed every day for a week and still no reply.”

The decision not to allow responses by emails and confusion over the address to return the option forms was the subject of many queries raised by members even after an update the TTC website.

We have an automated service checking the content of the website so that we can inform members of information updates immediately after they happen and point them to the relevant page.  Many of the outstanding questions could be answered and given a wide audience in a timely manner by this approach.

4. Indexation of Pre-1997 Accruals

The immediate change in benefits recognised by most members was that both the new scheme and PPF benefits would be at statutory minimums with neither including indexation for pre-1997 accruals.

Comparisons quickly showed that the Trustees view that the new scheme would be better for the vast majority was correct.
The Pensions Regulator in a letter dated 19 Sep 2017 stated:

“We fully appreciate that the pension increases the members will receive in the New BSPS are at the statutory minimum and are less generous than those of the BSPS. However, the proposal is the product of intensive negotiation between the BSPS trustee (on behalf of the members), TSUK and the wider Tata group. It seeks to reasonably strike a balance between the interests of the stakeholders and in the light of the alternatives.”

Many older pensioners who worked for the British Steel Corporation and British Steel PLC and left a decade before Tata purchased Corus now faced an uncertain future because the benefits, proposed in 2016, were thought to be a fair outcome.

This was said by the Chairman in the BSPS Trustee response to the government’s consultation:

“It is true that members whose pensions were earned wholly or mainly before 1997 might see little or no future increases to their pensions whilst in payment. But the same (or worse) would happen with PPF compensation. It should also be noted that existing pensioners in this group have enjoyed full RPI indexation since retirement, whereas future pensioners will not. If circumstances allow us to reinstate pension increases in the future, we would expect to prioritise pre-1997 accruals.”

Many family members of older pensioners, widows and dependents have expressed deep concern and anxiety about the real term reductions to their loved one’s pensions.  The lack of pre-1997 indexation leads to a potential 20% real term reduction over the next 10 years and this is seen as particularly unfair.

 “Hope someone can help, my dad has 26 years service all pre97 he has received little information from BSPS he doesn’t use any modern technology and I am his only hope to find out the correct information before he makes a decision in December. Dad is on a very small pension by today’s standards plus my mum is still with us so not having the pension index linked could mean hard times for them both! Would appreciate some advice.”

All efforts to persuade the BSPS Trustees and other stakeholders that took these decisions were met with the same answer which is known from previous responses to the Committee and APPG Steel.  The loss of pre-1997 indexation remains the overwhelming concern of the 82,000 pensioners and while scams have a devastating impact on an important minority this change affects a group who have no other source of income and are unable to cope with future cost of living rises.

5. Bridging Pensions

The impact of funding the High/Low (11-8) pensioners was covered in the BSPS Trustees response to the 2016 consultation.

Under current rules, members in receipt of the bridging pension would receive higher compensation from the PPF after reaching State Pension Age.  This windfall was estimated at £600 million and this would need to be taken from the assets destined for the new scheme.  In October we were made aware of the consultations on the draft amendments to the PPF regulations.  The 4,600 members were left in limbo and could not make their Choice of BSPS2 or PPF until this was resolved.

At the roadshows, questions about the PPF rule changes dominated much of the time allocated for Q&A but no answer could be given other than “We await the decision by Government”.  With the deadline approaching we saw anxious members trying to get advice on what they should do.  BSPS extended the deadline to 22 December and wrote to relevant members this week stating the government’s intention was clear; the PPF amendment would apply to all BSPS members transferring to PPF.

This issue will not be a concern to other DB schemes transitioning to PPF in the future.

6. Transferring Out

The option to transfer out of the scheme has been available to members as part of the scheme rules for many years so could be thought of as separate from the Time To Choose Consent Exercise.  In reality, the need to provide CETVs and other information in a timely manner has been the biggest problem to the members of our group and the pressure to consider transferring out has weighed heavily on their shoulders.

Pressure to transfer out

Historically transfers out of the scheme have been looked on as bad decision and it is evident that many remain reluctant to take this decision for fear of getting it wrong.  Normally anyone considering transferring out would have had put much time and effort into studying the options before starting the process by asking for a CETV.  Many of the younger members spoke to us about “not really thinking about pensions at their age” but now being forced to make a life changing decision against hard deadlines.

Whilst many knew little of this option prior to August when the newsletter was received, some were aware of the pension freedoms introduced in 2015.  Peer pressure came to the fore as transferring out was seen as the means to get total control of your fund with these new freedoms.

Demand for CETVs rose exponentially as members reacted to what became a “fight or flight” response.  They began to see leaflets, posters and business cards from IFAs along with new websites referring to the benefits of transferring out.  The first sites returned when Googling “British Steel Pensions” were IFAs offering free consultations for members who wanted to gain from the new pension freedoms.  The website designs appeared to show that there was some link to British Steel or Tata.

Recently, the first site being returned is a firm specialising in no win – no fee claims for “mis-selling”.
(see figure 1 : below)

We saw a huge surge of posts and replies extolling only the positive benefits of transferring out.  Many questioned the principle that DB schemes provide a ‘guaranteed’ pension as they saw vindication in their view that ‘nothing is guaranteed’ as BSPS2 was forcing ‘Hobson’s Choice’ of lower benefits on them.

“I look at it this way. I transfer out and what happens is my own fault stay in and I’m at the mercy of something that changes the deal anytime it likes. Nah ram it!”

The major perceived benefits for transferring out became:• Being in charge of your financial future with no company or state interference

  • • Death benefits for your wife and children
    • Their fund would gain from the inflation busting performance that they were told they WOULD get from private investment funds
    • CETVs are at their highest point (told at roadshows their TV’s would drop in BSPS2)
    • Being able to retire early and use the new freedoms of draw down

“Well after reading that (Pension transfer ‘wrong for 85% of British steelworkers’) it confirms that transferring out is right for me. I want to pay my mortgage off, retire early and half of my pension is pre 1997”

The differences in the underlying risks between a guaranteed DB scheme and a private plan was considered but not seen as a reason for remaining with a TSUK/BSPS. Many of the members believe that TSUK would “go bust and we would all end up in PPF anyway”.  Putting their trust in the PPF was perceived to be giving control of their future to politicians who could change the rules of the PPF when it inevitably collapsed under the weight of future DB scheme failures.figure10
Figure 1: Google search

There is also much importance being given to the lack of trust in Tata who “engineered this whole thing to get what they wanted and damage our pensions”.  The perception remains that the pension fund and the members were forced into this situation as collateral damage to allow a JV with ThyssenKrupp.  The timing of the signing of the MoU suggests there may be some truth in that.

“Any collaboration with Thyssen will favour the Germans which BS/Hoogovens favoured the Dutch (more powerful workers voice on board backed up legally so UK workforce suffered more pain).  Transferring guarantees me a CETV which is significantly more I would have expected, big numbers more than I would have been quoted 2 years ago, so Bank it and invest with someone you trust. It is yours no strings attached and you use it for your family to get the best outcome you can without looking over your shoulder.”

The members of the panel at the Thornaby Roadshows in November 2016 appeared not to appreciate that the choice of PPF or the new scheme also depended on the suitability of transfer for an individual member.  It is apparent that the trustees are focussed on one target; achieving the split of members and assets of BSPS by 29 March 2018.  Transfers appear secondary and must not affect this objective.

Lack of a guided pathway and counselling

The FCA’s regulatory guidance on DB to DC transfers and conversions (April 2015) appears to support the view that the role of the Trustee is provide the information in a timely manner, keep records and consider the effect of the transfer on the funding level.  Support to members is covered:

Trustees can support members in a number of ways to ensure they have the information they need to make a fully informed decision, including on how to find a Financial Conduct Authority (FCA) authorised adviser.

Trustees can do this by making members aware of the FCA’s consumer pages at

This was considered at the June 2017 Trustee board meeting:

The Trustee approved the setting up of a separate member helpline service to provide guidance when members come to make their decisions. The Trustee decided however that it was not appropriate to recommend a particular firm of independent financial advisers for those members who wished to pay for more detailed, individual advice.
The decision not to provide a guided pathway and independent counselling to their members, most of whom with little experience of investments, set them on a turbulent journey which left them vulnerable to dubious advisers and unsuitable financial advice. On the 29 November, an additional section was added to the Q&A’s on the TTC website:

You should think carefully before transferring out. You would be giving up guaranteed future pension income in return for income that might not be guaranteed and could vary depending on how you manage it. You should take independent financial advice – and legally must do so if your transfer value is over £30,000. You should be very careful to avoid scammers and unscrupulous financial advisers. You can find an adviser from Make sure they’re authorised by the Financial Conduct Authority with permission to advise on pension transfers. You can check this by looking up the adviser at

Even though transfer values can seem very large, transferring out is unlikely to give you as much total pension income as either the PPF or the new scheme, on a like-for-like basis.

We took a (unscientific) poll asking

“Do you agree that the Trustees should have supported you more in terms of information on the risks of CETV release and provided a panel of ‘preferred’ IFAs?” The response from 200 members was “94% YES; Strongly”.

Finding a suitable adviser and getting all the relevant data

Transfer values were ‘mind-blowingly large’ compared to any sum the members were likely to see in their lives and expert regulated advice was a legal requirement.  Finding a suitable adviser and meeting the deadlines became a near impossible task for the following reasons:

  • • Numbers of members who requested CETVs – overwhelmed local FCA approved advisers
    • ‘Harvesting’ by unregulated introducers and out-of-area advisers intent on ‘turning the handle’ rather than giving the counselling and impartial advice
    • Not considering the individual needs at all – many were told to transfer at the initial meeting
    • Concern over the reliability of
    • Finding a suitable adviser on required “an MA in Pensions” to navigate
    • CETV’s not provided to the member within the statutory 3 months
    • Inability to get the information the adviser needed

Most BSPS members alive locally to the steelworks where they worked.  This clustering meant that the local IFAs were inundated with requests and took a professional decision to close their books to new DB transfer business rather than dilute their service.

“I’m struggling to believe it. But 5 reputable Financial advisers that have been recommended to me are at capacity. I feel like I’m chasing the last bus that’s accelerating away. Can you please recommend advisors to me that you have faith in?”

Many of the advisers themselves were not aware of all the possible permutations and did not have the rules and financial assumptions for all potential outcomes.  Few have considered all of the options open to the BSPS members.  The major factors for a deferred member considering the choice are:

  • • 10% reduction in PPF before NRA
    • No transfers allowed from PPF
    • Transfers from BSPS2 possible
    • Better early retirement package from PPF (even with -10%)

Members and their IFAs need to compare the relative benefits of all the options available to them:

  • • Transfer out now
    • Transfer from BSPS2 later
    • Early retirement PPF
    • Early retirement BSPS2
    • Retirement at NRA from BSPS2
    • Retirement at NRA from PPF

IFAs tell us they have been hampered by their inability to get the information they need.  Posts on the group refer to not receiving CETVs within 3 months of requesting one or receiving a CETV with an expiry based on sign off several weeks earlier so the member has less than 3 months to take their decision.

“I am in a similar position, requested transfer 9th October, finally got through to someone to be told it was posted 7th November, so it was emailed to me yesterday 4th December, noticed straight away it was dated 3rd November. E mailed them back pointing this out and asking ng how to get it rectified, was told it was my responsibility to chase it up, and the date would stand.”

Financial advisers have regularly private messaged the administrators of the group to ask if we can assist getting information from the Pensions Office.  They informed us that they are told of a standard 6 week turnaround of emails, that they can only ask about one member per email and most were unable to talk to anyone at the pensions office because “they can’t get through by phone”.

The extension of CETV guarantees from 11 December to 26 January was welcomed.  This primarily affected the large number of members whose CETV’s were frozen until the 11 September RAA payment by TSUK.

Pressure to get a CETV before the deadline

On 29 November, members became concerned by a new communication from BSPS stating:

If you are thinking about transferring out your Scheme benefits but have not yet requested a transfer value quotation you should contact the Pensions Office by 11 December 2017 at the very latest. This is to allow time for:
1. Your quote to arrive (up to three months, though we aim to do this in one month)
2. Finding an independent financial adviser and taking their advice
3. Finding and joining a new pension arrangement that can take your transfer
4. You, your financial adviser and the provider of your new pension arrangement completing and returning all the necessary forms to the Pensions Office – by 16 February 2018.
If you complete all these steps by 16 February 2018, we estimate that the Pensions Office will be able to process and pay your transfer instruction by 28 March 2018. However, we can’t guarantee that the Pensions Office will be able to do this. So please give them as much time as possible by completing the steps above as soon as you can.

Questions raised by this included:

  • • Do I lose my right to a CETV after 11 December?
    • Do I lose my right to a 3 month guarantee for my CETV?

BSPS said “If you miss this deadline, you might only be able to take a lower transfer value, or might not be able to transfer out at all.”– We are still unclear if the deadline is 16 February or 28 March.

The deadline for submissions was 28 March according to a letter from the trustee. At the roadshow in Thornaby, Martin Ross, BSPS Technical Manager, requested that members ask their FAs to submit completed paperwork by mid-March 2018 so that the necessary checks could be completed.  This issue of when the deadline is remains unanswered.


The overall conclusion is that members choosing to consider transferring out were put under great pressure to consider an option they had never thought about and many had never considered.

The lack of timely responses led to ineffective use of the 6 month statutory timeframe from requesting a CETV to submission of paperwork to proceed with the transfer.  The Trustee were following FCA guidance given but there appears to be a gap in essential support to the members from the moment they requested a CETV.

Many if not all of the issues could be solved by providing a service which could guide members from consideration of a transfer through to completion.  The lead could be taken by TPAS who have been outstanding in their help and support to our members.  They would need access to the DB Scheme administrators to obtain timely responses to queries.

The £30,000 limit forced DB scheme members to obtain independent financial advice but without a support mechanism for unsophisticated investors with large pension pots.  The BSPS bulk transfer is unusual, but not unique, and members of many other schemes would benefit from a service which helped them create a personalised plan.

In recent weeks we have had many pensions experts volunteering their support to our members.  In particular, many of the members in the Port Talbot area are grateful to Henry Tapper and  Alastair Rush for their face-to-face counselling and review of member’s transfers.

If the Trustees were required to provide access to independent counselling and guidance with help from UK agencies and a panel of suitable advisers many of the members would have a single point of contact for the comprehensive support they required.

Many members also thought they were protected by a final check of the suitability of the transfer by the BSPS Pensions Office.  It is understandable why this is not the case, at the present time, but it is also easy to see how an unprincipled regulated FA could take advantage of this.

In the past fortnight, many of our members have seen the media reports on Celtic Wealth/Active Wealth (UK).  We immediately followed this up by talking to the FCA and reviewing the additional requirement on the Active Wealth (UK) Ltd entry on the FCA web site.  To date, many members are unaware of any actions taken on their behalf by the FCA. The letter, which should have been given to review by the FCA on 27 November, has not been seen by any members.

In addition, we talked to Stewart Davies at Momentum Pensions and were able to provide a list of actions being taken by them to protect the members funds while they awaited the outcome of the third party IFA reviews.  These same points were sent by email to affected members the same day.  We were unable to get statements from the other companies involved.

Posts on a group set up by Alastair Rush for the Port Talbot members affected include all the negative emotions:

  • • Sadness (depression, despair, hopelessness)
    • Anxiety (fear, worry, concern, nervous, panic, etc.)
    • Anger (irritation, frustration, annoyance, rage)
    • Guilt from those who referred their colleagues
    • Shame/Embarrassment

As the members have had little information from other sources they are reliant upon telephoning the firms involved to understand what they should do:

“I have just spoken to Liam of Celtic Wealth and he has explained the facts of this issue to me and I’m still happy that I went with Celtic/ Active. I advise anyone with concerns to contact him or Clive. From what I see this is just a case of sour grapes, greediness and scaremongering.”

The FCA and TPAS have helped callers by explaining the purpose of the voluntary requirement but are unable to answer their most important questions:

  • • Is my money safe?  Will I lose money?
    • When can I get my money back?  Will this be over soon?
    • When will I get a letter from Active Wealth (UK) Ltd
    • When will my transfer be reviewed?

We hope that the CHIVE initiative will be able to give counselling to affected members, (and any other members) concerned about the suitability of their transfers).  We hope the members will get immediate clarity on the suitability of their investments and advice on actions they can take to prepare for all outcomes.  Many members now fear that their pension pot is at risk from high charges and exit fees.  Unfortunately, the early indications are that their fears are justified.perf 2


Automated response to emails to the BSPS Pensions Office:

From: Pension Enquiries <>
Subject: Automatic reply:

Thank you for contacting the British Steel Pensions Office. We have received your email but we’re sorry that we won’t be able to reply as quickly as we usually would. Please bear with us.

Because of the change to the pension scheme, we are receiving a very large number of enquiries from members. We are working as hard as we can to respond to each one quickly and accurately. We are dealing with each enquiry strictly in the order it arrived and cannot move anyone’s enquiry to the top of the queue.

If you are asking about the option pack sent to you in October, we cannot reply. Instead, we have set up two free, impartial helplines to answer all your questions:

Pensioners (including spouses and dependants) call 0808 1688 709. For outside the UK, call +44 (0) 1206 585 361

Non-pensioners call 0800 085 7264. For outside the UK, call +44 (0) 113 823 1344

Lines are open Monday to Friday, 9am to 8pm

If you are waiting to get a Transfer Value quote that you’ve asked for, we will get this to you no later than three months after your request. We are working hard to get these quotes to members sooner than that if we can. To help us focus our time on providing quotes, we won’t reply to emails that are chasing up quotes, unless it’s less than a week before the three month deadline.

If you are asking about a payment that you are expecting for early retirement or a transfer, please bear with us – we are dealing with all these payments in order. We will tell you when we have paid you. If we need any information from you, we will contact you.

Are you are contacting us about something else?
For example:
– change of details
– to tell us about a death
– to ask for a Transfer Value or early retirement quote

If so, please check that your email includes your:
– full name
– date of birth
– National Insurance number
If it doesn’t, we won’t be able to deal with your enquiry.

Once again, we are sorry to keep you waiting, and appreciate your patience.



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

A pension settlement needs general agreement.

I spent most of this cold dark weekend putting together a submission to the FCA on what we know is happening to millions of pounds of money that has been disinvested from the British Steel Pension Scheme and reinvested through the Vega Algorithm in the 5Alpha Conservative Fund.

I was working with ordinary steel men, IFAs and fund experts. Late on Saturday afternoon – having read the first draft, Stefan Zait wrote me

As I read it, I got more and more angry. Feel sorry for the families affected

i won’t go into more detail here, hopefully the damage can be stopped.

Can we make steelmen their own chief investment officers?

What a ridiculous question – of course we can’t!

What I’m learning from this work is

  1. That you should never invest in something you do not understand.
  2. That you need to know what you’re paying for
  3. That pension freedom does not mean the freedom to rip people off.

I am also convinced that the great pension schemes that have paid ordinary people like today’s workers at TATA steel have done a great job of investing people’s savings and paying them an income at a pre-agreed rate for as long as they and their partners need it.

What has gone wrong is not the mechanism of investment and payment – we call the pension.  It is the expectation of certainty that has been given to ordinary people about that wage for life.

We cannot predict how the world capital markets will perform over the next three decades. nor can we predict how inflation will bite into stock market returns. Nor can we predict accurately how long we will live. Past performance is a guide but even the actuaries are confused about mortality trends.

So to guarantee a wage for life over the next thirty of forty years to someone in their fifties today is a mad thing to do. There has to be the flexibility to pay more or less depending on what actually happens.

These simple ideas have not been discussed at meetings between steel men and those advising them. Consequently many steel men have been convinced to leave the collective pension schemes which they feel may not pay out in full and put their trust in advisers who will manage their pots.poll bsps

There is another way

While the steelworkers have been putting their trust in the likes of the Vega Algorithm and the 5Alpha Conservative Fund, the Communication Workers Union has been making it clear to its members what the risks of self-managing pots is and how much better it would be to stick with the traditional collective way of paying pensions.

Of course there is a problem with this. Royal Mail cannot afford to take the risks of markets going down, inflation going up and people living longer than expected.

What appears to have happened last week , is that Royal Mail and the CWU have come to an agreement on a level of risk that the Royal Mail can accept and what risk is right for the member to take.

The solution , which has been described as “Collective Defined Contribution” is discussed in yesterday’s blog.

What has happened between CWU and its members and latterly between CWU and Royal Mail is a proper discussion of pension risk and just who should be taking it. If this had happened at BSPS, I suspect that I would not have spent the weekend discovering the delights of the Vega Algorithm.

We all can be special but we can’t all be special in the same way!

Everyone has the right to a transfer value from a DB scheme (until they get within a year of retirement when they lose that right).

In my opinion , we should have the right to a transfer value even in retirement. in the trade this is called a “property right” and it recognises that in special circumstances people should have immediate rights to the capital value of the future income promise.

It gives us great comfort to know that if the worst happened, we could get a reasonable pay-out so that we and our immediate loved ones, would not go short.

A few people will be determined to manage their own pots (4% in the survey above). These people should have the right to self-determined pension outcomes. But it must be clear to such people that they are taking the risk of poor outcomes and that “taking their pot and letting an IFA manage it” does not guarantee them good outcomes.

In practice, we all want to be seen as special but most of us are happy to use the default investment – let the scheme pay our wage for life and be special other ways!

We need a retirement default – a single guided pathway that we can all agree on.

In my view, the solution that the CWU and the Royal Mail are working towards, provides just that. I hope it will cater for people who want to opt-out for health reasons, or wealth reasons or just because they think they’re special.

But i am sure that as with all other collective decisions we see in pensions, 90%+ of Royal Mail staff will stick with the default.

But let me remind those who are designing that default of what I have learned from all this stuff with BSPS members.

  • That you should never invest in something you do not understand.
  • That you need to know what you’re paying for
  • That pension freedom does not mean the freedom to rip people off.

The agreement at the Royal Mail has been reached collectively and will be supported by the postal workers. The Solution at Tata was imposed on the steelworkers. Ironically, BSPS2 will probably offer a higher degree of security than whatever emerges at Royal Mail. But I will be very surprised if we see the scenes at Port Talbot at Mount Pleasant.

Whatever the CDC solution turns out to be, it needs to be intelligible, transparent and have total integrity. That’s a tall order – but if the CWU and Royal Mail can pull it off, we may be some way to restoring confidence in pensions elsewhere.



Posted in BSPS, Pension Freedoms, pensions, Royal Mail | Tagged , , , , | Leave a comment

Common sense to the rescue; Royal Mail and the CWU adopt CDC.


The last thing this country needs is more strife over pensions. With the BSPS Time To Choose election window , drawing to a close, it’s good to know another vexatious chapter will not be opened,

Whichever side of the dispute you sit, I hope you will join with me in congratulating the Royal Mail and the CWU for finding a workable solution that avoids a strike, pays posties a wage in the retirement and doesn’t tie up investable capital in unwanted guarantees.

In the dispute, both sides have agreed in principle to a mediator’s recommendation to adopt a collective defined contribution (CDC) pension scheme with a defined benefit element. CDC was authorised by primary legislation in 2015,   Regulations to make it possible have not yet been enacted. Labour has come out in favour of such regulations, and the Conservatives are expected to announce their position in the new year.

Here is Royal Mail’s summary of the mediator’s recommendations:


  • Royal Mail and the CWU should commit in principle to the future introduction of a Collective Defined Contribution (CDC) scheme with a Defined Benefit element.
  • To support the introduction of a CDC scheme for all, Royal Mail and the CWU should establish a Pensions Forum. The Forum will have responsibility for lobbying the Government to make the necessary legislative and regulatory changes so that a CDC scheme can be established, and for overseeing its governance.
  • In the meantime:
  • For members of the Royal Mail Pension Plan (RMPP), Royal Mail should implement — from 1 April 2018 — a Defined Benefit cash balance scheme on the terms already proposed by the Company.
  • In addition, existing Royal Mail Defined Contribution Plan (RMDCP) members with five years’ or more continuous service in the standard section of RMDCP should have the option of joining the Defined Benefit cash balance scheme.
  • Royal Mail should auto-enrol current and future members of RMDCP to the top tier of contributions (10 per cent from the Company and 6% from the member).

Here is Terry Pullinger, CWU Deputy General Secretary (Postal):

“[T]he employer has now accepted that we will develop one pension scheme for all of our members. That it will be a Wage in Retirement Scheme. That there will be an element of defined benefit guaranteed, and that there will be an element of shared risk. But it will be targeted to genuinely produce a pension in retirement for people. It will not be a scheme that simply cashes out the moment you retire. It will be a Wage in Retirement Scheme.”

What Pullinger refers to as a Wage in Retirement Scheme is not, however, the pure DB scheme with discretionary as well as defined benefits originally proposed by First Actuarial.

Rather,  the ‘shared risk’ element involves the mediator’s recommendation of CDC:

“…to have the scheme that we would like, the scheme that I’m describing to you, there has to be legislation introduced. It’s already law in this country. But the regulations for that legislation have not [yet] been drawn up. …We are now jointly connecting with people to try and ensure that we drive through that legislation as quickly as possible to enable our new scheme as we develop it and agree it. …that may go on for some time [so] we’re also dealing with transitional arrangements.”

I’m looking forward to the two meetings of the Friends of CDC  next week and I hope it will result in a helpful submission to the DWP’s consultation early in the new year!

Thanks to Mike Otsuka for his help in publishing this report. The basis of this article is Mike’s post here. I hope that Mike will join us at Congress House, an invite has been sent!

Posted in pensions | 1 Comment

Why CETVs at BSPS have changed so much.

BSPS CETV change 1.png

This letter explains why a former BSPS member claimed on BBC News last night that he had lost hundreds of thousands of pounds by timing his transfer request wrong; or- as he claimed – because he was badly advised over timing.

The letter endsBSPS transfer change 2

and gives two option boxes – one to stop and one to go. Those who stopped, like the person who got this letter – got the new values – which were generally higher, those who carried on regardless, were left with much lower transfers. This is the practical explanation for the grievance aired on BBC news.

Why did the basis change?

I mentioned that I am walking forward with a blindfold, I need help and I am getting it. I have received this explanation from an IFA who is happy to remain anonymous.

Regarding the sudden change in the British Steel transfer values this year – I have seen a letter from the trustee which states before June 2017 members who were more than 10 years away from retirement (under 55) had their transfer values calculated using a discount rate based 100% on Equity Dividend yields.

Members age 55 or over had their value based on a discount rate using Bond Yields. Then in June 2016 they used Bond yields for everyone which meant a big jump in transfer values because the bond yields are so much lower than Dividend yields. This particularly helped younger members (e.g. someone in their 40s could have seen an overnight increase of 170%).

This accords with the letter sent in by an  IFA who has asked not to be named. The more conservative the investment strategy , the lower the discount rate and the higher the transfer values (all else being equal). The younger you were (under the old arrangements, the lower your discount rate and the lower your CETV). It is possible that some older people might have seen their CETVs gone down, but in moving to a flat discount rate for everyone, it looks like most people were winners.

This is because at the same time as going “flat rate” the scheme reflected the more conservative investment strategy which reduced discount rates all round and gave the scheme’s CETVs a big kicker!

Whether the scheme is “fully in bonds” – as mentioned above is another matter. The most reliable information I have at the moment is that the best estimate discount rate is calculated against the actual asset distribution within the BSPS fund , which is thought to be “rather less than before than rather greater than nothing”. This explains why CETVs are rather lower than would be expected if a pure gilt discount rate was in operation (the rate if the fund was totally in “risk-free” assets)

Transfer values  were helped still further when later this summer BSPS received a cash injection of £550m sufficient to reduce its deficit and allow the trustees to reduce the clip on the assets that recognised this deficit from 8 to 5% (known technically as an insufficiency report). So it’s only been recently that CETVs have reached their highest rate.

What does this mean now?

CETVs are likely to fall soon as the basis for calculation moves from the old benefit basis (BSPS) to the new benefit basis (BSPS2). But BSPS2 may have a more conservative investment strategy which might offset the fall – so we just don’t know how much or quite when. The general view is that CETVs from BSPS will be higher than those of BSPS2 and any CETVs already issued or issued in Time to Choose, will be based on BSPS and  be honoured at least to January 26th and possibly for three months after the date of issue.

To complete your transfer by 28 March 2018, BSPS estimates that you’d need to get your completed paperwork to them by 16 February 2018. This is to allow enough time for the Pensions Office to process your paperwork and pay your transfer to your chosen pension arrangement, by 28 March 2018.

If you miss this deadline, you might only be able to take a lower transfer value, or might not be able to transfer out at all.

If you’re switching to the new scheme you won’t be able to carry on with transferring out of the current scheme. But you may still be able to transfer out of the new scheme at a later date. You’d need to start the process again by requesting a new transfer value quote from the new scheme. When you ask for your transfer value to be paid, you need to be at least 12 months younger than your normal retirement age. Your normal retirement age is usually your 65th birthday. Your transfer value in the new scheme is likely to be lower than your transfer value in the current scheme, to reflect the fact that the overall benefits, including possible future increases, could be lower in the new scheme.
If you’re moving into the PPF you can still go ahead with a transfer, provided that your completed paperwork reached the Pensions Office by 28 March 2018. However, the transfer value you get might be reduced. This is because the transfer value payable in these circumstances cannot be more than the cost of providing the compensation payable to you by the PPF. This might be lower than the transfer quote from the current scheme. If you don’t want to go ahead with that transfer, you won’t have any further opportunity to transfer out. If you didn’t return your transfer paperwork by 29 March 2018, then you won’t be able to transfer out at all.


The obvious guidance is that if you are going to transfer, get on with it and get your papers in by 16th Feb, if you aren’t – make sure you’ve completed your option form and put your feet up – it’s nearly Christmas!

And finally “The Chair of the Trustees speaks”

In a rare utterance on member choices, BSPS trustee chairman Allan Johnston has said:

‘We are concerned by reports that some members have been targeted with inappropriate financial advice and feel pressured into making a decision on transferring their BSPS benefits.

‘While the trustee cannot advise people what to do with their pension we would urge eligible members to think carefully before transferring their scheme benefits out of the BSPS to another pension arrangement as they would be giving up guaranteed future pension income in return for income that might not be guaranteed and could vary depending on how it is managed.’


Posted in BSPS, Financial Conduct Authority, pensions | 4 Comments

Commission – the charge that dare not speak its name.

charge at work

I feel like someone walking to a destination with a blindfold on, I am getting information from my phone but it is intermittent and there are many obstacles that I stumble over as I walk along. Thankfully, there are people watching my progress and warning me to watch my step!

  • Yesterday I learned a lot about workplace pensions that I didn’t know. Much is tied up in my blog about what is officially  the “TATA Personal Retirement Savings Plan (PRSP)”.
  • I learned about the default investment strategy, its composition (55% shares – 45% bonds, equity), its objectives (to help people invest to retirement) and its charges (0.26%).
  • I learned that advisers can use this low cost , diversified strategy to help clients achieve good retirement outcomes and be paid for doing so through “adviser charging”. This can even include the cost of transfer advice which is charged “conditional” on the transfer being executed into this Plan.
  • I also leaned that the advisers who set up the plan do not offer individual advice but that Aviva allow the transfers to be managed under a separate agency agreement and be paid for at the request of the client from the PRSP pot.

As almost all those still working with Tata are using the PRSP, it would seem the “natural thing to do” to consolidate any transfer taken from BSPS into this plan. But this option does not seem to have been considered by all but a fraction of advisers or BSPS members.

I remain confused – why not? If Tata chose Aviva to run its workplace pension (into which they will pay as much as 10% of workers salaries, one would expect this choice to have been advertised as a good one. Large companies do due diligence, they do not commit large amounts of their and their staff’s wages to a plan that isn’t good – they conduct due diligence.

This due diligence should provide workers with a safe harbour – the first port of call in stormy times. Why has it not been visited by all BSPS deferred members in their “Time to Choose”? I searched the Time to Choose site for information about PRSP but couldn’t find anything. I searched the BSPS Scheme site – no help.

Finally I googled the full fund name and found a website set up to help members with the plan. It contains a webcast with all the details of the PRSP which you can watch here.

Ironically , Aviva told me yesterday that they couldn’t tell me how much PRSP cost, but this information , like everything else I needed to know, is in the public domain! If I go to the dedicated Tata Personal Retirement Plan website and navigate through a lot of linked pages, I can even find a page that tells me my options if I have another pension plan. You can see this page here.

Unbelievably, this website makes no reference to BSPS, whether money from BSPS can be transferred, what the terms of transfer are. It’s only next step is to a contact page

Contact Tata

Is this helpful?

Steel workers are thrown back into the same loop – with a link to which will take them to advisers. There is no responsibility taken by Aviva, or the plan adviser (whoever that is) or indeed Tata – for everything reverts back to

This PRSP, the primary retirement vehicle for Tata steelworkers going forward is so divorced from the Time to Choose process as if it were a Dutch or American plan, and yet it offers a default investment strategy in a product selected by the employer sponsoring BSPS, BSPS 2 and the employer or former employer of all 133,000 people in their Time to Choose.

I don’t think this is helpful. If I was a member wondering around with a blindfold on, I wouldn’t be feeling anyone wanted to help me.

More stumbling in the dark

As I continue to wonder around with my blindfold on, I come to more information I did not know. Last night I watched the BBC news at 10 to find out that people have been losing hundreds of thousands of pounds by  transferring out of BSPS at the wrong time.

Apparantly advisers should have been telling their clients that the transfer values on BSPS were about to rocket up, though I haven’t been able to find out how they could have foreseen this, nor why they actually shot up.

That people accepted one price for their benefits only to find they could have got a couple of hundred thousand pounds for the same benefits a month or two later suggests a failure in the valuation process (as well as a question as to how the lower value could have possibly been worth taking). I don’t intend to go down that route today, as I expect I will get some help from somebody as to what really happened earlier this summer and why transfer values shot up (I said I  get a lot of people stopping me stumble).

But the program brought up a word I had not heard mentioned in pension circles for a long time – the C word – Commission.

The regulatory expert Rory Percival picked up from the BBC news piece the use of the word in relation to what was going on at Celtic Wealth and Active Wealth Management.


Technically I am sure he is right, but Alan Chaplin had a point when he replied.

Rory alan

I had made the same point to the FCA’s Robert Finer at a Transparency Symposium last week.

A major contribution of SIPP platforms to the advisory market is the facilitation of layered contingent charges levied as  a % of fees which work no differently than commission.

Put another way, the customer can be led around with blindfold, for all he’s going to see of what he’s getting – and paying.

The charge that dare not speak its name?

If a client signs up to pay an annual fee to an adviser for an indeterminate time, with the onus for cancellation being on the client and the fee being taken as a percentage of funds under advice, that fee is a commission.

Lawyers may argue on a pin, but the charge that dares not speak its name is “commission”.

What every business wants is to amortise the annual value of fee income several years ahead as this gives the shareholder a capital value to the business and a price on which to buy or sell it. Commission does this, it only stops when a client cancels the agreement. We know that clients don’t do that very often, so the practice of embedding advisory fees into products is highly desirable to anyone running an IFA business.

By comparison, the need for advisers to annually request that a fee be taken – the practice that Aviva demand in operating adviser charging –  works the other way round. The adviser has to justify his or her fee every year, the fees cannot be amortised and the value of the business is measured against the capacity of the adviser to gain repeat business.

Am I stumbling here into an area where someone can help me? Am I hearing and reading the wrong things, or am I finding myself groping in the dark adjacent to something that might just be called “the truth”?

Is the reason that the TATA GPP is not promoted by Aviva , Tata, BSPS or institutional advisers because they are terrified they might be considered to be giving advice? Is the reason that the TATA GPP is not promoted by advisers because they are terrified of not getting paid? Where are members interests in this? Why is nobody talking about this?

Finally – what does the regulator make of transfer advice to TATA workers looking to transfer BSPS benefits that doesn’t refer to what TATA’s dedicated pension website refers to as “the Company Pension”?

All answers to or in comments below – thanks!

charge at work

Posted in BSPS, dc pensions, Financial Conduct Authority, pensions | Tagged , , , , , | 10 Comments

A method for the madness. Is the DWP Select Committee – pension’s best hope?


The diverse agenda of the DWP Select Committee might be considered madness. I am not going to write that their is method in this madness as it’s clear to me that we cannot properly consider freedoms, without looking at CDC for those with  pots but no pensions.

I also want to get on the right side of this Committee as I am due to give oral evidence to them in a few days time. I have only once been done a genuine favour by a Minister and that was by Frank Field who gave me a lift back to the Oxford Park and Ride after a lecture in town. Frank Field is regularly thought mad twenty years have passed since that lecture and I still see a kind and generous soul who understands the financial behaviour of ordinary people better than most.

So to have the chance to answer questions about what Al and I saw in Port Talbot and the interactions we’ve had on the Facebook pages will be an honour and a pleasure.

The special session is informing the inquiry into the operation of pension freedoms.

 The Committee is due to produce the first report of this inquiry in the next weeks: this evidence session is intended to inform a second report that will propose regulatory and other measures to prevent similar situations.

It is not for me to propose those measures but I notice that on the list of inquiries currently being carried out by Field and his team is one on collective defined contribution schemes.

Chive – a good interim solution

I hope that the link between the current madness in Port Talbot and other steel towns needs not be repeated.

Al Rush has embared on Chive, yesterday he was doing  work with steelworkers who are flocking to him and his team of unpaid IFAs, unravelling the misconceptions of BSPS members. I understand that the BBC will be reporting on this on the 6 and 10 o’clock news.

If you are a member and you are reading this, then you can book yourself a session in one of the many locations Chive is operating in – using this link.

Some IFAs have been rather less than generous to Al and this charming note – captured by Dave Trenner – explains why Chive – as applied to the emergency at BSPS, is not a measure to “prevent similar situations”.

up against

But Chive, relying as it does on a self-moderating group of highly qualified Pension Transfer Specialists, is a resource that other employers and schemes will be able to call upon when other groups come to their “Time to Choose”.

Chive will need to operate on a commercial basis in future but for now , I’m sure all but the hardest hearted will agree with these sentiments.


More radical long-term solutions needed.

To my mind , there is no obvious solution arising from the FCA’s retirement outcomes review. The retail sector has failed to come up with a mass market solution to give ordinary people , faced with pension freedom , a guided pathway.

Although it will take two years to create the regulatory framework, CDC could still deliver, by the beginning of the next decade, a default solution for those -like Al and others are speaking with – who are looking for a wage in later life without the backing of a sponsor.

In the short-term, the demand for such a service will be as much from those with money emerging from DB as from money accumulated in DC. The wall of pension wealth moving inexorably towards later-life , demands the Select Committee’s attention and I’m very glad it is getting it.

Method in its madness.

So the seeming madness of running concurrently an enquiry into pension freedoms and an enquiry into CDC makes sense to me. One is the solution to the other, CDC will be born out of frustration with pension freedoms but CDC is also the expression of pension freedoms for those who want a wage for life but do not want to be tied to the tyranny of annuity rates.

Which is why you will see a lot more articles like that from Con Keating this morning – on this blog. And why I am confident that the remedial work Al is doing in the steel towns needs the publicity it will get from the DWP Select Committee’s ongoing scrutiny.

I am not supposing that achieving a short-term fix to the problems created by the decline of DB will be easy, CDC is no silver bullet; nor am I suggesting that the proper organisation of advisory report is a long term fix for retirement outcomes, it is only a sticking plaster. But I do think that the DWP select committee hold the keys and that with the stewardship of Frank Field, will be able to take matters forward.

That is my hope. It is probably pension’s best hope – right now.juliafield



Posted in drawdown, DWP, governance, Henry Tapper blog, pensions | Tagged , , , , , | 2 Comments

“Cry havoc and let slip the dogs of war”

cry havoc

One of the features of a close-knit community is that people talk to each other. For Steelworkers this has been at works and  in clubs.

Now the works and clubs of Port Talbot, Llanwern, Scunthorpe and Redcar  have digital counterparts in the Facebook pages managed by Stefan Zait and Rich Caddy.

This post is about the conversations that begin on those pages and lead to discussions via email and other messaging systems. If we want to understand how decisions are being taken by BSPS members , we need to recognise we are in a digital age. The rapid free-flow of information has its own risks, as I am about to show.

The nature of the risk

A post on one of these pages signalled a worrying development for those fearful of the consequences of DB to DC transfers.

Hi, my investment is with Vega algorithms via Gallium via intelligent money via Darren Reynolds /active Wealth , just checked my investment, it’s down -0.32, could you advise next step please.

Steelworkers know how to use a calculator, that 0.32% fall in the investment might be equivalent to a week’s wages.

The post is followed by another “investor”

“Mine is same. Down 0.02%”

Of course it is not uncommon for daily unit prices to fall as well as rise, these steelworkers are going to see this happen almost as often as they see them rise and with on-line access to their Gallium accounts.

There could be a lot of sleepless steel men over the next few decades, unless people understand the nature of their risk

 Why DC is different

It is difficult to put your shoes in those of a community of workers who for the past five decades have been assured pensions that don’t go down in value. But that is what Port Talbot is – and many other steel towns.

For thousands of steelworkers moving their DB entitlements to Defined  Contribution pots, that certainty is gone.

The basic message that past performance is no indication of the future is not one that is getting through to most of the people with whom I am speaking (or messaging).

Here is someone with £590,000 in his account (he’s given me permission to quote anonymously),

“a FA has told me (and others) that Royal London have averaged 10% over the last 10 yrs and I could have the potential of having £1.1M in my pension when I’m 60. Whether those figures are exact or an exaggeration I’m not sure, but that gives a lot of flexibility come retirement”

For an opinion on Royal London, I asked Al Rush who’s replied

The Governed Portfolio range has ‘only’ been going for eight years or so.  I think it’s a great choice of fund.  With a portfolio of that size, the all-in charge (including advice) after transferring out should be somewhere in the region of c.1.2% – if transferring is the right thing to do.

The bold “if” comes from Al.
I am not in a position to comment on the rights or wrongs of specific investment but I do think that giving people expectations based on past performance goes against the letter and the spirit of the law.
We are in an era of low inflation (the new normal as experts call it). We can expect long term equity returns to give an above inflation return (the liquidity premium), but that does not mean that 10% returns are on the cards.
Guys – DC is different because you are taking the investment risk, not Tata.

The cost of the risk

I’ll take Al’s word for it that the cost of the Governed Portfolio is 1.2% pa. I’ll take my correspondent’s word for it that he will be paying a 1%  advisory fee. I would like to think that the 2.2% total charge will include the cost of investing (though I fear transaction costs may be on top).

If my actuaries are telling me to expect inflation +3% on my DC pot and inflation is 2%, I can see the cost of the risk this fellow is taking is very nearly 50% of the expected return. In other words, to achieve inflation + 3% , I’d need to get a 5% +2.2% return = 7.2% pa.

That’s a pretty tough call over the fifteen years this fellows got to retirement. The £1.1m figure looks like a 4% net roll up, which still assumes a 6.2% return (and that’s before netting off the £7,500 fee to meet the initial advice.

My simple argument is that this fellow may be able to afford the risk of the Government portfolio’s volatility, but can he afford the advice? My assumption is that if you are paying 1.2% pa for the portfolio, a secondary level of governance on what is a growth portfolio is not needed.

Can you afford all this advice?

The worrying lack of alternatives

My correspondent tells me he is investing into his workplace DC plan at the maximum match (he is paying 10% of salary and so is TATA). This is into an Aviva personal pension set up on TATA terms.

I have mentioned this option before and asked steelworkers if it has been put to them. My correspondent has given me a reply.

When you ask could I invest the CETV into my Aviva DC pension. I was always under the impression that Aviva wouldn’t accept the transfer into this – nearly everyone I’ve spoken to also think this and this would have been the easy option to do.

I am currently investigating whether there is a special clause in the TATA GPP which prevents transfers in and I am asking what the terms applying to default investments into this plan actually are. I suspect they are rather lower than 0.75%.

I am not suggesting that the TATA (Aviva) GPP is suitable for this gentleman’s money, but I am very concerned it he has been given the impression it is not an option,

You have to wonder how such an impression could have become prevalent in the community, when Time to Choose was initiated by TATA and managed by its pension trustees.

Why aren’t steelworkers considering transferrin to their workplace pensions , whether with TATA or elsewhere?

Perverse consequences of conditional pricing

I am also asking Aviva, whether its workplace GPP could, should it be able to accept this man’s money, pay the £7,500 initial advisory fee to the advisor from the fund. I suspect it can’t because the advisor does not have rights to the policy – but more on this later.

If I am right then the cost of the advice goes up, as it will have to be paid for from taxed money and VAT will be payable (as the advice will be deemed to be about transfer advice not about product advice).

Put income tax and VAT on that £7,500 and the bill suddenly seems a lot less palatable.

If I am right, then I can see why steelworkers do not think they can exercise “the easy option to do”.

If the FCA are happy to turn a blind eye to this, then should they have bothered with RDR?

Why do we allow such taxation inconsistencies to persist? “Scheme Pays” could be used for more than the collection of tax.

Putting the answer before the question.

In this blog, I have identified four  concerns I have with the steelworkers  risk transfer from DB to DC. My questions to steelworkers are in bold.

  1. Steelworkers getting agitated by falls in their DC pots – visible online. Are you prepared for inevitable market reverses?
  2. Steelworkers being given unreasonable expectations based on selective use of past performance figures. What happens if you pick a losing fund?
  3. Steelworkers paying twice for “fund governance”. Are you aware of the impact of a 2.2% + yield drag?
  4. Steelworkers getting poor information on alternatives (such as workplace pensions), possibly because of adviser introduced bias. Do you know what you might be missing out on?

To these , I will add a fifth, alluded to in Al’s bold “if”, the gent I’m corresponding to has 15 years till he is 60 and he’s in a well funded DC plan. He has tax-free cash entitlements from his DB plan (whether he move to BSPS2 or defaults to PPF).  In terms of his major concerns, the lack of inheritable wealth from DB, I think he is under further misconceptions. He talks of DB benefits being capped by indexation (not strictly the case as discretionary increases are still possible  (with a £2bn buffer at outset). He talks of his reduced life expectancy as a manual worker (I’ve pointed out that there are more than 100 members of BSPS over 100 years old).

In short I think the fifth concern I have is that the £7500 advisory fee that this man will pay to transfer to a DC pot is just that. That it is a golden key to £590,000 (well call it £582,500).

Cry havoc and let loose the dogs of war

The military order Havoc! was a signal given to the English military forces in the Middle Ages to direct the soldiery (in Shakespeare’s parlance ‘the dogs of war’) to pillage and chaos.

I fear that this is just what TATA has done. It is important that we seek to manage the potential havoc using these digital means at our disposal.





Posted in BSPS, pensions | Tagged , , , , , , | 12 Comments

Steelworkers are “front and centre of my mind”



MM topOver the course of the last 24 hours there have been a number of positive developments for BSPS members.

  1. The deadline for decisions taken in “time to choose” has been taken back to 22nd December for all members (previously this had only applied to a handful of special cases)
  2. The CETV quotes issued to date will be honoured by trustees till 26th January or the end of the 90 day guarantee, whichever is the later.
  3. One of the SIPP Providers – Momentum – that took money from Active Wealth Management has made a number of timely interventions to protect member’s wealth from damage.

Taken together, these developments should go some way to ease the growing sense of disquiet among steelworkers and particularly those worried by the closure of Active Wealth Management (AWM) to new clients

The FCA’s restraining order on AWM, goes further. Darren Reynolds – who runs AWM is not allowed to continue advising his clients.  Almost at the close of the week’s business, the FT broke further news.

Fox in charge of coup

I have written to the FCA, suggesting that it reconsider its position and actively involve itself in the selection of a third party IFA.

The scale of the AWM transfer portfolio has yet to be revealed.  However we know that there around 100 CETVs that have been paid to Momentum through AWM and Momentum is only one of the destination. If average CETVs are £350,000, then the FT’s estimate that AWM’s BSPS assets under advice (£25m) looks  low.

To ask Darren Reynolds – who is barred from advising this portfolio – to appoint the “third party IFA” is akin to putting the fox in charge of the chicken coup.

Were the Pensions Regulator involved, either Pi ,  Dalriada or similar would have been appointed to restore order.

The surveys we have seen which looked specifically at BSPS decision making make it clear that steelworkers are not liberating their pension to manage their money themselves, they are appointing IFAs instead of their pension trustees as their fiduciaries.poll bsps

What is clear is that less than 4% of those who responded – wanted to manage their own money , 82.6% said they wanted to “take their pot and let their IFA manage it“.

Put another way, these decisions aren’t about pension freedom, they are about another style of control. Members are swapping trustees for IFAs.

This should be deeply worrying to the FCA, for while Trustees – especially of schemes such as BSPS, are few and accountable, IFAs are numerous and are far less easy to regulate. The failures of trust documented on this blog, suggest Active Wealth Management abused the trust of BSPS members as did its lead generator and most likely those downstream offering wrapper, asset management and fund administration.

The vulnerable people I and Al (and now Jo Cumbo) have spoken to, had every reason to trust AWM. It was fronted by Celtic Wealth, a local firm which was (until this week) endorsed by a Welsh rugby hero (Shane Williams). Celtic Wealth did not lavish hospitality (chicken in a basket) but offered a service at a reasonable price (£1500) which promised steelworkers the keys to unimaginable sums of money and removed control of that money from Tata UK, on whom the Steelworkers feat they were overly-dependant.

Any implication that those who signed up with Celtic and then AWM were being stupid , should consider the degree of trust steelworkers have in local IFAs. The members we spoke to repeated what they had been told by IFAs about the FCA, guarantees, expected returns and most of all about the viability of the adviser’s plan to more than meet the expectations they could have of BSPS2 and the PPF.

They took this on trust and they were not being stupid. Who else was there for them to turn to? Those local IFAs who have spoken to who have behaved impeccably, (Ray Adams of Niche and Matt Richards of Aspire for instance) have had to turn away business to manage the clients they have taken on properly.

It took Al Rush and some local experts to point out that the majority of advice given was a pack of lies.

“Victim” is not too strong a word.

I came across a member yesterday who had removed his investment from Vega Algorithms and now sits with the Momentum SIPP in cash, the excursion had cost his pension pot £3,000.

The cost of restitution – if it is anything like what we have seen in the past – will put considerable financial strain on FSCS, PI insurers and IFAs (if they are not following the example of Bespoke/Celtic or Strand/Vegas).

But the biggest cost will be to the members, who are even now enduring considerable uncertainty. We know exactly where such doubt leads and it is not a healthy place.

That is why I want the Regulator to take stronger action and engage with the local community of IFAs who are (from conversations I have already had) prepared to move mountains to restore some confidence in pensions.

I have written to the FCA and asked that they take immediate steps to reverse the decision to put the fox in charge of the coup and that they divert resource to providing victim support to steel-workers who have been duped.

I am using strong words which no doubt a lawyer would advise me against. But I fear there is not time to argue these matters in the court. The need for help for the victims of poor advice in Port Talbot and elsewhere is immediate and can be focussed on a relatively small number of people.

We pride ourselves in having a regulatory system that protects the most vulnerable. What has and is happening in Port Talbot shames us.

I was very pleased to read this headline and the article behind it.MM top

The words are good. But unless Megan can follow them up with action, they will ring hollow in the valleys.

Addressing the victims of poor advice in Port Talbot must be front and centre of our minds this weekend.





Posted in BSPS, pensions | Tagged , , , , , , , , , | 10 Comments

You have to be there to fully understand it.

Though it’s a truism – it’s true. You cannot understand the break down in the orderly provision of pensions that is occurring in Port Talbot, until you go there.

I did not go to Port Talbot yesterday, there was a need for professional reporters (Jo Cumbo) and professional advisers (Al Rush ). There was a need for witnesses to verify what Al and I had seen earlier.Eugen pt

Eugen is not being sensationalist, you can sense in the simple words he is using that he has been shocked as a professional adviser but more as a sympathetic person.

Jo Cumbo’s reporting throughout the day emphasised the vulnerability of people who have been given plenty of advice but little support.

Two tweets responses from Chris Sier are worth quoting. The first is to Jo Cumbo

eugen 2

The second to himselfEugene 4

That something is going very wrong cannot be in doubt. What’s needed now is sound practical advice to steelworkers on what to do.

This is Michelle Cracknell’s response, which I count as definitive. If you are an adviser and know steelworkers who have yet to take a decision or have taken a decision and are unsure. Please cut and paste what sits beneath the line and text, e-mail or just print it out and give it them.

It is not too late to change things. The FCA have taken steps to stop Darren Reynolds and Steelworkers  still have the first 11 days of December to make or remake their choice.

Steelworkers in peril

Steelworkers are in peril as the deadline for members of the British Steel Pension Scheme is fast approaching and many of the members are yet to return their option form.

Members of the British Steel Pension Scheme must make a decision about their pension by11th December 2017. Each member has received an options pack and must decide whether to:

  1. remain in the current scheme, which moves into the Pension Protection Fund;
  2. move to the new British Steel scheme – BSPS2; or
  3. transfer to a private pension.

Many Steelworkers are struggling to make a decision and feel nervous, angry and distrustful of the scheme. Some members have been vocal on social media about the issues that they are facing. There are reports that a number of opportunist financial advisers and unregulated introducers who, for their own financial gain, have been plaguing the members to use their services by inviting them to “chicken in a basket” suppers. There are some very good financial advisers who can go through the options available to you and make a recommendation.

Only use financial advisers who are regulated by the Financial Conduct Authority to conduct this type of work and be prepared to pay them a fee.

For those who have made a decision, the agony is not over. The administration of the British Steel scheme has been under immense pressure with the volumes of questions being asked of them and members are reporting that there has been no acknowledgement of receipt of their option forms. Further confusion has been created by the address given on the option form being different to that given on the pre-paid envelope.

The pension scheme has said that forms will be processed no matter which of the addresses it was sent to.

If you are a member of the British Steel scheme, here is a checklist.

Spot the scam –

  • With all the publicity surrounding the British Steel scheme, the scammers are targeting members with the promise of investments such as hotels in Cape Verde, with promises of returns of 8% per annum or more. Be very wary of anyone who approaches you out of the blue with a proposal of how you can transfer your money out of the scheme to invest in a high risk, high charging and unregulated investment that promises high returns.
  • Proceed with Caution – 


Ask questions

  • Your pension is very valuable. You may be feeling very confused about the options. It is really important that you do choose an option so that you know what pension you will have. A good place to start is to contact The Pensions Advisory Service. TPAS is a publicly funded organisation that has pension specialists who can talk members through their options. It has a dedicated and free helpline for British Steel pension members is 0207 932 9522.



Mind your money

  • If you are considering transferring out of the scheme (option 3), be prepared for the ongoing work that is needed for managing your own pension fund. Even when you have an adviser who you are paying to look after your pension, you will need to meet with the adviser regularly to review your pension and make decisions about investments and level of income that you want to take out. You will have to pay a fee for this service and you will have to spend your time.


Proceed with Caution

However angry you are about the British Steel situation, the options of going into the Pension Protection Fund or the BSPS2 scheme may result in you having a lower pension but the pension is still guaranteed.


A guaranteed income is very valuable. You do not have to worry about investments going up or down. So give careful thought before giving it up. Once you have transferred out, you cannot go back into the scheme.


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

Following the money away


port tal2

There is a simple rule in investment matters, “if you can’t understand it, don’t invest in it”.

Which is why the FCA stop people with limited investment understanding investing in compex financial products .

It is why transparency matters, if you can’t see what is going on- don’t go there.

The  news is that thousands of self invested personal pensions could be investigated for “‘non-mainstream investments’, which tend to be more exotic, higher risk, often unregulated projects“.

If anyone is any doubt about the relevance of this topic, follow this link to see how the FCA is starting civil proceedings in relation to alleged misleading statements on pension investments.

For example

This is the investment strategy that was being suggested for a man with a £200,000 CETV.

The portfolio construction algorithm is based on empirical research and up-to-date portfolio management techniques. We use technology to do the heavy lifting: the systems we have created enable us to make qualitative and quantitative assessments of 1,000s of securities every day. The result is an intelligently diversified portfolio with the greatest potential for return for a given risk profile.

You can be sure that the human biases of fear and greed, proven to be detrimental to long terms returns, do not play a role in how your investments are managed. Instead, every investment decision made is free of emotion and consistent with a growing body of investment and risk management research that spans decades.

The man was introduced to Darren Reynolds of Active Wealth by Celtic Wealth and  planned to use Intelligent Money to invest in Vega Capital which is an appointed representative of fund administrator Gallium. As the investor pointed out on a private Facebook page

this may be normal but I have no clue.

The journey of the £200,000 would have incurred an introductory fee to Celtic, Darren Reynold’s advisory fees, the wrapper fee for the Intelligent Money Sipp, the investment management fees from Vega and the administration fees of Gallium. On top of this would have been the transaction costs involved with the “Vega Algorithms”.

As almost all of this money would have been paid out of the £200,000, the investor would have got all of this for free – he would not have had to reach for his pen to sign a cheque or open his wallet.

Thankfully the FCA are now on top of this situation, Active Wealth has a restriction on it contacting its clients and cannot take new clients.Darren 4

But we know that money has reached Vega because former BSPS members show us.

vega cert



Fees are one thing, but they are only part of the harm that come to an investment. There is a more fundamental problem- competence. Vega Capital is run by these two chaps;


Source Matt Richards FPSS ACII

Both were former RBS bankers .

Steffen’s  linked in CV suggests he left RBS to set up Vegas. But we know better.

Steffen actually set up another investment company before setting up Vega in March 2017.

That company was called Strand Capital.

Strand entered the FCA’s special administration service following insolvency proceedings in May 2017.

Just why Steffen forgot his time at Strand is a mystery, but clearly it should be of interest to investors in Vega Capital and indeed savers into  an auto-enrolment master trust that invested in Stand Capital’s funds.


It would seem that Vega Capital is a Phoenix of Strand. I’m grateful to the website of My Workplace Pension (known to BBC viewers as wideboys r’ us) and to Steffen’s Linked in page  for these two quotes.  Note the date in the URL for my workplace pension-no mention of this on Linked-in.

A lot of coincidences

Now of course none of this is proof of anything dodgy. It might just be an awful lot of bad luck that’s befallen those at  Active Wealth/Strand Capital/Myworkplacepension all to be caught up in insolvencies or shut down. Similarly the problems at Celtic Wealth and Gallium detailed previously on this blog, may just be an unfortunate coincidence,

But if you are a regulator, or a fiduciary and your job is to protect people from getting into financial deep-water, you’ve got to start somewhere. So perhaps they could start here.

Posted in advice gap, FCA, Fiduciary Management, Financial Conduct Authority, pensions | Tagged , , , , , , | 3 Comments

Honest endeavour stops scammers in their tracks.

Al rush - working hard

Al Rush

Darren Reynolds and his firm Active Wealth have been restrained by the FCA from carrying out pension transfer business for the foreseeable future. Darren 4

Active Wealth’s business plan was to take leads generated by Celtic Wealth through promotions such as the notorious “chicken in a basket” suppers in Port Talbot.


Celtic Wealth is owned by Clive Howells, the same Clive Howells as was behind Bespoke Pension Services . This was the firm behind Mrs Hughes’ liberation of her pension from the Royal London Staff Scheme.

For those who don’t follow such things, Justice Morgan allowed Mrs Hughes to transfer out of her occupational pension scheme into another occupational pension , even though she had no connection with the sponsor of the new scheme.

Royal London had fought the transfer on the basis that it was a scam and that allowing it would encourage similar scams.

Here’s what Angie Brooks wrote at the time

I am not saying that Bespoke Pension Services are scammers but on the back of their victory in the case of Ms. Hughes, there are a further 160 blocked pension transfers sitting with the Pensions Ombudsman. We have no way of knowing whether they will all be pension transfers invested in Cape Verde assets, but we do know the Hughes case must have been very important to Bespoke Pension Services’ business.

Interestingly, Bespoke Pension Services are unregulated and their address is a virtual office. According to their latest published accounts the firm was insolvent in 2014. The two directors/shareholders – Mark Anthony Miserotti and Clive John Howells – have between them an impressive portfolio of investment, consultancy, property development, investment and financial planning companies – one of which is called “Fortaleza Investments” which suggests something Brazilian

This is the conclusion that the Pension Ombudsman came to after reading

In particular, it (the Hughes judgement) provides instruction to trustees and administrators that, assuming the other requirements for a statutory transfer right are made out, members do not need to be in receipt of earnings from an employer sponsoring the occupational pension scheme to which they wish to transfer their pension. Earnings from another source are sufficient.

It seems likely that most transferring members will meet this requirement so, beyond verification of earnings and the provision of risk warnings, trustees and administrators will be conscious that under current legislation they cannot refuse such a transfer – even if they have significant concerns that it may be for the purposes of pension liberation.

So it came to pass

I am sure that Clive Howells, in his new guise as boss of Celtic Wealth, could not believe his luck when the British Steel Pension Scheme members were given a limited time to choose. With entrepreneurial zeal , he has provided Reynolds with leads on an industrial scale as documented in FT Adviser.

Back in 2014 asked these questions of Clive Howells

What qualifications do your team have for pensions and investment advice? Why was your firm still trading while, according to Companies House records, the company was insolvent in 2014? Did your firm pay off the £101k owed to creditors in 2014?

If we had answers from Clive Howells on these questions, I suspect we would not be reading of Celtic Wealth , nor Darren Reynolds , nor the mess that will now have to be unravelled by Trustees who surely must question the integrity of the advice behind any transfer request that has come through this sales channel.

Thanks to Al Rush

As I write, Al is once again dashing down the M4 to Wales, this time with an intrepid journalist beside him. Al is the hero of the piece. He is responsible for stopping Reynolds in his tracks and I hope Celtic Wealth from greasing the wheels of other associates looking to by-pass proper process.

The story of Hughes v Royal London is a salutary lesson. It turns out not just to be a test case for pension liberation, but a confidence boost for Clive Howells and others intent on providing fuel to this fire.

The pronouncements of Antony Arter, the Pensions Ombudsman who ruled in favour of Mrs Hughes, turned out to be a judgement in favour of Bespoke Pension Services and its offspring Celtic Wealth.

No thanks to the British legal system

Thanks to Al Rush but no thanks to the British Legal system which has singularly failed to act in anyone’s interests but the scammers.

The courts are the scammers friends and the only action that matters now is more prevention by the FCA.

It was Angie Brooks who asked the questions and nobody followed up. Thankfully Al has asked the question and somebody is following up. If you see malpractice , you should report it to Action Fraud, the FCA and tPR and you should follow up.

If we leave things to the British legal system, the likes of Clive Howells will still be digging out leads in another five years.

The next Pension Play Pen lunch is on Monday (Dec 4th). We will be discussing Bob Ward’s question “are trustees doing enough to stop bad outcomes from DB transfers?”

If you have read this article and want to come , then you are most welcome. We meet at 12 for 12.30 at – near Bank . The meeting is free and we share the cost of the food and drink which is typically £15. We wrap up around 1.45 and everyone is away by 2pm.

Well done to all who exposed Philip Nunn this weekend,


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When will they ever learn? (The CDO is back)


The FT reports (with its usual light touch ) that the collateralized debt obligation is back and being used by Global Pension Funds (and hedge funds) as an alternative to junk bonds. I question whether in its “authentic” (CLO) or synthetic (CDO) form, the packages of toxic alchemy that fuelled the 2008 crash were anything but “junk”.





 The sale of collateralised loan obligations — bonds that group together leveraged loans made to companies — has already past $100bn of new issuance for 2017, well ahead of the $60bn sold over the same period in 2016 and approaching the post-crisis record of $124bn set in 2014.

(FT (Nov 28 2017)

There is of course an alternative to junk, it is called patient capital. In a world where pension funds paid pensions rather than obsessed about mark to market valuations, then the need for high yield bonds would be minimal. But in the Alice in Wonderland world that has been created for us by the banking industry, we have to listen to Tracy Chen, head of structured credit at Brandywine Global Investment Management

 “Investors need return, they need yield, with junk bonds at such low yields where else can you go? It pushes investors into the securitised world.”

It” is grammatically the “need”  for return and yield. It cannot be achieved through patient investment of productive capital but must be achieved by using “structured credit” – that is what the bankers tell us and the bankers are running the show (again).


Need generation


Is this what we want?

I don’t address this question to the people who are involved in creating structured banking products to help out pension trustees, I address this to the trustees and especially to trustees who still talk to members.

What would your members say if you told them that you were considering using collateralized loan obligations and collateralized debt obligations (synthetic or otherwise)? And what would they say if – as happened in 2008 – these CLOs and CDOs failed as a result of their alchemy?

In the 10 years since the banking crisis, the people of this country have paid a high price for the failure of the banks and the mis-purchasing of these financial instruments. These failures have impacted wages and the services we receive out of general taxation. With little economic growth and with the debt burden taken on to bail out the banks, Government has decided to close basic services like libraries. This is the impact of CDOs and CLOs on ordinary people.

If any trustee of a pension scheme (global or otherwise) is thinking of investing in opaque banking instruments that promise a higher yield than ordinary bonds through these structures, can they stop and think about the damage that has already been done.

Remember Einstein’s definition of insanity and learn from it. We fought two world wars, we don’t need to fight two banking crisis’.


Stop it – right now!

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

We do not restore confidence on our own – we do it together

Patient capital

Today we see the launch of the Government’s new industrial strategy.  Five Live’s “Wake up to Money” program came from the white heat of a Coventry industrial research plant. Last week Nigel Wilson called for us to put back the Capital into Capitalism and that same (budget) afternoon, Phillip Hammond name checked the “Patient Capital” project that is designed to do just that.

So it’s sad to hear that Aviva, one of the great sources of capital for British industry, is choosing not to invest in British productivity but to buy back shares and boost its share price. This can’t be seen as a productive use of capital, the parable of the talents bemoans this kind of behaviour and so does Aviva Investors  (share buybacks short-term pain, long-term gain).

With earnings hard to come by in a low-growth world, … companies offering sustainable revenue and earnings growth, rather than short-term fixes like share buybacks, are likely to be rewarded.

Rewarding investors for taking a long-term view and not a quick return on investment is at heart of a good industrial strategy. I’m not good with these kind of words so I’ll continue to quote from Aviva Investor’s market briefing.

Whilst companies will likely continue to generate significant amounts of cash and debt markets will remain accessible, it is questionable how much longer this buyback boom can continue. Long term investors, in particular, want to see firm evidence capital is being used productively.

Here’s  the conclusion.

To generate sustainable long-term growth, companies need to focus on re-investing further in their own businesses

and the threat to management who put pandering to short term shareholder interest before the long-term interests of the business.

 Ultimately it is up to long-term shareholders, as stewards of capital, to demand companies allocate capital in the most efficient way.

I hope Aviva’s Mark Wilson (no relation) has access to his own company’s websites!

As with pensions

Investing rather than speculating) in equities demands a long-term view. You are expecting to be rewarded for being patient. This is why John Ralfe points out that equities are not a risk-free source of return; the risk is that in the short-term you need your capital back and lose out.

But that does not mean you should not invest for the long-term; that is what our great pension funds like British Steel and the University Superannuation Scheme have historically done and that is why they successfully pay pensions to hundreds of thousands of people.

Ordinary people investing in DC are still invested in equity based funds; but recently, we’ve seen a shift from equities to bonds among institutional investors.

retail institutional

Like the insurance companies, our pension funds have been a long-term source of “patient capital“. It seems no coincidence to me that the drop in the productivity of the British Company has coincided with the fall in equity investment among British pension funds as LDI and other fixed income strategies are adopted.

The wholesale de-risking of our funded occupational DB plans from equities to bonds, often using complex derivative structures as part of “liability driven investment” has led to a decline in investable capital for the long-term. This has in turn led to a decline in long-term investment and is one of the reasons we are falling behind other OECD countries in our productivity.

Any industrial strategy needs to address not just the lack of investment but the reasons for the lack of investable capital. Nigel Wilson has put L&G’s money where his mouth is and invested shareholder funds in long-term investment projects with social purpose. Mark Wilson seems intent on handing back working capital to shareholders.

We are sitting on £300bn of cash in ISAs, “we” being British tax-payers (or in the case of ISAs – “non-tax-payers”).  This is dead money that is simply sloshing round the system creating un-needed and unwanted liquidity. That money would be better put to productive use.

We want more Nigel and less Mark, more investment into real assets (equities and infrastructure) less into short=term holdings (cash and bonds). Activists, including Aviva Investors, should be pointing this out to management – including Aviva.

We want pension funds prepared to invest for the future. It is clear that many DB schemes are so far down the line in their de-risking programs that they may never be investors again. But that does not close the door on their opening again to future accrual, albeit accrual using equity investment to meet the long-term horizons that pension liabilities create. The FT reports that even the Bank of England are considering returning to investing in growth assets, a move that provoked this comment from Ros Altmann

 “It effectively admits that the cost of providing pensions using only index-linked gilts may be too high and that the use of just these gilts may not deliver the most effective asset backing for the liabilities.”

It is opportune that in the week that we announce a new industrial strategy and days after a forward-thinking budget , the DWP Select Committee choose to open discussion again on CDC – what I like to call “target” (rather than guaranteed) pensions.

The essence of social capitalism is that we are all in this together. Nothing could be further from that truth than the self-invested personal pension. We need to isolate self-investment as the means of the special few and not shoe-horn SIPPs into the mainstream.

The mainstream investment is a collective , it’s how equity markets work – collective investment into publicly owned companies. Similarly it is how our pension schemes work. It is high-time we reasserted the importance of long-term investment and the vital risk-mitigation that comes from investors coming together to collectively define outcomes.

We do not restore confidence in pensions on our own – we do it together.cropped-playpensnip1.png


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A time of trust – not guarantees.

About the time that I was ranting to TISA about the complacency with which we are dismantling the retirement promises made to those who were promised a DB pension based on the years they worked with the company;- this happened!

DA enquiry

Click the link to read what the DWP Select Committee are up to. For those who are “click averse”, I’ve left the blurb at the bottom of the page.

This is why the DA Pension (better known as collective defined contribution or “CDC” matters).

Forget the technical stuff – this is how CDC could matter to you.

Every single private defined benefit pension scheme in Britain is under threat of closure. That doesn’t mean you lose what you’ve got , or even that you have to take less than you’ve earned to date. It means that the pension promised against what you’ve yet to earn, is going to be based on what you can get from a pension pot – not more “wage for life”.

It needn’t have been this way!

At some point in the nineties , some hard-boiled eggs decided that the promise employers paid to pay pensions needed to be written in stone. Writing promises in stone is expensive and the weight of the stone sunk many pension schemes that , had they continue to promise to pay what they could, would still be helping you build a wage for life (rather than a pension pot).

What’s done is done. Most of us have to make the best of our pension pot and some of us have even decided to cash out our wage for life in return for a bigger pot. The hope is that there will be some way to convert our pension pot into a wage for life that suits us when we get to wanting to spend our money.

Advance to Go – collect £200

In 2014, the then pension minister Steve Webb, decided to allow the old style pension schemes that didn’t have promises written in stone – to start up again and call themselves “CDC”. He was successful and the idea became law in April 2015. Unfortunately, the new Government decided that the market didn’t need anything as old fashioned as a pension system that worked, but that we wanted a brave new world of financial empowerment , free of pensions or at least with pension freedoms (probably the same thing). This meant scrapping the detailed rule-making which would have meant that CDC schemes would be available about now and investing in Pension Wise, and the Pension Dashboard and trusting in the market to come up with innovative solutions (aka silver bullets).

Unfortunately, no matter how many times we have passed “Go” since then , few “collect £200” silver bullets have been dished out. Many people are already looking at the “community chest” or “take a chance” as their best chances of winning.

Confidence in pensions is not high

Since Frank Field took over as Chair of the DWP Select Committee, he has seen one great pension scheme after another sink beneath the weight of the promises written in stone. BHS, BSPS, USS, Royal Mail,  Halcrow, Hoover Candy and a whole load of smaller schemes like Austin Reed, have all either “closed to future accrual” , “entered the PPF” or used an RAA to become semi-comatose or “zombie”. This blog is full of it – just key these words into the search button at the top of the page.

It is highly unlikely that – had the old system persisted – or if schemes like Royal Mail had been able to revert to the old system in future, that much of the argument, industrial action and the general turbulence we are seeing in places like Port Talbot or Scunthorpe would have happened. Put simply, Royal Mail, USS, BSPS and Hoover Candy might all have carried on providing a weaker promise – a promise to do the best they could – if they had been allowed to convert to CDC.

But that couldn’t happen – because of the stupid mistake made by the Government in the summer of 2015.

Head and Tails.

The idea of CDC, as presented to the House in 2014/15 was to provide a way for companies to convert from a DC plan to something  like the original idea for the company pension scheme before promises had to be written in stone. Unsurprisingly, employers were less than enthusiastic to put their necks into a noose which might again be tightened when the CDC promises were re-written in tables of marble.

It was a case of heads we lose . tails we lose. Few- if any- employers told Government they would voluntarily take up anything that could remotely be interpreted as them providing staff with guaranteed pensions.

Meanwhile, the only way members could convert their pots to pensions was being given a good kicking by George Osborne

“from this day forward, no-one will ever have to buy an annuity again”

Which was all jolly good news for those who believed you could turn mutton into lamb using pension freedoms. But while the freedoms are fine for the high-net-worth, financially literate clients of IFAs, they are not going to provide the steelworker or the postman with a wage for life.

We have given the nastiest, hardest, problem in finance – to people least capable of solving it.

CDC however has the capacity to operate without an employer’s sponsorship. It could be used to bring together the disparate pots of the postmen and the steelworkers and provide scheme pensions rather more efficiently than through individually advised drawdown and without the risks of DIY drawdown.

I have argued this point to the FCA at their stakeholder events which they ran this autumn as part of their Retirement Outcomes review. I was publicly ridiculed by the FCA moderator in the room for suggesting that “risk-sharing” along CDC lines could provide the innovation needed to sort out the postmen and the steelworkers and the people who never had a DB pension and are hoping that “something will turn up” from auto-enrolment. In short the mass-market that they have been worrying about as part of their work on FAMR.

It’s Tails you lose your wage for life and Heads you lose your chance to risk share! Guided pathways and annuities at 75 all round!

Weirdly, the simple answer to the mass-market  retirement problems that the FCA are considering, is sitting on some shelf in the DWP’s Caxton House office.

If Frank Field and his committee can get this message and then transmit it to the people in Canary Wharf, running the Retirement Outcomes Review, we will have the most significant piece of joined up Pension Government since Steve Webb left office. It’s a big “if”, but it’s the only game in town right now.

There will be more Royal Mails, more BSPS’ and the next one is just around the corner. There will be more feeding frenzies like the one we’re seeing at Port Talbot and there will be some very disappointed people who’ve taken “no-brainer” CETVs over the past 18 months.

Even if the DWP Select Committee, get the drafting of the CDC secondary regulations back on track, they are unlikely to be finished before 2020. So CDC is not going to be a silver bullet for the 2018-19  scheme casualties. Nor will it be a solution for people who have DC pots and want them to pay them more than an annuity without the risks of advised or unadvised drawdown. They too will have to wait till at least 2020.

I am not holding my breath, I’ll respond to the DWP consultation (as I’ve just done re the problems in South Wales). Until we have a pension minister who busies himself in these issues and a regulators who are in listening mode, 2020 looks a pipedream.

But pensions are long-term plays – the wheels grind slowly but sense prevails.

It’ll be a long-time coming but change is going to come.


(an appendix for people who don’t click the link at the top but who want to know more about CDC) – the text of the DWP SC press release.

Collective Defined Contribution (CDC) pension schemes are a new – to Britain at least – type of retirement saving plan with the potential to address some of the concerns that policy makers and the public have about the current pension “offer”. They are commonplace in the Netherlands, Canada and Denmark but are not yet allowed in the UK.

Defined ambition schemes

Also known as a form of “defined ambition” scheme, they differ from Defined Benefit (DB) schemes in that you are not promised a certain retirement income – although as we are seeing often, the company sponsors of DB schemes are not always able to keep those promises.

A CDC scheme instead has a target or “ambition” amount it will pay out, based on a long term, mixed risk investment plan. CDCs aim to pay out an adequate level of index-linked pension for life but this is an ambition rather than a contractual guarantee. They have the scope to redefine the benefits they offer if circumstances – like adverse economic conditions – require.

CDC  differs from the traditional Defined Contribution (DC) schemes that are largely replacing DB schemes in that it does not produce an individual “pension pot”, which you then have to decide how best to use for your retirement, but invests your savings in a larger “collective” pot, and then provides an income to you during your retirement.

Thus, CDC schemes take the big central decision of pension freedoms out of retirement planning, and also much of the risk.  In the Budget this week the Chancellor announced plans to “unlock” investment in UK infrastructure through longer term investment in “scale-up”, innovative business: CDCs have been identified as a potential source of this type of investment.

Potential benefits to savers

The Committee is launching a new inquiry into merits of this idea, the role that ‘defined ambition’ CDC schemes could play in the pension landscape, the potential benefits to savers and the wider economy, and the legislative and regulatory framework that would be required to make it work.

The Committee’s ongoing inquiry into pension freedoms has highlighted the general level of mistrust and disengagement with pension plans, and it is well known that policy makers are keenly looking for ways to get people to plan and save much more for their retirement.

Advocates of CDC schemes argue that they provide greater assurance of retirement income and more efficient pooling of costs and risks among members than traditional DC, but do not impose the burden of underwriting an onerous pension promise on employers. Studies by the RSA and Aon Hewitt estimate that CDC could have delivered 33% better pension outcomes than traditional DC over the past half-century.

Detractors argue that CDC may further fragment the pension landscape, suffer from lack of demand, and run counter to the trend towards greater individual freedom and choice in pensions.

The Pension Schemes Act 2015 created by the 2010-15 Coalition Government defined “shared risk/defined ambition” or CDC as a distinct pension category.

However, regulations under the Act to bring them into effect have not yet been introduced. In October 2015, the Government announced the plans would be shelved indefinitely so as not to distract from other major reforms such as auto-enrolment and pension freedoms.

Chair’s comments

Rt Hon Frank Field MP, Chair of the Committee, said:

“What the Select Committee is aiming for is to retain some of the best features of company schemes in a different age when employers are no longer willing or able to sustain the burden of final salary promises to employees, who could club together and pool the risk themselves”.

Call for written submissions

The Committee invites evidence from any interested parties on any or all of the following questions:

Benefits to savers and the wider economy:

  • Would CDC deliver tangible benefits to savers compared with other models?
  • How would a continental-style collective approach work alongside individual freedom and choice?
  • Does this risk creating extra complexity and confusion? Would savers understand and trust the income ‘ambition’ offered by CDC?

Converting DB schemes to CDC:

  • Could seriously underfunded DB pension schemes be resolved by changing their pension contract to CDC, along Dutch lines?
  • How would this be regulated and how would the loss of DB pension promises to scheme members be addressed?

Regulation, governance and industry issues:

  • How would CDCs be regulated?
  • Is there appetite among employers and the UK pension industry to deliver CDC?
  • Would CDC funds have a clearer view towards investing for the long term?

Submit your views

You can submit evidence through our evidence portal, or please get in touch if you have special requirements for submitting evidence.

The deadline for submissions is Monday 8 January 2017.


Posted in CDC, DWP, FSA, Music, pensions | Tagged , , , , , , , , , , , | 3 Comments

Is the USS really in crisis?

leech 2Professor Dennis Leech is Emeritus Professor of Economics at Warwick University. This week has seen the University Employers threaten to withdraw sponsorship for future DB accrual, the University Union announce intended strike action and the DWP Select Committee ask fundamental questions about how Defined Benefits are promised. Professor Leech’s contribution the debate is the more timely and valuable than ever.

Threat to the defined benefit pension scheme

The employers have said that they want to close the USS defined benefit pension (DB) scheme to future accrual, which means that new members will not be allowed to join, and existing members will not be able to contribute any more into it than they have already built up. Future pensions contributions will all go into a defined contribution (DC) pension pot via the Investment Builder.

Defined benefit pensions are much cheaper and less risky

This is a very bad decision because DB pensions are much better than DC ones. They are a guarantee of a secure ‘wage’ in retirement for life, whereas a DC pension scheme works differently: it gives a single sum of money on retirement which you have to turn into an income. And pension freedom puts you in the position of having to take some very serious decisions about what to do with this pot of money that will affect the rest of your life. A lot can go wrong, especially as a result of poor financial advice, and you may have to live out your retirement with the consequences of one bad decision.

A DC pension is risky because how much your ‘pot’ is worth depends on the vagaries of the stock market. Academic research has shown that it costs between fifty percent more and double to provide a given secure income in retirement via a DC pension scheme than DB.

Essentially, there is less risk in a DB pension because of the collective nature of the scheme. None of us knows when we will die, which is the biggest risk facing us if we are having to live off a DC ‘pot’: if we do our ‘drawdown’ sums wrong we might run out of money before we die, or leave unused retirement money as an unplanned legacy if we die earlier than planned. (It is actually rather far fetched to believe we can plan for our retirement in this way.) But actuarial life expectancy tables solve this problem in a DB scheme: the longevity risk is simply pooled.

Likewise it is much less costly to build up a DB than a DC pension because the investments are pooled in a large diversified portfolio, exploiting economies of scale and the law of averages which are not available to a DC fund.

A pension is a ‘wage’ in retirement for life. A DB scheme is designed to provide that while a DC pension does not. A DC scheme is really an employer-subsidised saving scheme. How you turn the savings you have built up into a pension is another matter that you have to decide and that is not easy or cheap.

The source of the problem facing USS

Contrary to what a lot of people think, the USS is not a government scheme backed by the taxpayer, like the teachers, civil service, health service and others. It is a private scheme run and regulated like a company scheme. It comes under the Pensions Regulator in the same way as, for example the schemes at BT, Royal Mail, British Steel, BHS, etc. Like all these it is ‘funded’ which means, in effect, that it must stand on its own feet, that its trustees must be able to show the regulator that it will have enough funds to pay the pensions members have been promised and expect every month after they have retired.

The source of all the controversy about valuing the scheme is the interpretation of the phrase ‘enough funds to pay the pensions’. Does that mean a capital sum or a flow of income? The difference has a big effect on how much risk there is.

The UUK have said the scheme must close because it is in deficit, the deficit is growing and that is unsustainable because it means the institutions will have to make ever larger recovery payments.

Let us examine the claims of the UUK. First, the scheme is not in deficit in the ordinarily meaning of the term. Second, there is no evidence that investment returns are too low for the scheme to be sustainable. Third, the scheme is sustainable as long as it remains open and continues into the future along with the universities it serves. Fourth, it is highly questionable that there is a deficit even in the narrow technical meaning in which the word is being used here.

Where is the deficit?

Figure 1 (below) taken from the USS Annual Report for 2017 shows the income from contributions and investments and payments of benefits. It shows that there is not actually a deficit in the usual meaning of the word. Income from contributions by employers and members totals £2 bn, while pensions in payment come to £1.8 bn. In addition it made a return on its investment portfolio of £10 bn (mostly this was from market price movements but that figure includes over £1 billion in dividends, interest, rent etc.).

We usually think of a deficit in the George Osborne sense of not enough money coming in to pay the outgoings, necessitating selling assets or borrowing more. The USS is clearly not in deficit. It is cash rich and every year investing its surplus in new assets such as Thames Water, Heathrow Airport, and many other infrastructure projects in addition to traditional assets like company shares and bonds.

Figure 1: Deficit?Figure 1: Is this what a deficit looks like?

Will there be a deficit in the Future? Here we must enter the realm of intellectual speculation and deal with economic theorising, market fundamentalism and evidence-free opinion

Looking at one year’s figures is not enough since they may not be typical and we need to look into the future. We need to find a way of seeing if there will be enough money to pay the pensions when they come due.

It is not obvious how that can be implemented. We have to do a thought experiment.

Consider a pension payment to a young lecturer early in his or her career, when he or she has retired, say in 50 years from now. There has to be enough funds to pay that. The pension can be forecast on assumptions about longevity, salary growth, inflation and other factors. But how can we tell if will be enough money? One approach is to ask how much will be needed to be invested today to give enough in 50 years to pay the expected pension.

Since the trustees have to be sure that the money will be there, they must be prudent in their assumptions. How prudent is prudent enough? Since nothing is ever certain, if they wish to be very prudent, they cannot rely on contributions from employers or members in the future. Theoretically the scheme could close (maybe all the member institutions go under for some reason we do not yet know) and there could be no contributions. So it is arguably best to err on the safe side and make this assumption.

And they have to decide how the money is invested to pay the pension in 50 years. Since nothing is certain in investments it would be imprudent to rely on risky assets like equities, even though they are almost certain to grow handsomely in a long enough period. Prudence – paradoxically – requires investing in secure bonds, which have a poor rate of return. At the moment the rate of return on government bonds is at a record low level due to the government’s policy of quantitative easing.

If we do this calculation for all prospective pension payments, we get a figure for the liabilities. Comparing that with the value of the assets the scheme owns gives the funding level or deficit/surplus.

The liabilities figure is very large because it is based on the very powerful arithmetic of compound interest over long periods of time. It is also very sensitive to assumptions made – for the same reason. And it must ignore a host of real world factors that can change dramatically. The figure for the deficit is very inaccurate and volatile since it is the difference between two very large numbers, the liabilities and the assets, both of which are highly volatile. The deficit figure quoted by the UUK and USS executive has changed by over £2billion in little over two months. This fact alone suggests that this way of valuing the scheme is unreliable: the actual value of the benefits can not have changed in that time by more than a miniscule amount.

Another other problem with this approach, that has not been sufficiently discussed, is that it begs the question of how the capital value of the assets is to be converted into money to pay the pensions – that is, an income stream. That process needs to be spelled out and not just assumed. Can a scheme as big as the USS just sell assets on a large scale if need be without disturbing the market? It seems unlikely.

Are investment returns really too poor?

The UUK give one of the reasons for the deficit that investment returns have fallen. It is certainly true that gilt rates are at the lowest they have ever been, lower than inflation. It would not really be sensible for a rational investor to invest in gilts since that would guarantee losing money. But other investments, particularly equities, produce a good return that would seem to be enough for the pension scheme to continue to be viable, if it continued to invest in them.

Figure 2 below shows the estimated returns on different investments that were prepared for the UCU by its actuary, First Actuarial. They contain a suitable margin for prudence to enable them to be the basis of a discount rate. The returns have fallen dramatically to low levels on bonds particularly government bonds.

Figure 2: Poor investment returns?


Is the USS unsustainable?

Another thought experiment is to ask if there is likely to be enough cash flow to pay the pensions, based on a projection of income from contributions and investment earnings and liabilities. This is a natural, direct approach that requires less in the way of assumptions than the capitalisation approach described before. In particular it does not require a discount rate for compound interest calculation.

Figure 3, below, shows projected cash flows for the USS that have been prepared for the UCU union by its actuaries (First Actuarial). This is just one of a number of scenarios that have been studied but all show the same picture (2% real salary growth, real asset income of 0.2 percent). It is clear that from this point of view, where the scheme remains open indefinitely, in the same way as is highly likely the pre-92 university sector will, the pension scheme will be perfectly sustainable, having a small deficit or surplus.

Figure 3: Unsustainable?

Figure 3

Is the scheme in technical deficit or is it in surplus?

There is a fundamental difference in the methodology between the situation where the scheme is assumed to be open indefinitely and where it is assumed to be getting prepared to close. In the latter case it must find a way of ensuring it is funded at all times, or at least as soon as possible while it can rely on the employer being able to support it. Volatility of the technical ‘deficit’ due to market fluctuations in asset prices represents risk here. The risk is that the scheme will close and the valuation will crystallise with assets values low due to a depressed market, such that they are inadequate to pay the liabilities. Hence the need for recovery payments to meet the cost of covering this risk.

On the other hand, if the scheme is open indefinitely with a strong covenant, it can be assumed it will never need to close. Therefore asset price volatility is not important. The ability of the scheme to pay benefits depends on there being sufficient investment and contribution income coming in. Therefore market volatility is not a source of risk. There is much less risk and therefore the scheme is cheaper because there is no need to cover it. Also the scheme does not need to invest in ‘safe’ assets like gilts for the same reason. An open scheme can, and should rationally, invest in assets that bring the highest return.

Figue 4 below (from the Technical Provisions Consultation document, September 2017) is the analysis, by the USS executive (not the UCU actuary this time, but the USS exectutive itself under its requirement to provide a fair view of the scheme), of the ‘deficit’ based on these two different assumptions. On the assumption that the scheme may have to close and therefore must be extremely prudent, so called ‘gilts plus’, which is the proposed basis, the ‘deficit’ is £5.1bn. (This has been changed since the TP document was published and is now £7.1 bn. The fact that these figures are so very volatile, with pension liabilities which change very slowly over decades being valued at amounts varying from month to month by billions calls into question the whole methodology.) On the other hand, if the scheme remains open, there is no need to apply a great layer of prudence to all the calculations, and the valuation of the liabilities can be done using the ‘best estimate’ of the investment returns as the discount rate. On this basis the scheme is massively in surplus, to the tune of £8.3bn!

Figure 4: ‘Deficit’ or ‘Surplus’?

Figure 4


All the efforts of the scheme trustees, the employers and the Pensions Regulator should be devoted to ensuring the scheme remains open. The biggest risk comes from the deficit recovery payments calculated on the basis that the scheme might close. It is therefore a self-fulfilling prophecy. If the scheme is assumed to be ongoing and open then there is little risk.

Risk is not an absolute exogenous quantum as some suggest. It is contextual. And assumptions about it are self fulfilling. The problem with the methodology that is being used is that it is based on an assumption that risk is the same in all circumstances. That is a theory which is false empirically.

Why can’t the Pension Protection Fund help?

What is puzzling is that the methodology takes no account of the safety net provided to all pension schemes by the Pension Protection Fund. The USS contributes its share of the levy to this government scheme which guarantees pensions in payment and ensures active members will receive pensions at 90 percent of the DB scheme level.

Why does the USS valuation ignore this? It seems directly relevant since it manifestly limits the risk.

It is said that if the USS entered the PPF it would be too big for it. But the PPF would take on the assets as well as the liabilities. Since the PPF is a government body there can be no problem of it failing to support the schemes in its portfolio, as there is with a private sector employer with a weak covenant. There is no problem with short term market volatility posing a risk.

Therefore we can argue that because the USS is protected by the PPF, a statutory body supported by government, the greatest part of its risk is removed. The valuation should therefore be done without such a large amount of prudence, and therefore the deficit will be much smaller or non-existent. Therefore the scheme is not in danger of failing and of having to enter the PPF.

Can anybody explain why this argument is not being used?

This article was originally posted here.


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TPAS offer BSPS a dedicated helpline. Don’t leave your choice to chance!

tat 3

If you are a steelworker , you now have help on your pension options from TPAS. This is great news.

As from this morning, members of BSPS, can call experienced pension people who can discuss the scheme with the experience of TPAS counsellingtata jo

My understanding is the same as Jo Cumbo’s; the provision of this helpline is at the FCA’s request and it is no small measure a victory for Jo who has championed the cause of steelworkers who have had precious little support so far. It is in direct response to the reports coming out of Port Talbot of a “feeding frenzy”,

Too late?

We are now barely two weeks away from the end of the  Steelworker’s “time to choose”. Some will argue this is too little too late. That would be wrong.time to choose

While the deadline for getting election forms back to the BSPS administrative centres is December 11th, there is an extended deadline for elections to transfer.

The trustees have requested that if the CETV is still valid that the election to transfer is received by March 15th to allow the paperwork from the FA to be verified as accurate and complete

This reflects the time it is taking turning round transfer quotes, getting the transfer analysis completed and in establishing (where appropriate) a plan capable of receiving a transfer).

For most steelworkers who have yet to make up their mind, TVAS comes in the nick of time. For steelworkers who have made up their mind but may be getting second thoughts, TPAS is there to reassure , confirm and on rare occasions to correct understanding.

Out of touch?

Anyone who thinks that TPAS is out of touch with the needs or ordinary people has not spoken to their helpline and has certainly not met Michelle Cracknell or visited their offices.

Michelle may look the prim headmistress but she has fire in her belly. I had the good fortune to watch her wind up an audience convened to discuss Pensions by London Fraud. Her brilliant talk focussed on her wish to start a coffee shop in her Hampshire village to jump on the band-wagon. She took us through the way the shop would run – it would have no queues as we’d all pay up front in advance, it would sell choice but deliver a single coffee and it would promise a coffee that would make you thin.

I suspect that 50% of the audience thought she was serious, so plausible was her business case. Michelle knows that scammers are smart, offer great customer service and are totally unscrupulous in promising what they know they cannot deliver.

TPAS are in touch and it is not too late!

TPAS know about these choices, which is why I urge steelworkers who are unsure of what to choose, or of their choice they have made  to phone  020 7932 9522. This may have arisen out of reports from Port Talbot, but is as relevant for Scunthorpe, Redcar, Motherwell, Newport or wherever a steel worker lives today. TPAS is only a phone call away.

The choices made in the next two weeks have lifelong consequences. Don’t leave your choice to chance.


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USS pension changes would be a disaster (but they are preventable) – Dennis Leech


The changes to the USS that UUK proposed on Friday will substantially alter the nature of academic employment in the Pre-92 universities and will damage higher education irrevocably. They will mean academic salaries having to rise substantially to attract the best both internationally and from other industries to maintain standards. As such, they are a very unwise, short-sighted – and unnecessary – move by the university employers.

The academic career in a leading institution is never easy. Research is fraught with hazards. However the certainty of a pension provides a safety net that facilitates risk taking. It permits a researcher, for example, to explore an avenue of enquiry, not knowing what if anything is there to be found, but always in the knowledge that if it turns out to be a blind alley – as is often the case – then at least he or she will not be personally worse off as a result. It is a good basis for intellectual risk taking on which progress in human knowledge comes.

So why are the UUK preparing to scrap the pension scheme that has worked so well and contributed to the success of British higher education? We are told it is all getting too risky and hence too expensive. But I don’t think that is true.

Without going into technicalities, two things stand out, one political, one intellectual, as having created this fallacy. The political change was the coalition government’s withdrawal from formal involvement in the management of the scheme. Originally, when it started in 1975, there were three partners with seats on the board: the employers, the members and the government. At that time universities were mainly government financed through the University Grants Committee. The scheme had a strong covenant so could ignore any short term market volatility and invest long term in high return assets. But HEFCE withdrew in 2011, since when the institutions themselves have had to stand collectively behind the scheme. That is proving increasingly difficult given the uncertainties they are currently having to face. On the other hand, many commentators regard this particular group of well respected institutions as almost certainly sure to thrive for many years to come, and wonder what the fuss is about.

The other change that has led to this crisis has been in the mental framework used for pensions accounting in recent years. Most of the actuarial profession has undergone an epic ontological conversion from having a world view based on macroeconomics to one based on financial economics. Instead of pension schemes being able to benefit long term from economic growth by investing in productive capital, the traditional approach, they are now seen as myopic speculators in financial assets. Instead of investment return being the reward for patience, it is now seen as the reward for bearing risk; the world has become a “Random Walk Down Wall Street”; all assets are assumed to have a fixed quantum of risk which automatically and always gives a commensurate return. There is no distinction between long term and short term investment; all investment is speculation.

Financial economics has been widely adopted despite the fact that it is merely a theory without a sound basis: a pseudoscience. Many of its core ideas have been debunked by leading economists. For example the efficient markets hypothesis – that markets embody all known information – has been refuted by leading economists Joseph Stiglitz and Robert Shiller on theoretical and empirical grounds respectively.

Yet much of the finance industry including many pension scheme managers ignore the evidence. It is at the heart of the USS valuation methodology which talks about market derived asset prices, yield curves and inflation expectations being “objective”. But it is nothing more than a theory based on a particular set of assumptions.

It is a truly alarming state of affairs that such a closed belief system should be governing something as important and mundane as pensions. Yet universities themselves must ultimately take the blame. For the past twenty years or so business schools have found a ready market for financial economics courses. They have been marketed as “modern finance” embodying the latest research, with the emphasis on application of techniques rather than critically reviewing evidence, and have trained many thousands of graduates applying the ideas uncritically and confidently.

We are told there is a fixed amount of risk: the USS valuation document talks about a “risk budget”. Such a thing could only exist in the world according to financial economics. Risk depends on the context. There is a lot less risk if the scheme remains open to new members than if it may have to close. The view embodied in the USS valuation is the latter and that means market volatility poses a great risk that the pensions may not be paid and that has to be covered at great expense to the institutions. But if it remains open there is no need to regard market volatility as a problem and there is much less risk. In fact the UCU actuaries, First Actuarial, have demonstrated that the scheme could continue to invest in high return equities for the long term and all would be fine. Why are the UUK not listening?

This article first appeared in  the Times Higher Education Supplement and is reproduced with the permission of Professor Dennis Leech who is Emeritus Professor of Economics at the University of Warwick.

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We have “capitalism without the capital” – we should be patient!

Nigel Wilson

It’s budget day and Nigel Wilson has been on Wake up to Money, urging the Chancellor to encourage Britain to invest positively for its future. He tells us that Britain has “Capitalism without the Capital”, he’s right and I’m with the caller from Portsmouth who urged L&G’s CEO to become UK CFO and step into Phillip Hammond’s shoes.

I don’t seem to be agreeing with much that John Mather says at the moment but I agree with this message he sent me last night;john mather

Where are the Statesmen? Can we quadruple the return in £300bn of cash ISAs by cutting out that banks and lending directly to the smaller developer who builds homes and communities across all markets

I support John’s attempt to get ISA money flowing into housing as development capital as I support the work of L&G which is doing rather more to increase the UK housing stock than the grand words of Government (I hope I can change this paragraph after this afternoon’s budget).

What Wilson and Mather are saying is that the money we are holding to pay tomorrow’s bills can be put to better use than short term deposits or short and medium term bonds. The duration of an equity is limitless and is right for longer term investment. We have a bond and cash culture, Mather and Wilson want us to think for the longer term and (in different ways) for the good of Britain. I would be glad to see both of them in the Treasury, but they are probably doing more good where they are!

More Wilson, less  Morgan

nikkiI could do with less of Nikki Morgan, who has recently been given the role of chief secretary to the Treasury. She spoke at the TISA conference yesterday afternoon. She repeated the mantra around broadening the range of tax incentivised products to line the financial adviser’s briefcases.

She was hot on Fintech and robo-advice to fill the FAMR gap and she talked about funding long-term care . Her animus against long-term investing through pensions was barely concealed.

Steve Webb’s assertion (most recently made at the First Actuarial conference) that the Treasury hates pensions, rung truer the longer that Morgan talked.

Meanwhile, one of the great British Pension institutions, the British Steel Pension Scheme is being ransacked by financial hooligans , repeating the anti-pension message.

The short termism of the Treasury in respect to saving (pension or otherwise) is creating an epidemic of like-minded behaviour which is doing lasting harm.

My hope for Hammond

There is an opportunity in this afternoon’s budget for Phil Hammond to put the Capital back into Capitalism , to create investment in urban renewal though the building of new housing and the infrastructure to support urban dwelling.

There is plenty of capital. including the £300bn sitting in cash ISAs which could be incentivised to be put to this use. We still have a funded defined benefit pension system with more than £1tr in assets, well over half of which aren’t being invested in growth seeking assets.

My hope for Hammond is he looks at this money and gets it working. Wilson and Mather and many others will help.

My fear is that we will instead retreat into the shrivelled carcass of the austerity project and pull up the drawbridge (not just on Europe but on growth).

As Wilson said on the radio this morning, there is nothing stopping us, now is the time to look forward and avoid the timidity that has oppressed us for nearly ten years. We do not need another financial bubble, we need simple policies such as those advocated by Wilson and Mather, that put our money back to work.

But as the cartoon below shows, it will take more than a budget to move us on, we need to restore our confidence in equity, in long term savings and in pensions.


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A day with Dalriada

brian spence



Dalriada are a firm of pension trustees who divide their business into “Regular” and “Irregular” business. Brian Spence who runs the business was prepared to talk to me about “Irregular business”. Members of, and employers participating in, the NOW master trust will be pleased to know that Dalriada consider them as “regular business” confirming what is already in the public domain, that Dalriada were invited by NOW to become trustees – and not the Pensions Regulator.

Irregular business

Not all Dalriada’s appointments are at the behest of existing trustees. The Pensions Regulator has been given the right to appoint its own trustees under Section 7 of the Pensions Act 1995 Dalriada are generally appointed to this work after a competitive tender, other firms appointed to schemes of this type are believed to include Pi Consulting and ITS.

Irregular business is typically work where Dalriada replace existing trustees in executive duties and take responsibility for the management of the pension scheme. Importantly they do not work for the Pensions Regulator or HMRC or any other public agency. However, they may get special support from public organisations and work closely with the police, action fraud and the regulators.

brian spence 3



This is because there is typically a high level of suspicion surrounding irregular schemes. The first such scheme that Dalriada took on (in 2011) were the “Ark” pension schemes. This was a pension liberation arrangement. I was shown the good and bad of the scheme management; the good surrounded the high level of asset recovery, the bad the difficulties agreeing the member’s liabilities to taxation as most payments made by the scheme prior to Dalriada’s appointment were unauthorised, illegal and potentially subject to penal tax recovery.

I was given insights into a number of other schemes, well known to those, like Angie Brooks, who have tried to stand in the path of pension scammers. These include London Quantum, a particularly egregious arrangement which managed to both misinvest and mislead simultaneously. Dalriada were keen not to use the word “fraud” in describing the various irregular schemes it acted for, but the whiff of malpractice was prevalent.

What impressed me most in our conversation, was its lack of emotion. Clearly the people in the room who had direct dealings with those who had lost their pensions had suffered considerable trauma, albeit one step removed from the financial calamity of those they were helping. I was impressed by the people I spoke to who supported victims of what are clearly gross injustices.

I was also impressed by the professionalism and deliberation of the senior managers in our meeting. They accepted that in hindsight, decisions could have been different, but I was satisfied that – despite the desperate plight of many I have dealt with who have been on the wrong side of the scams – they had been diligent in the carriage of their duties.

That said, I remain unconvinced that the British legal system is working properly for either Dalriada or the members of the schemes it acts for. I am far from convinced that HMRC are sufficiently agile to deal with the sensitivities of fraud victims.

brian spence 2


I am absolutely convinced that there is no sense in pursuing victims of liberation frauds for money. The current plans to tax such victims on the capital of loans they had unwittingly made to others is against all common justice. It is no deterrent to future scammers, who will not be inconvenienced by the financial ruin of victims. It has no practical relevance to the current scamming of members, as these are not involving liberation.


What became obvious during our meeting and has absolute relevance to today is that the best way to recover from pension scamming is not to let it happen in the first place. This is why it is so important that the FCA act on the numerous whistle blowing reports coming out of Port Talbot and not let money from BSPS flow into the hands of villains.

The speed with which the FCA are currently acting is most welcome (and in sharp contrast to the pace of restitution for the victims of scams past).

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

How will the Chancellor balance the pension books?



Those who see pensions as the fat underbelly of Government spending undoubtedly include the Treasury, who are busy sifting through their options this weekend in readiness for the Chancellor’s Autumn budget on Thursday.

One of the rituals of modern life on planet pension is the soothsaying of pensions Cassandra Steve Webb who mis-predicts woe with monotonous regularity.

He was at it again at the First Actuarial Conference last week and I hope he is wrong again. But, his arguments are plausible and repeatable on this blog.

Steve’s starting point is to ask what “everyman” or “prudent-man” or Joe Public might consider a decent wage in retirement and he concludes it is the pension of a teacher not a head-teacher. Working on the conversion factor 1:20 , the lifetime allowance gives you a £50,000 pension , which is the sort of pensions a head might get for a lifetime’s service (50k x 20=£600k). But a teacher wouldn’t get a pension of more than £30,000 (30k x 20 =£600k) . Apparently, Treasury logic is that tax incentives could be cut to say £600,000 from £1,000,000 and would only offend head-teachers.

I’m not sure the former pensions minister was being entirely serious about Treasury logic here but he was clearly serious in his contention that the Treasury hates pensions and that “honey I shrunk the LTA/AA” is a credible strategy for spreadsheet Phil.

In previous year’s Cassandra has argued that higher-rate tax relief could be abolished. This always seemed a daft idea, schemes could convert to non-contributory or promote salary sacrifice and the net impact (at least on high earners) would be zero (there could be unfortunate consequences for low earners as recent blogs have shown.

But the Treasury still has one nuclear option up its sleeve, one that it seriously considered in the run up to the April 15 budget and that’s to expand the use of Scheme Pays.  Scheme Pays is a way of getting you to think you are getting tax relief buy giving you the same take home as you always got, but knicking the tax-relief back out of your pension. It is how the Chancellor gets his extra tax if you exceed the annual allowance and aren’t able to write out a cheque for the tax due.

Scheme Pays is an excellent wheeze which puts the onus on pension scheme administrators to pay our tax for us and put a lien on our future benefits.  It’s painless, devious and cynical and it’s the kind of policy that really appeals to the slick kids who run the Treasury. Whether Phillip Hammond has the Ed Balls to introduce Scheme Pays to abolish higher rate tax relief is highly unlikely.

But if he wanted to really take on the enfeebled pension industry, he could go all the way to Paul Johnson and abolish all upfront tax-relief by taking away Pension Relief at Source, stopping higher rate self-assessment claims and using scheme pays for all net pay schemes.

That last “nuclear” option would net the Treasury so much money that they could afford to pay the kind of terminal bonuses that Paul Johnson envisages (Lifetime ISA +).

What do I think?

The overall the cost of tax relief to the government went up by £3bn last year and faced with the difficulty of getting primary legislation through a hostile House of Lords, the government would need to turn to tax relief to make up shortfalls as this was not a matter voted on by the House of Lords. I reckon it unlikely, however, that the pension tax free cash would be targeted and the Chancellor would be reluctant to do much on inheritance tax.

With auto-enrolment quintupling minimum personal contributions over the next five years, Phil is going to have to prioritise pensions just to meet the present taxation promise. I’m with Steve Webb – despite his poor track record – and worry about the LTA and AA getting appreciable hair-cuts.

Cutting higher rate tax-relief is a non -runner – for avoidance reasons; the scheme pays options is a live outsider. Trimming the annual allowance and lifetime allowance is second favourite with the “do nothing – and wait till times are easier” the odds on favourite!


Posted in pensions | 3 Comments

A brave and timely response to UUK’s proposals


I was wondering how to react to news that the UUK (the employers of university staff) is proposing to axe future Defined Benefit accrual into the USS.

Anger or sorrow seemed the two main candidates as I flew back last night. I was certainly angry that certain people were celebrating the proposals on twitter. But I was really upset for the many people I know who work for universities. Coming on top of the problems for BSPS members and the ongoing conflict at the Royal Mail, this is a hammer blow for tens and thousands of people who signed up to certainty and will get something else.

To be precise, UUK propose the current level of employer funding (18%) be paid into a DC account and not earn members further rights to a guaranteed income for life – a pension.

My views on closing USS for future DB accrual are known. But I couldn’t help blurting them out.

why jr


Thoughts of Mike Otsuka

But this morning , turning to the thoughts of Mike Otsuka , I read a measured and sensible article that I hope will get the circulation it deserves.

Mike who’s the staff union rep (UCU) at the LSE is thinking about the strike ballot that’s been called.

A YES vote will be interpreted as a mandate for sustained and disruptive strikes, since Sally Hunt writes: “There is no point pretending that anything other than sustained strike action with the aim of hugely disrupting (and not rescheduling) lectures and classes in the New Year will make the employers listen.”

There is, however, also no point in getting our employers to listen to demands for things they are incapable of delivering. Our employers cannot deliver something the Pensions Regulator won’t accept. The Pensions Regulator has stated in a letter to USS that the level of investment risk of the valuation that USS proposed in September is at the limit of what they would find acceptable. The current level of defined benefit on salaries up to £55,550 exceeds this level of acceptable investment risk for future accruals.

In order to achieve the required majority vote of a majority turnout, UCU will need to offer a proposal for us to rally around, which is realistic about what can actually be achieved by the strikes we’re being asked to authorise. It will also need to be worth the disruption and sacrifice.

The following is both achievable and attractive: a WinRS (wage in retirement scheme — see linked slides 10–12 including notes, this post, and this slide presentation by First Actuarial’s Hilary Salt) funded in perpetuity by USS’s current growth portfolio, but with a very modest core DB promise that remains within USS’s and tPR’s level of investment risk, with all further pensions increases contingent on investment returns. If investment returns exceed a modest CPI + 1.85%, it will be possible to provide us with pensions beyond the level of our current CRB 1/75 accrual.

WinRS is something our employers can deliver, which they also have an interest in adopting. But if they initially refuse, it’s something worth going on sustained strike to achieve.

So I hope UCU proposes WinRS, or something else that is both attainable and attractive, rather than something our employers can’t deliver, such as a preservation of the DB status quo.

The final paragraph is open to question, “can’t” and “won’t” aren’t quite the same. Reading the employer’s argument, it relies on the Pension Regulator’s assessment of the employer covenant (which is quite different from that of the employer covenant specialists employed by the Trustees). EY and PWC rated the covenant as good and the Pensions Regulator thinks it’s not.

Mike is prepared to accept “won’t” as “can’t” on the basis that future accrual will continue, albeit at a modified rate. He will get some stick from that from hardliners and I’m sure he knows it. But I think Mike is being smart. There are matches you can win without contesting every set piece.

For the sake of all parties, I hope that the tone of the debate is as measured and temperate as Mike’s response and that the arguments for and against, don’t lead to the kind of disruption foreseen by UCU.

As with the Royal Mail workers, my sympathy is with USS members who are seeing their pension promises about to be broken in return for a cash settlement.

Mike’s proposal is for a different way to share the risks of funding, one that has been developed by colleagues of mine. In introducing this idea into the debate at this critical point, Mike has done a good thing and I applaud him.

I hope that he gets credit for this brave and timely statement.

Mike Otsuka

Otsuka – forever young!

Posted in advice gap, pensions, Trades Union Congress | Tagged , , , , , , | 7 Comments

Getting away from it all

Meriem 3

Ten days ago, Al Rush and I were steaming down the motorway in Al’s £850 Jaguar to Port Talbot. When we got there met some steel workers and some retired steelworkers and people who ran the rugby club and we met some IFAs.taibach

Yesterday, our conversations were the subject of a parliamentary question asking whether the Government would be sending the FCA to sort out what had been widely reported as a “feeding frenzy” for sub-standard advisers.

Christopher Woollard of the FCA had , the day before, made it clear to the DWP select committee that that was exactly what the FCA intended to do, and for all I know, IFAs are being stalked through the streets of Swansea and Bridgend as I type.

That we’ve got so far, so quickly is down to social media and to Josephine Cumbo and others who have picked up on it. I cannot think of another instance of these things working so well.


I meanwhile am in Amsterdam, chairing the inaugural Life and Pensions Conference for Europeans wanting to know what we are getting up to and vice-versa.

I try to opt-out of work and take holiday to go to these kind of things. We at First Actuarial don’t have much commercial interest in Pan European Pensions but that doesn’t mean that what Dr Olga of Dow Chemicals has to say about joining the Aon Master Trust, doesn’t touch me – or that understanding how Dow’s participation is part of a pan-European strategy , masterminded from a Belgian hub – doesn’t interest.

We heard a German robo-insurer explain that excess profits (they work to a 20% fixed margin) go to charity and not the policyholder. Apparently this reduces fraud (Germans would rather rip off a shareholder than a charity). If you want to see how an app can bring together all aspects of an insurance policy from premium to claim – get GETSAFE from the App Store from next week.LPC

Clive Bolton spoke feelingly of his time in charge at Aviva and I shared how the members of BSPS mobilised through the Facebook pages set up by Rich and Stefan.

I’m preparing now for day two and reflecting that the little insights – like the GETSAFE fraud-prevention scheme, help our understanding of the big picture – the dynamics surrounding the DB member experience (for instance).

The distance between Amsterdam and London is no more than London and York, but there is something about this town which is quite different from anything you can find in Britain.

In former days, I came to Amsterdam to enjoy the pleasures of the flesh and the coffee shops. These days, I prefer to wander the canals in the mornings and evenings and to enjoy the incredible diversity and culture of this cosmopolitan city.

Meriem 4

On my walk to work

It was fitting that I went to dinner last night with a Moroccan and Macedonian. Meriem and Annetta are organising this conference and I’d like to give them a big shout out for making such a good job of it.

Meriem 1

Thanks to all yesterday’s speakers, especially my good friend Theo. We have one more day today and this evening I am out on the town with the remarkable Sikko before a late night flight home to the cold reality of work.

I hope I can refresh myself today.Meriem 2

I hope that over the weekend I can catch up with the many  requests from steelworkers looking for good IFAs, thanks to all those good IFAs who have been in touch. There is plenty of work for you to do and you don’t have to blow your marketing budget on chicken and chips in a basket!

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

Taylor – the Full Monty or a stitch-up?


I was asked to comment on the impact of the Taylor Report on Payroll at the Reward Autumn Update. Though I had been promised a script from Matthew Taylor himself, it never turned up – maybe I was stitched up.

I feel for Taylor, when he was commissioned by the Prime Minister, she was in the first flush of her Premiership, her acceptance speech made on the steps, now confront you as you visit number 10. How distant those halcyon days must seem to her today. And how different the ground that the Taylor report fell upon. “Good Work” as the report is called – looks like “little work” for anyone.

This hasn’t stopped the pension industry from trying to make some capital and increase the scope of the auto-enrolment project. The Pension Policy Institute have published a paper that suggests that the average gig- worker is missing out on £75,000 of pension contributions (in today’s terms). This assumes he/she will be a career gig-worker – if that isn’t a contribution in terms.

The PPI report, sponsored by Zurich (by coincidence, a provider of workplace pensions) is florid in language, appealing to the instincts of a Pension Minister who has requested an extension of his title so he is now also Minister for Financial Inclusion.

Gig economy workers could boost the size of their pension pot by up to £75,000 if a form of auto-enrolment were extended to cover all workers, according to research by the Pensions Policy Institute for Zurich. The ‘Restless Worklife’ study is the first to use data from the gig economy to model applying auto-enrolment to gig workers, a key recommendation from the Taylor review, the government-commissioned study into working patterns.

The UK gig economy includes five million people, ranging from those who class themselves as self-employed through to 800,000 on zero-hour or agency contracts. Of the current UK workforce of 32 million workers, this means one in six is currently a gig worker – with no, or restricted access to workplace benefits – including pension saving – placing millions at risk of financial hardship.

Modelling by the PPI for Zurich, using a UK-wide YouGov study of more than 600 individuals currently working in the gig economy, found that a typical worker now aged 25 earning £25,000 could end up with a £75,600 lump sum at retirement. This is based on the Taylor review recommendation of enabling individuals to put aside four per cent of their income when completing tax returns. When combined with the State Pension, this would equate to an income at retirement of £13,500.

If the worker had been auto-enrolled into a workplace pension, removing the current restrictions in place on minimum earnings, they could end up with a final lump sum of £101,500 which, when added to the State Pension could give them an income per year of almost £15,000 at retirement

But is the gig-worker really excluded from the financial system by missing his date with Workie?

I suspect , judging from the stats on gig demographics I showed in my speech, that most gig-workers are purposefully outside of the financial system and quite happy to stay that way; they are the kind of people you find living on canals (people I like very much as you never know where they will turn up next).

The PPI and Zurich may think it is a good idea to collar them with increased national insurance which can be rebated into a workplace pension, but I am not so sure they yearn for that kind of financial inclusion.

I suspect that they are busy being diverse, and living a life that is far from the regulated world of payroll as you can get. Talk about forcing round pegs into square holes.

These self-employed mavericks might well regard Matthew Taylor’s report and the conclusions of the PPI and Zurich as a stitch up. My best pension instincts (I used to be head of sales for Zurich Pensions) side with the establishment, but there’s another side of me that doesn’t and on balance – I think that if we are serious about diversity, we should be happy to allow the gig economy to carry on as an alternative to mainstream fiscality.

This of course assumes that Philip Hammond does not have another go at changing the tax and NI arrangements for the self-employed. Having failed disastrously at the April budge, I think it highly unlikely that he will.

I am due to be submitting a version of this blog as an article for Reward Strategy after 22nd June and it may just be that it will end up considerably livelier than this one. For now, I can only say than the impact of Matthew Taylor’s report will be neither the Full Monty of a stitch up. To coin Michael Portillo’s one word description of the old state age pension – it is likely to be nugatory.

Here are the Zurich’s “Full Monty” recommendations

Expand auto-enrolment to the self-employed via the self-assessment tax return process. Employee contributions to be initially set at four per cent, increasing to eight per cent when appropriate to avoid triggering a mass ‘opt-out’

Commission a government review of employment and working practices for older gig workers: Gig workers – along with regular employees – will be forced to work longer before they can afford to retire. We therefore need to consider what challenges older workers face but also how we can support employers to take on an ageing gig workforce

Introduce financial incentives for gig companies to offer Income Protection. The government should consider tax or

National Insurance incentives to encourage the provision of Income Protection within the workplace

More financial education from gig companies to increase awareness among workers of existing savings and protection products

Greater innovation from the insurance industry to develop more flexible savings and protection products for workers unable to commit to paying a regular subscription.

Cut and paste and keep and check out how many spreadsheet Phil adopts next week.

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

Pension Advice; it’s all about getting paid.

getting paid

I have read and listened to a lot about professional integrity.  Having been an IFA and being now a fee-based consultant, I know that the first thought you go to bed with (and wake up with) is “how am I going to get paid?”

The second thought, that nags away at you at 2pm is “will I have to pay that money back?” or even worse “will I have to pay the money back and pay compensation if things go wrong?”

This is not unique to financial advisers , it is a problem for all professional service providers whether they are advising on money or the construction of a bridge.

Getting paid requires a need

Last week, Rory Percival told a group of advisers at a Prudential function that they should produce reports each time they advise a client to stick with a defined benefit (DB) pension, as well as when they encourage them to transfer out.

“giving advice to stay is probably as risky as giving advice to transfer.  Personally, I think you should do that more formally, and write the client a letter or an email explaining that [opinion].

So let me put this through my “getting paid” test. In what circumstances will someone pay me to tell them to do nothing? Frankly, I can only see one. If your engagement letter with the client, signed prior to a decision being made makes it clear that you expect to be paid, whatever the outcome of your research, and your client signs an agreement to that effect, then you are in the business of advice.

Working with Al Rush, I see how he uses his judgement (based on experience) to give guidance to a number of people. That guidance is free. Al only takes on clients who are prepared to pay him and -let’s be frank, most people will not sign a letter to agree to pay for a recommendation to do nothing. I do not blame any adviser for refusing to advise people who will not pay – especially when there is no need for the adviser to be paid.

A very small number of professional people will pay advisers to validate a decision to stay in a final salary scheme, but frankly most – like me – are prepared to take that decision without advice.

Getting paid requires a budget

If an adviser has established a need- typically the need to take control of a pension away from trustees and self-manage the cash-equivalent. The next issue is getting paid for the advisory risk, execution and ongoing management.

As Brian Gannon points out when I asked the question , “why are workplace pensions excluded from transfer advice?”

Advisers need to be paid for the advice, and if the advice is to transfer then usually the cost of advice would be several thousand pounds. In almost every case that I have ever dealt with the member has wanted the cost of advice to be taken from the pension funds transferred.

A lot of workplace pension providers do not allow advisers to take their fee from the transferred funds. As an example, and not to single them out, but Standard Life’s good to go does not permit adviser fees, and nor do i believe does NEST.

So given most ordinary folk do not have several thousand pounds to spare they will often tell the adviser they do not want to consider schemes which do not allow for the cost of transfer advice to be paid to the adviser.

It’s all very well – people like me asking for “whole of market” solutions , but if people like me aren’t prepared to pay for advice out of taxed pounds with VAT on top, then the advice should rightly be focussed on products that are accessible within a client’s budget.

This begs a second question – why do occupational pension schemes not compete with SIPPs to pay advisers from the funds, a question I am asking operators right now.

Keeping the pay requires “value for the money”

This is why some financial advisers stay in business and others don’t. Advisers who act with professional integrity do not just have the qualifications, they live by them. Professional Integrity keeps advisers from taking money which they cannot justify in terms of labour or risk taken or skill displayed.

Much of what I and Al found on our travels displayed no integrity in the advice offered. I very much doubt that many of the advisers named to us – would withstand a thematic review from the FCA. Some of the wealth managers we heard of, are no more than lead generators for others, yet they were expecting to be paid as advisors.

We have no difficulty in talking to the regulators about this. The vulnerability of steel men to financial fraud at this “Time to Choose” requires that we do.

If you do not offer value for money, you- as an advisor – have not got a sustainable business plan. You may have a plan which allows you to run away to Spain – but you do not have a plan that will enable you to build your practice in your local community, as many good advisers do.

It’s all about getting paid.

Advice should be paid for, advice should be affordable and advice should offer value for the money paid to the advisor.

That is all there is to it. It’s all about getting paid.

When someone walked into the room we were in , in Port Talbot, the first thing I saw them do was assess us – work out what we were about. We told people we would not be paid and we would not tell them what to do. “I was on holiday, Al was giving  up his time for free”.

Our terms of business were clear “why are you here?” asked two people directly. For me the answer was to find out what was happening.

Our conclusions were that some people were getting value for money, most of the people we spoke to weren’t. There was little quality control – chicken in a basket saw to that.

I want to deal with an adviser who is commercially minded, who makes it clear he or she wants to be paid and will only deal with me on their terms. I am not alone, if it’s a take it or leave it offer, I know where I am.

Paying clients their pension

It’s all about getting paid. If you wind that back, you can see the essential choice for the steel men is

“do you want to get paid a pension, or do you want to pay yourself?”

The majority of steel men with that choice are choosing to pay themselves  – with the help of an adviser. That’s the pension freedom they have been given as a right.

That places a lifetime responsibility on the adviser. That is why advisers need to be properly paid and be accountable for the work they do.

poll bsps

Poll on Facebook – late October

A lot of money is being paid to financial advisers by the deferred  members of BSPS, the advisers are getting paid , will they make sure their clients are?


Posted in BSPS, dc pensions, de-risking, pensions | 4 Comments

L&G; a smooth operator with an open IGC


For an Independent Governance Committee to work, there must be a means for it to interact with its membership in a meaningful way. L&G – uniquely to my knowledge – offer policyholders of their workplace pension the opportunity to come to their offices and quiz the IGC Committee. Yesterday was the day, I saw the window and jumped right through!

As well as convenor Richard Atkins (who will be sorely missed), the committee that turned up were Dermot Courtier (chair), Steve Carrodus, Rachel Brougham, Daniel Godfrey and Ali Toutounchi.  Thanks!

This is an impressive turn-out and it was complemented by talks from a number of senior people from Legal and General. It was entertaining, interesting and thought provoking but best of all, it gave people who are interested in their L&G workplace pension , a chance to share views. Mine is my most valuable liquid asset and I certainly had a chance to ask my questions!

What’s good at L&G

There’s a lot to like. The introduction of the Future World fund this year (the one used in the HSBC DC default) is good news. IMO the fund could currently be overpriced (at twice the cost of their bog-standard global equity product). But we’ve been seeing clients choosing it as the default accumulation fund and 50% of my money is now managed with the various tilts and screens that distinguishes it.

We heard from the Chair about various initiatives from the IGC to hold L&G’s feet to the fire on admin, the cost of fund transactions, member communications (Dermot’s pet subject) and on default management. I was pleased to hear that action is being taken to help employers with adviser designed defaults whose advisers have “gone away”, we see quite a lot of stranded defaults in our governance work at First Actuarial and we’d like to see insurers take responsibility for them. Default investment options need to adapt to changing times and times are changing.

LGIM are doing much good on corporate governance, we heard case histories of how they’ve engaged with companies like SNAP and help exclude them from indices for governance failings. We saw diversity in action as speakers came at us with a diversity of ideas and intelligence that really engaged the audience. This is an investment organisation at the top of the class.

What’s not so good

It was worrying that, despite my meeting earlier in the year where I told them this, the IGC still don’t get that the ITM Ease and PensionSync links are really not working as they should. Employers have problems with ITM Ease and the PensionSync link is only available through a few payroll software suppliers (Star, Xero, QTAC and one or two others). L&G need to do something to raise its game re small employers. It should have a clear strategy which helps advisers place business with it on a structured basis, what is happening now is a mess that needs cleaning up. I will be following up on this with the IGC.

The problems with closing one major operational centre- Kingswood – should not be used as an excuse for L&G. The administrative platform is in need of a refresh at the very least. I have spoken to L&G about this and know there are plans, I was sorry not to get mention of these plans from L&G directly.

L&G are valiantly trying to reach out to their customers, but they clearly aren’t getting all the right people to their events. Where were Liz Robbins, Daniel Harvey and the FSB yesterday? There was insufficient input yesterday from the SME segment of AE clients.

Also in need of some investment is the member portal which looks and feels 20th century. I know that L&G are doing work on this but the Chair seemed to gloss over areas where even L&G know they are behind the times.

And as for the IGC itself, it needs some diversity. We had two good talks on corporate governance from Sacha Sadan and Dame Helena Morrissey which raised some questions that I wanted answering. Helena talked around Andy Haldane’s question;

You can hire two but have three candidates for a job, two get 80% of your questions right, one gets 20%, why would you hire the one who scores 20%?

Andy’s (and Helen’s) answer was that if the person who knew little but what little he/she knew complimented what the other two both knew, you should hire the 20% er, and leave one of the 80% ers on the bench.

From what I can see, the entire IGC is made up of 80% ers. There were plenty of 20% ers in the audience, some highly articulate and clearly IGC board material.

L&G are getting really weak at knowing small employers, they are focussing on their big trophy clients and have a big trophy client chair, I urge them to let the IGC get itself a rep who is both a member and working for a smaller company. We don’t need L&G’s workplace pension to become another exclusive club like BlackRock’s, Fidelity’s and Zurich’s.

What of the future?

I’d urge L&G and its IGC to read yesterday’s blog about guided pathways. Most members of L&G’s workplace pensions have little idea how their plans can be used to provide them with retirement income. I say this as a member of a group plan with 300 pension-savvy members but as someone who speaks with ordinary people quite a lot.

At Tata Steel, there is an L&G plan and an Aviva plan and they are simply not being considered by members for transfer purposes. If you read Brian Gannon’s excellent comments on the blog, you’ll see that IFAs are simply not connecting with these excellent products (and why). Many L&G GPPs sit alongside DB plans that are shedding members at a fast rate, some of these members should be in SIPPs and some could do with the low-cost default management offered by workplace plans.

L&G need to wake up to the needs of ordinary people who want to manage their own drawdown , they should be looking at NEST’s suggestions for guided pathways, which – in the absence of collective solutions- are the next best thing.

The IGCs should be recognising that many people (like me) in workplace pensions are in need of default disinvestment options. So far, product development in this space has been weak and L&G can and should do more to hang on to its money – not through lock-ins but through positive incentives to stay.

If L&G don’t do this, people like me with SIPP off!

Why I can’t I write this kind of blog elsewhere?

I would like to provide my feedback to the trustees and IGCs of other workplace pension operators. I don’t think many of them want it! There are a number of exceptions, I think of NEST , NOW, Aviva, Salvus, Blue Sky, Smart and People’s Pension but I also think of the many insurers and master-trust operators who are busy spending money on benchmarking exercises and missing the chance to talk to payroll operators, the owners of small businesses and the IFAs and accountants who advise them.

I fear for IGCs and for Master Trustees, they are all too often collections of people who have similar interests, similar views and have similar blind spots. The worry is they end up becoming a club and a cost centre, rather than an open community giving value.

I can’t write this blog for other workplace pension operators because L&G is the only organisation that runs the kind of open forum that gives me this chance. If you enjoyed reading this and want me to do more work in this sector, contact your IGC of trustee chair right now and ask them why they aren’t doing more of this kind of thing!


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

“Transparency” needs to do some work.


I worry the work on transparency is hypothetical – that it lacks practical application – that it has no immediate value to the consumer. But then I think of the conversations I’ve been having with consumers – these past four weeks – I get it.

I will begin quoting advisers debating what the Prufund where many BSPS members are investing their transfer values.

Prufund 1

While advisers debate exactly what Prufund is – and what it can reasonably be expected to deliver – here is another discussion about what BSPS members are actually being told.

Prufund 2

There are already many former BSPS members who have confirmation they are invested in insurance funds. I am seriously concerned about this.


I know a little about Prufund. What I know I have from the Pru IGC chair- Laurence Churchill, to whom I will send a link to this blog. The point of the fund is to provide stability to people who want their long-term investment returns linked to the stock- market and not just cash or gilts. It is invested as a cautious diversified growth fund and the Prudential issue bonuses, which ordinary people think of as dividends or interest.

As such it is a reasonable home for people’s money, provided that they realise that returns are in the long-term linked to what the market offers and that they are not guaranteed. And provided that the gross return is not eroded by charges from intermediaries to a point where people could have done better sticking their money in cash.

Advisory fees

As with Prufund, there is nothing wrong with financial advisers or with paying them a fair day’s wage for a fair day’s work.

But when advisers claim that they are authorised by the regulator to take 2% of an investment that may be worth £1,000,000 for a recommendation (that’s up to £20,000 folks) then the world really has gone mad.

Advisory solutions

When you look through a window, you want to see what is inside. If you can’t see inside you have to take somebody’s word for it. With Prufund, which is a complex product , you have to take the word of an adviser.

The Prudential trust advisers to properly represent their product. I was in the room when al Rush heard that 5.5% number, we heard a number of people talking about the financial solutions they had been offered. When we probed people’s understanding, it was paper thin. They had no idea of what was the other side of the window.

People are trusting in advisers and so are the Pru. This little poll – taken by members on members is  representative of what Al and I found.poll bsps

Not only are people prepared 2% upfront to advisers (on average CETVs of £350k) but they are happy to pay full product charges and pay 1% + for the advice.

I would be happy to pay these costs if I could see they were value for my money, but none of the people we spoke to had the first idea what level of service they would be getting from their adviser , let alone what the total costs of the financial solution were.

The Regulator

No doubt the FCA will be conducting numerous thematic reviews on the advisers who are recommending these solutions at these prices. The question is whether the solutions are appropriate – not to the risk-appetite of the members but to their financial aptitude.

I know from time spent at racetracks and in betting shops, that the appetite for risk of the working man is substantial. This is why there are so many profitable bookmakers. Working men bet on dogs and horses, white collar staff bet on markets, usually to the same effect.

In my view, any thematic review needs to start not with the adviser – who will evidence all the right disclosures – but with the customers. If the customers do not understand the nature of what they are buying, disclosure has not happened, advice has not been taken.

My position is that of Al Cunningham
<blockquoteclass=”twitter-tweet” data-lang=”en”>

Put another way: unless someone can get you a GUARANTEED personal arrangement (aka an annuity) worth more than the PPF or BSPS2, think carefully about the risk and potentially lifetime commitment you’re taking on.

— Alistair Cunningham (@Cunningham_UK) November 11, 2017



I now find myself a “Transparency Ambassador” – thank you Andy. That title is meaningless unless you can translate a good idea into action.

That ordinary men are investing their most valuable financial asset – what was their wage for the rest of their life- into products they know nothing about with advisers who they know little about is not “transparency in action”.

Transparency in action is to shine a light on these practices, to broadcast them to the IGCs that run the products into which money is invested – I mean Prudential, Zurich , Royal London and Old Mutual as well as many others that have not been mentioned to me but accept CETVs. It means talking to the IGCs and GAAs of the SIPP providers including Hargreaves Lansdown and AJ Bell. It may mean talking with the Pensions Regulator and the Financial Conduct Authority. It does not mean standing by as the train crashes.

Lessons must be learned

The trauma of “Time to Choose” will lead to a period of reflection, when the lessons of the BSPS consultation with members need to be learned.

We do not know the final numbers, but even the early door statistics are frightening

I BSPS Transfer

I am not frightened that people asked for transfer requests. I am pleased, if they didn’t then they could not have made informed choices. I am not worried about the numbers of transfers made so far, the 700 mentioned and £200m is meaningless. What is happening between now and March 28th (when the last BSPS transfer request can be accepted) is that up to 40,000 people have to make decisions with an advisory population (qualified to advise on these decisions) of only a few thousand.

We saw plenty of evidence of transfer analysis being commoditised through outsourcing, we saw no evidence of members understanding what they got for their advisory fees and we saw frightening examples of misunderstanding about the products used to replace rights under BSPS and its successors.

It is absolutely right that people have a CETV and I do not censure any member for wanting to avoid BSPS2 and PPF and have pension freedoms. That is their legal right.

But it is wrong that we let  people take decisions without the help of good quality advisers – and that is what we appear to be doing.

The lesson that must be learned is that with freedom comes responsibility and we cannot require the responsibility for decision making  to be entirely on pension scheme members.


Posted in BSPS, pensions | Tagged , , , , , , | 6 Comments

Advice to WTW, Aon, Mercer and the denounced.

Sit down- shut up!

This is my advice to WTW, Mercer and Aon who are facing the Competition and Market Authority’s probe into their behaviour as investment consultants.

They are reported in the FT “denouncing the FCA’s flawed report” that got them in this pickle

Mine is advice given to rival football fans when they are facing a penalty. It is good advice.Here’s another piece of advice

When you’re in a hole – stop digging,

And here’s some advice to the victims of bullying

From the Daily Mirror for “12 ways to beat bullies“. This should be read by  anyone who comes in contact with the “big three” in “denouncing” mode.

  1. Don’t become resigned to being a victim. You CAN help yourself and get others to help you
  2. TELL a friend what is happening. It will be harder for the bully to pick on you if you have a pal with you for support.
  3. TRY to ignore the bully or say “No!” really firmly, then walk away
  4. MOST bullied people have negative body language – hunched up and looking at the floor. Try to stand straight and make eye contact
  5. IF you don’t want to do something, don’t give in to pressure. Be firm. Remember, everyone has the right to say no.
  6. SIMPLY repeat a statement again and again: “No, you can’t have my lunch money, no, you can’t have my lunch money!” The bully will get bored because they are not getting anywhere and give up
  7. MAKE your phrase short and precise: Say “It’s my pencil.” or “Go away” firmly
  8. DON’T show that you are upset or angry. Bullies love to get a reaction – it’s “fun”. Keep calm and hide your emotions – the bully might get bored and leave you alone
  9. MAKE up funny or clever replies in advance. They don’t have to be brilliant, but it helps to have an answer ready. Practise saying them at home. If the bully says: “Give me your sweets,” you could say: “OK, but my dog licked them so they don’t taste very nice.”
  10. STOP thinking like a victim. If you have been bullied for a long time, you might start to believe what the bully says – that you’re ugly, awful and no one will ever like you. This is “victim-think”.
  11. MAKE a list of all the good things you can think of about yourself. Talk to yourself in a positive way. Say: “I may not look like a film star, but I’m good at maths and have a brilliant sense of humour.”
  12. KEEP a diary about what is happening. A written record of the bullying makes it much easier to prove what has been going on.
Posted in pensions | 6 Comments

Cost and value of advice in Port Talbot


Al Rush and I drove down to Wales yesterday and spent a day in the Taibach Rugby club at the invitation of the moderators of the BSPS Facebook groups.

It was helpful to understand a little of what it’s like in Port Talbot. Al grew up there and many of the steel-workers we met knew Al from school. Thanks to the club for making us so welcome and supplying us with the bottomless cups of coffee and tea we all consumed!

It is not until you sit within a stone’s throw of the factory gates that you can understand how important the Port Talbot Steel Works is to the communities of the town – such as Taibach.

What we found

We did not meet great numbers of members, but we were busy for seven hours with small groups wanting individual help. We were not there to tell people what to do but to help them find good financial advisers as they thought about their options (including the option to transfer).

We found

  1. That those people who had met advisers had no benchmark for judging either the quality of the advice or its cost
  2. That there was general confusion about value for what was being paid for advice,  implementation and ongoing servicing.
  3. That there was confusion about whether the advisers were offering advice or simply outsourcing advice to third parties (outsourcing).


Some people we met had shopped around and got wildly carrying prices and solutions. We found little evidence of advisers suggesting anything other than transfers. The cost of advice, transaction and ongoing service was generally expressed as a percentage of the transfer value and was typically 2% of the CETV for implementation and 1% for ongoing advice (paid on top of product fees of c1%). The average transfer value of those we spoke to was £350,000.

We did not see any justification for these costs, though one gentleman who asked for a justification of a 2% up front charge was told that this was what the FCA suggested.


We did not see any evidence of cash-flow modelling by advisers. Most people we asked, found it hard to explain the basis of the adviser’s recommendation and gave as reason for transfer, it was what they wanted.

Most people had been recommended insured products, typically from Zurich, Prudential or Royal London. We found a lot of confusion – especially among those looking at using Prudential’s Prufund, more than one person we met thought it was giving a guaranteed return (of around 5%).

We found little understanding of the risks of drawdown. We did not hear one mention of annuities. While people were generally aware about the PPF, BSPS and BSPS2, we found there was little awareness of the risks of what they were transferring to and considerable trust that the financial adviser would take care.

One person we talked to, thought he had spoken to three tied representatives of Zurich, Prudential and Old Mutual. He could only articulate the advice he got in terms of the solution presented.


There appear to be three kinds of advisers operating in Port Talbot.

  1. Travelling advisers who turn up from other parts of the country, offer an incentive for meeting (chicken in a basket), conduct advice sessions and then are away.
  2. Local advisers who do not have the qualifications to advise on transfers and who outsource to specialists who provide the certificate needed for the trustees to release funds
  3. Local advisers who do the work themselves.

We met with local advisers doing the work themselves but not with the (1) and (2). Coincidentally, the FCA were reported on making a pronouncement on the state of the market that drew similar conclusions (Megan Butler as reported in New Model Adviser).

‘We often found the route cause of a lot of these issues related to the business model, the business model between the firm and sometimes the specialist transfer firm. In part some firms which had seen significant growth in their DB transfer business had defaulted to a commoditised, industrialised process, an outsourced process perhaps, not focused on the client’s individual needs,’


We did not see enough people to make any general statements, but what we saw concerned us.

The advice given by the trustees to use is not being heeded. The market for advice is forming around availability of advisers not around suitability. We found a low level of understanding of cost and value and a confusion about where the advice was coming from.

Considering the sums involved, we see a considerable transfer of value from member’s pension rights to the advisory community and on to pension providers. The concept of “independence” is not high on the agenda and most advisers talked of advisers as gateways to getting their hands on their money. There was little awareness of the contracts that members were entering into with advisers or people’s rights to move away from advisers and cancel the advisory agreements they were signing.Al

We were not there to discuss the quality of the decisions being taken, though Al did valiantly talk with members about their future cash flow requirements.

We were there to help people meet good advisers – and they did. In Al they saw how things could be done and though Al is not putting himself forward, we have now met advisers who have an approach to the problem that offered a high quality of service at a rather more reasonable price than what was generally reported from those we spoke to.

There are some 43,000 steelworkers who are eligible for a CETV from BSPS. All of them should be looking at this option and most will need to take advice on whether it is right for them, and if so- what to do next. There are rather less qualified advisers to help them.

If Steel-workers want help with signposting to good quality advisers, we can now help, though we cannot advertise these generally.

If any BSPS member wants help with finding an adviser, they should contact or Al at al If they need more help with their options , they can speak to TPAS on 0300 123 1047 or the helpline provided by BSPS.

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

Salary Sacrifice – a foot in the door for the poorly pensioned?

foot in the door

Everybody knows that the pension tax-relief system is heavily weighted in favour of the have’s who get big income tax incentives. It is weighted against the low waged who can get excluded from contribution incentives altogether.

Steve Webb, who thinks about these things, has announced he’d like to see even those on minimum wage, being able to participate in some of the tax and NI saving activities of those who earn more than him.

I’m not an actuary, and I’m getting some experts to run a check on these numbers (which may change when they have) but here’s the Pension Plowman’s stab at how salary sacrifice (some call it salary exchange) could work for the low paid.

An employee is  on minimum wage of £7.50 an hour working 40 hours a week. Weekly pay = £300 so annual pay is £15,600. This person will be auto-enrolled and pay basic rate tax.

The employee pays 12% employee NI on earnings above £157 a week so 12% of (£300 – £157) = £17.16 a week.

In addition the employer pays 13.8% NI on these same earnings.

If they could pay pension contributions of say £10 a week by salary sacrifice they would save £1.20 in NI (and still get tax relief) and the employer might share some of its NI saving,

So a minimum of a 12% effective uplift for the employee , simply by sharing the saving 100% of the NI saved on his/her earnings, a maximum of nearly 26% uplift if the employer savings are shared.

The minimum wage dilemma

So why don’t salary sacrifice/exchange schemes operate for those on minimum wage?

I asked the question to payroll’s answer to Martin Lewis – Kate Upcraft and this – is -what – she -said!

No problem for us to administer – we simply reduce gross pay but it’s illegal to reduce gross pay below NMW and given the amount of unpleasant and damaging publicity about NMW non compliance at the moment, including the sleep in debate I can’t see the law changing

I had to look up “sleep in debate” – I thought that this was an all-nighter at the House of Commons- but it’s about carers who sleep at their client’s house in case something happens in the night (and get paid for attendance).

Kate’s substantive point is that the Conservative Party wouldn’t risk annoying other parties by allowing people to choose how they had their minimum wage paid to them.

Salary sacrifice is not something that happens to you like auto-enrolment, it’s not done on an opt-out, you have to opt-in to salary sacrifice, and you’d only opt-in to something, if you thought it was good for you.

Earning between 12% and 26.8% uplift on your pension contributions looks like good news. I’d choose that if there were no downside. I could try and construct a downside to pension salary sacrifice -SS (as opposed to the same contributions being made with SS) but I’d be struggling.

Denying people on minimum wage the opportunity to get more paid into their pension pot seems perverse. The Labour opposition should join with Steve Webb in calling for this practice to be allowed. Kate Upcraft has no practical objections and I’m sure she’ll join with Steve Webb in campaigning for a better deal for those on the minimum wage.

So do I.

The net pay dilemma (pt 94)

When the history of HMRC and the Treasury’s pension policy comes to be written, the net-pay scandal will be writ in black type as one of its darkest hours,

How can 300,000 people be auto-enrolled into workplace pensions on a promise of a 3% contribution from the boss and a 1% top-up from the Government, only to be told that the 1% never turned up because their employer used the wrong kind of pension contribution? It makes special pleading about the wrong kind of snow look rational!

HMRC continue to pass the buck to tPR who pass it back to HMRC (this actually happened last week in front of a live audience at Reward Strategy.

Then everyone blames operators (of DC trusts) for not moving to relief at source and nothing happens. In April 2018, the minimum contributions that will not get Government incentives double, by April 2019 they will have doubled again. NOTHING is happening – NOTHING.

Salary sacrifice +NET PAY    1+1 =3 ?

I commented in John Greenwood’s “on the money” article on salary sacrifice yesterday.

John picked up the comment which appears in later editions. He writes my words better than I can – so I hope you don’t mind me quoting myself directly from Corporate Adviser!

First Actuarial director Henry Tapper says: “Many of those on low earnings are not only unable to exchange salary for pensions, but unable to get the Government Incentive – basic rate tax relief – because they are in net pay schemes.

“Salary sacrifice/exchange gets round the net pay problem as all employees are treated equally – whether RAS or net-pay, tax-payers or below the income tax threshold.

“I would suggest that if it we were to make it easier for employers to offer salary-sacrifice to the low paid, we might go a great way to solving the net-pay problem.”

I was partly thinking of the (up to) 26.8% NI kicker – which mitigates the loss of the Government Incentive.

But I was also thinking that as soon as you get people thinking about the social consequences of denying the minimum waged the right to the NI kickers, you think about the Net-Pay scandal.

Pension tax credits

I am no expert on the HMRC’s capabilities but sorting this out does not look impossible. , It strikes me that anyone who chooses to sacrifice below minimum wage is special, if only for choosing to have a notional salary below minimum wage. Can we not make that election a trigger for  special treatment that puts money into people’s wage packet by way of a tax kicker from HMRC. For every pound sacrificed , could not HMRC put 20p onto the wage? Could we call this a pension tax credit?

Once you are sacrificing salary, the differences between RAS and net-pay are irrelevant. Everyone who sacrifices salary for pension in the nil-rate band should have the Government incentive of 20p in the pound paid on top of net salary as a pension tax credit.

I hope I am not being fanciful. The double impact of an NI kicker into the pension and a pension tax credit could incentivise pension contributions to the low-paid to the kind of levels enjoyed by the high-paid.

Though a word of caution has been uttered by Thomas Coughlan in his comment on this article

This might help low earners, but it wouldn’t help really low earners. If salary below the NI primary / secondary threshold (£8,164 per annum) is reduced there is zero benefit. So, whilst eliminating the NMW barrier might help those earning between £8,164 and about £14,500 (annualised NMW), it wouldn’t help those earning less than this.

This coupled with no income tax benefit via salary exchange for those earning less than £11,500, and I’m not sure getting rid of the NMW barrier would be that beneficial. Much better for low earners to pay to relief-at-source personal pension and get 20% income tax relief.


All this is food for thought for employers operating net-pay schemes. If I were running a net-pay scheme I’d be putting the risk of a class action from low-paid employers on my risk register. That’s when they find out just how much they are losing out on at the moment (both from being denied the NI and the tax incentives that are available to others).

There seems to be some social justice here. There seems to be some commercial risk-management too. But most of all, there is an opportunity here to get the low-paid to a point where they have decent sized pension pots – a whole lot quicker.t

Whether tweaking the rules for a workplace pension is the answer, whether LISA is the answer or whether there is merit in Alan Chaplin’s suggestion , I don’t know.

Looked at the Help to Save scheme today –

Looks better than pension to me for anyone eligible… For those eligible but unable to afford maximum contributions, maybe employer can top up instead of paying pension contributions. At the end of the saving period, take the money and put into pension and get another 25% “bonus” in tax relief??

One thing’s for sure, something had better change about the way we deal with low paid worker’s pension rights and the incentives attaching.

Posted in accountants, actuaries, advice gap, pensions | Tagged , , , , , , | 15 Comments

Practical help for practical people- what we hope to do for BSPS members.

What Al Rush and I are up to

I’ll be taking up to a week off over the next fortnight – partly because I have to and partly because I relish the opportunity of scooting around the country doing what I can to put British Steel Pension Scheme (BSPS) members in touch with good advisers.

Of course this is subject to demand and as yet we haven’t seen much demand for the sessions that Al Rush and I have promised the steelworkers of Port Talbot, we’ll know by Monday whether we’ll need to use the facilities of the Taibach Rugby Football Club or whether we can manage the enquiries over the phone or using the web.

If you are a steelworker with BSPS benefits, you can sign up for a session on Wed/Thurs 8/9 here. Further sessions are planned for Scunthorpe and Redcar. Please do not sign up if you are not a BSPS member.


Thanks to the advisers who’ve been in touch over the week offering your services, I will be spending the weekend with Al , working out who to promote and how to promote your services.

To be clear, we are looking for pension advice on BSPS benefits as well as execution. I have been accused of a bias against transfer execution, partly because I chose not to execute myself.  I do subscribe to Mr Cunningham’s view, that you have to feel you have a special need to transfer, but I do not suggest that anybody should be excluded from transferring (who has that right),  As my colleague Peter Shellswell told me yesterday “we are all special”.

Nor do I fully subscribe to the view of my friend John who sent me a link to the FCA’s guidance on transfer redress (FG 17/9) with a note

Who in their right mind would take on the commercial risk in exchange for a trivial fee

The FCA are fairly brutal in their assumptions, for instance redress will mean an adviser will only be able to write off the first 0.75% of any charges taken since receipt of money (effectively rendering themselves underwriting the charge cap). The actuarial factors involved within the paper look firmly set on the side of the person getting redress. As the FCA says

The basic objective of redress is to put the customer, so far as possible, into the position they would have been in if the non-compliant or unsuitable advice had not been given or the breach had not occurred.”….

The redress calculations, detailed in the document, should reflect the features of the customer’s original DB pension scheme … this would include, for example, different tranches of pension increase rates and deferred revaluation rates.

Peter Shellswell know only too well how onerous a task it is to calculate this redress, how expensive the redress becomes and on whom the burden of redress falls.

Those who enter into advising on DB transfers and executing transfers need not be out of their right minds, but they need to properly understand that execution carries risk. We would not want to jeopardise any adviser’s livelihood by promoting them where we did not feel they were competent.


BSPS have produced a technical note for advisers which can be found here. It has a lot of useful guidance on how to think about BSPS2 as an option.


Despite some recent relaxation in the original tPR stance (which was fundamentally anti-transfer) both the FCA and tPR start from a default position which is that members are better staying in a defined benefit scheme.

Clearly members of BSPS are in a special position. BSPS2 is not as generous as the Scheme they are currently in , nor is the PPF. There are concerns about the future solvency of BSPS2 , especially where the covenant of the sponsor is seen to be weak.

There are concerns that once a member is in the PPF , he or she loses the right to a transfer value and further concerns that transfer values from BSPS 2 are likely to be lower than BSPS. There are even concerns that the recent fall  in interest rates will reduce CETVs between now and the end of Time to Choose.

There are counter arguments to all these concerns. If members go to the two BSPS group sites on Facebook – entry heavily moderated- they can see the conversations between other members. The arguments are extremely well laid out on the Time to Choose website and their is an excellent FAQ Facebook page for general use , which can be found here.

Detailed information on the BSPS scheme can be found here and specific help on the choice itself is martialled on the Time to Choose website , set up for members in the period of choice – till 11th December.

In addition, TPAS have put up some very useful information on its website, which is free for  BSPS members to use and can be found here.

Public awareness

As part of all this, I’m turning over the Pension Play Pen lunch on Monday, to a discussion of the choices facing steelworkers, people who turn up to the Counting House on Monday will be able to put themselves in the position of steelworkers and find our for themselves how tough those choices can be (details here).

There should be considerable public concern that the outcome of the current decision making is a good outcome – e.g. it delivers to the reasonable expectations of BSPS members.

I don’t think that most members can fully understand their choices without financial advice and I am not competent to give that advice myself.  However, along with my colleague Al Rush, I think we can help people to understand what good advice looks like and help people get value for money for the advice they pay for.

I hope that as a result of a few days fun work, we will see a few more messages like this

Hello Henry, I am one half of the lovely couple from scunny Al Rush referred to. I met al thru an online bike forum and have had two meetings with him to discuss my options. I feel that I have found an excellent IFA.
I have followed your comments regarding BSPS and would like to thank you for your input. It’s a minefield for us steelworkers with no knowledge of finance. I shall be at your meeting in scunthorpe.

To sum up

  • We am not anti financial advisers ,we are pro good advisers
  • We are not anti transfers ,we are pro well-informed transfers
  • We are not anti Tata, BSPS, BSPS trustees
  • We are pro the restoration of confidence in pensions
Posted in advice gap, BSPS, pensions | Tagged , , , , , , , | 7 Comments

BSPS2 is not a lame duck – people should not feed the pike.


This tweet was put on social media by John Ralfe last night. More people read my blogs than read John’s tweets and there is a good argument for letting this idiocy lie.

However, it is important that little rumours are not allowed to spread. Here is the tweet.

can I repeat, IF TSUK went bust, BSPS2 would not have enough assets to stay out of the PPF. It is just a matter of fact.

— John Ralfe (@JohnRalfe1) November 1, 2017

I know people close to the deal that has been struck by Tata, they have no reason to be kind to Tata, BSPS2 or to the RAA agreement that allowed BSPS2 to happen. When John Ralfe uses the phrase “it is just a matter of fact”, be assured, he is at his most speculative.

The generally held view, among senior people I have spoken to is that it is not BSPS2 that Tata workers should be worried about, but their jobs.

Assuming that the mega-merger with ThyssenKrupp goes ahead – and there is no reason to suppose it wouldn’t, then Tata Steel looks a strong business. It will undoubtedly restructure and this will be unpleasant, but the memorandum of understanding that has been signed, should make BSPS members sleep easy – about the pension arrangements put in place.

Steelworkers have quite enough to worry about – without needless scaremongering about what might or might not happen in “the medium term”.

A more dangerous scenario than to BSPS2 than the loss of the covenant is the loss of confidence in it, that is created by reports of its imminent demise. The scammers and low-life financial advisers who repeat that BSPS2 is just PPF deferred, could create such a loss of new members for BSPS2 that it becomes unviable to run. We are a long way from that point at the moment, but that could happen. It would mean that some of  the money that had been destined to back BSPS2 would be paid to the PPF and the rest of the £2bn buffer promised to BSPS2 members – would be lost to pensions.

This may be in the interests of jobs at Tata (or Tata ThyssenKrupp) but it is more likely to be a windfall for shareholders.

I do not know how John Ralfe can speculate that BPSP2 would be sunk by the loss of its sponsor, there are examples of schemes that have continued to trade sponsor less (Polestar and Trafalgar House). Whether the Pensions Regulator would allow this to happen is debatable but there is precedent.

But of much more importance is to look at the behaviour of Tata itself – in the past year. I can see no evidence that the Indian parent has done anything but stand behind BSPS, it has continued to fund it and has not walked away from its obligations but taken the extraordinary step of setting up BSPS2 to be self-sufficient.

Why would it go to such lengths if it did not want BSPS2 to succeed? Why would the impending merger with ThyssenKrupp be anything but good news for the BSPS2 covenant? And why is John Ralfe so keen to scare BSPS members either into transfer or the PPF?

I can find no answers to any of these questions. I can see no reason to be concerned about BSPS2, to any greater degree than any other scheme. Indeed, the high level of transfer requests already received by BSPS, has considerably de-risked BSPS2 since the buffer is not diminished by transfers into personal pensions (it is by transfers into the PPF).

It would be helpful if John would revert to his former position of encouraging people to consider their pension rights before transferring, and considering them in a sensible non-emotive way.

Chicken Licken was right to warn there was a risk of the sky falling on his head, he was wrong to suppose it was likely.


Since publishing this blog , I have received this mail from someone close to BSPS management. I quote it verbatim by way of balance.

As far as I understand it, the RAA was just about separating BSPS from Tata Steel UK. It was not about setting up a new scheme. Once the RAA was sorted out, the Trustee was able to look at setting up a new scheme. Initially, they were expecting the new scheme to have no sponsor, and were pleased when TSUK said they would sponsor the new scheme, and they got the equity stake. But the Trustee sees that sponsorship very much as back-up.
They don’t expect to need any more money from TSUK, as the new scheme will be well funded. This came up at the member meeting I was at in Corby on Tuesday– in response to the question ‘What happens to the new scheme if TSUK goes bust’, the panel replied that they would hope the new scheme could continue without a sponsor (like Kodak). This would of course need approval.

Chicken Licken was right to warn there was a risk of the sky falling on his head, he was wrong to suppose it was likely.

Posted in actuaries, advice gap, pensions | 2 Comments

Do you want to advise BSPS members in their “time to choose”?


This blog is for financial advisers, though anyone, including BSPS members, may find it useful.

Financial advisers are urgently required by these members who are in their “time to choose”.

There are two self-help groups for BSPS members. One is for all members and the other specifically for the 42,000 people in the scheme who have not drawn their pension. It is the latter group who have most need of financial advice

Along with Al Rush, Angie Brooks and John Ralfe, I have the opportunity to see the questions , hear the moans and provide input to the online self-help communities that have been created by two British Steelworkers from Teeside (who deserve a lot of praise).

Surprisingly, no-one has  creating a self-help group for advisers to  get up to speed with the issues that members are facing. There are very specific issues surrounding the scheme and its peculiarities which need to be understood if advisers are to properly understand the problem.

Depending on the response to this blog and to work I do this week, I may set up such a group. In the meantime, should you be saying “yes” to the answer posed in the title this blog, please read on and take some action.

Getting up to speed

As a first place to learn about these peculiar matters, I would recommend that you- as financial advisers – thoroughly read all the pages of this website.

If you want to really understand the scheme, you can go to BSPS scheme site, which contains the answers to almost all questions (and a good search facility).

If there is demand, we (Al Rush and I) may run an “advisers webinar” to help with the frequently asked questions you will get when advising.

We intend to provide specific help to the groups and this blog is part of that process. As I and Al  develop these plans, we will share them.


At the bottom of this page, I’ve pasted  a checklist on how to choose a financial adviser. Nobody quite knows where it came from or who wrote it. It is being used by BSPS members who are having to make tough choices about their pension benefits. (If you claim it as your work- I’ll credit you).

If you are giving advice, why don’t you check that you can properly answer each of these questions in not more than 50 words?

If you want to help BSPS members. You might want to go a step further and write your answers down and send them to me at


These are the towns where BSPS members are congregated and BSPS are meeting their members. You might like to think about towns to which you could help members.





Port Talbot
Ebbw Vale
If there are towns that you can travel to which are on this list, you might like to send me your selections.
We may need an adviser map to share with BSPS members.


So here are the questions we’d like you to think about and respond to (please no more than 50 words per answer – preferably less!)

How to Choose a Financial Adviser

Where to start.

When you decide to see a financial adviser, especially if it is your first contact with them, you should plan in advance by pulling together your relevant paperwork, thinking about your financial goals and preparing a list of questions to ask.

Your adviser will firstly want to understand which products you have, your current financial position, your goals and how you feel about taking risks with your money.

This will help them to recommend a financial plan and products that are right for you now and in the future.

Here are some questions that you might want to ask us before deciding whether to proceed:

Q1: Are you approved by the FCA?

The adviser should be regulated and approved by the FCA with pension transfer permissions.

Q2: Type of advice offered?

Financial advisers can offer ‘independent’ advice, where they can consider products and providers from the whole market or ‘restricted’ advice, which is limited to certain products, providers or both.

Your adviser has to clearly explain if they specialise in certain areas, such as shares, funds, units, insurance products or anything else, and the providers they look at.

Q3: What experience and qualifications do you have?

The FCA has increased the minimum standards of qualification that financial advisers have to meet to ensure their knowledge is up to date.

Advisers now have to be qualified at Level 4 or above of the Qualifications and Credit Framework (equivalent to the first year of a university degree). Level 6 is pension transfer exam for example.

Professional advisers also need to obtain an annual Statement of Professional Standing (SPS).

Ask to see proof of the above if you need proof.

Q4: What are your charges?

It is important to understand what fees and charges you will pay for advice and when you will be expected to pay.

Q5: Do you offer an ongoing service and how much does it cost?

This might be an annual review to check the value of your investments and consider any changes to your circumstances, checking your risk profile, make sure you are not missing tax saving opportunities, improving the tax effectiveness of your portfolio etc.

Q6: How do you assess my financial needs?

Financial questionnaire, your goals and planning etc.

Q7: How will I receive the advice?

Your adviser should send you an outline of their recommendations which is usually called a ‘suitability report’. Check this carefully to ensure it reflects the discussion you had with the adviser and that you understand why they recommended a particular plan or product.

Q8: How often should I review my investments?

You should ask the adviser how often they recommend reviewing your investments based on your circumstances.

Most experts suggest that at least once a year is sensible to ensure your investments are in line with your risk profile.

There are often budget changes that will add or remove tax allowances – it is important to review these regularly to make sure you don’t miss out.

Q9: Who will look after my advice?

Will the adviser continue to see you or another member of the firm? Points of contact if the adviser is off sick, on holidays, leaves the firm or retires.

Q10: How do I know I am getting the right advice?

Does the adviser have external compliance to check their work?

Q11: How do you assess whether a product or investment has the right level of risk for me?

Examples – risk profiling, client experience, timescales and capacity for loss.

Remember – There is no such thing as a dumb question when it comes to looking after your money or loved ones.

you 2


Posted in advice gap, BSPS, pensions | Tagged , , , , , | 9 Comments

“A decision to take a transfer cannot be reversed and should not be rushed”

time bomb 3This blog is mainly written for deferred members of the British Steel Pension Scheme, but many other people may find it interesting. There’s no doubt that what is going on in Tata-land, will go on with other employers who feel they can no longer fully-sponsor their defined benefit promises.

This blog is about transfer activity and starts with a statement taken from the BSPS Time to Choose website .

BSPS Transfer

In clear language, the British Steel Pension Scheme lays out to members the state of play in September. Since then, many more requests for transfer value quotations have been received. Best guesses are that of the 42,000 or so eligible for a transfer, most are considering their options. The sample poll which has appeared on the BSPS website, is probably skewed by members who are particularly exercised.

poll bsps

Many members will either do nothing (and see their pensions paid by the PPF) or take a decision to join the Regulatory Apportionment Arrangement (RAA) – known as BSPS2.

time to choose

There are many factors that may influence the split between these three decisions.

One is trust;

should BSPS2 be trusted to pay pensions over many years? The trustees have confirmed that they intend BSPS to start with a £2bn buffer – that’s a lot of solvency. The less people who enter BSPS2 , the higher that solvency per head. Ironically, for those who are prepared to have a scheme pension paid (on worse terms than the current BSPS), every transfer increases the security of future benefits. I should point out that the Pension Protection Fund will still cover those in BSPS2.

I cannot say this often enough, the Trustees of BSPS have shown good faith towards their members as has the management of the Scheme. While these choices are tough, they are not of the Trustees’ making – nor is the Scheme managing these choices badly. In many ways, the information appearing on the Time to Choose website, is exemplary. Members can draw their own inclusion with regards “trust” but I am saying, as an independent observer, that I have see no reason to distrust what is being said by BSPS

Another is fear;

closely aligned to “trust”, “fear” drives decision making , but usually in a perverse way. If trust is lost, fear increases and the fear is that the only certainty is in direct ownership of your pension pot. This is driving some behaviour. I worry that decisions taken out of fear will not be sound. When you transfer, you are simply handing your money to another third party, not all these third parties are reputable – some are sharks.  See Angie Brooks’ blog. angie 6

Another is certainty;

transfer values are certain, at least for three months after being issued (when they are guaranteed). The certainty of the transfer is not matched by the certainty of outcome from that transfer. Yesterday I published figures produced by the TUC showing how both the size of your pot and what it can buy, change from year to year.

Retirement year Accumulated pension fund Annual Income (£s)(2017 annuity rates) Annual Income (£s)(Historical annuity rates)
2017 £305,519 £16,804 £16,804
2016 £307,751 £16,926 £14,464
2015 £307,265 £16,900 £17,821
2014 £299,893 £16,494 £18,593
2013 £284,417 £15,643 £16,496
2012 £274,989 £15,124 £15,674
2011 £268,149 £14,748 £16,893
2010 £248,570 £13,671 £16,654
2009 £223,357 £12,285 £16,082
2008 £268,785 £14,783 £20,428
2007 £275,212 £15,137 £20,366
2006 £264,299 £14,536 £19,030
2005 £240,999 £13,255 £17,111
2004 £231,333 £12,723 £16,656
2003 £213,844 £11,761 £15,183
2002 £248,496 £13,667 £18,140
2001 £288,372 £15,860 £23,070
2000 £306,272 £16,845 £27,871

In truth you have no certainty having your own pot, you have just exchanged one set of problems for another. I met a chap last night who was an expert and claimed to enjoy managing his self invested personal pension. I wonder how many of us are like that. Not many I reckon.

Another is time;

many BSPS members eligible for a transfer think that time is running out for them. This is compounded by the delays people are experiencing getting a quote. People feel they won’t have time to make the decision and that they will indeed be rushed. To be clear, transfer values will be issued till the end of December (closing of “time to choose” and the election to transfer need not be made till the end of March.time goes on

In the new year, the rules will change, the BSPS2 basis of transfer calculation will apply, this is unlikely to be as favourable as that currently being used. The message from the Trustees is clear, you had better transfer during “Time to Choose” than after.

My message to all those waiting for transfer quotes is be patient, I would be amazed/shocked/angry if the current clip on transfers is increased or if the discount rate that drives the calculations was altered over the next two months.

Another is shock and awe;

I live in London, I am used to things costing hundreds of thousands of pounds, but when I saw my DB transfer value, I nearly fell over. It was worth more than everything else I owned – and I am well off.

shock and awe

When I saw my transfer value

We are told that the average transfer value issued in the first tranche (the 7000 mentioned above) was £285,000. Comments on social media suggests that the older steelworkers are getting quotes which are often above £500,000.

These are eye-watering amounts of money. But as I have written before, they are no more than the earnings of steelworkers in their lifetimes – taking into account inflation. It is a happy fact that many steelworkers could be in receipt of a wage in retirement (a pension) for longer than they worked.

The amounts being offered as CETVs are huge , but so is the amount of money , most of us would like to spend on ourselves and our families over the next 40 years.  It is so hard to get your head around this, so easy to take the CETV.

And another is the availability of advice

I am a blogger, I am not a financial adviser and I am not an adviser to Tata, the Scheme or the Trustees. My only intention is to be a useful commentator who can use 35 years experience selling and advising on pensions, to good use.

There is a final factor that will determine people’s behaviour and that is the availability of good advice. This I fear is in short supply. This is not a criticism of financial advisers, it is simply an observation on “supply and demand”.

Financial Advisers are not good at getting organised. There is no list of recognised advisers available from the Trustees (something I will criticise them for) and those good advisers like Al Rush , Darren Cook, Al Cunningham, Eugen Neaqu and Paul Stocks who are familiar with BSPS – have limited capacity.

Al rush - working hard

Al Rush- working hard


It is not as simple as a dating agency for not all advisers are the same – witness this message sent to me this morning

A steelworkers questions for our friends in finance.


I have an option to transfer from the British steel DB scheme to a private pension, as recommended by TPAS I visit more than one FA, here’s my dilemma…


I visit an FA who charges 3% to transfer my £500,000 pension and another who has capped fees at £5,000.


Which one offers the best value for money?


I visit two FA’s with exactly the same transfer pot and circumstances, one recommends a transfer, the other recommends I stay in the British steel pension scheme.


Which one should I trust?


One FA can manage my investment for an annual charge of .75%; the other has a flat annual charge of £800.


Which one offers the best service?


I offer both FA’s a choice of S235 or JR55 grade steels for construction towards a multi storey building.


Which one would you use?

If  advisers reading this , feel they have capacity, perhaps they can drop me a line and I may be able to put them in touch with sensible people who moderate the BSPS pages. My e-mail address is


After a lot of words I come back to the title of this blog

A decision to take a transfer cannot be reversed and should not be rushed.

If you are reading this and you are one of the 42,000 members of BSPS not drawing your pension, then you can write to me too, and I will give you simple help. You should be speaking to your helpline, calling the TPAS hotline 0300 123 1047, using the Facebook pages set up Stefan and Rich and you should be getting yourself a pension education.

Because if you don’t do this for yourself, nobody can do it for you.

Posted in accountants, advice gap, Bankers, Change, drawdown, Facebook, pensions | Tagged , , , , , , , , , | 8 Comments

Workplace savers play pensions roulette- TUC


The Trades Union Congress (TUC) exists to make the working world a better place for everyone. It brings together more than 5.6 million working people who make up their 50 member unions.  I want unions to grow and thrive, and for them to stand up for everyone.

Here they are standing up for the 9m new savers into workplace pensions and the 8m existing savers who didn’t need to be enrolled.

TUC’s new research finds market volatility can cost savers up to £5,000 in their annual pension payment

A typical worker could be £5,000 a year poorer in later life if they retire after a bad year for pension funds rather than in a good year.

Male, median earner contributing to a defined contribution pension for 40 years

Retirement year Accumulated pension fund Annual Income (£s)

(2017 annuity rates)

Annual Income (£s)

(Historical annuity rates)

2017 £305,519 £16,804 £16,804
2016 £307,751 £16,926 £14,464
2015 £307,265 £16,900 £17,821
2014 £299,893 £16,494 £18,593
2013 £284,417 £15,643 £16,496
2012 £274,989 £15,124 £15,674
2011 £268,149 £14,748 £16,893
2010 £248,570 £13,671 £16,654
2009 £223,357 £12,285 £16,082
2008 £268,785 £14,783 £20,428
2007 £275,212 £15,137 £20,366
2006 £264,299 £14,536 £19,030
2005 £240,999 £13,255 £17,111
2004 £231,333 £12,723 £16,656
2003 £213,844 £11,761 £15,183
2002 £248,496 £13,667 £18,140
2001 £288,372 £15,860 £23,070
2000 £306,272 £16,845 £27,871

Green= highest , red = lowest.

Analysis of historic investment returns by the independent Pensions Policy Institute found that a pension saver’s pot size can vary by up to 40%, and it’s just the luck of the draw.

You can ignore the middle set of figures, they simply convert capital to income at this year’s rate and unsurprisingly show that the savers whose 40 years investments did best  (2000, 2016 and 2017) would have given the best outcomes – simply based on a theoretical consistently applied annuity rate.

But life’s not like that. In the real (non-theoretical world)  the person retiring with the  biggest pot would have got the worst annuity ( and that’s before taking into account this person had to lose 16 years of inflation (between 2000 and 2016) as well as taking an absolute fall in income of 50%. Can you imagine seeing your pay fall from nearly8 £28,000 to £14,500 in the last 16 years?

The impact of investment returns on the workplace savings of women is similar. However, due to a pattern across the last 40 years of lower wages and savings for women workers, female retirees are likely to have greater reliance on the state pension. The analysis therefore focused on historic figures for median male earners.

This is how TUC General Secretary Frances O’Grady saw the numbers;-

“Someone who has saved all their working life should not have to play roulette with their pension fund. But if their retirement lands on a bad year, market volatility could leave them with a much poorer standard of living for the rest of their life.

“Every saver should be enrolled into a well-governed scheme that is able to cushion members from the worst markets can throw at them. And it is time to implement plans that were passed into law two years ago for collective pensions, which can be less volatile and more efficient than traditional schemes.”

And of course she is right.

The only way we can take pensions off the roulette board is by releasing them from the shackles of gilt returns. Back in 2000, you could buy twice as much pension for the same amount of cash, that was simply because of the returns (yields) you could get on a gilt – which were twice what you could get sixteen years later. With no market growth in the intervening period, you can see why someone’s annuity income fell by half -with no inflation proofing.

That is of course the nightmare scenario and it’s why virtually no-one in 2016 was buying an annuity, equity markets have increased by about 8% since this time in 2016 and annuity rates are picking up too. But that is not the point. Workplace pensions shouldn’t distribute such a weird dispersal of outcomes ( as Frances says).

The point of a any kind of collective pension is it can smooth these anomalies over time. People retiring in 2000 in a smoothed fund might expect less and those retiring in 2016 more. As Con Keating, writing in a blog last week points out, the redistribution in a CDC plan is between those in a generation, not between generations.

CDC is fairer, safer and more certain than DC. That is why it is the pension of the future. Obsessed as we are by freedom from pensions, we forget that what most people want is a wage in retirement that lasts the rest of their life. CDC can not only smooth market returns but it can insure within its own pool – the longevity risk.

But now I’m talking actuarial – and I’ll stop. Well done the TUC , well done Frances O’Grady and well done the Labour Movement for seeing what should be blatantly obvious.

I look to the distant horizon and CDC!


Posted in pensions | 2 Comments

So what makes you so special?


It’s a tough question in any walk of life. There is always someone who will answer that question because they are, but most of us will find ourselves out when answering it. We’re not – and if we were all special, there would be nothing special about the word.

Alistair Cunningham asks this question of his clients when they come to him with the question

“should I transfer my defined benefits into my own personal pension”

Most people want to be flattered

One of the few chants that Yeovil Town can sing with much conviction starts (and ends)

“You’re nothing special, we lose every week”

Most people like to think that winning comes naturally to them (football fans come naturally). Nonetheless they recognise that for every winner, there is a loser- it’s just not going to be them.

I see this insanity in all walks of life. It’s what drives punters to take on bookmakers, it’s why most people invest in actively managed funds. It’s why people take transfer values. People think they are special and they can do things better themselves.

A good behavioural economist – or even a charming  one (Gregg) could give me the name for the behavioural bias I am talking about. By the way, if you are bored for half an hour , read this list of cognitive bias’ and work out which you’ve been subject to (I recognise the lot).

I’m not really talking about the mis-wiring of the brain. If we had perfect behaviour we would have perfect markets and the state could run things. We have entrepreneurs because people recognise stupidity and reckon they can make a buck from it.

That essentially is why we have transfer value and why people bet against the collective pension schemes, reckoning they can do it better themselves.

Alistair Cunningham challenges his customers to explain what makes them special.

Special needs

I recognise that some people have special needs, and I’m not being patronising or rude,

My friend Nick has been given a life expectancy of two years, true that was eight years ago but he still lives every day as if it were his last – (which makes him special to me).

I know a couple who have a firm plan to spend now and live out their later years in poverty. I believe they will do this, they are crazy but brilliant.

But most of us think we are special for reasons that make no sense at all. We underestimate our capacity to survive on this planet, we think of our worst behaviours and convince ourselves we will die of them. We suppose there will be a terrorist bullet with our name on it, that Korea will drop a bomb on us, we fear the future to the point we deny we will have one.

Then we say we are special needs. We want the freedom of having money in the bank, or under the management of an IFA or there for our kids.

Most of us do not have special needs. Just consult the actuarial tables. If you make it to retirement, you are (actuarially speaking) going to live a long-time and the chances are you are nothing special – you will.

Special powers

We may not believe we have special powers, but we are only too happy to grant them to third parties. “I know this brilliant…IFA/wealth manager/stable lad etc.”

I don’t know why we do it, I might go back and consult my list of stupidities again. I’m sure there is a cognitive bias towards creating genius in your own head.

The fact is that most active managers do not beat the index over time (especially after you’ve paid them, most stable lads are having a laugh and your IFA is probably suffering from the same delusion as you, he simply trusts his mate and takes the plaudits for himself. I use the male gender as I really think that the assumption of special powers by IFAs is a male thing.

IFAs do not have special powers, if the statistics suggest that you will struggle to get a return of CPI +3 over ten years and if you think CPI is 2% then think gross return of 5% – less the 2% you pay for someone to manage your money and you are likely to get 3% pa.

Your IFA may believe he can get 8% and can show you someone who has, but he is unlikely to have special powers – nor is his mate – and you are likely to get what everybody else gets (CPI+3).  This is why actuaries build prudence into their calculations, they know that everybody suffers from irrational exuberance, they just turn down the heat (which is what I have to do with the bacon right now).

Right – bacon sorted; how about transfers?

If you, a member of the BSPS, believe that you are special and – with 95% of the cash equivalent transfer value you should have had, can beat the market. It is for one of three reasons

  1. You have special needs – or think you do
  2. You have special powers – or have a mate/IFA./stable lad with them
  3. You think we have a special market.

We’ve covered 1 and 2 and I hope I’ve asked you to ask yourselves some questions about those special powers. I’ll finish with a few words about special markets.

We are – without doubt – at the end of an unusual period in our countries economic history. Never before has a Government – let alone a collection of governments, taken such radical concerted action to reshape an economy as the past three Governments have (with quantitative easing). The low interest rates we have today are artificially low and the economic stimulus will – as with “austerity” eventually disappear.

We will return to normal (revert to mean) and we’ll see higher interest rates, lower transfer values and people will turn round to the actuaries at BSPS and say – where did all the money go. They may say that 95% should have stayed at 93%, they might even say the trustees should have blocked transfers altogether.

People around British Steel will think BSPS was special, just as I think that being a Zurich pensioner is special. We all want to think we are special and that we are in a special market.

But even if austerity and QE unravels and 2017 was seen as a high-water mark, I do not think I – or you are special enough to bet against the UK economy , let alone the world economy. That transfer value was set against the expectations of a firm of experienced actuaries and what they thought you need to meet the promise given you. True that promise is not going to be around in the same form after April 2018, but it was made to you as 95% of the cash equivalent value of your benefits.

If you think you have special needs, if you think you have special powers, if you think you have a special adviser or if you think you understand a special market, then you will take your transfer.

But if, perhaps after reading this – you doubt any of these things, and you accept that there is nothing special about BSPS – no conspiracy theory against special old you, then you will sit tight and work out whether you’d be better off in BSPS 2 or PPF.

And if you aren’t in BSPS, count yourself lucky you don’t have to make these decisions by the end of the year. I’m off to Lady Lucy for the final boating weekend of the year, I’m nothing special either, I took my pension , turned down my CETV and didn’t even take my tax-free cash!

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

DWP now leads the way on cost disclosure



David Gauke (sponsor)

David farrar

David Farrar (author)

What’s this about?

In a first-rate document, the DWP have set out radical proposals to allow ordinary people to see and compare the costs  their trustees are paying for the investment of their pension money.

These proposals go well beyond anything previously proposed by Government and will set a pole in the sand for the FCA – who intend to consult on how people who invest their money directly (personal pensions), will get this information.

You will notice that I’m already dancing round a pin with regards “ownership”!

The DWP has authority over trustees and their occupational pension schemes (that include master trusts like NEST, NOW and People’s Pension. The Treasury has authority over the operators of group personal pension plans (Aviva, L&G, Prudential etc.).

The DWP enforce through the Pensions Regulator (tPR) and the Treasury through the Financial Conduct Authority (FCA)

The DWPs fiduciaries are called Trustees and the FCA’s Independent Governance Committee’s (IGCs)  – clear so far?

This is all about “ownership”

Ownership is one of the few ideas that Government has right now and it’s a good one. Here is what David Gauke (head of  the DWP) on ownership.

dwp 8

This is the underlying reason the Government think they can intervene (in this radical way). Gauke goes on…


I’m am sure David Gauke (MP and Secretary of State, didn’t write all this), but this is his document, he owns it and I’m attributing these words to a Government who need to be and remain accountable. These are important principles, and the principle that an individual member has a right to own information about where money is invested and at what cost is one that I intend to hold both the DWP and the Treasury to.

This principle is radical and sets the tone for all else in the document, it should not be ignored.

What is being proposed?

This is not just a disclosure about what should be disclosed, it is about how it should be disclosed. Chair’s Statements must already disclose what is readily available and the work of the Sier Committee will mean that transaction costs will now have to form part of that disclosure. Nobody reads Chair Statements as they are lost in the pile of paper dumped on members every year.

In responses to the paper the DWP were told that members showed no interest in further disclosures and that the cost of disclosure would make for worse member outcomes (higher charges. The DWP has taken such arguments into account.


They have concluded that members do want to know how much they are paying and want to have some ownership of their money. Instead of stopping with the default fund, the DWP want to extend disclosure to all funds


This will have a radical impact on scheme design. I very much doubt that schemes that offer a wide range of funds (usually on a funds platform) will be too keen on doing so if they are creating a multiple obligation on trustees. This proposal will have a radical impact on scheme design for trust based DC plans (and probably for contract-based too).

The DWP proposals will mean that fund choice proliferation will cease.

On line is the default distribution mechanism


By insisting that members of schemes have on-line access to the costs of the funds into which they are investing, DWP open up this information, not just to members, but to the wider public. Is this a charter for benchmarking? The DWP makes it clear it is.


I intend to be one such “industry participant”. I intend to report true costs of owning funds , nominal fund reporting and risk adjusted fund reporting. I intend to provide a league table of all information needed to make value for money assessments on funds and I intend to publish it in a league table. I intend that information to be generally available to employers and members in a way that makes it clear who is winning, who is losing and who should be taking action to ensure they get and continue to get value for money.


The DWP online proposal opens the door to value for money benchmarking by trustees, employers and members

The Pension PlayPen applauds David  (both sponsor and author of this paper).

The information displayed needs to be relevant to the needs of those making decisions

I am pleased to see that the DWP are not requiring the Trustees to disassemble the engine and report on the performance of the carburettor, distributor  and engine block separately. Instead they will report on the performance of the motor- bundled.


Not only is this good for trustees, it is good for members, stopping a trend towards over-supply of unnecessary information that has caused considerable damage to past disclosure. For an example of simple cost disclosure – let’s take the Quietroom SMPI


While the DWP stop short of requiring pounds shilling and pence disclosure, Quiet room’s statement of costs is surely moving towards best practice!

A step along a road

The DWP’s paper does not conclude the matters, it simply takes us a step along the way,


I see no reason why we should not have day to day reporting on our workplace pensions available on our desktop, laptop, tablet, phone or watch.

How we choose to read information is up to us, the principle has been set out – it is our information. Those who are paid to manage our money have an obligation to disclose how and where our money is invested and the cost of the management.

Last night I renewed my friendship with John Godfrey who is back from a year in number 10 and working again with Nigel Wilson. I reminded him of Nigel Wilson’s promise to me that I would be able to see Legal and General investments on Google Earth! It hasn’t happen – please make it happen John and Nigel.

David Farrar likewise, please keep David Gauke pointing in the right direction. This paper is what was wanted, needed and expected! It has delivered and I thank you for it.

Please take this as the first consultation response – it’s an A* verdict from the Pension PlayPen!




Posted in accountants, advice gap, drawdown, DWP, IGC, pensions | Tagged , , , , , | Leave a comment

The”great Pension cash-in” needs a check out.

Gareth Slee

Gareth Slee. “I didn’t feel like I had won the lottery, but it is not far off”

Jo Cumbo’s article on the “Great Pensions Cash-in” has been given promoted to the FT’s “Big Read” – so it should be. It’s a fine piece of work and it has a brilliant opening which I will quote because many readers of this blog will know just how Gareth Slee feels.


Gareth Slee cannot believe his luck.

“The money is life-changing for me,”

says the 55-year-old former steelworker who has traded in his gold-plated final salary pension for a six-figure cash sum.

“I will never have to work again. I didn’t feel like I had won the lottery, but it is not far off.”

Gareth Slee is one of more than 220,000 people in Britain who have taken the irreversible step over the past two years to opt out of schemes with secure retirement benefits and shift their money into riskier personal pensions, where cash can be used to pay down mortgages, buy new cars or spend in one go.

“I know it’s risky but I trust my adviser,”

says Mr Slee, a native of Port Talbot in Wales.

The value of money changes over time

I can remember the first time my monthly gross pay passed £1000, I ‘d been working a few years before it did and my first five yearly tax returns ( I was self-employed 1983-92) didn’t see me declaring more than £10,000  . And yet I lived in central London and got married in these years.

If somebody had handed me £100,000 in cash in 1995  and told me that I need not work again, I would have reacted like Gareth Slee. All my Christmases would have come at once. I would have gone back at work within a few months (as the FT have found many have to).

I was young, “pensioners” aren’t.  Gareth at 25 had a work expectancy equivalent to his life expectancy today.

Gareth’s transfer value reflects the risks in the promise he has from the British Steel Pension Scheme (less a 5% clip to reflect the deficit in the Scheme). It is in effect an equivalent to an offer being made to him at the start of his working life to pay all his salary up front.

If Gareth were to add up all his earnings from the late 70s till today, he might be shocked not just by the money he had earned – BUT BY THE MONEY HE HAD SPENT. If he was to do what actuaries do, and convert the amounts he earned 35 years ago into today’s pounds, Gareth would be gob-smacked

The value of money changes over time and people cannot see this. This is why Merryn Somerset Webb wrote an article in the FT “If I had a Final Salary Scheme, I’d cash it in“. Her boss, Martin Woolf, had such a scheme – and did. Gareth, Martin and Merryn are not stupid people.

Gareth is not stupid to be blinded by the “sexy-cash” (Steve Webb’s phrase) being dangled in front of him. Nor is he stupid to trust his financial adviser. If the world turns out as financial adviser’s models suggest, Gareth will happily draw-down his cash sum and possibly leave his wife with some of it when he dies. Investments will perform as planned, no major liabilities like nursing home fees will wipe out savings and Gareth will die conveniently according to his limited expectations.

There is nothing stupid in trusting a financial adviser, after all they are backed by substantial Professional Indemnity policies. Provided the adviser is around, Gareth should be ok .  For PPF read PI – so long as the liability is still insured. This is the one-way bet that professional people laugh about when comparing the income multiples of the final salary pensions they have cashed out.

“Cashing-in” or “cashed-out”

Careful readers will notice that I use a different preposition to Jo Cumbo. The “Great British Cash-Out” is different from a “Pensions Cash-In”.  In my view, people are taking cash-out of an insurance policy that was designed to protect them from the impact of inflation, of the risks of market failure and of the long-term consequences of living longer and less healthily than expected”. If people considered a CETV as an alternative to those emotive security blankets, I doubt that we would have numbers that look like this.

poll bsps

Gareth is not alone.

 Research from consultancy Willis Towers Watson says 55 per cent of pension scheme members, who are aged over 55 and who received advice paid for by their employer, decided to transfer. – FT

I am not sure whether schemes are proud of this statistic. The article points out that the transfers paid are well below the book-value of the liabilities, releasing the balance sheet of heavy oppression. Since the oppression was created by the artificial process of mark to market accounting and the impact of quantitative easing, I would be surprised if WTW considered the gains much more than “paper”.

People have “cashed-out”, but we will have to wait decades to find out if they “cashed-in”. In the meantime, many of the advisers will have retired and many of the PI policies will have lapsed. A different Government will be able to blame previous governments with the benefit of hindsight and articles like this will be yesterday’s news.

If Gareth’s money runs out, he will still have the NHS, the social security system and the “free-service” of the same ambulance chasers who are standing outside the gates of the Port Talbot steelworks.

That may not sound a great future, but it is becoming the default – implicit in BSPS’ “Time to Choose”.  

Some one needs to check out this cashing-in, for it cannot end well

Further reading

Here are the Government stats updated 25th October, on uptake of pension freedoms.

Merryn Somerset Webb – if I had a Final Salary Scheme I’d cash it in.

Josephine Cumbo-  UK retirees gambling away pension freedoms

Josephine Cumbo – Life Assurers rake in billions from Defined Benefit Transfers

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

The legitimate concerns of BSPS members

time to choose

From the little time I have spent talking online with BSPS members, I have been impressed with the matter of fact way they are dealing with the choices presented to them.

Here is a case study of the complexity faced by one member of the scheme. Whether you are reading this as a steelworker or as a pension expert, think of this.

This person was not born to be a pension expert, he has had that thrust upon him.

His grasp of the salient facts of the situation shows that he has fully engaged with what he has been sent.

It is noble that he (and so many others) have got to grips with the choices (a word of commendation for the Trustee’s communications).

A message I received overnight

(I have slightly changed the words but not the numbers)

Just to give you an example of our current dilemma in real terms (my figures).

When I became a deferred member last year I had 21 years service working a 12 hour shift pattern.

On becoming deferred I lost an entitlement to what was known as 1 for 7.  Basically for every 7 years service’ a member, I could retire a year early without loss of benefits. Although this benefit had stopped accruing,  a few years previously, I had still achieved 2 years and should have had a full company pension at 63.

When I first received my deferred benefit statement it showed an annual pension of £13,500 and CETV of £120,000.

This year my annual pension  increased to £14,000 and a CETV of £336,000 (with an 8% insufficiency reduction), Following the announcement of the RAA and cash injection, the reduction has now been reduced to 5% so my CETV has gone up to £347,000.

Here are my choices

Option 1 – remain in the BSPS and become a member of the PPF.

Here are my concerns with the PPF:

The PPF currently has 6,000 live DB schemes paying levies, 4,500 are in deficit. Is it a matter of time before the PPF folds in on itself and has to start reducing pensions payment.

I lose an immediate 10% but receive higher benefits for retiring early.

I get lower spouses benefits.


Option 2 – New BSPS

Here are my concerns with BSPS2:

I’m focussing on the 2016 accounts –

Benefits and expenses payable £676m.

Contributions received and ROI’s £321m. (£168m without contributions)

After speaking to a member of the Halcrow pension he feels like his scheme is unable to recover the deficit due to the low risk investment strategy.

Indexation capped at 2.5%

Fear that CETV’s could be reduced again at any time.

Early retirement reductions: 55 – £13,000, 60 – £17,175, 65 – £21,580


Option 3 – Transfer

I’m aged 47

Based on 3% growth at 55 I’d get £438,953

If I create own bridging pension

55 – 67: £24,378

67 – 90: £17,065 + SP £8,325 = £25,390

Additional benefit that pot carries over as inheritance.

Option to work days or part time 55 – 60 if pot has not achieved 3%.

How would you deal with organising this information?

My correspondent has not sent me the downsides of transferring ; I suspect he has read enough on my blog.

There are many things I don’t know, this gentleman’s dependants, his state of health, his current employment status and his willingness to work (part or full time) in the future.

Could I possibly advise him what to do? Of course I couldn’t.

Do I think he has made a proper analysis of his situation? I don’t know. I don’t know what choice he will make though I suspect he is leaning towards transfer.

What I do know is that he very politely pointed out to me that I was wrong in my previous blog (I should have known about the insufficiency report) and that he pointed this out with gentleness and kindness.

It strikes me that we are doing such people no favours , asking them to make choices like these. It is not – even was the “time to choose” longer – a choice that is within the financial capability of most people (whether steel workers or financial experts

Ask yourself ,

“how would you deal with organising this information so that you could take such a life-changing decision?”

Another message received this morning

As well as the message from the steel worker, I got a mail from someone who is a pension expert. He had read the results of the poll I mentioned yesterday

mini poll

and this is what he wrote…

I cannot believe so many have IFAs an if they did not have one before that so many are willing to allow them to manage their pots.


Proof that this scheme should be in the PPF.

If this goes badly I expect it to be the last such pissing around which the PPF will countenance. And if TPR wasn’t so full of deal-making ex bankers they would not allow it either.

Intermediaries and advisors taking the piss.

I didn’t change any of those words.

My five suggestions to Steel workers taking a decision

  1. Study and your statement
  2. Do not get frustrated by the Helpline, it is what it is
  3. If you can’t get what you want from the helpline – go to TPAS (free, impartial and clued up)
  4. Use the Facebook pages if you are looking for an IFA, others have been there before you
  5. Read Angie Brooks’ blog if you are considering transferring – don’t get scammed

Further reading

Which is all well and good – as long as you have your information, thousands of BSPS members haven’t  and it seems the Pensions Regulator is not too impressed.

For further reading on transfer issues, I would recommend Elliot Smith’s good article in New Model Adviser (BSPS section at back).

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

There are no rats and the ship is not sinking (a message for BSPS members)


Thanks to the moderators of the BSPS Facebook groups for access and to the poll’s author for permission to publish. This is a very worrying post from a BSPS member.

The poll is recent and is the only data I have seen relating to BSPS member intentions.

It tells a tale… if members act in line with this (exit) poll, something like £4bn would leave BSPS before BSPS2 arrived. As the bulk of BSPS’ assets refer to retirees and are destined for the PPF, this could leave BSPS2 looking a little unpopulated.

poll bsps


I’ve been asked for some thoughts. I have three.

  1. Firstly, even denuded of 85% of potential members, BSPS2 would remain viable and – assuming the residual sponsorship was not reduced, the solvency of the scheme should improve.
  2. Secondly, the run on BSPS1 is unlikely to mean further reduced transfer values. This is not a transfer now while stocks last situation and there is no need to panic.
  3. Thirdly, though I can feel confident about BSPS2, I cannot say the same for all the 86% of those who will transfer out. Will 83% of those who expect to be advised, have ongoing advice, that remains to be seen, will the 4% who will make their own way end up happy, well we have some evidence that they may not,


So, on balance, I have to urge extreme caution to BSPS members who are not in retirement.

Even though time seems to be conspiring against these members, there is considerable downside in taking a transfer without being sure what happens next. It is unlikely that you will fall into a bearpit, but scammers are digging them. It is more likely that you underestimate your life expectancy and the needs of your spouses. It is more likely that your investment pot will fall prey to “pounds cost ravaging” or “sequential risk” (ask your adviser). It is likely that the investment hurdle rate you need to hit, to justify drawing a pension from your own pot will be higher than you think, after you have paid all fees.

That transfer value did not happen by accident. To put money behind the defined benefit promise, the BSPS Trustees and the scheme’s management have done well. We know that the management costs of the scheme are some of the lowest amongst all occupational pension schemes. If cost control is a proxy for a well-governed scheme, you can feel confident that transferring to BSPS 2 will keep you under this excellent umbrella.

It is an umbrella that will shelter many and an umbrella that is not available if you choose to transfer out. Though there is certainty in your transfer – there is no certainty that it will provide you with equivalent outcomes. The British Steel Pension Scheme has let nobody down.

Think before you press the trigger. If you are not a BSPS pensioner, you are likely to have a minimum of twenty years of life ahead of you. That is a long time for your money to last and a long relationship with your financial advisor.

But in terms of the timeframes of an occupational scheme like BSPS (or BSPS2) it is no time at all.

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Time-bound decisions; the tough choices facing BSPS members

time to choose.png

Supporting the Steel Workers in their decision making

Over the weekend I was asked to join two important Facebook Groups, one is for those still working at Tata and the other for former employees, what links them is that both groups are for members of the British Steel Pension Scheme (BSPS).

I am  proud to be in these groups, it shows a trust which I will not betray by attributing any posts. It gives me a precious insight into how steel men and women are reacting to the choices being presented to them and is incredibly valuable in helping me guide First Actuarial in how we can help future memberships who will undoubtedly face the same issues.

Those choices

As with the Kodak membership, the position if BSPS members take no action is that they will see their membership exchanged for membership of the Pension Protection Fund. It’s estimated that for up to 90,000 of the 130,000 members, this will be a bad thing. But for a sizeable minority, the PPF will present a viable choice and for a few, a very obvious improvement to moving to a new scheme (let’s call it BSPS 2).

There is another choice, to take money away from BSPS using a cash equivalent transfer value. Though this is the most volatile option, it appears to be the most talked about in the two groups I have joined.

Help is at hand

The Trustees of BSPS have appointed two firms to run a helpline for members.  The Daily Telegraph report that

“While there is a helpline, phone handlers are not allowed to tell savers which option is better for them”

This is not the helpline’s fault. It can only offer guidance – advice is about giving a definitive course of action – telling people what to do. So the help at hand is limited.

The Pension Advisory Service (TPAS) find there is a brisk trade in calls from BSPS members seeking a second opinion. This is good, people need to make informed decisions. If I was taking a decision as important as this one, I would want all the information I could get.

But not all the data…

For reasons which aren’t clear, not all the people being asked to take decisions have all the data they need to take those decisions.

This is from the very clear website put up for members to refer to

Some members have no personal figures in their option pack

There are several reasons why this can happen. We might not have had all the information in electronic format. In other cases, we didn’t have all the information we needed to calculate figures in time for the option packs because members transferred in benefits from another scheme, or paid Additional Voluntary Contributions to add a period of service. We are working to make sure we have all this information available before the new scheme starts paying benefits and the current scheme moves into the Pension Protection Fund.

The key word here is “before”. Giving members information after deadlines have past is not helpful to the decision taken before the deadline.

The issue of time crops up again in the next section of the site.

We can’t send you any more figures

We won’t be sending you any more figures on top of what is in your option pack, because it’s not possible to do that in the time available. If you’re a non-pensioner and your option pack has no personal figures, you can find information about your deferred benefits in your latest deferred benefits statement. If you can’t find this statement, please phone the helpline and ask for a replacement.

We know that the lack of figures in your option pack could make it harder to choose your option, particularly if you are thinking about transferring your benefits to another pension arrangement. If you are thinking of doing that, you or your financial adviser can ask the helpline for a fact sheet that sets out in more detail how pension increases in the new scheme will be calculated. This will help your adviser carry out the analysis they need to advise you.

Infact this whole section of the site is called “Time to Choose“. BSPS members have a closing window of time to take decisions, a window shaped not by them but by the Trustees and Employer.

Some things change with time (including CETVs)

But always at my back I hear, time’s winged chariot hurrying near – Andrew Marvell.

I can quite understand why BSPS Trustees want to impose time deadlines, but I can also understand the worry of members who are having trouble getting information about their benefits in a timely fashion. Things are not helped by people realising that in the outside world , interest rates are going up and transfer values going down.

This snippet was being reported on the Facebook pages yesterday, it comes from the Sun and it’s all about time.BSPSsun

BSPS members, whether they’ve left Tata or are still working there, are entitled to a CETV – unless they are actually drawing a pension. News that the CETV may fall in time is clearly a worry. It would be very helpful for members considering a transfer out of BSPS to be given assurances. I can confirm that CETVs are guaranteed for a three months period after issue. This conveniently takes members to the end of the decision making process. So members do not need to panic.

Having said that, one thing that was clear, is that a CETV from BSPS1 is likely to be higher in value than from BSPS2 (which has an inferior) benefit basis. You cannot take a CETV from the PPF so if you are going to transfer, you are best to do it in the pre-December window. Time is critical to the decision.

Some things do not change

People’s need for a wage in retirement after they have hung up their boots does not change, just because they have the freedom to do what they like with their pension.

BSPS is one of the oldest and best run pensions not just in Britain, but in the world. For all the discontent about having to take these decisions (which I totally understand), knee-jerk reactions against either BSPS or the PPF are unlikely to make for good decisions,

One thing that worries me  when I spend time on the Facebook pages, is the level of frustration shown at the process.

It is understandable frustration, but it worries me that some members seem to think it is worth transferring at any cost. As Angie Brooks points out on these sites, this attitude is precisely what scammers hope for. They will be more than happy to liberate pensions on the basis of ignorance. I urge all those considering moving their pension to speak to TPAS but also to read Angie’s excellent advice to deferred members of BSPS.

I am afraid that the presence of fraudsters is another thing that doesn’t change.

Our thoughts are with the 130,000.

I was in the fortunate situation of choosing to be a pensioner of a strong DB scheme. Not only did I make the choice not to take my CETV but I actually chose pension above cash.

I did so because I know I am likely to live a long time and will need to support dependants for much of that time. Nonetheless , the decision about what to do was tough.

The decision facing the 130,000 members of the scheme , including those who are drawing pensions, is tough. Doing nothing may prove a bad option, doing something may prove disastrous (if it leads to a scam). Most options in the middle should be reasonably easy to understand – provided the information is presented well. But as we have read, not all the information is at hand.

Understanding the options is one thing, knowing what to do is another and I totally sympathise with the people on the Facebook page who ask for such advice.

These decisions were never “in plan”. Those who set up BSPS did not expect the scheme to be a source of trouble. They saw it as a means for steel people to retire without trouble.

If we are serious about restoring confidence in pensions, we should be supporting the steel-workers over the next three months , in legal ways.

That means acting responsibly but helpfully. Which may mean doing no more than I can do on this blog.

What I can do is to promise what help I can give – if asked.



From the BSPS site

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How small schemes can win (with no surrender)!

no retreat 5

I’m listening to Bruce Springsteen – “no retreat, baby no surrender”

A useful note about “the consolidation opportunity” sits in my inbox. It’s from Con Keating who had been studying the ONS data on how pension schemes invest their money.  He concludes small schemes have already consolidated, they have yet to reap the consolidation premium. This blog looks at five ways that trustees of small schemes can win- without surrendering to Superfunds!

I keep hearing that there are enormous gains to be made from pooling pension scheme investments – cheaper fees as a result of economies of scale.

The ONS MQ5 data series contain aggregate information on scheme investments – though it should be noted that the sample used is large scheme biased, and in-house management is more prevalent among those schemes than in the small.

The total long-term assets are £1,473 billion at the latest date available (end 2015)- Corporate securities account for £903 billion of this. Of these £499 billion are held in mutual funds of one form or another.

These schemes hold just £84 billion in UK ordinary shares and £169 billion in overseas ordinary shares. These are self-managed or in segregated accounts.

Other assets, such as linkers (£195 billion) and insurance policies (£134 billion), account for the £570 billion difference.

If the £300 billion or so of small pension scheme assets not captured by the ONS sample were similarly distributed, then they would hold £183 billion of corporate securities of which £101 billion would already be in mutual vehicles. In my experience, smaller schemes actually hold far more in mutual vehicles than are self-managed or in segregated accounts.

The consolidation “opportunity” appears to be rather small in amount and as a proportion of scheme assets.

Should we conclude from this , that there is no opportunity to reduced the cost and improve the efficiency of how small schemes are run? The answer of course is no!

Scheme Consolidation is not the only way to achieve efficiencies. So far, the PLSA has been allowed the assumption that superfunds are the way to “super-value”. Let me quickly five other ways small schemes can get big value.

no retreat 3

Here are five top tips for trustees who don’t want to be consolidated.

  1. Hire a practical investment consultant who thinks about your funding before his/her getting paid. These are rare beasts, almost instinct among the big three, but they exist and I know a few (if you’re asking).
  2. Get your strategy right, before implementation – asset allocation trumps the “hunt for alpha”.
  3. Remember Buffet! Very few investors are capable of beating the market over a long-term; unless you can understand how an active manager you are employing, will outperform the market index, invest in the market index.
  4. Benchmark your fees, big schemes think they have favoured nation status, but I have sold to all kinds of schemes and the ones I liked to most are those who don’t check what they are paying with others. Do not sign NDAs, your adviser should be working with you to drive down costs (remembering that you are paying a lot more than what’s in that AMC).
  5. Consider platforms. The best fund platforms such as Mobius and LGIMs offer great deals on funds. They are today’s consolidators. Not only can they bring you funds at better prices than you might buy direct, but they can offer investment administration at considerable discount.

no retreat 2

What we can learn from Con’s note is that we already have consolidation , through pooled funds; the ONS statistics suggest that the inefficiencies are in our failing to get best value out of what we’ve got. The answer is not in retreat – nor in surrender!



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A lot not happening! PLSA update


A rare sighting of our pensions minister (in a WASPI free zone)


As the PLSA conference winds down and attendees return home, they will be left wondering what hasn’t happened.

A lot of debate didn’t happen because those most wanting to debate were not at the Conference. Thankfullly we had expert journo Jo on hand to report and to give a lonely Plowman a big hug on arrival (I was the Conference fringe).

PLSA meet


There does not seem to have been much debate on Several sensitive topics – cost transparency, value for money, the conflicts of investment consultants and (most scarily) tax reform.

Delegates heard a lot about scamsJC11 snowden

but not much about remedyJC2

Delegates will have heard that the Government are unlikely to include the self-employed in the AE review (Matthew Taylor),JC9 white paper

and that there’s little appetite to extend the earnings band, include the young or up maximum contributions any time soon (AE working group).

They’ll have heard that we won’t be getting another pensions bill before 2020 (Charlotte Clark)JC 5 scams

and so the Regulator will have to use existing powers (Lesley Titcomb).jC3


They’ve heard that the dashboard is not finished but that the ABI’s wish for compulsion on data suppliers won’t be granted (Margaret Snowden) .JC1

They’ve heard that schemes should have in-house financial advisers from the Pensions Minister (presumably to explain the complexities he and his colleagues have created).

What little discussion there was around costs and charges focussed on what should not be done with the disclosures.JC10 feees

In short, delegates have heard very little new which is probably just as well. There is only so much change that pensions can absorb. As the dust settles on the detonations that followed turner for a decade, this has been the quietest year for pensions I can remember .

To suppose this is business as usual would be a mistake. Many consultancies have spent the past fortnight filing CMA returns that suggest the CMA referral is going to be every bit as thorough as supposed.  It was encouraging to see one forward looking consultancy looking for a way out.JC 14 stacy


Under the auspices of the FCA, the Sier working group is busy managing the disclosures that fund managers will make to trustees and IGCs so we can understand value for money. Up and down the country, we are starting a new phase of auto-enrolment where employers will have immediate duties.

What is happening is not happening at the PLSA. What is happening at the PLSA is a desire to consolidate small schemes, but this does not appear to be getting much support from Government.JC 7 consolidate

What is happening?

Beware the known unknowns! The Treasury weren’t conspicuous at the Conference and with an autumn statement a month away, it’s easy to concoct conspiracy theories! Tax was the elephant in the room. Long-gone the days when pensions had any control over their tax-treatment!

We know the Dashboard is now in the hands of the DWP, where it forms part of a raft of measures to improve guidance for the advice-excluded.

We will have a statement on auto-enrolment in the w/b December 6th and we’ll finally get the DB white paper in February (much delayed). The DWP will shortly consult on the disclosure of costs and charges as part of the trustee’s duties around value for money.JC12 costs

What is happening is a downgrading of the pension agenda, partly as a result of Brexit but mainly because auto-enrolment and pension freedoms are being allowed to bed in. The big ticket pension problems, BHS, British Steel, Royal Mail, USS, Hoover Candy, Halcrow – are working their ways to some form of resolution. Integrated risk management is working to a degree but only to a degree.

To sum up – we are catching breath and waiting for the next set of problems to emerge! WATCH THIS SPACE


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Why I’m not at the PLSA conference today


PLSA conference

I’m writing at 6am, soon I will be getting on a train to Manchester which will be full of people going to the PLSA Conference. I won’t be going to that Conference, instead I will be visiting Sage’s accountant support office in Salford and helping First Actuarial with its work with small businesses in the north west.

I first went to a PLSA conference in 1995 and they became for me a business highlight for decades. But three things now stand in my way.

  1. The cost of going has soared, add hotel and travel to the Conference rate and I have difficulty justifying to myself the value of the networking (the sessions are live-streamed for non conference goers
  2. The block of time the Conference books from your diary means it is hard to get on with other things. Most of the other things I do, do not involve the things the PLSA talks about.
  3. The agenda the PLSA is pursuing is quite opposite to the business agenda of my employer. We are believers in small being beautiful, open being good and we have a very old fashioned view that we provide pensions for people who can’t or don’t want to do it for themselves.

While I have been writing, I have been corresponding with Derek Scott, my Perthshire buddy who chairs the trustees of one of the great PLSA schemes. He was bemoaning my not going and I’m afraid I had to tell him it was unlikely I would be a member of the PLSA for much longer (unless 1-3 above, changed).

We are exchanging views on the merits of supporting St Johnstone (one win in six) and Yeovil Town (one win in six).st johnstone

Which I guess is code for sticking up for the smaller scheme. I watched Yeovil lose 2-1 to Cambridge last night – I was tempted to stream Real Madrid and Tottenham on my BT sport app (but didn’t).

There’s really no need for smaller football clubs you know. Only 95 Yeovil fans made it to the Abbey Stadium, hardly a reason to have lower league football (in economic terms).


But if you take the Yeovils and St Johnstones out of football, you cut out the feeding grounds for the Southamptons and the Aberdeens and that means that the foundations of the Premier League get a little shaky.

The occupational pensions world is about the glamour clubs (the schemes of the retail banks, the utilities, local authorities and the corporate giants. They have the budgets and the intent to spend to keep the PLSA Conference afloat for years to come. But if you cut out the smaller schemes then there is no one learning how best practice works and a Conference becomes an echo chamber for those who already know how to do it.

In all seriousness, the fabric of our occupational pension industry, which the PLSA and the NAPF before it, has represented for some 60 years, is being undermined by its own trade body. The Gupta report, though it makes great sense to a management consultant, makes no sense to me at all.

I am a Yeovil fan, a fan of lower league clubs who dream of being big one day. I don’t want to be part of some premier league set up where the integrity of my support is sold to BT or SKY sport. You won’t find Aon near Yeovil, unless Man Utd. come visiting as they did two years ago.  But if Aon knew the pride I had in getting a Ferrero Rocha from Pat Custard at half-time, perhaps they’d understand.

PAt Custard



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Too late Chancellor – that ship has sailed!


If I were a cynical editor looking for a story to focus on, I would look no further than speculation on the autumn statement. Yesterday the Telegraph floated a story, purportedly a leak from #10, that the Chancellor was going to rob rich old gits to give youngsters more incentive to save.

I don’t have access to the Telegraph’s comment boxes (this is “premium” speculation) but when Hurricane Hammond hit New Model Adviser, it  quickly grabbed all the attention.attention

The comment count tells us exactly what bothers the new model adviser.

Within minutes of NMA, FT Adviser was reporting that the “Old for young pension tax”- was being shunned by the rest of the industry. The snowball had broadened with the comment of financial advisers keen to point out the plan was unworkable, unfair and foolish.

I thought I might point out that “we would say that” and that anything more unworkable, unfair and foolish than the current pension taxation system would be hard to devise.

I spent much of the rest of yesterday morning receiving calls from financial journalists as I appeared to be the only supporter of redistribution of Government incentives in favour of the “have-nots”.

As I talked, it occurred to me that one of the principal reasons given by advisers for transferring pensions wealth into SIPPs was to protect that wealth for the next generation. I chuckled to read IFAs falling over themselves to protect their wealthy old clients from any such wealth redistribution.

The reaction of the financial community to an attack on its principal source of remuneration is perfectly natural but it is not commendable. What is commendable is Hargreaves Lansdown’s reported proposals to Government

‘When do we want money to go into [pensions]? When you are young. Who doesn’t have the money to put into pension pots? The young. So let’s weight the government incentive in favour of young people. And it’s simple.’

This from the forever-young Tom McPhail.

I am not a PR agent, but if I were, I would listen to Tom McPhail and watch Hargreaves Lansdown. You don’t need a weatherman to know which way the wind blows, you need Tom.

Sense from Ros Altmann

I don’t agree with Ros in many things , but I do like what she has written about intergenerational fairness on her blog this morning. She argues that direct help to the young is better than redistribution through the tax-system.

The problem here may be the legislative agenda that does not have space for the recommendations she is making. If they cannot fit into the Finance Act, can they compete with the BREXIT avalanche.

We should remind ourselves again, that the opportunity for radical tax reform of pensions was missed in 2015 to stave off BREXIT, Governments do not often get second chances – the boat has sailed and with it the chance of serious progress on housing, social care and juvenile debt. Ros, you were a part of the Government that so let you down.

Some advice to the advisory community.

Most of us old gits, were young bucks in the eighties and nineties. We have grown up with our clients and those clients we now have, have got very wealthy through their own endeavours and through random factors such as the sustained growth in house prices.

Advisory firms report that there are no young people coming into financial advice.

Could it be that we have been pulling up the rope ladder behind us? Could it be that we have left no-one helping the young with their plans? I suspect that the 48 comments on the NMA story reflect just that.

Hargreaves may have a slightly different pitch. They may consider that the shareholders would like to see new advisers advising new customers in decades to come. Consequently Hargreaves Lansdown, through McPhail, are pitching through Government to the next generations who will not become wealthy old gits until the second half of this century.

This can variously be described as a long-term strategy, succession planning and sucking up to Momentum , all of which have obvious long-term advantage to the HL share price.

A lesson to be learned

Financial advisers would do well to look at Hargreaves Lansdown and learn. This sentence will probably cause considerable spleen amongst the advisory community but it needs be said.

Simply peddling your own pedillo is all very well, but your range is limited to your own efforts. Hitching your pedillo to the back of a yacht takes you wherever the yacht can go. Hargreaves Lansdown simply want access to the new waters.

Last night I listened to Tim Jones, former CEO of NEST brilliantly explain why we could not hold back the technological advances that the internet had brought, nor the inevitable changes to our working practices that social media has brought. He pointed out that the Labour party had won the hearts of our nation’s youth by capturing social media (in fact stealing it from Farage). Having been at #CPC17 I can tell you that I am about the only person over 50 who was using that hashtag and – as with the room of old people in which I was sitting- about the only person who had phone to hand at all!

Labour own social media

Labour social media

Too little too late – we are in a new paradigm whether we like it or not.

Tim hates it all – he claims we are sleep-walking into a surveillance society and handing the social media moguls who run Linked-in, Facebook and Ali-Baba the monetisation of our identities. For Tim, the fragmentation of the great financial hegemonies, the banks and insurers and fund mangers is inevitable. He sees social media as corrupting this change as people seek to win back self-determination in their business and social lives – but find themselves a slave to the very tools they trusted.

As I listened to his magnificent rant in the Guildhall last night, I realised how absurd the argument over inter-generational fairness has become. It is impossible for Hammond to win the hearts and minds of a nation’s youth, employing the carrot and stick of taxation. For him to have any chance, he is going to have to be smart like McPhail and mobilise the new upwardly aspiring voters who use their phones for everything.

I don’t agree with Tim Jones, I don’t think we are all victims of social media, I suggest that as with any dynamic social trend, those who win will be those who use the opportunity and those who lose will be the rest.

Hargreaves Lansdown do not need to win the argument against the IFA community, they need to win it with the very voters that Hammond is after. The difference is that young  people listen to McPhail and co, they do not listen to the fractious IFAs and I suspect they are not listening to Hammond.

One old git in the audience last night demanded the Tories reclaimed social media to “put young people right”. The idea that you can own democracy is still prevalent throughout the geriatric oligarchy.


that ship has sailed

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USS – the plot thickens!


Correspondence has emerged between the various macro-stakeholders in the USS “pension deficit”

The cast in order of appearance

Frank Field – Chair Elect of the Work and Pensions Committee.



Here he is kicking off correspondence in August with….



Lesley Titcomb – CEO of the Pensions Regulator.



Here is her response to Frank Field.



Field also writes to Professor Janet Beer at Universities UK (the sponsoring employer)

janet beer



And Janet Beer responds to Field on behalf of the employers.



Frank Field writes to David Eastwood, Chair of the USS

David Eastwood, Chair of the USS , responds to Field.

david eastwood



Taken together, this correspondence ,mainly in August 2017 forms an archive for future scholars trying to unravel the complex dynamics at play.

Frank Field – fresh from a bruising encounter with Philip Green of BHS is determined to be on top of the USS deficit,

Lesley Titcomb is determined to show Frank Field she is on the case and working hard to protect the PPF and the employer’s interests.

Field is critical of the Universities UK for inadequately funding USS and wants tuition fees ring-fenced.

Janet Beer hints that rather than put up tuition fees, Universities UK would prefer “benefit reform” ( a euphemism for pension cuts).

Field is critical of the USS’ management of the investment of the  scheme, it’s recovery plan and wants to know more about actuarial assumptions

David Eastwood defends the USS’ management’s transparent approach and hints that it is piggy in the middle.

Taken together, the correspondence displays how difficult it is to align the interests of the general public, employers and the managers of the scheme. The voice that is not heard in this debate is that of the members, who appear to be the stakeholder most likely to pick up the tab (by way of pension cuts).

The heart of the matter

Perhaps the most interesting letter is that from Lesley Titcomb to Frank Field in which she sets out the guiding principles that tPR’s past intervention prompted USS to adopt.

uss bull

These principles are open to challenge.

Take the first bullet;-  What does “proportionate” mean?  Given that DB pensions are not funded like insurers,   with no legislative standard other than “prudent”, what level of risk protection is reasonable/prudent for a scheme like USS? We now know that the Pensions Regulator is not prepared to accept the covenant assessments carried out by PWC and E&Y on UUK, so presumably tPR reckons itself the judge of prudence. This was never the Regulator’s role.

How exactly is USS pension risk measured?  The USS is an open scheme with liabilities already into the 22nd century.   Who defines the suitability of the risk measure and what is it?

Take the second bullet; what is meant by risk reduction? Pension cuts dressed up as “liability reduction exercises”? Why should tPR be intervening in what is fundamentally a matter of reward? The total compensation of those in the USS is the aggregate of pay and benefits, if benefits are reduced, does this not put upward pressure on pay? If so- where is the long-term gradual risk reduction going to be achieved?

Why is the Pensions Regulator taking such a proactive stance?

As mentioned above, the spectre of BHS runs through this correspondence. No one wants to be seen to be weak, everyone has to be on the front foot and so we have this extraordinary meddling.

Ironically, the losers in any pension dispute are the members who either see their benefits or their covenant reducing. The irony is that the members are hardly mentioned in this correspondence, they seem to rank lower than the interests of the tax-payer (who pays the student fees), the Universities, the USS (who have an a priori charge on the assets for their management) and of course the Regulator. The Regulator’s agenda – it appears – is primarily to protect the PPF, secondly to protect the sponsor and finally to protect members.

Here is the nub.

BHS, Tata Steel, Royal Mail, Halcrow have one thing in common, an employer with uncertain revenues and a weak business model. The USS is different, Universities are well funded, have strong cash-flow, excellent contingent assets and have no history of failure.

Both PWC and Ernst and Young considered the University’s covenant to be grade 1 (as good as it gets). TPR has disputed and is not yet prepared to accept the covenant assessments

It is hard with so much evidence to suggest that Universities UK cannot stand the risk, that the battle being fought is not about Universities going bust, or fees going up, but about USS members continuing to accrue a  defined benefit in retirement.

While I can understand the feelings of deprivation amongst those who are not accruing such a defined benefit, I do not agree with the principle of “beggar my neighbour”. For the same reason , I do not believe those who have fine houses should be forced to live in the annex and rent out the majority on affordable rents.

Fine pensions and fine houses are the privilege of a few but they are things that can be achieved by the many over time. They are things that people can work for. If we want to pull down our pension schemes, why not pull down fine houses too?

The alternative

The principle of “beggar my neighbour” that runs through much of the correspondence between the four parties in these discussions is mean-spirited and self-destructive. No one will win by transferring USS assets from equities to bonds.

In comparison, the £60bn of assets that the USS currently invests, are funding British industry, our infrastructure and doing so in a sustainable way.

No one will gain if the University staff go on strike, least of all those who pay tuition fees.

The tax-payer is the insurer of last resort of the maintenance of the University system and has been, one way or another since the 15th century.

It is an extraordinary thing, that the Pensions Regulator and the Universities themselves seem to have come to a pact which assume there can be no escalation in risk from pensions. For within the Pension Regulator’s letter to Frank Field we discover;-

USS bull 2

Instead of looking at the USS as a threat to the Universities’ future solvency, we should be adopting a “can do” approach – glorying in the taking on of 27,000 new members, exploring the flexibility of the scheme funding regime and looking at those £60bn assets as a tremendous opportunity.

For to look at pension liabilities as a threat, is to forget they represent the futures of millions of UK citizens which are the better for them. The mantra of risk-reduction hides a more fundamental issue, our workforce is relatively unproductive. If the best we can do to make our human resource more productive is to starve them of retirement income, we have no real understanding of personal motivation.

If we want to make Britain great again, we need to be a lot more ambitious in the way we deal with issues like the USS “pension deficit”.

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Portals for show, pensions for dough



dough 1

in the beginning!

The Pension Dashboard is under pressure. Having lost its sponsor, Simon Kirby MP in this summer’s election, early-day momentum is running out. The ABI are clearly fed up and are now calling for Government intervention if they are to continue their involvement. Such intervention would mean that those holding data on our pension rights would be required to feed this data to a central source – not so much a dashboard – more a “NEST board”. This idea of a public utility, sponsored and maintained by some NGO has been rejected in the past by a Government anxious to keep away from such a role. I can see little reason to suppose anything will change.


What options for the friends of the dashboard?

  1. They can continue with plan A and deliver protocols that enable private firms to aggregated data more easily (multi-dashboards)
  2. They can move to plan B and force the Government into intervention (as they are doing)
  3. They can accept that the dashboard itself will evolve over time and that the advantages of having a dashboard, engagement, aggregation and better value for money, will happen without their work,

What does recent history tell us?

Government intervention in data management is quite common. The Real Time Information (RTI) initiative has been a success in allowing HMRC to digitalise the payment of tax and improve the accuracy of collection and the speed of enforcement.

It is now embarking on GDPR which it hopes will better protect the consumer from being swamped with unwanted marketing or attacked by scams.

Both initiative address problems that go beyond the scope of the private sector, RTI is about improving state revenues and GDPR is about civil liberties. I find it hard to create a similar justification for further intervention in the creation of portals to aggregate the data from our various sources of retirement income.

dough 2

one great big pot



The recent history of auto-enrolment suggests that when called upon to impose a single protocol by which data was passed from employer to provider, the Government stayed out of it. What has emerged since are multiple types of API and CSV data transfer systems which – one imagines- will rationalise themselves over time. There remains a strong argument that Government could and should have intervened at the outset of auto-enrolment and implemented something akin to the PAPDIS standard, but in 2010, technology was not where it is today.

The sad fact is that – save in under-developed countries – as Estonia was and many African countries are, the state has great difficulty in imposing any kind of data standards for private industry, precisely because of the speed of change of technology.

My fear for the Pensions Dashboard is that by the time a set of protocols emerge, a new way of doing things will have emerged that will make them obsolete.

Where has there been private success?

I can see two initiatives from the financial services industry in my small part of the market, that have made a difference. The first is the work done by IDEA in creating a common way to administrate investments so that money is deployed to assets faster. This initiative happened because Legal and General got tired of waiting for consensus and created a market around itself.

The second is the Origo pension transfer club which operates a transfer standard meaning that between club members deals are done in about a fifth of the time were the club not used. Origo was set up by the ABI and the insurers and seems to be doing a very good job. I have been urging more master trusts to sign up to it (Peoples are there, Smart and NOW are nearly there and NEST is thinking about it).

A third initiative, the pension passport, is reported in the FT today.Passport The passport, trialled by insurer LV – and much promoted by Tom McPhail, is a super one-pager which gives people with simple pots a green light to aggregate money without the need of financial advice. It is warmly to be supported.

I am currently struggling to release a pot of money with Zurich to join the rest

of the money with L&G. I have to fill out lots of disclaimers confirming  that I know not of any impediment etc.

I have to get two sets of paper forms and send them to the right people and once I have waited a few more weeks , I hope that I can stop paying Zurich 4.25% pa for doing what L&G do for 0,1% pa.

It should not be this difficult, if my Zurich benefits had come with a passport, I am sure that I would have had all my money in one place at my 55th birthday, now nearly a year ago!

Where can we look for hope?

If all the pension dashboard had hoped to do was Plan A (create the protocols by which data aggregation could happen) then I was onside. This was how it was laid out to us by Simon Kirby (ex MP) in the Aviva Digital Garage last year.

Plan B looks a non-starter to me. I’m not saying my lot wouldn’t play (First Actuarial are fairly confident about the quality of our data and we aren’t technology luddites), however we would resist compulsion – as would all organisations with an obligation of good faith to members , trustees, employers and their rights.

We look at areas in the private sector where aggregation is occurring and we see plenty of slick organisations such as Pensions Bee, Evestor and Neyber making great strides. Portals such as MoneyHub already exist. Software providers such as Altus, Intelliflo and pensionsync are providing the technology for IFAs , payroll, schemes, insurers and the DWP to talk with each other. RTI is developing within the private sector at a rate.

Talking with former NEST supremo, Tim Jones at a CSFI event this week, I heard of the advances in cryptography that could allow for a new generation of data management products super ceding and indeed by-passing the block chain.

I don’t pretend to fully understand how these technologies will be applied , but I am quite clear that whatever Government builds for 2017 will be an anachronism by 2020.

Hope springs from the selective adoption of new technology applied to a proper understanding of what ordinary people want. The dashboard and the passport should be friends as they both help people to do what they need to do, organise their finances in retirement. We hope that the single guidance body – the revamp of TPAS, MAS and pension wise, will be able to properly promote dashboards and passports before too long.

Portals and pensions

I feel for those involved in the dashboard projects, especially for good people like Yvonne Braun of the ABI and Margaret Snowden of PASA. The dashboard is a good thing that will have collateral benefits in improving data quality and the speed at which pots follow members. The dashboard has the right aims and getting common data standards is a good thing.

However, I think that Plan B is unworkable and that calling for compulsion is an admission of defeat. I do not support compulsory data transfer. Portals are a means to get better pensions but they cannot become an end in themselves. We urgently need better pensions now, especially because of the new freedoms.

The ABI are – in calling for compulsion – diverting attention from where the dough is going – the pension. This may suit the ABI who have consistently blocked any innovation in pension payments , but it does not suit ordinary people who are less interested in portals than in having a good retirement.

Portals are for show but are ephemeral, pensions are for dough and for sustenance.

dough 3

You can do good things with dough






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Zurich and Widows, a sensible marriage?


I had better be careful here, my partner Stella is Group Pensions Director at Lloyds Banking Group and I am a Zurich pensioner and ex- head of sales of the Zurich workplace proposition. I have -as they say – skin in this marriage.

Yesterday Lloyds Banking Group announced they were purchasing Zurich’s corporate pension book (with £19bn of funds). 200 staff will TUPE from Zurich to Lloyds and as part of the deal Zurich will get some protection business passed its way from Lloyds.

Zurich corporate pensions – born in a conflict zone

Zurich corporate pensions book is now a part of a life company set up in 2004 called Zurich Assurance.

Zurich assurance is itself a reluctant love-child of Eagle Star, Allied Dunbar. It’s genesis was in a trade war over who owned the pension brand – with Threadneedle Asset Management the cuckoo in the love-nest. The entity has nothing of these ugly sisters, it was set up with minimal reserving as a bright blue unit-linked platform from which corporate pensions could be purchased. It has done very well.zurich ass


The back-story

I was in a small-team, well remembered for the remarkable Jon Poll, who saved Eagle Star’s corporate pension proposition from extinction and created a new proposition using the hi-portfolio administration system (Caroline Moore) and the newly created Profund Open record keeping system. This system is now used by NOW pensions and owned by JLT when Profund went bust in 2004. We were wise enough to ensure that in this eventuality, the code for their version of the software stayed with us.

It seems odd that what is now reported to be a £19bn business, only saw the light of day because when Zurich took over the shooting match from BAT, the big beasts of Allied Dunbar needed to put Threadneedle in its place. Emma Douglas and Mark Stanley, who were then running the Threadneedle DC proposition were thwarted in their ambitions by Sandy Leitch who could not cede to Threadneedle big beast Simon Davies.

Corporate decision making usually comes down to politics , personality and pride and that’s exactly how Zurich Assurance was created. Whatever the legal entity that has been sold by Zurich Insurance to Lloyds Banking Group, it is considerably more valuable than anyone ever considered it could be. Back then, corporate pensions played second fiddle to worksite marketing, auto-enrolment was not even a twinkle in the eye and the Allied Dunbar direct Salesforce were lobbying Government to lift the stakeholder cap so that they could be paid some initial  commission on pension sales.

How a neglected child grew up to great things

widow 2

The DC pension landscape at the turn of the millennium was still dominated by commission , with-profits, opacity and greed. We took the decision to head for the high-ground and at that time there were only a handful of actuarial consultancies acting in a transparent way. Bacon and Woodrow, Mercer and Watsons charged fees to set up AVCs and other “money purchase” plans and first Eagle Star and then Zurich were able to compete more because they did not present a commission proposition than because there was any great confidence in their capabilities.

But a replacement was needed for the Equitable Life and Eagle Star had stepped into the breach. Pioneering straight through processing of contributions, it had become the first DC provider to have used a CSV upload, reconciled by the client and a direct debit to pull contributions through. This simple methodology was to revolutionise contribution collection in the UK. It effectively outsourced error reconciliation back to the client. The savings this created  the profitability for further investment in the business.

It wasn’t till around 2005 that anyone at the top of  Zurich even noticed this fast-growing business. As with most success stories, it happened because of luck, insight and a lack of interference from the top. As soon as the potential for this little business unit was discovered I was booted out, Poll followed a few months later and Zurich became the corporate behemoth it is today.

Scottish Widows

You tend to characterise your relationship with huge entities like Widows through some personal anecdote. Mine relates to a time when we were negotiating for Scottish Widows to be promoted on I and a colleague were ushered through the hallowed halls of HO in Edinburgh up a broad staircase at every turn of which were corporate slogans advertising Scottish Widows’ intention to treat customers fairly.

When we were sat down in a magnificent boardroom we were told in no uncertain terms that we were not to offer on our site any better terms than their existing customers already had. We were asked to quote no terms at all to employers with Scottish Widows products! We looked at that statement “we treat all our customers fairly” and gasped!


Until recently, Scottish Widows were an organisation that had lost its moral compass, its pride in itself and any sense of independent direction. It is greatly to its credit that it has soldiered on and made a recovery. It is now a credible insurer angling for the affections of IFAs against local rivals Standard Life and Royal London. While Zurich took the decision to court the actuarial consultancies, Widows had stuck with the corporate IFAs and the larger retail IFAs and I would be surprised if Scottish Widows and Zurich often compete.

Marriage prospects

The bride and groom have very different pedigrees and appeal to different sets of friends. But I suspect they will get on alright, because their cultures are now aligned.

I left Zurich because I had no place in the corporatisation of what we had started. I am not the kind of guy who hosts tables at awards ceremonies, shakes hands on tradeshow stands or spends most of my working day in internal meetings. We parted company on good(ish) terms, I got a good pension and a nice boat, they got a business which they could grow,

Scottish Widows, owned by Lloyds Banking Group have really done nothing in the corporate space but waste money. Their disastrous forays into “portals” (my money works) the sale of SWIP to Aberdeen, the failed attempt to win 10,000 new schemes through auto-enrolment, have seen them fall down the league table of credible providers of corporate money works

But relative to the propositions of Barclays Life and HSBC Life, Scottish Widows is the last player standing.

Scottish Widows appear to have sensible management (not before time) and they have gone back to their roots with their bulk annuity business. As with Aviva and Friends, and Aegon and BlackRock, they will now have to promote parallel propositions under single ownership. Will these merge or be maintained separately -time and the market will tell.

Zurich customers should have nothing to fear from the change of ownership. Scottish Widows are unlikely to destroy £19bn of value (though crazier things have happened). Scottish Widows will keep the Zurich product as a flagship- if they have any sense. It may be rebranded, but I very much doubt there will be much interference.

I don’t think the Zurich product has ever had much appeal to IFAs, it paid no commission and it never tried to adapt itself for the SME market.

The big question is not about accumulation, but about the capacity to keep funds on the respective platforms into the spending (decumulation) phase. I am far from clear what the strategy for the two propositions will be going forward, but this is where synergies may be found that can work for both Widows and Zurich. A jointly manufactured decumulation proposition for the billions of pounds that will be liberated as the policyholders mature, is the key opportunity (and threat) for Lloyds Banking Group.

It is on how successfully Lloyds can marry and maintain the marriage through retirement, that the long-term success of this acquisition will be judged.



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Is NOW the time to transfer out?

NOW Trustees.PNG

Spot the newcomer!

I was talking last night to a senior financial journalist about NOW pensions. In the catalogue of actions that the Pensions Regulator can call upon, insisting on the inclusion of Dalriada Trustees, is perhaps the most alarming.

Dalriada is a private entity but is used by the FCA as an enforcer. Victims of the ARK pension scandal will know Dalriada well as one of its professional trustees is busy enforcing tax -claims against members who have received unauthorised payments.

Dalriada are the fiduciary equivalent of Rentokil.

So when we heard that Dalriada is being invited to join the NOW board, alarm bells started ringing. According to my friend, the invitation was at the behest of other trustees but so was NOW’s withdrawal from the favoured master trusts list on tPR’s website. It appears that the Trustee’s are coming quietly.

You will note from the infographic above, that Dalriada are there in corporate rather personal guise and do not have a “NOW pensions” soubriquet.

As my friend said “very odd”.

Close, but no Segar (yet)

In December, Joanne Segars, former pensions boss at the TUC,  ABI and PLSA will become a trustee. She joins a string of marquee signings, replacing John Monks (ex TUC ). supremo). Chris Daykin is a former Government Actuary, Nigel Waterson a former Shadow Pensions Minister while Jocelyn and Win are respectively admin. and investment gurus with “portfolio careers”.

Once again NOW will have gone for the sage institutional option. Segars managed to sell NOW a “PQM ready” sticker back in 2013, something they are still very proud of. NOW went on to be the first to purchase the MAF sticker, which pleased the ICAEW and PLSA. They have given the investment audit on their mono-fund to Redington, which will please the mallowstreet community.

“The team think deeply about portfolio construction and risk factor correlations. Particular attention is paid to volatility and stress scenarios where they use expected shortfall to measure risk. The strategy extensively utilises the ATP risk infrastructure.” – Redington 2017

NOW tick all the boxes.

The trouble is that they are not doing a very good job of running a pension scheme, which is what the Trustees should be very concerned about.

No space to list the train crashes at NOW

NOW’s problems are with their participating employers who- over a period of five years have had consistent problems with the collection and allocation of contributions from payroll to fully invested member pots. There are so many horror stories, I cannot list them for space- even were I able to mention the clients (which I should not).

Over this five year period, we have seen NOW’s rating for payroll interface plummet on the Pension PlayPen. Contrary to Redington’s view, First Actuarial’s rating of NOW as an investment organisation is a dim view. , which has been a staunch supporter of NOW’s noble ambitions, has bowed to the weight of evidence.

For all its promise, NOW has failed to deliver. It is Paris St Germain ,relegated to the Championship..

You cannot outsource the member experience – it is what you do

The problem is not just with marquee trustees. There is a real issue about the Commercial Board of NOW. Its Chair is a Danish banker (with a regulatory hat), its CEO was CFO of NOW’s chief administrative supplier and its sole non-exec is a former fund manager. None of these people has first hand experience of managing the funds of ordinary people.

now commercial.PNG

Like the marquee trustees (Blackwell excluded), these are people who see matters from the abstract cloud of policy or strategy , not with the eagle eye of the practitioner. The people who are getting their hands dirty are not in NOW;  NOW outsourced its operations to Xafinity, to Staffcare and latterly to JLT. NOW has listened to conventional wisdom that suggested “best in breed” third parties beat doing it yourself.

But this has meant NOW are two steps away from resolving any crisis. Whether it be the problems that forced it to swap administrators, or the outage when they did, or the disastrous relationship with a middleware supplier or the failure to get their administrator to operate relief at source or even the problems they’re having transferring members out, NOW seem to have no control of their suppliers.

It might be argued that NEST have a similar issue with TATA but NEST are different, they seem to have limitless money to throw at TATA and a payback period as flexible as the gusset on a tart’s knickers.

NOW the price goes up.

NOW has told us that they have embraced Origo and that in future , members wishing to transfer out to other Origo members, will be on the 10 day pathway to completion. I hope this is the case, as Pension Bee’s Robin Hood Index has NOW taking 5 times that standard to rid themselves of members who quit.

Deferred members of NOW with small pots should consider this. From April 2018 they will be paying £1.50 pm however small their funds. This is on top of the investment charge on their fund.

This is a substantial hike from the current member charge


NOW charges 2

And this comes on top of the charges to the employer for having them in their part of the NOW master trust.

NOW ongoing costs

If you are the fifth active member of your employer’s fund and you leave that employer, you are costing your Ex- employer, £7.50 pm + VAT.

It is not just in the interests of members to get out of the £1.50pm member charge, but in the interests of their employers. This is why Romi Savova, CEO of Pension Bee wrote me

If only it was possible to transfer out…

She was writing of the member’s experience getting NOW’s administrator’s to process transfers to third parties (including Pension Bee).

NOW argue that this (further) price hike, is to protect the richer members from cross-subsidies, but there is no corresponding price reduction for richer members. NOW is simply showing it has got its pricing wrong.

Taken with everything else that has gone wrong this year, this suggests worse may yet be to come.

Intentions good – implementation terrible

It is the inevitable conclusion. Marquee trustees, a non-executive commercial board and operations outsourced ineptly.

NOW is not a bad organisation, it is an incompetent one, one that consistently hides behind accreditations and the commendations of institutional partners. It is operating in a space where payroll is king and accountants the king-makers, but NOW is not able to build the APIs to the software through which their employers pay their staff.

They simply don’t have the confidence of the organisations who feed them – Sage especially.

NOW has lost the changing room.

NOW is a massive operator of workplace pensions, more than a million of us depend on NOW for future benefits. It is time it recognised that it simply isn’t in charge of itself. The appointment of Dalriada tells me that the Pensions Regulator has lost all patience.

Without a proper CEO, without trustees who have hands on experience of running a large pension scheme and with a commercial board about whom we know nothing, NOW should be putting itself into pre-pack mode. It should be talking now to its major competitors about handing over responsibility for the management of these pots to another trust.

There are several master trusts who would relish the challenge of turning NOW round and I hope that they are talking right now.

Employers should start considering their participation in this master trust, deferred members should seriously consider transferring out asap.

The Pensions Regulator is making it clear it has lost patience, NOW so do I.



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Finger in the dyke stuff! DC pricing is just too leaky Jon!

Jon Stapleton


It’s a mug’s game Jon!

Jonathan Stapleton has written a deliberatively provocative piece in Professional Pensions which will be applauded by the operators of workplace pensions but is going to get short shrift from me.


You can read  Jonathan’s opinions here.

The gist of Jonathan’s argument is that price pressures on providers is forcing them to skimp on the quality of the investment default.

The pressure to reduce costs has not only meant payback periods for providers have been extended but also that the amount of money available for the investment content in the default offerings of these schemes has been squeezed ever further.

Members opting for a default offering in any major scheme are unlikely to receive anything more sophisticated than a passive lifestyle default. And, given that over 95% of people choose the default, this matters, especially at a time when the next financial crisis could be just around the corner.

Perhaps the time has come for us to adopt a different tack. To start choosing value for money over cost alone and, dare I say, paying more for our DC schemes.

Yes, members want low cost, and they don’t want to be ripped off by providers; but they also want a quality investment offering that will be robust in all market conditions.

I write as someone who has his entire DC wealth in a FTSE 50:50 global equity index tracking fund which I am paying 0.1% + 0.02% transaction charges. Jon might argue that I know the price of everything and the value of nothing. I would argue that I see no point in paying higher fees unless I have evidence of value. Other than NEST, I see no evidence of any particular value in the market. But as regular readers know, I am working on changing that so that we can compare apples with oranges using value for money scoring.

When we have accurate data that reflects performance over reasonable periods of time, then we can start assessing the validity of Jon’s assertion that you can buy funds robust in all market conditions.

The next financial crisis could always be just around the corner, like Chicken Licken’, we could assume the sky is about to fall on our head and no doubt it will.

chicken licken

Mark to market DC


In my short working career , the equity market has fallen on my head several times and I fully expect it to do so again. As a 55 year old expecting to crystallise in not less than ten years, I am under no delusions!

But as the conservatives will find out if they sack Mrs May, it’s one thing throwing out the incumbent, it’s another finding an alternative.

My first message to Jon Stapleton is that equities remain the best long-term growth assets and there is precious little point in paying for diversification if you have no immediate liabilities.

carsten -chicken

Nurture your chickens instead



Pricing pressure is fundamentally downwards

While I challenge Jon’s premise that paying more for fund management will increase value as unproven, I further challenge the assumption in his article that the operator’s  “fixed” costs and margins, that make up the majority of the AMC are “fixed” at all.

nest debt

and where does the line go after 2038?


He points to NEST which will continue to accrue debt till 2029 at which point it will owe the DWP £1.2bn He does not mention that in a few short years following 2029, NEST will pay all that debt off and then become the biggest cash cow Government has ever owned.

Well that’s what the NEST projections tell us, and this of course assumes that NEST costs remain constant and that pricing remains constant too.

But of course NEST’s current fixed costs are likely to change over time and I have to conclude that they will fall, as will all providers’. Here’s why.

  1. the adoption of distributive ledger technology; as NEST’s former CEO Tim Jones tells me, pension administration has yet to grasp let alone adopt the benefits of the block chain.  When it does, the manual processes that cost NEST and its competitors the bulk of its record keeping fees will fall away, making records more secure, easier to access and a whole lot cheaper to manage.
  2. the increasing ability of the public to self-serve; NEST – like most of its peers does not run an app to give members instant access to their pot and the capacity to manage it. This is because it has not yet confidence in the security and accuracy of its records (see 1 above). Following improvements in record keeping, operators will be able to pick up on people’s increasing capacity to do simple things for themselves. Assisted by artificially intelligent bots, taught by machine learning, we can – in time – self-serve!
  3. taking out the slack in fund management; the 36% margins enjoyed by fund managers and their cronies are not sustainable. Greater transparency caused by regulatory and consumer pressures (bravo to the TTF) mean that both the AMCs and the fund expenses of all pension funds are going to come down. This can either mean we get more for the same money (if Jon’s belief in buying robustness is proven) or that what we are currently paying fund managers will reduce. As we have no way of knowing what we are paying for fund managers (see my bleating about NDAs) , we currently cannot put pressure on fund management margins but that is going to change and very soon.
  4. Consolidation drives scale and reduces prices (eventually). Right now BlackRock is owned by Aegon, Friends is owned by Aviva and pretty soon we expect Zurich to be owned by Scottish Widows. The smaller master-trusts are queuing up to be bought by bigger master-trusts, the only question is whether they have earned a price. We will see a contraction in choice but this will create greater scale and – in a market in which the CMA are taking a great interest, this will ultimately benefit the consumer.

Jon Stapleton is right to point to a short-term increase in the operator’s prices. NOW pensions is putting up the fixed costs charged to deferred members as it claims these costs are subsidised by the richer members. This is of course hog-wash, were it true we would see richer members seeing a decrease in charges, which is not happening. NOW is trying to stabilise its current financial position.

Hardly any pension providers are making any money out of auto-enrolment but that is not the same as “workplace pensions”.  The biggest DC schemes such as LBG, JP Morgan and HSBC now have billions in assets and present fund managers with fabulous long-term income streams. The bundled players such as Zurich, Standard Life, Legal and General and Fidelity who got in early and captured the elite DC market ten to twenty years ago are now very profitable indeed.

nest debt

Profitability after 2038 will be huge (under lifetime pricing)


As the NEST chart shows, once you have reached a certain size, the operators of DC pensions can make huge amounts of money. Assuming that is, that people like me don’t go pissing on their bonfire and driving costs down. Why the operators are so resolutely against benchmarking, refuse to lift NDAs and write me stroppy letters when I write this kind of blog, is that their vision of “lifetime pricing” is complete baloney (and they know it).

We do expect the operators to finance the early part of a DC pension’s charges. We expect them to reserve for this or to explicitly state their borrowing (NEST). Even the non-insured master trusts are going to have to partially reserve within the next few months. We also expect for operators to recover the costs of this financing later in the contract and I am happy to see numbers which show them doing this.

But we do not expect to see the kind of profiteering that has been going on among the insurers on legacy DC (I am still paying 4.25%pa on the capital units of my Allied Dunbar pension bought in 1985).

Instead we expect to see prices for DC coming down as the massive surge in profits in the NEST projection, feed through.

nest debt

The long-term profitability of NEST is immense


Workplace pensions are not here to provide the shareholders of insurance companies with windfall profits in the ten or twenty years time. They are here to provide members with good outcomes. A 1% pa reduction in charges over the lifetime of a contract means a 27% improvement in outcomes for consumers.

Right now, workplace pensions may be costing the shareholders, their pleasure is downstream, but they should not expect a gold-rush – unless they get the ongoing patronage of a munificent financial press, regulator, CMA and of bloggers like me!


ear ear!






Posted in auto-enrolment, dc pensions, de-risking, Debt, NEST, now, pensions | Tagged , , , , , | 2 Comments

Normalising pension saving for everyone


The TUC is publishing this morning important research into inclusion. Since our new pensions minister has included “inclusion” in his title, I hope he is reading it!

Six in 10 workers in the UK agriculture and hospitality sectors are not saving into a workplace pension, according to new research which has sparked fresh calls for ministers to act.

The research … found 908,000 of those working in hospitality, such as pubs, clubs and hotels, were not enrolled in a company retirement fund — equivalent to 59 per cent of the sector’s workforce. (Jo Cumbo -FT)

The numbers need a little understanding. Many of the 908,000 will be working part time and have full time jobs elsewhere, many are students who are typically outside the auto-enrolment wage bands and there are many workers who are migrant from aboard and not properly part of our national labour force.

Which points to a larger question. Do we consider being part of a workplace pension a condition of work?

The gathered consensus

The ipsos Mori research published earlier this autumn suggests that we do. 73% of a large survey of low-paid employees said that being in a pension scheme was now normal, very nearly 70% were looking forward to being nudged into higher contributions. Considering the very large numbers of don’t know/don’t cares in any survey, these show considerable support among those most financially vulnerable – to paying money towards their own retirement.

It is very good to see the TUC promoting the need to include these people into workplace pensions. It demonstrates a degree of support from all parts of the labour market for greater self-reliance. This is not me making a political point, it is me observing that there is now general trust in UK financial services to deliver good outcomes for those with the least to contribute. Credit where credit is due, as a result of better industry practice and Government intervention, the TUC is countenancing using the private sector as the means to baluster the welfare state.  Guy Opperman – please take note.

We are used to a war between our major political parties on policy matters. But no such war exists within pension policy. Indeed, I have been in a room and heard Carolyn Fairburn of the CBI speak with feeling of her admiration for the work of Frances O’Grady of the TUC. Not only is there considerably less friction in Westminster, there is considerably less friction on policy matters such as this, within the representatives of worker and employer rights.agriculture 3

The auto-enrolment review

We are weeks if not days away from the publication of the Government’s auto-enrolment review. Last week, at his one appearance at the Conservative Party Conference, our Pension Minister, Guy Opperman, spelt out his support for greater inclusion in auto-enrolment. There has never been a time of such political and social consensus. Now is the time to extend the scope of auto-enrolment to embrace the young, those with small earnings and the workers who are excluded through self-employment.

Normalising pensions

I am not a fan of compulsory private pensions, we have compulsory national insurance which is a lever for Government to improve state pensions through the national insurance rate.

I am a big fan of inclusion, but it has to be voluntary inclusion, at least in as much as people need the right to say “no” (and opt-out or cessate). That is why I think auto-enrolment is the right policy for Britain (pace David Harris)

I don’t think we should try and second guess those who work in the hospitality industry. There are some genuinely low earners who some would have paying off debt rather than saving. Inclusion would require a few migrant workers to have small orphaned pots when they return to their countries of origin, and there will be quite a few in this group who will opt-out having no reason to be saving (and knowing it). But none of this is good reason not to include the bulk of this group in the “saving habit”.

A nation proud to save!

Blimey, I seem to be writing Guy Opperman’s headlines for him! Actually, I think this headline is the political equivalent in my own “restoring confidence in pensions”. Saving is a habit- a good habit – like going to the gym, not picking one’s nose and saying “thank you”. It is just good manners.

People who don’t save are not quite part of society and should be aspiring to save because it is the grown up thing to (like not picking your nose).

We are getting to a point where we have savings vehicles which are fit for purpose. We are beginning to think about the spending equivalents in our new “post annuity” world.

We have 9m people who are new-savers and we have very few employers who are deliberately non-compliant in helping them to do so. We have payroll organisations like Sage who are looking at how to help things stay this way. The nay-sayers like the IOD have piped down. There is a consensus that saving into workplace pensions is a good thing.

So I hope that if you are reading this Mr Minister, you will have the courage to listen to the numbers from the TUC and that you will have the courage to use the auto-enrolment review to extend the scope of auto-enrolment.

For this is the best chance the Government may ever get.

agriculture 2


Posted in auto-enrolment, pensions | Tagged , , , , , , | 5 Comments

Straight talking and honest representation

This morning I and three members of BSPS, give oral evidence to the Work and Pensions Select Committee at Parliament.

We have been asked to speak about our experiences and comment on lessons that can be learned.

The four of us met for the first time last night. In August this year, the announcement of the cash injection into BSPS was met with great relief. The general view of employee representatives, the press and Government was that this would relieve stress on the 130,000 members of the scheme.

But this has not been the case. Stefan Zait’s extraordinary submission, published here, details how members have continued and continue to suffer anxiety.

That this is the case, we can have no doubt. Reports from “Chive” suggest that demand for counselling and guidance among steelworkers in Port Talbot and elsewhere is high.

We will convey this anxiety to the Committee, explain it and offer some pointers for the future. The agreement between the four of us, is that the experience of BSPS members can be used positively in the future, to make things easier for ordinary people caught up in matters about which they have little experience.

I feel an extraordinary responsibility to tell matters factually and with sincerity. Now is the time for straight talking and honest representation.


Posted in advice gap, BSPS, pensions | Tagged , , , | 1 Comment

The pension dashboard is changing – but for the better?

digital garage

From here last March


digital garage 2

to here today



Like a fool I thought that a DWP seminar on the Pension Dashboard would be held at the DWP, it was held at the ABI. I had to double back on my Boris Bike. which meant I missed the Pension Minister’s words . Cycling on London’s new super high-way linking the DWP and ABI at least gave me time to re-cap.

Those were the days!

The Pension Dashboard was launched  in Aviva’s Digital Garage in Hoxton Square by Simon Kirby .

Simon is no longer in politics (let alone the Treasury) and his mate Richard Harrington is no longer in pensions. The Treasury have handed over to the DWP where former Treasury star, Charlotte Clark has taken up the baton. Guy Opperman has told us the Pension Dashboard will happen. I went to One America Square to find out what.

I found that somewhere in the intervening 6 months, there has been considerable Governmental scope creep and this concerns me.

The Digital Garage has been replaced by One America Square, Fintech by the ABI and the buzz-words are now “compulsion” and “standardisation”.

What’s changed?

Two things have changed

  1. This is now about Government delivering , not about Government facilitating
  2. We are now assuming that pension operators will have to participate.

The world according to Kirby was a place where entrepreneurial zeal as displayed by firms like MoneyHub and Pensions Bee and Evestor, were held back only by the lack of data standards. Given a common set of protocols, devised by Government and curated to the Fintech cognoscenti , the Hoxton square mob would make the dashboard happen.

Just look at how revolutionary things like mobile banking and comparison sites have already been.

It’s time for pensions to catch up.  (Simon Kirby March 2017)

The world according to the DWP is one where innovation is a dirty word and where the entrepreneur is regarded with suspicion.

The not so brave new world

Whatever happened to the data standards, they weren’t on display at the ABI. Instead we learned that the Government was not only going to facilitate but legislate. New laws were on their way that would require pension operators to make data available on request. Government would now operate the data hub through which all data would pass. Innovators would have to plug into the hub to play.

The key words were simplicity and consistency. The vision was one of people comparing their combined pension forecasts (remember them?) with each other – presumably after a good session on the printer. Far from catching up, the pension sector looks consigned to standing in a queue outside the DWP waiting for further instructions.

I have not seen the DWP in such interventionist mode since the days of Gordon Brown where the vision was of NEST managing the auto-enrolment process. There are many who still cherish that vision, I am not among them.

NEST have continued to go their own way. They did not co-operate when payroll needed a common data standard and effectively killed PAPDIS at birth, they are now the outlier, the only major workplace pension operator not using Origo. NEST has consistently refused to co-operate with private pension providers on matters of data management.

NEST demonstrates the not so brave new world of the DWP and much as I like and admire Charlotte Clark, I see her vision and NEST’s vision as compelling everyone to dance to their tune.


The auto-enrolment project compelled employers to participate. Employers have also been compelled to adopt RTI and are now struggling with GDPR. We have compulsion coming out of ears.

The cost of digitally transforming legacy systems or adopting manual data export processes will be very high. It will eat into whatever budget operators have for innovation. There are many areas competing for that money, not least the need for proper payment systems so people can spend their pension pots with the freedom they have been promised.

But worst of all, compulsion on a pension system that is, as Kirby pointed out, well behind the Fintech curve , will not drive innovation or competition or better outcomes. It will create another big Government data cock-up , the likes of which litter the digital landscape.

What can the DWP do?

I would urge the DWP to reconsider its expansionist agenda and start talking again – not to old lags like me (there were many in the room) but to the young people who are energised to deliver real change that is relevant to a generation yet to have serious pension wealth.

Leave the baby boomers out of this – give the dashboard to the kids

Forget my generation, we can get by on the BR19 and from forensic research using the tools at our disposal. We can turn to MoneyHub and PensionBee and Evestor if we need help in aggregating data and we know that these guys are about managing our money.

Divorcing the delivery of the dashboard from the entrepreneurs is retrograde. Let them drive technology forwards and leave our generation to innovate another way. I will be spending two days this week looking at CDC.

Being sold robo-aggregation is the least of anyone’s problems.I have no difficulty telling a robo-adviser to f*ck off, I do it every day. Robots are remarkably resilient.

Those who worry that the innovators are just trying to sell them something, have forgotten that most of us need to buy something – a properly organised retirement plan. I have absolutely no difficulty with Fintech’s driving that forward.

Take back this project from the ABI

The DWP should get back to being the DWP and leave the ABI out of it. They should have their own budget for this important project and should not be having meetings in the offices of one of the vested interests.

Frankly, if the DWP cannot host their own research, then Guy Opperman’s claim that the “Dashboard will Happen”, sounds an empty threat.

Focus on the future not the past

The pension dashboard is in danger of delivering a “super-simpi”, a souped up statutory money purchase illustration.

The value of the Dashboard is not in making the past better but in satisfying the needs of a coming generation. Frankly it’s the generation who were not represented in the room i was in yesterday lunchtime.

If you want a dashboard that is relevant to people under 35, put people under 35 in charge of delivering it.

Talking among ourselves.

The DWP had a little innovation in the room in the form of a foam ball housing a radio mike which was supposed to be chucked around the room by energetic dashboardees.

It didn’t work. An elderly matron professed she’d never been much good at netball and the ball was politely passed from table to table.

It seemed a good metaphor for what was happening with the dashboard itself.

yellow mike ball


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

Financial Regulators aren’t carved out of stone – they need a merry Christmas too!

happy Christmas

Financial Regulation seems a brutal business, impersonal and intimidating. Necessarily, a degree of formality is needed in one’s conduct on both sides.  I would not feel comfortable at the FCA’s Christmas party nor they at mine. But that does not mean we should not have parties.

For reasons that are obvious, if you’ve been following this blog, I have had a lot of interactions with Regulators in the last few months. Historically I know the Pensions Regulator, latterly I have been dealing with the FCA, I don’t have dealings with other regulators though my household does.

What’s apparent to  me is that regulatory relationships are built over time and around trust. They are just like any other relationship. That’s because even the FCA is simply the sum of its parts and those parts are people.

Ignoring the basic rules of relationships , mistaking organisations like the FCA for institutions, will simply not do. I am sure that I have been guilty of talking about the Regulator as if it were an inanimate building or a series of processes. But this really is missing the point.

The FCA, like the Pensions Regulator needs to have a happy Christmas. It needs to be treated with the respect you would give any other person whether they worked in Port Talbot or the City of London or in Shaftesbury (where my family come from).

Financial Regulators aren’t carved out of stone, every person who I’ve spoken to at the FCA has been interesting in their own right!

“WOW – I didn’t expect that!”

On Friday, we had some really good news. One of the firms I’m involved in was told that we’d qualified for Direct Support from the FCA’s Innovation Hub. We were so pleased and one of my work friends sent me an email with the header “WOW – I didn’t expect that!”

Somebody at the FCA had taken a decision to help us based on our not very scientific, not very legally worded , perhaps rather naïve submission. We were simply worried that we could be out of our depth, we got what we asked for Direct Support.

It means something to all of us – personally as well as corporately – when a regulator puts its trust in you. We really are very grateful. We want to repay that trust and go a small way to sorting out some of the issues that the FCA has on its plate.

Trust in the truth

It’s a truism that you never ask a regulator a question you don’t know the answer to. I think that should be “don’t deal with regulators until you trust them”.

To suggest we’ve got untrustworthy Regulators is frankly stupid (and libellous). We may accuse our regulators or being slow , lacking agility, disengaged and many other things but in truth – the issue is one of prioritisation.

There are only so many people who work in Napier House or 25 North Colonnade. They need a place to go to work, they need holidays, training courses and they even need Christmas Parties!

Recognising that the people that we – being regulated- are no different from those regulating us – is half way to creating the trust that I’m talking about.

The other half is that you’ve got to have trust in yourself; I don’t just mean trust in yourself as a person, but trust that the organisation you work for, is trustworthy.

Which is why I trust that the BSPS issues will be moved forward in a positive way by the Work and Pensions Select Committee on Wednesday. It is also why I trust that the FCA and tPR are having and will have a positive impact on how things work out from the Time to Choose.

Trusting our regulators in times like these , is all that we can do. Thank goodness we live in a country where that trust is justified.

happy christmas 2


Posted in advice gap, christmas, FCA, pensions | Tagged , , , | 1 Comment

Risk sharing in pensions for USS employers